Friday, May 27, 2016

The New Overtime Pay Rule, Unlike a Higher Minimum Wage, Is a Winner

Last week the Department of Labor adjusted a dollar amount unchanged in 41 years.  Effective December 1, the highest salary for which employers must pay time-and-a-half for weekly hours worked over 40 will increase from $23,660 to $47,476.  It will now increase, algorithmically, every three years.    

I do not support raising the minimum wage.  As I have written before, that costs jobs, rarely eliminates poverty, pushes demand for positions unnecessarily high, and sticks it most often not to the likes of McDonalds and Wal-Mart but to struggling local employers.  In a country where people’s wants and needs vary drastically, it is wrong that jobs paying below a certain amount are illegal.  Yet I do not see requirements for overtime eligibility the same way, and here is why.

First, requiring unpaid work is employee abuse.  Below a true management level, for which $47,000+ is a better approximation than $23,660, labor is an hourly expense.  Any requirement that production workers, be they making hamburgers or computer programs, provide it for free, whether they are compelled formally or informally, goes straight to the employer’s bottom line.   

Second, too much work and not enough people to do it during their regular hours is a human resources problem, for which the business’s management, not its workers, is responsible.

Third, over the past several decades there has been more and more concentration of work into fewer employees, which minimizes the number of jobs.  Avoiding hiring people by getting uncompensated hours from existing workers makes that worse.

Fourth, no longer will so many people need to choose between being promoted or getting higher pay.  That may sound strange, but if restaurant shift managers are expected to stay late whenever they are needed, those accepting that position may well earn less per hour than the newest salad maker. 

Fifth, the threshold adjustment will prevent the problem of many restaurant and retail managers, ostensibly hired to supervise, putting in unpaid extra time doing low-level tasks themselves.  These situations, as dirty as water after a manager washes dishes, will be cleared up.

Sixth, one of the few comprehensive solutions to the jobs crisis I have seen is to reduce working hours.  I think a normal standard of 30 a week would prove to be successful, and we are taking one step toward getting there by bringing that, in effect, down to 40.

As for the case against the change, I don’t remember seeing as many bad arguments on one issue as I have here.  Those opposing the law claim it will make managers punch time clocks (no need for that, and most managers fill out timecards, to track what projects they are working on, as it is), that jobs will become more rigid (only at the expense of volunteer work) with less telecommuting and flexible hours (employees can contemporaneously write down the hours they put in on paper, if recapping at the end of each week isn’t good enough), that businesses will be damaged by the loss of unpaid work (which also happened when slavery ended), that workers will lose “prestige” and suffer “demotions” (nonsense and nonsense), that it will call for excessive record-keeping (one small spreadsheet per work group?), that it will result in pay cuts and loss of benefits (employers can do that any time they want anyway), and, as maybe the most laughable example of false entitlement, that it will hurt universities by requiring they pay postdoctoral fellows and adjunct professors for the time they actually put in.  The only reasonable objection I have seen is making accounting for business travel more complex, but the laws on pay there should, of course, be the same for those now under the threshold. 

What will be the effect of this change?  Contrary to what President Obama said, it will not raise pay for a great deal of people.  Employers will have five main ways of dealing with the higher limit:  simply paying for overtime as it occurs, not having the extra work done, reducing base pay as to formalize the amount of hours the employees have actually been working, giving raises to bring workers over the maximum, and transferring work over 40 hours per week to new employees.  Only two of these would mean more money for workers, but two would give them extra free time.  As for opportunities, observers have different views on how many jobs this new law will generate, with Goldman Sachs economist Alec Phillips estimating 100,000 new ones next year, but California’s similar 1980 regulation created almost none.  We will need to wait and see. 

Although this threshold increase will mean change, three things should be clear to employers and employees.  Those earning more than this $47,476 – which is only the 1970 inflation-adjusted equivalent of $7,699 – can continue to be expressly paid for getting the job done, no matter how many hours it takes, and can put in all the extra time they want.  Despite one complaint, networking activities, if optional, will be unaffected.  And all workers will be as welcome as ever to advance themselves after hours.  Those things will continue to benefit businesses, but cheating their employees out of their labor will not.  That is a good thing.  

