UNCOMMON SENSE 20 © March 1998
by Chris Tilly, Professor of Regional Economic and Social Development, University of Massachusetts at Lowell, and member of the editorial collective, Dollars and Sense
Our economy has expanded steadily, if unevenly, since the recession of 1990-91. But how are we to evaluate such economic growth? Two important questions to ask are these:
As we track the economy from one boom to the next, does each successive boom leave us better off than the one before?
Are we better off today than our parents were at our age twenty-five or thirty years ago? For the average American, the answer to both questions is “no.” How can we track the lost ground? There are many different ways, but perhaps the most informative is a look at the deteriorating quality of jobs.
Seven dimensions of job quality
Twenty-five years ago, we thought we knew the difference between good and bad jobs. Good jobs were well-paid, secure, and connected to paths of upward mobility. Bad jobs were low-paid, unstable, and dead-end. In the optimism about economic growth of the postwar era, bad jobs were peripheral and in the process of being swept away by economic progress.
This picture of good and bad jobs has been altered in three ways. First, people place more value on issues such as autonomy and fulfillment on the job, and on balancing work and family, reducing the dominance of bread and butter issues such as wage levels. Second, the business press and some scholars have challenged the notion that a good job is a stable one, proposing instead that good jobs are stops–often quite short ones–in an upward career trajectory. Third, and most important, bad jobs can no longer be described as vestigial. They form a central, and by many measures, growing portion of employment in the United States.
No single measure of job quality tells us all we want to know about jobs. So let’s take a quick look at seven aspects of job quality: wages, fringe benefits, due process in discipline, hours flexibility, permanence, upward mobility, and control over the work process. If we go through this checklist, the news is not exclusively bad, but it is so overwhelmingly bad that it leaves little doubt that jobs are getting worse.
Wages. After controlling for inflation, workers’ average hourly wage fell by 13 percent between 1973 and 1996. This marks a dramatic reversal: for every year between 1959 and 1973, the real wage rose, during recession and expansion alike.1 Despite the current expansion, average hourly pay is still not back to its pre-recession level. The declining average wage tells only part of the bad news, because earnings inequality also increased dramatically. The great irony is that this wage loss took place at a time of increasing skill levels. Thus, an apparent paradox: income gaps between workers with low and high levels of education widened dramatically even as the workforce as a whole failed to gain a payoff from its increased educational attainment and skill. Minority workers’ education increased as well: in fact, blacks narrowed the education gap with whites, but experienced a widening pay gap. For women workers, pay equity is still an urgent issue, with nearly one-third of respondents to an AFL-CIO survey reporting that their job does not pay equal wages for equal work.2
Fringe benefits. In response to alarm about falling real wages, some observers argue that the wage is simply the wrong measure of pay. They point out that although real (inflation-adjusted) wages fell while productivity (output per worker) rose, real compensation has tracked productivity much more closely. Compensation, which includes fringe benefits, has been growing faster than wages.3 However, including benefits is not as comforting as it first appears. For one thing, US productivity growth (and therefore a major source of compensation growth), lags behind that of other industrialized countries. Even more troubling, the rise in the value of fringe benefits over the last 20 years is driven primarily by the sharp rise in the cost of health care. This generates another paradox: though a growing share of compensation is devoted to health insurance, a declining share of the working population is covered by employer-provided health insurance, as well as other fringe benefits.
Due process. Due process refers to protection from arbitrary punishment. Because we think of due process as protection from government action, we have largely surrendered the right to protection from arbitrary action by employers–particularly regarding unfair firing. What resources existed against unjust dismissal have largely evaporated. Early laws restricting firing were overturned by court decisions in the 19th century. Union coverage, which peaked at one-third of the work force in the 1950s, provided an alternate source of protection. But by 1996, the percentage of workers represented by unions had dwindled to 16 percent (and only 11 percent in the private sector),4 so union-enforced guarantees of due process have become increasingly scarce.
From the 1970s onward, there has been a growth of state-level case law barring “wrongful discharge” by employers. While this might appear to take the place of shrinking union protection, so far it has the character of a lottery–yielding a few large settlements but no consistent protection.
Hours flexibility. People are primarily flexing to meet the demands of business, not to please themselves. Adults are working more hours; in particular, families are contributing more labor force hours, due to increased paid work by women. As for the growth of “flexible” forms of employment, this marks a decline rather than a rise in job quality, since growing numbers of workers are stuck in part-time and temporary work against their will. And they typically receive few benefits and lower pay than others doing the same work.
Job permanence. Are jobs becoming less permanent? Yes and no. Jobs are becoming less permanent for men, particularly older men, and more permanent for women. When these changes are combined, the net effect is no detectable trend. However, this does not necessarily imply that the changes are benign. Womenôs growing job tenure probably results from the fact that women are now more likely to choose to stay at jobs rather than quit. This may reflect their greater attachment to the labor force, and not that there are more permanent jobs. In fact, menôs declining job tenure tells us that permanent jobs are becoming less available. Employers are now more likely to lay off or fire workers or shut down.
Is the shortening of job duration a bad thing? Some in the business press have argued that frequent job changes facilitate ongoing learning and advancement, and that rather than viewing shorter tenure as a setback, it should simply be seen as a change in the patterns and rules of job-holding. But one survey that asked workers to rate job quality found that a 10 percent increase in the expected risk of job loss in the next two years reduces their job’s rating as much as a 10 percent pay cut! And though the earnings penalty associated with changes due to job loss was lower in the 1980s than in the 1970s, it remained a penalty. While some fast-track workers are using more frequent job changes to advance, most workers experience shorter-term employment as a reduction in job satisfaction. Also, changing jobs often means loss or reduction of benefits such as pension rights.
