Monday, February 11, 2013

When Work Doesn't Pay

There is a persistent myth that a skills shortage or not enough education is the reason why wages are so low and jobs are going unfilled. It's one of the biggest crocks we're being sold (and that's saying a lot). Wages no longer cover the costs of employee training which must be borne on the back of the employee and/or the state, most jobs are low wage (yet require a degree of some sort just to apply), and jobs go begging rather than train people or hire someone without a degree. Work no longer guarantees a decent standard of living for many people. What kind of economy cannot pay its workers enough to live on? Which economic theory accounts for that? Even slave owners had to take care of their slaves. Clearly fiddling with interest rates and tax levels is not going to fix this. It looks like the Iron Law of Wages was less of a myth than we think.
Last night 60 Minutes did a segment about manufacturing companies that can't find good entry-level workers even though millions of people are out of jobs. While reporter Byron Pitts was reading the intro, I threw my shoe at the TV (figuratively) and told Marian acidly that it would almost be worth watching the segment just to see what idiocy they were going to promote this time around. I was just about to switch back to the Bears-Texans game, but it turned out Marian wanted to watch the segment, so I ended up watching it too. About halfway through, after describing a local community college in Reno that trains students to run complex, computer-controlled machines, we got this:

    "Most of the students here will start at jobs paying 12 dollars an hour."

At that point I jeered. You're wondering why you can't get highly qualified applicants for 12 bucks an hour? Spare me.
Companies That Want Better Workers Need To Pay More (Mother Jones)
Friedman tells readers:

"Welding 'is a $20-an-hour job with health care, paid vacations and full benefits,' said Tapani, but 'you have to have science and math. I can’t think of any job in my sheet metal fabrication company where math is not important. If you work in a manufacturing facility, you use math every day; you need to compute angles and understand what happens to a piece of metal when it’s bent to a certain angle.'

Who knew? Welding is now a STEM job — that is, a job that requires knowledge of science, technology, engineering and math."

The obvious problem in this story is that Tapini apparently doesn't understand that you have to pay more money to get highly skilled workers. If the minimum wage had risen in step with inflation and productivity since the late sixties, it would be almost $20 an hour today. Back in the late sixties, a typical minimum wage worker would have a high school degree or less. Now, according to Friedman, we have CEOs who think that they can get highly skilled workers at the some productivity adjusted wage as someone who would have had limited literacy and numeracy skills 45 years ago. If we applied the same standard to doctors, they would be averaging around $100,000 a year today (instead of around $250,000). If employers really do have such poor understanding of how markets work then it will certainly be a serious impediment to economic growth in the years ahead.
Thomas Friedman Says That Our Economy Is Being Killed By Employers Who Can't Do Arithmetic (CEPR)
And yet, even as classes like Goldenberg’s are filled to capacity all over America, hundreds of thousands of U.S. factories are starving for skilled workers. Throughout the campaign, President Obama lamented the so-called skills gap and referenced a study claiming that nearly 80 percent of manufacturers have jobs they can’t fill. Mitt Romney made similar claims. The National Association of Manufacturers estimates that there are roughly 600,000 jobs available for whoever has the right set of advanced skills.

Eric Isbister, the C.E.O. of GenMet, a metal-fabricating manufacturer outside Milwaukee, told me that he would hire as many skilled workers as show up at his door. Last year, he received 1,051 applications and found only 25 people who were qualified. He hired all of them, but soon had to fire 15. Part of Isbister’s pickiness, he says, comes from an avoidance of workers with experience in a “union-type job.” Isbister, after all, doesn’t abide by strict work rules and $30-an-hour salaries. At GenMet, the starting pay is $10 an hour. Those with an associate degree can make $15, which can rise to $18 an hour after several years of good performance. From what I understand, a new shift manager at a nearby McDonald’s can earn around $14 an hour.

The secret behind this skills gap is that it’s not a skills gap at all. I spoke to several other factory managers who also confessed that they had a hard time recruiting in-demand workers for $10-an-hour jobs. “It’s hard not to break out laughing,” says Mark Price, a labor economist at the Keystone Research Center, referring to manufacturers complaining about the shortage of skilled workers. “If there’s a skill shortage, there has to be rises in wages,” he says. “It’s basic economics.” After all, according to supply and demand, a shortage of workers with valuable skills should push wages up. Yet according to the Bureau of Labor Statistics, the number of skilled jobs has fallen and so have their wages.
Skills Don't Pay The Bills (New York Times)
A front-page article in the Wall Street Journal presents a fascinating mystery: Despite persistent high unemployment, some employers are having a tough time filling jobs.