Friday, May 20, 2016

Ten Principles for What’s Still a Permanent Jobs Crisis

“For most of their lives, Americans have thought all good people could find work and support themselves.  That is gone forever, and no economic recovery will bring it back.”

In the five years since I put that on the back cover of Work’s New Age, we have had fine economic times.  We have added over 8 million net new jobs since 2013 alone, and the official unemployment rate is, at 5.0%, a hair above half of what it was when that book went to press.  The American Job Shortage Number (AJSN), showing latent demand for additional positions, has not improved as much, but is still down from 23.3 million in July 2009 to 17.3 million last month.  Over the past year wage increases have exceeded inflation, and the numbers of those officially jobless for 27 weeks or longer, and working part-time for economic reasons, are way down. 

Yet the jobs crisis is not over.  The events of the past seven years, if not the entire 43 since what I call the Winning by Default era ended, have broken the back of the idea that ordinary Americans can routinely get work at all, let alone support others or even themselves with it.  The labor force participation rate, the best indicator of how common it is for United States residents to be either working or officially unemployed, was last month at 62.8%, well below its 2008 Great Recession 65.8%-66.2% range.  Since that recession ended in 2009, a disproportionate number of new positions – sources disagree on just how many – have paid lower than most.  At one point, one-third of jobs added since then were with temporary help agencies, and, per a CNN article from last month, many growing the most in numbers, specifically food preparation and service workers, personal care aides, home health aides, retail salespeople, and restaurant cooks, have average annual pay under $22,500.  At the same time, more and more people have been putting pressure on governments to raise minimum wages, and early returns when they have succeeded, as I wrote a few weeks ago, have shown that such moves have, indeed, caused jobs to go away.  We also have now had almost seven years without a recession, which while hardly unprecedented is not representative. 

So, given that we are not out of the jobs-crisis woods, what principles can we use to deal with our work situation, both currently and in general?

First, the largest employment gap, emotionally as well as logistically, is between those with and without jobs. 

Second, as long as we have no guaranteed income, the worst legal thing a worker can experience is not to have employment at all.

Third, the high share of new jobs being low-paying means our employment statistics, including the AJSN, overstate our prosperity.

Fourth, however, there is a place for low-paying positions, as people’s wants and needs vary greatly, they are not always the only sustenance source for those working them, and even a job at the lowest $7.25 hourly minimum, if full-time and including some small perquisites such as free food, can support one person in the great bulk of our country.

Fifth, education has done almost all it can to facilitate people working good jobs, as the number of such positions is limited and decreasing, and it now serves mainly to affect who gets them.

Sixth, almost every alleged “skills gap” situation would go away if employers were willing to either train workers or to pay market wages for those with the capabilities they want.

Seventh, I see no hope for many more high-paying jobs that the market can’t support, as artificially creating them usually costs more than they are worth, so we all need to adjust to their shortage.

Eighth, large numbers of things we have now, such as a constantly increasing set of medical treatments, were unavailable or extremely expensive in decades past, and many more, such as almost all electronic devices from TVs to phones, are priced far lower in constant dollars than ever before, and these boons are not counted in any wealth or prosperity statistics.

Ninth, accordingly we need to redefine what it means to be affluent and financially successful.

Tenth, the middle class as we knew it may be disappearing, but as more resources become free or cheap it is being replaced by something with similar or even higher levels of comprehensive prosperity.  By 2050 there may be only a minute number of Americans with true lower-class status, a 1% or a bit more who have profited mostly through possibly unstoppable wealth concentration at the top, and a great mass of people who might be called “sustaining class,” “typical class,” or something more melodious.  They will not be virtually guaranteed full-size standalone houses or new cars every few years, as were middle-classers from the 1945 to 1973 Winning by Default years, but would be envied by them for having, for example, free long-distance telephone calls. 

More to follow on this last principle.  Stay tuned. 


Friday, May 13, 2016

Uber and Lyft in Austin: Have We Seen the Sharing Economy’s Peak?