Mobility. Closely related to the issue of permanence is the question of mobility over time. Good jobs presumably offer upward mobility. The fate of average wages, described earlier, does not necessarily tell us about the earnings trajectories of individuals over time. But in fact, the story is quite similar. Economy-wide, downward mobility has become markedly more common. The possibilities of upward mobility with a particular employer have contracted and the opportunities for ascent via movement from job to job have not offset this contraction.
Control over the work process. Workers value control over the work process highly. Perhaps the most compelling claim about recent workplace changes is that they have indeed empowered workers. How valid is this claim? Surveys show a rapid spread of reported “high-performance” work practices, but these results are difficult to interpret in terms of actual worker empowerment. We know from case studies that some companies are actually expanding worker control over the work process, but that many companies claiming to embrace high-performance principles have not loosened management’s dictatorship.
Summing up, jobs in the United States have definitely gotten worse over the past two or three decades. Real wages have fallen, and fringe benefits and due process have become less widely available. Small advances in family-friendly schedule flexibility have been overwhelmed by unwelcome schedule constraints imposed by employers. More frequent job changes and a shift from within-company to between-company mobility represent new opportunities for some, but translate into less favorable wage trajectories for the average worker.
High-performance work practices, finally, may hold the seeds of long-term improvements in job quality, but they have not yet demonstrated that potential. Indeed, it is not yet clear these seeds can take root as long as other trends in job quality continue to undermine worker security and commitment.
Why, and what to do about it.
This deterioration of job quality generally reflects the reduced power of workers relative to employers. Three areas of economic change have contributed this trend. The first is increased competition. Globalization is one source of heightened competitiveness. Deregulation, accelerated technological change, and the greater focus on short-term profits by corporate mangers and shareholders all contribute to this rise in competitiveness as well, opening new industries to competition. The second major change is faster technological change itself. Besides creating new areas of competition, for example, a wide range of telecommunications media, technological change has spurred worker displacement and job redefinition.
Underlying several of these trends is a reality of the job market in the United States: its chronic failure to provide jobs for all who want them, even poor jobs. Studies have shown that even in the best of times, there are several job seekers for every job. Despite its recent fall, unemployment in recent decades has been extensive,5 and an important source of weakened unions. And government itself helped create an atmosphere in which union-busting became respectable.
Like the United States, the rest of the industrialized world has experienced these changes in technology and increased global competitiveness (and, to a lesser extent, other escalation in competitive pressure). But despite significant stress on their industrial systems, including higher unemployment rates, in no other country have workers experienced the kind of collapse in job quality and surge in inequality experienced by US workers. Explaining this difference is the third factor: US businesses have, for the most part, responded to new competitive pressures by holding down wages rather by than enhancing quality. Their political supporters have extended this logic to government, weakening or dismantling many of the laws and regulations that protected workers from the full force of market pressures. For example, the value of the minimum wage was allowed to erode sharply, employers have violated collective bargaining rights with impunity, and sweatshops that operate under grossly unsafe conditions have proliferated.
To move away from our current path and back toward good jobs, these changes are particularly critical:
- government adoption of a full employment program which makes available a job at decent pay to all who want one;
- revitalization of the labor movement, the agent most invested in pressing a good job agenda;
- strengthened labor legislation and enforcement that ensure worker and union rights;
- promotion of true high-performance work organization;
- strengthened provisions designed to protect those at a disadvantage in the labor market, such as the minimum wage,6 gender pay equity, and anti-discrimination laws;
- a stronger, broader safety net of social benefits;
- increased investment in training;
- expanded work/family flexibility;
- reduced work hours, and income guarantees tied to a wide range of socially productive work.
Obviously, this agenda does not correspond to current economic and political priorities. Balanced budgets, tax cuts, and a devotion to the use of market-based decision-making do not leave room for such initiatives. Federal Reserve policy has mostly been to raise interest rates at every sign of potential wage increases. Neither is pressing corporations to improve conditions for their workers viewed as good market practice. But union and non-union workers alike should ask their elected officials what they plan to do to support this agenda. Community-labor coalitions have begun to win city-level “living wage” ordinances that set a minimum wage high enough to lift a family of four out of official poverty, and we should be asking our own municipality to adopt such a law. We need to join all those who have lost income or economic security and elders, low-income single mothers, artists, and others who face declines in badly-needed government assistance in asking this society if it truly realizes where its fascination with the economic law of the jungle is leading. We should be asking our employers what they can do to create better jobs–and forming unions to add clout to the question. We may not have all the answers, but asking the right questions about jobs in the US economy would be a big step in the right direction.
1. One result is that US workers have fallen behind those in other industrialized countries. Using a purchasing power parity standard for currency conversion [converting currencies based on the prices paid for a standard market basket of goods], US hourly compensation in 1992 lagged behind that in Germany, Belgium, and the Netherlands; US workers fell dead even with Italian workers (Freeman 1994, Table 1.2).
2. “Women @Work,” American@Work, Sept. 1997, p. 14.
3. For example, Herbert Stein, “A Primer on Pay and Productivity,” Wall Street Journal, 8/23/1995 .
4. Union membership in 1996 was 14.5 percent (10 percent in the private sector).
5. See Uncommon Sense # 4: “Employment Statistics: Let’s Tell the Whole Story.”
6. See Uncommon Sense #10: “Let’s Have an Adequate Minimum Wage.”
Editor: June Zaccone, Economics (Emer.), Hofstra University and Helen Lachs Ginsburg, Economics (Emer.), Brooklyn College, CUNY