employment

The Wages and Productivity Debate

/ The Old Crank

Interesting post here by James Tankersley on a study conducted by James Sherk, a senior policy analyst at the Heritage Foundation on the perceived wage/productivity gap. Sherk argues that total compensation (not just wages), if properly adjusted for inflation, has actually kept pace with productivity over the last 40 years, even wages have haven’t grown much since the 1970s.

Sherk argues that you have to take into account the growing share of compensation going to health care benefits—not just wages—and then makes some seemingly valid adjustments to the way productivity is measured and how inflation should be tracked for real wages and output. This results in what appears to be a much smaller gap between productivity and pay.

Tankersley writes:

The real problem, [Sherk] says, is that far too many workers are stuck in low-productivity jobs, particularly in the health-care sector; he argues policymakers should be focused on helping those workers gain more skills and move into more productive sectors — specifically, by looking for ways to reduce the cost and increase the accessibility of higher education. (my emphasis)

According to Tankersley, Sherk blames market forces for pushing lower-skilled workers into low-productivity jobs: “If those workers could more easily and cheaply gain more skills — say, through widely available, low-cost online education — they could compete for higher-productivity jobs.”

But this points again to an issue I’ve never been able to figure out (actually two issues, but I’m going to put aside my question about how to best measure productivity among health care workers*):

If everyone currently in a low-skilled/low pay job was to gain the skills they need to move out of those jobs and into a better one (this assumes, of course, that enough of those better jobs are actually out there), in most cases we’ll still need people to do those low-skilled jobs. This is particularly true in the health care sector that Sherk cites here, where the demand for low-skilled workers, like home health aids, is pretty high. Training people out of low-skilled jobs doesn’t eliminate the low-skilled jobs. I just think at some point you’ve got to address wages at the low end even as we expand education and training opportunities for those workers. (And as I’ve argued before, raising wages probably increases the likelihood that people in those low skilled jobs can take advantage of the education and training opportunities that are available.)

Anyway, for those who find Sherk’s research compelling, I’d suggest checking out Dean Baker’s response to Tankersley’s post, in which he essentially agrees that, yes, the problem has been not so much a wage/productivity gap, but an “upward redistribution from middle and lower income workers to those at the top, doctors, lawyers, and especially Wall Street types and CEOs.” He also argues that a wage/productivity gap does appear to have emerged in the years since the crash.

None of this suggests that low wages aren’t a problem. There’s some really good data, for example, in this post by Janelle Jones and John Schmitt at CEPR that shows how the minimum wage has lagged behind inflation. And in this post, Felix Salmon makes about as cogent argument in favor of raising the minimum wage I’ve ever read. His point about how the government essentially subsidizes companies that pay lousy wages is a good one, especially in light of the living wage controversy here in the District.

*I’m also ignoring Sherk’s obligatory plug for online learning.

Sequestration Quote of the Day

/ The Old Crank

“Austerity, including sequestration, is the economic version of medieval leeching.”

—Jared Bernstein, in a New York Times op-ed from May 3rd

In which case, we might as well just go ahead and appoint this guy to run the federal reserve.

By the way, Bernstein’s ideas about how to stimulate more job growth in the U.S. are worth reading if you are interested in such things. He’s following up with some Q&A’s on the subject over at his blog, starting with this post.

The Minimum Wage and Skills

/ The Old Crank / 1 Comment

Good article here on Chicago’s “Fight for $15” campaign, a push to boost Illinois’ minimum wage, which has been stuck at $8.25 since 2009. As noted in the piece, there has been a bit of a surge in these types of campaigns in recent months:

Wednesday’s action came just weeks after hundreds of fast-food workers walked off their jobs in New York City, also in a push for higher wages. Late last year, Wal-Mart workers in select cities staged protests, seeking higher wages and benefits as well as pushing back against the retailer’s decision to open on Thanksgiving.

The protests have been gaining steam in the fast-food and retail sectors — which have generated the most jobs since the recession, labor experts said, but are among the lowest paid.