Over the past year, as I wrote last month, there has been a backlash against the two largest areas of the sharing economy, namely room rentals, mainly provided by Airbnb, and car rides from Lyft and Uber.  Some cities, such as Barcelona and Berlin, will not tolerate Airbnb rentals at all, and others, such as San Francisco and Santa Monica, now limit and regulate them to the point where their supply is much reduced.  Even more places have contested these unlicensed taxi services, and some, including Spain, Romania, and the city of New Delhi, have banned them altogether.  In April, Uber agreed to pay up to $100 million to settle a class-action lawsuit about the company’s questionable-at-best categorizing of drivers as independent contractors; Lyft settled a similar complaint for $27 million earlier this week.  Only three days ago, the 35,000 New York City Uber workers formed a group described in the New York Times as “short of a union,” the Independent Drivers Guild, giving them a formal say in much of what their employer does.    

Last weekend, though, saw the clearest and most publicized American defeat for the unlicensed taxi companies.  Austin, Texas had a Saturday referendum proposing that Uber and Lyft be exempt from the city’s current cab-company regulations, including fingerprinting drivers for background checks.  The two firms spent $8 million toward convincing people to vote for the measure, which did not succeed, as 56 percent of Austinites voted to regulate all taxi providers equally.  Uber and Lyft responded by saying they would no longer offer their services in that city, effective almost immediately.

Austin is large, with a 1.25 million metropolitan population, and is hardly known as anti-technology, with 51,000-student University of Texas and as much connected private research and development as one might expect.  Views there on taxi regulations have no reason to be extreme.  That is why, then, that many more cities will follow.  They will not allow these companies to, as two Austin commentators put it, “arrogantly confuse a convenience for a few as a necessity for the many” and try to “take out city government” as if it were only another competing business.  The trend will probably move on to unregulated hotel rooms, which after all disturb local residents rather more than do unfingerprinted cabdrivers.  

So the two largest ride-sharing companies can’t tolerate being treated the same as those successfully offering taxis for decades?  That is telling.  I wrote last March that “the income achieved by Uber, similar Lyft, and room-renting facilitator Airbnb service providers is inflated by a temporary lack of regulation,” and predicted an end to the flowering of such companies by 2019 or earlier.  Indeed, the Austin outcome and the company’s reaction show that, despite estimated values as high as $62.5 billion for Uber, these businesses are remarkably fragile and transitory.

Not all what these companies are doing, though, is endangered.  Lyft has joined forces with General Motors on driverless taxis, which, given the state of and effort going into that technology, are almost certain to become the norm within 20 years or so.  Uber would do well to move in the same direction.  In the meantime, though, the idea that anyone can provide taxi or hotel services in the United States without meeting legal standards has, as of Saturday, become obsolescent. 

As for jobs in this sharing-economy center, they are still there.  Anyone wanting to make money doing these things is welcome to try, but they would be – and many already have been – fools for not properly assessing what it really costs them.  The same goes for opportunities sharing other resources, though none have emerged as being as widespread as Uber or Airbnb.  If it’s worthwhile to you, do it – but don’t count on it lasting for long.             

Friday, May 6, 2016

In April, Employment Figures Take a Breather, But American Job Shortage Number (AJSN) Shows We’re Still 17.3 Million Positions Behind

Lukewarm.  That’s how this morning’s Bureau of Labor Statistics April employment numbers felt, headed by an unchanged 5.0% official jobless rate.   

We gained 160,000 net new nonfarm positions, below some economists’ 200,000 projections, but still more than our population gain absorbed.  The count of those officially unemployed for 27 weeks or longer fell 100,000 to 2.1 million, and those working part-time for economic reasons, or unsuccessfully seeking to improve their shorter-hours positions to full-time ones, diminished a similar amount to 6.0 million.  Average wages were 10 cents per hour higher than in March, a fine result with annual inflation under 2%, and are now at $25.53.  Unadjusted unemployment fell from 5.1% to 4.7%, mostly on the seasonal difference between March and April.    

On the down side, the two best measures of how common it actually is for Americans to be working, the employment-population ratio and the labor force participation rate, gave up their past two months’ improvements to drop 0.2% apiece to 59.7% and 62.8%.  The number of people in almost all marginally attached categories rose as well, from a 148,000 gain in those wanting to work but not looking for it for a year or more, to increases in those feeling the same but stopped by family responsibilities, being in school or training, having ill health or disability, and being temporarily unavailable to work.  The count of people claiming no interest whatever in employment gained 342,000 to 88.8 million, significant as better prospects for working cause their number to fall.  