"In Bloomington, Ill., machine shop Mechanical Devices can't find the workers it needs to handle a sharp jump in business. Job fairs run by airline Emirates attract fewer applicants in the U.S. than in other countries. Truck-stop operator Pilot Flying J says job postings don't elicit many more applicants than they did when the unemployment rate was below 5 percent."

What gives? Employers these days seem taken aback when highly qualified, experienced people fail to rush to apply for the openings they post. The article supplies several possible explanations: For jobs that require specialized skills, there simply might not be enough qualified applicants; employees accustomed to working at higher-paying office jobs aren't eager to take lower-paying jobs at truck stops and restaurants; some of the unemployed might prefer collecting a few hundred dollars per week in unemployment benefits, while they last, to working a job that pays $8 per hour.

But the Journal article seems to overlook one important factor. Even in an age of historic underutilization of the labor force, the laws of supply and demand apply. Hiring is a negotiation between employers and employees over the terms at which they'll agree to come to work—wages, benefits, working conditions, length of commute, relocation requirements. Maybe some of these employers just aren't offering terms that are good enough.

At  "Mechanical Devices, which supplies parts for earthmovers and other heavy equipment to manufacturers such as Caterpillar Inc., part owner Mark Sperry says he has been looking for $13-an-hour machinists since early last year," the Journal reports. Thirteen dollars an hour, 40 hours per week, 50 weeks per year—that comes to an annual salary of $26,000. (In the adjacent Peoria, Ill., metropolitan area, per capita income was $39,965 in 2008.) Or take Emirates Airlines. When it held jobs fairs in cities like Miami and Houston, only about 50 people showed up, "compared to a global average of about 150 and as many as 1,000 at some events in Europe and Asia." The jobs don't require much in the way of education, and they come with benefits, free accommodations, and a starting salary of $30,000. But you'd have to move halfway around the world, to Dubai—an alien and expensive place. Would you uproot yourself and your family for $30,000 a year? Don't you think both of these employers would find many more interested applicants if they offered higher wages?
Is Any Job Better Than No Job? (Slate)
While there is still an upper tier of positions that require a college education and in many cases, advanced degrees, the bulk of employment growth in this economy is in badly paid service jobs. Despite the fact that the pundit class keeps wailing how America isn’t growing enough high skilled workers to compete in the world economy, the evidence is otherwise. For instance, Gene Sperling will regularly contend that America needs more engineers. Yet engineering jobs don’t pay enough to reward the cost of getting that degree. I’ve had engineers regularly say in comments that the only way to do well with an engineering degree is to then get a law degree and become a patent/intellectual property attorney. If the US really does need more engineers for competitiveness reasons, then it needs to get the cost of their education down, much the way it subsidizes the cost of educating elite mathematicians and physicists.
70% Of Jobs "Created" Don't Require A College Education (Naked Capitalism)
“How,” I asked her after I read the report, “is this anything except just depressing?” As economic struggles push people into low-wage jobs, their limited resources press retailers to keep prices low and affordable — and one way to do that, as American Public Media’s Marketplace reported, is to create still more low-wage jobs, often temp jobs, that don’t cost a company in benefits or demand steady pay for a worker in the off-season. With one in four workers in a low-wage job today, and low-wage work projected to account for two out of every three new jobs in the United States over the next decade, it’s hard to see the constructive side of a report on how those same jobs are difficult not just for workers, but for their families, and even harder to see how we get out of either cycle.

It’s part of our cultural narrative to insist that parents are fully responsible for raising our children (despite our national need to “produce” another generation of healthy, well-educated adults capable of filling the jobs we now hold). But you don’t have to favor subsidized day care or mandated child-care leaves for all to recognize that the forces that create and structure low-wage jobs are just one of the ways our society’s choices actively make taking that responsibility more difficult. We choose, again and again, to ignore the very real needs of the significant proportion of the work force with children at home. The result, in the low-wage worker’s world, is that job flexibility becomes the ability to quit one job and later find another, and many people describe themselves as being one sick kid away from unemployment.

