Good jobs

Good jobs provide decent wages, decent working conditions, and good benefits.  Bad jobs don’t.  These things tend to be correlated– you don’t get a job that provides great benefits and terrible wages and terrible working conditions.  Minimum wage jobs are generally not great along any dimension.

There’s been a lot of talk lately about minimum wage jobs and income inequality.  What is our responsibility towards the poor?  What is McDonald’s responsibility?  Should taxpayers subsidize low wage jobs so people can live on what they’re making?  Why are people working at low wage jobs for decades and not being promoted to a living wage?  Why is the median age of a fast food worker in the late 20s, and for women in the early 30s?

Some of the problem is structural.  The United States is rapidly becoming polarized.  Income inequality is growing.  It really is true that the middle class is vanishing.  Instead of a good amount of medium-skill middle-income jobs, the country is being divided into low-wage low-skill jobs and high-wage high-skill jobs.

I present for you a fascinating and depressing article on the topic:

The Growth of Low-Skill Service Jobs and the Polarization of the US Labor Market
David H. Autor and David Dorn
We offer a unified analysis of the growth of low-skill service occupations between 1980 and 2005 and the concurrent polarization of US employment and wages. We hypothesize that polarization stems from the interaction between consumer preferences, which favor variety over specialization, and the falling cost of automating routine, codifiable job tasks. Applying a spatial equilibrium model, we corroborate four implications of this hypothesis. Local labor markets that specialized in routine tasks differentially adopted information technology, reallocated low-skill labor into service occupations (employment polarization), experienced earnings growth at the tails of the distribution (wage polarization), and received inflows of skilled labor.

We also hear a lot about job creation and how important it is to support small businesses and small entrepreneurs.  But what kinds of jobs are these small businesses creating?

Quality over Quantity: Reexamining the Link between Entrepreneurship and Job Creation

By Adam Seth Litwin and Phillip H. Phan

Although much has been written on the quantity of jobs created by entrepreneurs, scholars have yet to examine the quality of these jobs. In this article, the authors begin to address this important issue by examining nearly 5,000 businesses that began operations in 2004. They investigate the extent to which nascent employers provide what many think of as quality jobs—those offering health care coverage and a retirement plan. The authors find that because of small scale, constrained resources, and protection from institutional pressures, start-up companies do not provide their employees with either of these proxies for job quality, and their likelihood of offering health or retirement benefits increases only marginally over their first six years of operation. The finding that entrepreneurs’ impressive record of job creation is not matched by a similarly impressive outcome with respect to job quality challenges policymakers to ensure that entrepreneurs are encouraged to create quality employment opportunities in the course of creating new businesses.

On the whole, not very good ones.

But it isn’t the invisible hand that’s creating this income inequality all by itself.  The government can subsidize poor people directly, allowing companies to continue to exploit cheap labor (or it can let those people and their children starve, as Fox News seems to be encouraging–something that will eventually lead to riots in the short term and lower productivity in the long term).  Or the government can change its policies to stop promoting income inequality.  It can go back to many of the big Nixon- and Johnson- era policies that helped promote a growing middle-class.  So that people don’t work at McDonald’s at minimum wage for decades unless that is truly all that they’re capable of doing.

28 Responses to “Good jobs”

  1. Liz Says:

    Slightly tangential: an old boss of mine (PhD in political philosophy, and an administrator at SLAC) observed that part of this income polarization has to do with selection of spouses. As he put it, CEOs are no longer marrying their secretaries, but other CEO-types; and similarly, doctors are marrying lawyers rather than nurses or SAHMs (etc. ad infinitum) – not all the time, obviously, but with increasing frequency. Thus a two-home income is either two low-wage earners or two high-wage earners, instead of one high wage plus one low/no wage. I have no way of verifying this, but thought it was interesting, at least.

    • rented life Says:

      That’s interesting. I’ve noticed I married “below” my class level, where most of the people in our age range married across, as you’re stating. While it’s never bothered me, it was hard for him for a long time because people treated him as lesser than. Maybe some of the reason people marry across is because we view marrying “down” with more scorn?

      • hush Says:

        I think people “marry across” because there are about an equal number of women and men these days in college, graduate and professional school (hooray to that!), and I know a ton of people who met their spouses either there, or in their first job.

    • nicoleandmaggie Says:

      Elizabeth Warren talks about this some in her books.