The American Job Shortage Number or AJSN, which shows how many more positions could be quickly filled if getting one were easy and routine, dropped almost half a million, as follows:

Compared with a year earlier the AJSN has fallen 530,000, almost completely due to official unemployment down from April 2015’s 7,966,000.  The year-over-year improvements, which were consistently 1 million-plus between 2014 and 2015, are getting smaller, showing that latent demand for work, as well as official joblessness, may be finding a floor.

Should we be happy with or concerned about April’s data?  A little of both.  There was no real chance March’s superb results would set a new pace, so a neutral sort of month is, as such, no problem.  We need to keep an eye, though, on the labor force participation rate and the employment-population ratio – if they drop again next month, that will mean times are getting worse, even if, for example, the unemployment rate falls.  We’ll see, and so will the turtle, who stayed where he was. 

Monday, May 2, 2016

Servants or Masters? Nine Consensus Points about Robots

We’re getting a good flow of articles about these sometimes scary but often cute mechanical assistants, from USA Today and the Wall Street Journal to the Financial Times and beyond.  Despite the concentration in business publications, there hasn’t been as much on the profitability of the things as there has about the age-old concerns of what jobs they will replace and when, along with what they could potentially do to us as well as for us.  Since they are becoming ever more common, in forms ranging from vacuuming Roombas to the human-like remote-operated “geminoid” demonstrated at March’s Austin South by Southwest Interactive Festival, it is increasingly critical that we understand the fundamentals about their nature.  Here are some things we should all agree upon.

First, artificial intelligence does not mean consciousness.  It is possible that robots do have that now – one school of thought on the matter sees it as coming from computation, which means that my desk calculator is aware too.  Yet AI doesn’t confer that, and no matter how capable machines seem to be, they are no inherently smarter, as a corporate instructor put it to me decades ago about uncontrolled computer disk storage devices, than overhead projectors. 

Second, robots need controlled environments.  That is the other side of their reliance on algorithms, and why, for example, they can crunch numbers at nearly the speed of light, burying a human genius, but cannot replace hotel maids. 

Third, progress on them is one-way, and we and they never regress.  Some knowledge in any field is always lost, but there is simply too much work on robotics for that to be much.

Fourth, just because worry about robots taking over the majority of jobs did not happen when it was first a broad area of concern in the 1930s, or again in the 1960s, does not mean they never could.  It is conceptually possible for any task with instructions that can be put in the form of “if A, do B” to be automated away.  That also explains why the thought of them taking over only or even mostly manual jobs is long obsolete.

Fifth, making projections, and being concerned about and wanting to prepare for job losses, does not make anyone a technology-hating Luddite.  Whatever our views are on where we are going, it is crucial for us to forecast it.

Sixth, when robots, computers, or anything else technical is used to complete work in place of humans, the number of jobs it creates is almost always buried by the number of jobs it eliminates.  If that is not the case, as may have happened with office personal computers in the early 1990s, the technology is then not saving businesses any money.

Seventh, on the other side, the idea that automated systems are bad if they make jobs obsolete is a trap to avoid.  We still don’t know how best to deal with robots and computers, but they are good things, and smashing them metaphorically as protestors physically did weaving machines two centuries ago is, in the long run, destructive to our prosperity, health, and happiness.

Eighth, consumer acceptance and resistance to robots will be a huge determinant, maybe the largest, in where and when they succeed.  Elderly Japanese have generally adapted well to cyborg caretakers, but would older Americans?  Fast-food drive-throughs now greet us with human-sounding disembodied speech, and nobody seems to mind – would that be the same if those voices were metallic?  How about C-3PO-looking bartenders, who in a few years may be technically ready to run their places? 

Ninth, we must still be concerned about semiautonomous robots programmed amorally enough to do more damage than help.  As Stanford law fellow Vivek Wadhwa put it, artificial beings may get us to something like Star Trek, with its interstellar voyages, or to more like the post-nuclear rudimentary civilization of the Mad Max movies.  Technology has always been a fine servant but a poor master, and understanding the fundamental facts about what it is and isn’t will help us choose wisely.  Even if the robots haven’t taken over or made all of us obsolete, it’s not too soon to think about it.   