“These families couldn’t remain intact without the effort of young kids stepping into adult shoes,” Dr. Dodson said, but without the chance to cultivate their own talents, many of these teenagers will find themselves playing out the low-wage job cycle with their own children. That’s good for creating a nation of low-wage workers, and bad for the American tradition of helping each generation do better than the one before.
How Children Subsidize 'Low, Low Prices' (New York Times)
Across the country, tens of thousands of underemployed and jobless young people, many with college credits or work histories, are struggling to house themselves in the wake of the recession, which has left workers between the ages of 18 and 24 with the highest unemployment rate of all adults.

Those who can move back home with their parents — the so-called boomerang set — are the lucky ones. But that is not an option for those whose families have been hit hard by the economy, including Mr. Taylor, whose mother is barely scraping by while working in a laundromat. Without a stable home address, they are an elusive group that mostly couch surfs or sleeps hidden away in cars or other private places, hoping to avoid the lasting stigma of public homelessness during what they hope will be a temporary predicament.

These young adults are the new face of a national homeless population, one that poverty experts and case workers say is growing. Yet the problem is mostly invisible. Most cities and states, focusing on homeless families, have not made special efforts to identify young adults, who tend to shy away from ordinary shelters out of fear of being victimized by an older, chronically homeless population. The unemployment rate and the number of young adults who cannot afford college “point to the fact there is a dramatic increase in homelessness” in that age group, said Barbara Poppe, the executive director of the United States Interagency Council on Homelessness.
After Recession, More Young Americans Are Living On The Street (New York Times)
Beatriz Morales García, 31, said she could not remember the last time she went shopping for herself. A few years ago, she and her husband, Daniel Chiva, 34, thought that they had settled into a comfortable life, he as a bus driver and she as a therapist in a rehabilitation center for people with mental disabilities. His job is financed by the City of Valencia, and hers by the regional government of Valencia.

They never expected any big money. But it seemed reasonable to expect a reliable salary, to take on a mortgage and think about children. In the past year, however, both of them have had trouble being paid. She is owed 6,000 euros, nearly $8,000. They have cut back on everything they can think of. They have given up their landline and their Internet connection. They no long park their car in a garage or pay for extra health insurance coverage. Mr. Chiva even forgoes the coffee he used to drink in a cafe before his night shifts. Still, the anxiety is constant.

“There are nights when we cannot sleep,” he said. “Moments when you talk out loud to yourself in the street. It has been terrible, terrible.”
In Spain, Having A Job no Longer Guarantees A Paycheck (New York Times)
Delta Air Lines Inc. (DAL), the world’s second-largest carrier, received 22,000 applications for about 300 flight attendant jobs in the first week after posting the positions outside the company.

The applications arrived at a rate of two per minute, Chief Executive Officer Richard Anderson told workers in a weekly recorded message. Applicants will be interviewed in January and those hired will begin flying in June, for the peak travel season.

“We’re hunting for foreign-language speakers as we continue to expand to all points around the globe,” Anderson said. “We are experiencing a phenomenal response to the job posting.”
Delta Air Gets 22,000 Applications for 300 Attendant Jobs (Bloomberg)
The millions of underemployed Americans today, working part-time or in jobs significantly beneath their skill level, underline a persistent feature of our workforce, starting long before the Great Recession: one out of four jobs pay sub-standard wages. Good Jobs America, a new book written by Paul Osterman and conceived with co-author Beth Shulman before her death, tackles this other half of the jobs crisis: the need to create more good jobs, with wages that can support a family.

A great strength of the book is the authors' creation of new data on low-wage jobs, bringing to light how little so many of us bring home from our work. The authors are exquisitely cognizant of the current policy and political climate that looks skeptically on the ability of government to intervene in the "power and correctness of the market." As a result, much of the book carefully examines the arguments and strategies that rely on non-government interventions in the labor market to increase job quality, as well as a refutation of conservative arguments against public policies to increase wage levels. In thoroughly exploring other avenues of change, and doing their best but ultimately failing to identify promising paths that don't rely principally on government, Osterman and Shulman make it clear why they conclude "what is needed is a broader political, social, and economic environment that supports progressive employment strategies." By exhausting the limits of other avenues, the book ultimately ends up making the case that we must have government action to ensure decent jobs for all.

