Daily Kos’s Mark E. Anderson examines increased productivity and stagnant wages between 1948 and 2014. His article includes a very informative graph that shows how these two economic measures were almost aligned. Now productivity doubles wages. Where has the money gone? Anderson argues that work has gone overseas where labor is cheaper and profits have gone to executives and investors. I agree, but would add one other big factor: automation. I was working with a client this weekend who works for a large technology manufacturer. His company will be able to shed hundreds of tech jobs once they move to cloud-based systems. Jobs can come back from China. Once they are automated, they are gone forever. Anderson makes a great point in concluding his article: What are the super rich and executives going to do when no one can afford to buy their products?
Writing in Huffington Post, Bill Quigley, a law professor, lists several sad facts facing American workers on this picnic day that is supposed to honor labor. I urge to you take a minute, review this list, and ponder its meaning. The one point I would like to underscore is this: While productivity increased 21% between 2000 and 2014, wages only increased 2%. To quote the Talking Heads, “Who took the money away?”
Jeanna Smialek of Bloomberg reports on a topic that it describes as “depressing” – wages. Despite steady increases in hiring, Smialek notes that wages have increased at a 2% rate since the end of the “Great Recession” in 2009. She cites two other measures that have held back pay increases: low productivity and low inflation. Bloomberg focuses on how this news impacts the economy. I’m more concerned with working people and what they are paid. More people are employed every month, and consumer sentiment remains negative. That doesn’t make sense. It would seem that increased opportunities to get new jobs and change jobs should make workers happier. However, as this fine article notes, too many Americans feel that their income is not letting them get ahead. If that’s the new normal, we’re in big trouble.
Huffington Post offers an interesting blog post from Dharmesh Shah, the CTO of of HubSpot. Shah says “you should never leave work on time.” His point is that many people work at jobs that are boring and make them watch the clock. I agree with him that a good job should be part of our life, that we should stay at work sometimes to meet a late deadline or to help a co-worker.
However, I think this good advice can have a negative side as well. Many people I know never leave work at their schedule time. Their schedule is open-ended. They take work home and come to the office on the weekends. Even if they love their job, there is too much work because many companies have come to think that the secret to productivity is under staffing.
Life needs balance. Too often now, the balance is weighted in favor of the employer. A writer I greatly admire, Seth Godin, has said things similar to Shah. As an entrepreneur, I agree with them. I frequently work late and often am in the office seven days a week. However, that is my choice. For many employees, the company they work for asks for more and more. In these cases, I strongly disagree with Shah. Too many people are carrying their jobs home in a way that destroys lives and family. Employers and employees both need to recognize that work is part of life, but not all of it. There is a time to leave work and start living.
Think Progress reports on Treehouse, an online education company that only works 4 days a week. Company founder Ryan Carson was working 7 days a week on a new start up. He made a decision that life was as important as work and instituted a 4 day work schedule for all employees. Treehouse is one of Carson’s 3 companies that follow the 4 day work week model. Some experts think this kind of work model improves performance while working more (60 hour weeks) hurts productivity. Time will tell if more companies follow Carson’s model – if he can even sustain it with his companies. The first step is to try. Three cheers to Ryan Carson for remembering that life is not all work.
Is it fair that workers are producing more wealth for their employer and not seeing a share of that wealth? Writing in Daily Kos, Meteor Blades reports on some alarming data from the Department of Labor. Productivity is increasing at an annual rate of 3% while labor costs are down and wages are stagnant. Blades does a great job of historical analysis, showing that wages began to contract long before the “Great Recession” of 2008.
This sad story is another reason why workers need to be in a constant job search. If your current employer is asking for more and not rewarding you, it’s time to test the market. For many workers, that will be the only way to get a significant raise.
Huffington Post offers a great chart that contrasts the minimum wage and productivity since 1947. The picture is stunning. The poorest working people tread water while they contribute to consistent increased productivity. According to the article, a minimum wage that kept up with productivity would be $21.72 per hour. Instead, it remains at $7.25.
Where does the extra value poor working have produced go? Maybe we should ask the billionaires.
I was listening to Ed Schultz’s radio show today, which included an interview with the great union leader Leo Gerard, President of the United Steelworkers, who asked this question: Why do CEOs and executives get the security of contracts? A small faction of unionized employees have such security, but that piece of the labor pie gets smaller every day. The best paid employees – the executives – are also the most secure.
Corporations now specialize in transferring risk from the company and executives to workers. I met with a client today who drives a small truck. His company is being put out of business by competitors that require drivers to purchase their trucks and routes, which is a method FedEx uses for some of its vehicles. When the company is no longer responsible for the vehicle, it can cut its price while increasing its profit. The company wins, so does it customer. Who loses? The employee who now has to own the truck, maintain the vehicle, and eventually replace it.
This example is just one way that workers are carrying the burden of “productivity.” The more a company can ask of its workers: own the vehicle, own your tools, pay for your entire pension, pay for most of your health care; the more it can take as profit. Those who believe in the “free market” will argue that these business models would be impossible if workers did not accept the terms. I think a more accurate way of describing this situation would be that desperate people will make bad choices. Those bad choices will cause all of us to suffer. First we will pay more to support social programs accessed by low wage workers. The next step will be much worse. What happens when wages fall so low that the shrinking middle class can’t subsidize the system that pushes money up? Our lives will be very ugly.
We need a system that offers real security as well as the opportunity for reasonable profit. Our current system is out of balance, asking the least of those who have the most, setting up a system where those who are most secure are getting even more security.
The best way to kill a lie is to catch it early and call it out. This is exactly what Laura Clawson does in today’s Daily Kos. Experts and pundits are claiming the unemployment rate is high because workers lack skills needed to fill open jobs. Clawson look at the numbers and finds something very different. Employers are recruiting workers less intensely than they did before the recession. She also tests the claim that there are not skilled workers needed to fill open positions. Again, the lie is blaming the workers.
Why might employers want to leave positions unfilled? It’s more profitable to squeeze every ounce of productivity out of existing staff. A client recently told me that a leading retailer is going to cut all of its store managers and shift that duty to people who are currently assistant managers without giving them the title or salary of store manager. Sooner or later, this kind of corporate “strategy” will boomerang. Don’t listen to the lie. Don’t blame the workers.
PS: No Sabbath this week. I’ve been busy and dealing with a minor health issue.
Paul Krugman has posted two very disturbing blogs on wages. In one, he demonstrates that median earnings for full-time male employees have been flat since the 1970s. How do people compensate for inflation? Krugman answers this question with a second graph that shows rising levels of debt from the 1980s-2010. In his second post, Krugman contrasts a steady growth in productivity over 40 years with a flat line for hourly compensation since the 1970s. If this graph is accurate, who benefited from the increase in productivity? It wasn’t hourly workers.
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