Wednesday, April 20, 2016

The Minimum Wage: A Bad 28 Months, and Getting Worse For Now

In December 2013 I published “Six Points Against a Higher Minimum Wage.”  It became one of my most-read Work’s New Age blog posts, with more than 2,000 views to date, and has generated good discussion and healthy controversy.  

Although I do not subscribe to ideology from either the left or the right, one of my fixed principles is supporting the maximum number of American jobs; since forcing organizations to pay people more than they would otherwise can only damage that, I am an archconservative on this issue, against any increase, let alone the up to 106%, to $15.00 per hour, many have been advocating. 

The six reasons I listed address different flaws in a higher minimum, clear but often lacking in publicity:  the incorrect assumption that most or all positions paying less than that are with very profitable companies; the nationwide job dearth, currently 17.8 million as measured by the American Job Shortage Number (AJSN); the already high demand for these opportunities even at current wage levels; the folly of worsening the deepest gap in American employment, that between the low paid and those not paid at all; that, between those not in poverty now and those for whom even $15 per hour would not get them out of it, there are relatively few cases where that rate would make the difference; and the excessive damage it would do to both workers and their employers in poorer areas.  I also noted that my conservatism on this issue did not extend to unemployment benefits or food stamps, which should be extended and made readily available for all in need of them, respectively.  I have also advocated, perhaps paradoxically, a guaranteed citizen’s income, which would end the erroneous idea that those offering work are responsible for the welfare of those they hire, and, if the minimum wage were repealed, would allow for a flowering of pleasant, interesting, or easy, but now illegally-low-paying, positions.

In the two years and four months since, there has been a great deal of activity here.  News stories about protestors who have latched on to specifically $15 per hour, usually but not always in the fast food industry, seem never to end.  Despite inflation since then at 2% annually, 12 states raised their minimums January 1st, with increases from 25 cents to $1 per hour, with current rates now headed by $10 in California and Massachusetts.  Although the press has generally been in favor of such moves or at least neutral toward them, that has changed recently, with unfavorable but apparently straight news stories from the Los Angeles Times (“California minimum wage hike hits L.A. apparel industry: ‘The exodus has begun,’” Shan Li and Natalie Kitroeff, April 15) and Investor’s Business Daily (“Minimum-Wage Hikes Hit Hiring in California, Arkansas,” Jed Graham, March 15), an expository article in CNS News (“California Minimum Wage Could Cost State Taxpayers Billions,” April 13), and anti-increase opinion pieces in The Week (“Democrats have lost their minds over the minimum wage,” Shikha Dalmia, April 11), and, astonishingly enough, The Huffington Post (“Don’t Kid Yourself on the $15 Minimum Wage,” Stephen Adams, April 12).  On the Democratic presidential campaign side, though, candidate Bernie Sanders has consistently been a staunch advocate of that national $15, and his opponent Hillary Clinton actually took criticism about, and as a result walked partially back on, her view that it should be “only” $12.  (To my knowledge, none of the 17 original Republican candidates advocated any minimum wage increase at all.)

These last articles put forth a few objections beyond my original six.  Adams claimed a higher minimum wage would generate “a moral hazard,” with workers at that rate “conned into thinking they don’t need to build up their human capital to earn a decent living.”  I’m not sure this idea is valid, and don’t have sympathy for his additional assertion that it would damage companies by compelling them to raise pay on higher-compensated employees, since above the mandated minimum that would be caused only by simple market forces.  A better cause for concern, suggested by another Graham article, is that employers, when forced to raise wages against their will, may recoup that by taking other benefits, such as education payments and vacation time, away from them. 

How are businesses dealing with giving substantial raises to all of their lowest-paid employees, and what do press sources think they need to do?  Articles in The Washington Post (“As minimum wage marches toward $15, small businesses adapt,” Joyce M. Rosenberg, April 13) and Forbes (“How To Cope With New Minimum-Wage Laws,” Bill Fotsch and John Case, April 12) address this matter, and although one is news reporting and one is couched as advice for entrepreneurs, some strategies in them are similar.  They both name raising prices, cross-training more often, and moving to what we might call a Costco employee model, with higher pay, better benefits, and higher expectations leading to, they hope, better performance, lower turnover, and fewer supervisors.  Other ideas mentioned by only one of the stories were passing work onto customers, such as restaurants requiring them to fill their own coffee cups and sit-down places getting them to bus their own tables fast-food style; teaching employees about the financial needs of the businesses to get more focused efforts; moving work to other states or countries; and installing labor-saving equipment.