The authors refute the "myth" that education is the solution to the problem by pointing out the obvious: "There will always be hotel room cleaners and food servers and medical assistants and the myriad of other low-wage jobs." Education may help an individual, but it won't solve the large societal problem. Furthermore, they review research that finds "most adults holding these jobs will not escape them." They describe numerous programs developed in industries like health care and hospitality to create career ladders for low-wage employees and -- while doing everything they can to accentuate the positive -- find that few of the programs are sustainable or result in many employees moving into better jobs.

The persistence of the problem is underlined in their discussion of another common bugaboo: immigration. Data they assembled show that from 1994 to 2010, while the proportion of immigrants in the workforce increased by 70 percent, the percentage of jobs that were low-wage stayed the same, 24 percent. Their data also reveal that while immigrants held more low-wage jobs in 2010, the percentage of immigrants who took jobs that were below the low-wage standard remained at just below 40 percent.

As the authors deeply believe that employers need to be part of the solution, they look closely at the problems that employers face in raising wages and promoting career training. But they find that "high-road" employers are few and far between, motivated by the rare business with a mission or CEO that is committed to decent wages and benefits. They find no evidence that a Costco has any impact on a retail job market dominated by WalMart, which when it comes into a market suppresses wages in its competitors. The history of labor partnerships also is not promising. Levi-Strauss' attempt at paying good wages collapsed under the pressure of foreign competition and when an agreement between the hotel employee union HERE and San Francisco hotels to trade employer flexibility for more training and wage increases melted in the face of non-union competition.
Why We Need the Government to Create Not Just Jobs, but Good Jobs (New Deal 2.0):
Politicians across the political spectrum herald “job creation,” but frightfully few of them talk about what kinds of jobs are being created. Yet this clearly matters: According to the Census Bureau, one-third of adults who live in poverty are working but do not earn enough to support themselves and their families.

A quarter of jobs in America pay below the federal poverty line for a family of four ($23,050). Not only are many jobs low-wage, they are also temporary and insecure. Over the last three years, the temp industry added more jobs in the United States than any other, according to the American Staffing Association, the trade group representing temp recruitment agencies, outsourcing specialists and the like.

Low-wage, temporary jobs have become so widespread that they threaten to become the norm. But for some reason this isn’t causing a scandal. At least in the business press, we are more likely to hear plaudits for “lean and mean” companies than angst about the changing nature of work for ordinary Americans.

How did we arrive at this state of affairs? Many argue that it was the inevitable result of macroeconomic forces — globalization, deindustrialization and technological change — beyond our political control. Yet employers had (and have) choices. Rather than squeezing workers, they could have invested in workers and boosted product quality, taking what economists call the high road toward more advanced manufacturing and skilled service work. But this hasn’t happened. Instead, American employers have generally taken the low road: lowering wages and cutting benefits, converting permanent employees into part-time and contingent workers, busting unions and subcontracting and outsourcing jobs. They have done so, in part, because of the extraordinary evangelizing of the temp industry, which rose from humble origins to become a global behemoth.

The story begins in the years after World War II, when a handful of temp agencies were started, largely in the Midwest. In 1947, William Russell Kelly founded Russell Kelly Office Service (later known as Kelly Girl Services) in Detroit, with three employees, 12 customers and $848 in sales. A year later, two lawyers, Aaron Scheinfeld and Elmer Winter, founded a similarly small outfit, Manpower Inc., in Milwaukee. At the time, the future of these fledgling agencies was no foregone conclusion. Unions were at the peak of their power, and the protections that they had fought so hard to achieve — workers’ compensation, pensions, health benefits and more — had been adopted by union and nonunion employers alike.

But temp leaders were creating a new category of work (and workers) that would be exempt from such protections.

The temp agencies’ Kelly Girl strategy was clever (and successful) because it exploited the era’s cultural ambivalence about white, middle-class women working outside the home. To avoid union opposition, they developed a clever strategy, casting temp work as “women’s work,” and advertising thousands of images of young, white, middle-class women doing a variety of short-term office jobs. The Kelly Girls, Manpower’s White Glove Girls, Western Girl’s Cowgirls, the American Girls of American Girl Services and numerous other such “girls” appeared in the pages of Newsweek, Business Week, U.S. News & World Report, Good Housekeeping, Fortune, The New York Times and The Chicago Daily Tribune. In 1961 alone, Manpower spent $1 million to put its White Glove Girls in the Sunday issue of big city newspapers across the country.

