Richard Florida’s recent piece in the FT, “America needs to make its bad jobs better,” presents a pretty interesting argument, one that a nation so focused on job creation might want to keep in mind. Florida points out, as plenty of others have before, that the sorts of service-sector jobs the U.S. is on track to create the most of in coming years—for home health aides, customer service workers, food preparers, retail sales clerks—don’t necessarily pay all that well, and certainly not as well as the manufacturing jobs they are replacing. Florida then argues that low pay isn’t necessarily inherent in these sorts of jobs, and that it is fully within our control to make them better:
It has happened before. [T]he blue-collar jobs we pine for were not always good jobs: we made them good jobs. When my father came back from the second world war, his poorly paid factory job had been transformed. He was able to buy a house, put his two sons through college and participate fully in the American dream. Some of this was due to the power of unions. Most of it was because of the enormous improvements in productivity wrought by improved technologies and management techniques. The same thing can and must happen in the service sector.
Since Florida’s opinion piece, a number of econobloggers, including Felix Salmon and Mark Thoma, have pointed out that even if the service-sector were to see a big boost in productivity, that wouldn’t necessarily translate into higher wages (or better benefits, etc). Historically, one has led to the other in the U.S., but that relationship started to break down in the early 1980s. Nowadays, gains from productivity are just as likely to feed an increase in manager or shareholder wealth.
There are a number of theories about why that is, but the big obvious one is the decline in unionization. Consider the following example, from Low-Wage Work in the Wealthy World, a book put out last earlier this year by the Russell Sage Foundation which uses case studies to show how the same jobs and economic pressures in different countries can lead to different qualities of life.
[I]n the United States and several European nations, wages and working conditions of front-line workers in meat processing plants are deteriorating as large retailers put severe pressure on prices, and firms respond by employing low-wage immigrant labor. But in Denmark, where unions are strong, and, to a lesser extent, in France, where the statutory minimum wage is high, the low-wage path is blocked, and firms have opted instead to invest more heavily in automation to raise productivity, improve product quality, and sustain higher wages.
Now, unions are far from perfect, even if the goal is to preserve higher pay. As the Russell Sage book points out, heavy unionization hasn’t done much for motel maids in Europe. And of course it is possible to get to a higher quality of job with no union involvement. Florida holds up the grocery chain Trader Joe’s and its policy of paying full-time workers at least their community’s median household income. Another example: people who work at Starbucks get health insurance simply because the company’s CEO thinks it’s the right thing to do.
The bigger point, then, is to recognize the importance of outside influences on companies—whether that means unions or Howard Schultz’s conscience. In the job-creation debate, companies are often talked about as if they already contain jobs and will produce them if just squeezed hard enough. The truth, of course, is that jobs are created when aggregate demand rises, something that comes from outside the company.
In the same way, the quality-job-creation debate often only addresses the decisions and values within a particular company or industry. If only the service sector were more productive, wages would rise. If only Wal-Mart weren’t so mercenary, fewer of its employees would have to turn to Medicaid for health coverage. Those things might very well be true. But it might also be true that we’d get better service jobs if Americans cared more about the quality of the things they buy and less about the quantity. If socks were three times as expensive, then they wouldn’t be nearly as disposable, and maybe it would be worth paying for a sales clerk who could intelligently talk to customers about the differences between brands. Alternatively, maybe we would get better service jobs if institutional investors who own shares in retail and other service corporations didn’t demand to see earnings grow each and every quarter.
I’m not saying that changing America’s shopping or stock-holding mentality is the right path, or even a possible one, but the example should at least serve to remind us that companies are responding to a whole host of forces when they decide to pay their workers at a particular level.