The ideas in the above paragraph are the ones we are likely to see as the minimum wage marches up toward, and in some places to, $15 per hour.  The future of work at that rate of pay will belong more and more to those now the best.  Per the CNS News piece, jobs will be disproportionately lost by younger, less educated, and less skilled workers – the people whom liberals wanted to become the prime beneficiaries of mandated higher pay.  We will see again the likes of what happened with warehousemen, who, two generations ago, needed little beyond physical strength, ability to read, and common sense, but now must also be not only more efficient workers but skilled computer users.  And there is no denying that positions will go away – in January, 20 states lost net jobs, of which 7 were among the 8 raising their minimums 50 cents per hour or more, including California, up $1, which broke a streak of 54 consecutive seasonally-adjusted monthly gains.  As above, and per an April 15th Forbes article (“Even The Fight For $15 Now Recognizes The Cost Of A $15 Minimum Wage,” Tim Worstall), there rates to be a backlash.  When August 2018 arrives, despite now-scheduled increases continuing, we may know the impetus behind this effort has peaked.  For now, however, we must deal with the combination of higher minimum wages and a permanent jobs crisis the best we can.  

Friday, April 15, 2016

Jobs and the Gig Economy – Or Do I Mean the Sharing Economy? – Part 2

Last week I wrote about a new expression – the “gig economy” and proposed it be used not as a synonym for sharing resources other than labor, but for employment of sorts through a chain of one-off work assignments.  I noted in passing that these propositions have “generally weaker prospects” than those in which labor was secondary to providing the likes of vehicles, housing, and equipment for their customers.  Why is that the case?

First, for employees, working small gigs is classically, in economic terms, an inferior good.  That means it is something that people use less when times get better, such as payday loans, margarine, or the lowest grade of beer.  When transitions between opportunities are included, it is clear that individual ones need to pay well over the minimum wage for even that level to be reached over the course of a week, month, or year, which is often not the case.  That is why Steve Tobak wrote in Fox Business that depending on these engagements for income is “no substitute for a career.” 

Second, the problem of poorly accounted-for expenses, on which Uber almost depends from its drivers, raises its head with individual work assignments.  That takes the form of setup and preparation time which shrinks net hourly receipts, as well as travel and needed-resource-acquisition costs.  Other things being equal, those are higher than for regular employees, due to workers having insufficient time to determine the most efficient solutions and to the variable nature of assignments preventing many economies of scale.    

There are three good things, however, about employment in the gig economy.  These income propositions can provide experience, not only valued by regular-job employers but allowing workers to find out how much they like and can do something, and get paid a bit at the same time.  They allow those who can’t find a regular job to earn money.  And, maybe best of all, they constitute a partial repealing of the minimum wage. 

Now on to the business side.  There is strictly no such thing as an industry requiring occasional employees, but authors of articles on the gig economy have discussed a number of new, and not so new, business ideas along with it.  Some never did well in the past, such as providing delivery of low-priced items – author, entrepreneur, and radio talk show host Bruce Williams said, decades ago, “you can’t deliver three dozen doughnuts” – but are being tried again, usually with similar results.   A great mass of them have potential but have not succeeded yet, mainly because their managements so far lack the experience to know how best to run them – of this grouping, most will fail but some will get there before their venture capital runs out.  One especially good principle is still to cater to the 1%, as money is concentrated to the point where those with large amounts of it will outsource almost anything they don’t want to do in person and may be willing to pay very high hourly rates for goods and services brought to them.  Who knows, the idea of selling extra-fresh milk from Omaha dairy cows, as Steven Hill mentioned in Salon last month, could work, as might an infinite number of other propositions; when the market has time to do its magic, winners will remain. 

Overall, we can expect that individual work assignments will provide money for many people.  Maybe not as much as they would like, but enough to make a real difference in their lives.  That is a superb thing.  It rises to the level of a possible comprehensive solution to the jobs crisis, along with guaranteed income, reduced work hours, assured government employment, and payment for providing online data and content. 

Five ideas, one for each year I have been writing on this subject.  If you can add to this list, please let me hear from you.