The strategy was an extraordinary success. Not only did the Kelly Girls become cultural icons, but the temp agencies grew and grew. By 1957, Kelly reported nearly $7 million in sales; in 1962, with 148 branches and $24 million in sales, it went public. Meanwhile, by 1956 Manpower had 91 branches in 65 cities (and 10 abroad) and, with sales at $12 million annually, employed some 4,000 workers a day. In 1962, Manpower also went public, boasting 270 offices across four continents and over $40 million in sales.

The temp agencies’ Kelly Girl strategy was clever (and successful) because it exploited the era’s cultural ambivalence about white, middle-class women working outside the home. Instead of seeking to replace “breadwinning” union jobs with low-wage temp work, temp agencies went the culturally safer route: selling temp work for housewives who were (allegedly) only working for pin money. As a Kelly executive told The New York Times in 1958, “The typical Kelly Girl… doesn’t want full-time work, but she’s bored with strictly keeping house. Or maybe she just wants to take a job until she pays for a davenport or a new fur coat.”

Protected by the era’s gender biases, early temp leaders thus established a new sector of low-wage, unreliable work right under the noses of powerful labor unions. While greater numbers of employers in the postwar era offered family-supporting wages and health insurance, the rapidly expanding temp agencies established a different precedent by explicitly refusing to do so. That precedent held for more than half a century: even today “temp” jobs are beyond the reach of many workplace protections, not only health benefits but also unemployment insurance, anti-discrimination laws and union-organizing rights.

By 1967 Manpower employed more workers than corporate giants like Standard Oil of New Jersey and the U.S. Steel Corporation. Manpower and the other temp agencies had gained a foothold, and temporary employment was widely considered a legitimate part of the economy. Now eyeing a bigger prize — expansion beyond pink-collar work — temp industry leaders dropped their “Kelly Girl” image and began to argue that all employees, not just secretaries, should be replaced by temps. And rather than simply selling temps, they sold a bigger product: a lean and mean approach to business that considered workers to be burdensome costs that should be minimized.

According to the temp industry, workers were just another capital investment; only the product of the labor had any value. The workers themselves were expendable.

The temp industry’s continued growth even in a boom economy was a testament to its success in helping to forge a new cultural consensus about work and workers. Its model of expendable labor became so entrenched, in fact, that it became “common sense,” leaching into nearly every sector of the economy and allowing the newly renamed “staffing industry” to become sought-after experts on employment and work force development. Outsourcing, insourcing, offshoring and many other hallmarks of the global economy (including the use of “adjuncts” in academia, my own corner of the world) owe no small debt to the ideas developed by the temp industry in the last half-century.

A growing number of people call for bringing outsourced jobs back to America. But if they return as shoddy, poverty-wage jobs — jobs designed for “Never-Never Girls” rather than valued employees — we won’t be better off for having them. If we want good jobs rather than just any jobs, we need to figure out how to preserve what is useful and innovative about temporary employment while jettisoning the anti-worker ideology that has come to accompany it.
The Rise Of The Permanent Temp Economy (New York Times)
America's long and steady march toward a fully disposable workforce continues apace, the Bureau of Labor Statistics reported this week. Union membership is at its lowest point in nearly a century, with just 11.3% of all workers – the same level it was in 1916. To put this in proper historical perspective, union members are as rare today as they were at a time when being one could get you shot to death in a mining camp by the Colorado national guard.
US unions' continued decline masks new forms of worker activism (Guardian)


  1. best blog out there. Thanks for this post.

  2. All very true. Of course, those who are still "lucky" think that they are succeeding based on their own skill, charm, and intelligence - the presence of misery and failure makes many people feel good, in strange way. Studies show, of course, that even the rich live more stressful, shorter, and less healthy lives when they live in societies with a lot of income inequality.

    Germany, and perhaps other Western European nations, have tried a different tack: producing high quality manufactured goods that cheap labor can't compete with.

    How will all of this interact with the facts of peak oil, overpopulation, and future food shortages?

    I doubt that the combination of peak oil, food scarcity, and the "iron law of wages" will be a pretty picture, until we come out the other side with a lower supply of workers.


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