  2. Cloud Says:

    What about the option of having a higher minimum wage and government subsidized health care and retirement? You know, like a lot of other countries do. I hear a lot about how our system makes us more dynamic, but is it really the “low minimum wage, low safety net” part that does that? Or is it the “easy to hire and fire” part? I can live with the easy to hire and fire part, but hate the way we think it is OK to pay front line workers peanuts while the CEO and other top management make multimillion dollar salaries. Could they get by on just $1 million and pay their workers better, and everyone would be OK? I have no idea how we’d change to such a system, but wonder if that would be a more desirable one.

    • Liz Says:

      I personally prefer the idea of a wage CAP, not a wage minimum. So for any given company, the highest-paid worker cannot make X times more than the lowest-paid worker. (In my fantasy scheme, this would be determined in hourly amounts and in consideration of benefits, bonuses, and other forms of compensation.)

      • Scooze Says:

        If there was a wage cap, then there would presumably be more profit in the organization. That profit would then be distributed to shareholders. How does this help the income inequality problem? Extra profits almost never materialize in higher salaries for the lowest paid employees. If it happened that way, then McDonalds would already be paying a living wage with their 21% profit margin.

      • Liz Says:

        This assumes an organization is publicly traded – not all are. It also assumes that standard wage-earners could not somehow invest in their publicly-traded parent companies, and that these wage-earners’ retirement/investment accounts would not benefit from the greater profit-distributions. Other than these two observations, I really can’t answer your question, Scooze.

      • nicoleandmaggie Says:

        Note that only “good” jobs tend to have retirement/investment accounts attached to them. Lower income folks rely completely on social security (or SSI) in retirement.

      • Scooze Says:

        Well it doesn’t really matter whether a firm is private or publicly traded – any extra profits go into the hands of the owners. In the case of a private firm that would be the founder/investors, etc. Either way, there is no incentive to pay higher wages just because a firm becomes more profitable.

        As for the suggestion that the lowest-paid employees have the right to buy shares of profitable firms (ie – its a free country), and thus become owners themselves, that is true. But given that the income gap is widening and the lowest-paid employees are getting less and less, it seems highly unlikely that they would have the money to do so. At least not in any significant way.

    • bogart Says:

      Seems to me that what Cloud describes also gets us a lot closer to “equal pay for equal work,” as the rules about benefits, when they are available at all, produce stark step functions. I earn a lot more, averaged per hour, if I am working 30 hours per week where I work (which is the cutoff here for benefits, unusually generous in the US) versus 29, because I suddenly qualify for a ton of benefits (of course I am aware of these rules and plan accordingly — but also, I’m able to, that is, I’m in a circumstance where I can and where my employer wants me to work 30 hours per week or more so I can qualify for benefits, versus only having the option of working part time or not even that). If fewer benefits were employer-provided, perhaps this would be less of an issue? Or, we could “just” make all benefits proportional to workload, so that if I work e.g. 15 hours/week I get 3/8ths of the benefits of someone working 40 hours/week.

      • First Gen American Says:

        My mom made minimum wage at the factory she worked at and she had better health benefits than I did (but I think that was partly regional..she lived in a city where there was good healthcare and lots of competition and I was in a more rural location.)

        When I worked in fast food, there were very few full time employees there because of the benefits issue. Plenty of people who were there wanted to work full time, but the company didn’t want to give out benefits so they doubled the staff and had almost all part time employees. The only full timers were the supervisors and managers. The irony is that many of these institutions tout their benefits packages as a reason for being a good place to work, but make them nearly impossible to qualify for.

        I also think that a woman’s ability to get high paying jobs is fueling some of the wage gap between the 1% and the very poor. I’m in a well paid field, as is my husband. From looking around me, it does seem that it’s more common to hook up with people in similar fields just because that’s who’s around you when you’re on the hunt for a mate. A generation ago, there weren’t too many couples like us. Now it’s pretty standard.

  3. chacha1 Says:

    I am not an economic historian, but would love to hear from someone who is … because my reading of western history (meaning Europe, England & America) is that a large & growing middle class is an artifact of the mid-20th-century and hasn’t really existed at any other time. It used to be manual laborers (largest proportion), professionals and business owners (much smaller proportion), investor/landowners (smallest by far). This is not to say that this is a “natural” state of affairs, but I think historically we don’t have much to work with as to equitable income distribution.

