[Marxism] Shaky Jobs, Sluggish Wages: Reasons Are at Home

Louis Proyect lnp3 at panix.com
Wed Mar 1 06:45:47 MST 2017

(Eduardo Porter is always worth reading.)

NY Times, March 1 2017
Shaky Jobs, Sluggish Wages: Reasons Are at Home
by Eduardo Porter

President Trump hasn’t been saving jobs in the last few weeks, focusing 
his energy (and Twitter feed) on how to close the borders to immigrants 

When he gets back to it, he might spend less time on the workers putting 
together air-conditioning units in Indiana and more — a lot more — on 
the maids and janitors who clean Trump golf resorts and hotels.

This is not to accuse the president of being hypocritical by skewering 
companies that move production overseas while, say, selling Trump 
merchandise made in Bangladesh, or loudly championing the cause of the 
working man while refusing to recognize the rights of workers at his 
branded properties.

Rather, it is to argue that by obsessing over how the manufacturing jobs 
of the 1970s were lost to globalization, Mr. Trump is missing a more 
critical workplace transformation: the vast outsourcing of many tasks — 
including running the cafeteria, building maintenance and security — to 
low-margin, low-wage subcontractors within the United States.

This reorganization of employment is playing a big role in keeping a lid 
on wages — and in driving income inequality — across a much broader 
swath of the economy than globalization can account for.

David Weil, who headed the Labor Department’s wage and hour division at 
the end of the Obama administration, calls this process the “fissuring” 
of the workplace. He traces it to the 1980s, when corporations under 
pressure to raise quarterly profits started shedding “noncore” tasks.

The trend grew as the spread of information technology made it easier 
for companies to standardize and monitor the quality of outsourced work. 
Many employers took to outsourcing to avoid the messy consequences — 
like unions and workplace regulations — of employing workers directly.

“It’s an incredibly important part of the story that we haven’t paid 
attention to,” Mr. Weil told me.

“Lead businesses — the firms that continue to directly employ workers 
who provide the goods and services in the economy recognized by 
consumers — remain highly profitable and may continue to provide 
generous pay for their work force,” he noted. “The workers whose jobs 
have been shed to other, subordinate businesses face far more 
competitive market conditions.”

The trend is hard to measure, since subcontracting can take many forms. 
But it is big. A study last year by Lawrence F. Katz of Harvard and Alan 
B. Krueger of Princeton, a former chief economic adviser to President 
Barack Obama, concluded that independent contractors, on-call workers 
and workers provided by contracting companies or temp agencies accounted 
altogether for 94 percent of employment growth over the last 10 years.

Nonstandard employment arrangements like these account for nearly one in 
six jobs today. That is 24 million jobs, nine million more than 10 years 

Many of these jobs are poorly paid. A 2008 study by Arindrajit Dube of 
the University of Massachusetts, Amherst, and Ethan Kaplan, then at the 
Institute for International Economic Studies at Stockholm University, 
found that outsourcing imposed a wage penalty of up to 7 percent for 
janitors and up to 24 percent for security guards.

The Government Accountability Office of Congress concluded that 
contingent workers in the education field — substitute teachers, 
adjuncts and the like — earn almost 14 percent less per hour. In 
retailing they earn 9.4 percent less. Contingent workers across the 
board are less likely to have health insurance. One-third live in 
families making less than $20,000 a year. That is three times the share 
of workers employed in standard full-time jobs.

The rise of outsourced work adds an important twist to the standard 
understanding of America’s growing wage inequality, which is based on 
the notion that technology has left less-educated workers behind — 
taking over their routine jobs while opening lucrative new possibilities 
for the better-educated.

The sorting of workers into different classes of companies will further 
widen the earnings gap as the rewards of the most profitable among them 
“increasingly go to a more limited group of highly compensated and 
more-educated workers and to shareholders,” Professor Katz explained.

Manufacturing has gone through this process. General Motors in its 
heyday employed more than 600,000 workers in the United States, 
including the engineer, the man sweeping the shop floor and the woman 
serving coffee. Though the engineer certainly earned much more, the 
other two could share in G.M.’s success. Norms of fairness, Mr. Weil 
argues, would limit the wage gap between workers of a single company, 
giving a boost to those at the bottom.

Outsourcing does away with such considerations. Apple is as successful 
as G.M. was in its time. But it employs fewer than 70,000 people in the 
United States. While it keeps engineers, designers and such in house, it 
doesn’t bother with workers not critical to creating seductive new 
gadgets. Many of those work for Foxconn, in Asia, where the margins are 
slimmer and the pay is not as good.

The trend is not unique to manufacturing nor to outsourcing overseas, 
though. It is happening across the nation’s brick-and-mortar workplaces 
and coursing through service industries, the fastest-growing segment of 
the labor market.

These days the receptionist at the front desk is unlikely to work for 
the hotel. The truck driver may not work for the delivery company, nor 
the nurse for the hospital. Jobs in coal mining and hydraulic fracturing 
— even shipbuilding — have been siphoned off.

Though the gig economy is still small — employing 0.5 percent of 
contingent workers, according to Professors Katz and Krueger — the 
technologies powering it are likely to fissure the American workplace 

This sorting would increase the slice of national income going to 
shareholders and reduce workers’ share. The pattern is consistent with 
evidence that most of the widening of the nation’s earnings inequality 
can be explained by growing pay gaps between organizations rather than 
within them.

Over all, Professor Katz estimates, the sorting of workers into high- 
and low-end employers accounts for a quarter to a third of the increase 
of wage inequality in the United States since 1980.

So can Mr. Trump do anything about this? When at the Labor Department, 
Mr. Weil argued that companies that outsource should share liability 
with subcontractors for wages and working conditions, so they could not 
simply wash their hands of responsibility.

It’s not an easy problem to fix, though. As Mr. Weil puts it, “How do 
you reattach some of the responsibility to the engine of value of these 
network business systems?” Companies will continue to seek efficiencies 
by shunting work into these broader networks. And it would make little 
sense to adopt policies that forbid this kind of business organization. 
Encouraging unions, which many scholars have suggested as a tool to 
improve wage growth, could well accelerate the splintering.

And yet, there may be a place for incentives to discourage the weakening 
of labor standards. Some employers might adopt a system like Harvard’s 
parity policy to ensure that those in contract positions like guards or 
cafeteria workers get the same pay and benefits as comparable university 
staff members.

Whatever its difficulties, addressing the vast transformation underway 
in the organization of work seems more relevant than tilting at 
windmills in hopes of restoring American manufacturing to its 1950s state.

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