wages

Links of note 9/14/2016

/ The Old Crank

U.S. Household Income Grew 5.2 Percent in 2015, Breaking Pattern of Stagnation [New York Times]
White House trumpeting these three takeaways: (1) median household income in 2015 up 5.2 percent from the previous year — the largest single-year increase since record-keeping began in 1967; (2) about three and a half million people moved out of poverty since last year—the largest one-year drop in poverty since 1968; and (3) the uninsured rate is the lowest since they began keeping records. The Times article emphasizes those points, but notes that median household income is still 1.6 percent lower than in 2007, adjusting for inflation, and 2.4 percent lower than the peak reached during the late 1990s. The Times also notes that the income gains “came mostly from job growth rather than wage growth. More people are working, but many of them are still struggling to maintain their standard of living.”

Related articles:

Goldman Sachs Isn’t That Worried About Technology Destroying Your Job [Bloomberg]
“[W]orkers are already responding to the new employment landscape by taking on “adaptive occupations” that are better insulated from the rise of the machines. Such occupations include nurses and web developers but can also extend to more traditional vocations such as carpenters, plumbers, and tailors.”

It’s Complicated

/ The Old Crank

The Wall Street Journal reported yesterday that while manufacturing has experienced some modest job growth lately, manufacturers are struggling to fill their open jobs. The story notes that the number of open manufacturing jobs has steadily risen since 2009, and that openings in manufacturing are at their highest level in 15 years.

I’m always a little suspicious, though, when anyone starts the ticker in 2009, which was when we were in the middle of one the worst recessions in history. Pretty much everything looks better if you start in 2009. It’s worth pulling the data from further back in time to get a better a better perspective on this recent growth:

Job Openings - Manufacturing, as of June 2016

Total U.S. Job Openings, Manufacturing, Dec. 2000 – Jun. 2016 (In thousands, seasonally adjusted). Source: Bureau of Labor Statistics

Here you can see that, yes, manufacturing job openings have rebounded since 2009, although they really had nowhere to go but up. In fact, they’ve climbed back to just about where they were in 2006. (We hit a high of 396,000 openings in April of that year, and there were 397,00 openings in April of this year.) So actually they are possibly at their highest levels in ten years, not fifteen.

But equally important is just how many more openings there were 15 years ago, if that’s what you count as your high-water mark (the BLS data only goes back as far as December of 2000). In January of 2001, there were an estimated 496,000 open jobs in manufacturing—100,000 more than there are today.

The second thing that I think is worth pointing out is that while job openings in manufacturing have been on the rise recently, employment in manufacturing has been on the decline for decades, and I don’t think anyone sees it coming back to where it was a few decades ago. Here’s another chart from the BLS showing the number of people employed in the manufacturing sectors since 1979:

Manufacturing Employment Trends

All Employees, Manufacturing, Dec. 2000 – Jun. 2016. (In thousands, seasonally adjusted). Source: Bureau of Labor Statistics

In this instance, the BLS data goes back to the 1930s, but I started at 1979 because this is the high-water mark for manufacturing employment in this country. (And remember, there were fewer people in the labor force back then, and, well, fewer people, period, so the percentage of people working in the sector was much higher than today.) But you can see that manufacturing jobs started rapidly disappearing in the 2000s, and really cratered during the Great Recession. So the sector has come back a little bit, but it’s nowhere near where it once was.

Executives told the Journal that the reason that jobs are going unfilled is because they can’t find workers with the skills to run the advanced machinery these companies have invested in. (The machinery that in many cases allowed them to lay off all of their lower-skilled workers to begin with.) But let’s say that  we did give all those lower skilled factory workers who got laid off over the last 15 years the skills employers say they need—I think it’s unlikely, looking at the chart above, that the sector is would produce enough new jobs in the foreseeable future to hire them all back again.

(Let’s table, for the purposes of this discussion, the argument as to whether, in certain cases, employers have a moral responsibility to do more than just hang up a “Help Wanted” sign and hope for the best in those communities that were hit hard when all that advanced machinery enabled them to cut a bunch of jobs. Some might argue that these employers ought to stop complaining and invest in what is needed to skill up those folks for these new openings. I’ll let you make up your own minds about that.)

It’s also worth noting—again—that there are those who study this stuff who argue that the skills gap in manufacturing  is overblown. I’m reminded also, of this paper, published a few years ago by the Federal Reserve Bank of Boston, which found that as a result of the Great Recession and the high unemployment rate that followed, employers simply got used to being able to hire workers with relatively high skills at a fairly low wage, a trend the study authors called “opportunistic upskilling.” Once the labor market tightened up again, hiring and retaining a workforce of higher-skilled people across the board was clearly going to be more challenging. They expected employers to adjust, by either lowering their skill requirements for some of these jobs or by raising wages. Those unwilling to do so would find that the average time to fill a position would grow longer. I have no idea if that is what’s going on at some of the companies highlighted in this article—but it could be!

The point of all of this is—it’s complicated. I don’t have any doubt that many manufacturing jobs require more advanced skills than they did a decade or two ago, but a reluctance by employers to raise wages, or to look at lowering the skill requirement for some jobs (and/or investing in more training on the job) may also be factors.

Why do I care about this? Well, because from a workforce training/adult education perspective, I want know with as much precision as I can what the actual employment trends are in order to figure out what the actual need for training really is, and whether there are other things we need to look at in order to get people into (or back into) a job.

Shifting Corporate Attitudes

/ The Old Crank

One of the problems with the minimum wage debate (whether to raise it, by how much, what will the effects be on hiring, etc.) is that it pushes this much more fundamental issue into the background. I don’t personally understand why it’s not a given that it’s immoral to pay your employees so little that they can’t afford to eat, and why this is not a major topic of public discussion.

But I also think we have to deal with the fact that that’s apparently where we are.

Cappelli’s argument is focused on wages, but it seems to me that the shift he describes is reflected in corporate attitudes towards employee education and training as well. Corporations increasingly don’t see this as their problem. Likewise, Cappelli contends that corporations’ former sense of obligation to pay employees a decent wage had both strategic and altruistic motivations, and I think that was probably true about training as well. But whatever altruistic motivation there was behind some corporate training investments in the old days has all but disappeared. Corporate leadership today more typically looks at training exclusively in terms of return on investment back to the corporation.

You can be morally outraged by all this—or not—but either way, it does have an impact on policy. What is the role of government in an environment where corporations see less of a moral obligation to their employees—not just in terms of wages, but in terms of supporting the education and training needs of our workforce?

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.