    From a different angle … the conflation of The Stock Market with The Economy is, in my non-economic-professional mind, the single biggest reason for the current trend toward increased income inequality. Public companies are motivated by shareholder profit above every other consideration, and that is why we have egregious executive pay packages, misdirected R&D, enormous wage gaps, stock-price manipulation, calculated bankruptcies (e.g. Hostess) etc.

    We cannot “solve” the minimum-wage/benefits issue unless the ethos of corporate governance is completely reconfigured. In the US, taxpayers are *already* subsidizing low-wage jobs through Medicaid, food stamps, etc.; corporations have no motivation to address these things because the social safety net keeps the pitchfork-wielding mob away from their gates.

    • nicoleandmaggie Says:

      Your history is right, at least in terms of modern times (I can’t speak to how things were say, prior to farming). But I like to think that the natural state of affairs isn’t necessarily what we should be aiming for.

      Laws affecting corporations absolutely have effects on income inequality. We cannot just look at welfare for workers without looking at the laws that govern corporate welfare and governance. Those are often invisible in these discussions.

  4. Chelsea Says:

    Interesting point about government subsidies to poor people partially contributing to the problem of companies not paying their employees a living wage. I hadn’t thought about that before.

  5. nicoleandmaggie Says:

    Great discussion! I’m tagging this one debatable. We’re really enjoying your insights– please continue. :)

  6. Scooze Says:

    I have been meaning to watch a documentary called “Inequality for All”, featuring Robert Reich. Anyone seen it? I think this is exactly the type of discussion in the movie.

  7. Sarabeth Says:

    I question the use of health care and retirement plans as proxies for good jobs. Providing those benefits is more expensive on a per-employee basis for a small company than a large one (this was particularly true for health care until the ACA was passed – small businesses did not benefit from the risk-pooling that allowed larger businesses to access decently affordable plans). In my experience of the Silicon Valley startup world, many small companies were not providing these benefits even when they were paying their employees $75,000-$100,000 annual salaries. Would these have been *better* jobs if they came with benefits? Yes, but they were still not bad jobs by any means.

    • nicoleandmaggie Says:

      Those jobs are likely the minority of small firms, which are more likely to be service-type firms paying minimum wage.

      • Sarabeth Says:

        True, but their large firm equivalents are the minority as well. It seems to me that these proxies provide less information about what is a good/bad job than plain old wages would. Maybe wages are harder to get data on?

      • nicoleandmaggie Says:

        I’m not sure that their large firm equivalents are in the minority, particularly if the unit of observation that you care about is the individual worker.

  8. becca Says:

    “So that people don’t work at McDonald’s at minimum wage for decades unless that is truly all that they’re capable of doing.”
    I don’t think there are actually any such people. I mean yeah, there are people working in fast food who can’t do much else. But if everyone working in fast food were of that level, way more stores would collapse under the accumulated issues. I’m working a fast food job right now (technically, “fast casual restaurant” = all of the emotional labor, none of the tips). It’s damn hard. I’m very thankful it’s looking like I’ll be able to go do something much easier soon- brain surgery.

    • Rosa Says:

      I really question the classification of all these jobs as “low-skill”. Many require a lot of emotional labor, multitasking, and (especially this!) being able to handle the near-catastrophes that come from being chronically just barely staffed enough.

      I have had a lot of “unskilled” jobs that were actually highly skilled – it is not hard to see the difference between good and bad administration or customer service, and sales is definitely not a job everyone can do well. Plus there are a lot of “unskilled” jobs I know I don’t have the skills for – waitressing for sure, or CNA.

      It just seems like the difference isn’t really the skill level, compared to the heyday of manufacturing jobs. It’s unionization and political power.

      • nicoleandmaggie Says:

        Cna is technically a skilled job. It requires education and certification. Skilled has a definition in its jargon version, which I don’t know off the top of my head but has something to do with education and training, not difficulty.

  9. Laura Vanderkam (@lvanderkam) Says:

    Marriage between high-earning people is part of income inequality, but so is marriage, period. The median FT male worker earned about 49k in 2012, and the median FT female worker earned 38k. Added together that’s almost $90,000 — which puts you about in the top quintile. Whereas one of those people, solo — especially if she has children with her — is going to be in tighter straits for running a household.

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