A study last year by the National Employment Law Project, an advocacy group, found that most of the jobs gained since the early 2010 — 58 percent — paid $12 an hour or less. (my emphasis)

Many advocates point to education and training as the best way to move people out of low-wage jobs and into careers that command a living wage—and, ideally, a middle class income. But that argument doesn’t attempt to address the problem of stagnant wage growth in the low wage/low-skill jobs they hope to move people out of. And no matter how much we invest in adult education and training, we’re still going to be looking at considerable  growth in these kinds of jobs for the foreseeable future (not just retail and food preparation jobs, but other low-skill, low-wage jobs, like child care)—jobs that presumably we’re still going to want someone to perform (and most of which can’t be outsourced to other countries).

The argument for investing in education and skills also rests on the notion of a skills gap: that there’s a large mismatch between available jobs and the skills of the workforce. A couple of years ago, Jared Bernstein made what I still think is the best and most succinct argument as to why recent economic data doesn’t support this notion, at least in terms of educational attainment. (In a nutshell: if it were true, we’d be seeing an accelerating wage/salary premium for workers with higher levels of education.) At the same time, he argued:

I still think we’d have a better economy/society with higher levels of educational attainment…I’m quite certain, in fact. It’s wrong to think that the jobs of the future all will demand wicked high skill sets—we’re going to need lots of home health aides, cashiers, security guards, equipment technicians, child care workers, along with high-end engineers. But to have smarter, better educated people in all of those jobs makes all the sense in the world.

In other words, supporting education and training for all workers at all levels makes good economic sense, whether you accept the skills gap argument or not. But, again, that doesn’t address the problem that, currently, many low-skill jobs don’t pay enough for people to live on, and there’s little incentive (or opportunity) for someone to become a better trained or better educated cashier, for example, if wages for that line of work are stuck at a level that keeps them in poverty or close to it. At the same time, there doesn’t appear to be an incentive for employers to pay more for employees at this level, whatever their skills are.

Maybe there is a better way to address this problem that does not involve boosting the minimum wage (or even better, passing living wage laws), but if I were suddenly made the all-powerful Grand Poobah of economic policy in this country (this would be in an alternative universe where actual experience in—or knowledge of—economic policy was not a prerequisite), I think the first thing I’d push for is to just give everyone making less than $10/hour or less a raise to $15/hour—and then see what happens.

Here’s what I think might happen: obviously, minimum-wage workers and their families would be better off right away, but I assume that the boost in wages would also have a stimulative effect on the economy as a whole, too (thus leading to more job creation), because even with that raise, people making just $15/hour are going to be putting most of those dollars back into the economy.

I also suspect that demand for adult education and training would actually go up, despite the fact that minimum-wage workers would presumably be happier in their low-skill jobs. Even a large minimum-wage boost is not going to make people rich, so I don’t see how it would kill off the incentive to pursue education and training for a career in a field where the pay is even better. What it would do is provide more people with the time (fewer people working two jobs) and the economic security (fewer people worried about where the next rent check is going to come from) to successfully pursue those opportunities. I’ve had a pet theory for some time that the best way to boost adult education enrollment and retention rates in any community would be to pass a living wage law and provide universal child care.

(By the way, I’m not convinced that small business owners are standing in the way of raising the minimum wage. In a recent poll conducted by the Small Business Majority, more than two-thirds of small business owners said they supported it.)

Again, in education circles we tend to think of education as the primary policy lever for moving low-skill, low-wage workers into a position where they can command a higher wage, but stagnant wages and growing inequality is an issue that education alone is not going to solve.

Can a TFA-Style Program for Lawyers Succeed?

/ The Old Crank / 1 Comment

A lawyer version of something like Teach for America is an interesting idea, but it seems to me to be more about addressing the poor employment prospects for graduating law students than about coming up with a long-term solution to the lack of affordable legal services for low- and moderate income people. If the law profession bounces back somewhat (or if the supply of lawyers starts to decline, which is likely), I wonder if enough law school graduates will still find these programs attractive.

Putting aside whatever else you think of Teach for America, if you are a young person interested in a career in education policy, TFA is increasingly becoming a ticket to the cool kids table. Even if you are heading somewhere else in your career post-TFA, there’s a substantial job market value in having TFA experience on  your resume, and I don’t think it’s unfair to say that this is a prime motivator for many of the high achievers coming out college who apply. For something like Lawyers for America or similar programs to succeed long-term, I wonder if they’ll eventually have to build up a similar level of cachet among elites so that even those not considering careers in public interest law or legal services for the poor will see value in the experience. And for those who are considering public interest law or legal services, whether they will actually be able to make a career of it.