Pay and Minimum Wage: Sometimes it Evolves, Sometimes it Shouldn’t

Cash compensation is the most common and basic reason for working.  It has recently changed in some ways and may do that more soon.  What have we seen and considered over the past several months, and how good or bad is it or would it be?

First, per an undated chart from Yahoo Finance, we now have 30 states plus the District of Columbia with minimum wages more than the national $7.25 per hour.  Given that each decided to mandate a level above that of the whole nation, that is favorable.  It is better still when cities or counties set higher or lower rates, such as in Oregon where, as of July 1^st, Portland will have $14 lowest hourly pay with the rest of the state at $12.75.  When the cost of living varies so much across the country, with southern Texas’s $7.25 buying much more locally than Hawaii’s $10.10, it is clear to leave that national floor where it is and let smaller areas choose for themselves.

Another good thing, since it is a result of the free market reacting to the pandemic and its effects, is that “Some workers finally have the upper hand in the job market” (Denitsa Tsekova, Yahoo Money, May 13^th).  While there is no reason for the number of positions to approximate the number of people wanting to work, there is also none for jobs, at all places and times, to be scarcer than people willing to fill them.  Here we have workers refusing opportunities that are unsafe, unsuitable, or just pay too little, making employers do more than post an ad and get bombarded with applicants.  The situation will shift back, especially as unemployment compensation resumes requiring people look for work, but will fluctuate, and that is fine.  A similar message came from Neil Irwin’s June 5^th New York Times “Workers Are Gaining Leverage Over Employers Right Before Our Eyes,” in which the author noted that “companies are becoming more willing to pay a little more, to train workers, to take chances on people without traditional qualifications, and to show greater flexibility in where and how people work.”  As the perceived labor shortage continues, employers will also need to dig deeper in identifying candidates, to think “more expansively about who is qualified for a job in the first place,” and to disregard certification requirements, such as those for teachers, originally implemented to shrink the number of candidates.  If there are not enough applicants for entry-level business positions, that could mean a return to not requiring bachelor’s degrees, or possibly even any college at all – that worked well before the 1970s and could succeed again.  All of these emerging and possible changes are, and would be, healthy.

We had a different view than the usual from Rick Newman in the May 24^th Yahoo Finance.  It was titled “Jobs are back – but pay isn’t,” but could have said job listings instead. I documented the growing gap between hiring and advertisements nine years ago in Work’s New Age, and it is still with us.  Newman cited “a recent study by Bank of America” which determined “that the average pay of open jobs is lower than before the pandemic in 12 of 15 sectors” and “flat” in another.  For better or worse, employers will get workers only at fair market pay, and as always, if they don’t, that means, broadly but accurately, that they need to boost it.  The reason that “Wage Growth Is Holding Up in Aftermath of the Economic Crash” (Ben Casselman and Jeanna Smialek, The New York Times, June 3^rd), per Newman, is that the raises are going mostly to existing jobs. 

Wrong ways to go are amply included in Kevin J. Delaney’s March 20^th New York Times “What Is Work Worth?”  Forcing an end to situations in which “low-wage workers at companies including Amazon, McDonald’s and Walmart rely on public assistance such as food stamps to make ends meet” (usually a result of low hours as well as low pay, and better than if they had no job at all) and “women and people of color generally earn less than their peers” (illegal and the source of serious penalties if caused by discrimination), would be naïve and anti-market.  Any line manager will tell you that if you “set pay for positions, not people,” employees will improve far less than if they can get merit raises, and few observers of any kind would think workplaces would be more dynamic if they returned to pay based on seniority.  The same is true for the author’s invoking the old saw that workers need “a wage that can support their families,” which may be nonexistent or contain other earners, is impossible to define, and cannot be implemented without stopping those willing to earn less and being able to live on it.

Over the 150 to 200 years since the Industrial Revolution’s United States widespread beginning, workers’ pay has varied.  It will continue to do so, even after this minor if real pattern break we are experiencing now has completed.  The choice we face is how to control it.  If we choose well, we individually as well as collectively will prosper.  If we do not, we will not.  It is up to us.

Working From Home: Problems, Implications, and One Prominent Exception

Thank you for most likely being among the 1,700-plus people who read my March 12^th post, “Eleven Brutal Truths on Office Design and Working from Home”!  I’m back to that topic, looking at four pieces published since then.  What did they have to say?

The oldest, “Stuck on Zoom:  How having more tech at home during COVID-19 creates longer, more stressful workdays,” by Terry Collins in the March 22^nd USA Today, described a problem reminiscent of the early Industrial Revolution, when employers had to learn that workers being physically able to stand and move for 19 hours a day didn’t mean that was what they should be doing.  Per Collins, but not unique to him, “the workday… doesn’t just feel longer.  For many of us, it actually is longer,” and “screens, keyboards, and computer mice on dining room tables are now commonplace,” which “is creating a never-ending workday for some employees who struggle to decide when it’s time to turn off the switch.”  He found people were working between 48 minutes and 3 hours longer daily, extended by “email, texts, and distractions,” to which I add porous personal boundaries and poor time management.  Exactly how this issue will be resolved is unknown – as it was about 200 years ago, it could be through labor unions, or just by enough people refusing to answer communications outside of their negotiated availability hours – but it will be.

A week later in the New York Times, we got Matthew Haag’s “Remote Work Is Here to Stay.  Manhattan May Never Be the Same.”  While as I wrote before the trendiness of working from home has swung like a pendulum, this central borough may never again match its “more than 1.6 million commuters every day” which has “sustained” it throughout, “from the corner hot dog vendor to Broadway theaters.”  As of the story’s date, Haag claimed that 90 percent of office workers there were working remotely – that number has shrunk greatly since, but must still be high.  It is wrong to expect the share of people working from home to settle at any approximate percentage – as it has for over 30 years, it will continue oscillating.

That assumption of indefinitely large amounts of remote work is at the center of Derek Thompson’s June 14^th The Atlantic “Winners and Losers of the Work-From-Home Revolution.”  The author, similar to what I wrote in the post above, started with studies showing the best and the worst views of remote labor.  His apparent contradictions, such as “It obliterates focus and extends working hours, but people want more of it?”, can be understood by realizing that workers don’t always want what is best for their productivity, and that companies are hardly unified over time or with others on its merits and drawbacks.  The article had an informative section on skills and attributes which working from home favored, such as introversion, “being a clear and fast writer,” and those skilled with Zoom and other tools, but does not mean they would attract raises, promotions, or even good performance reviews, so saying that it will “reward certain skills” overstates.  Other doubtful items are that “young people and new hires” are hurt from remote work though it is easy to disappear in a cubicle farm, with a “post-pandemic shift to WFH… spending in downtown restaurants, movie theaters, barbershops, and other retailers” will drop much more than 10%, and organizations, if they keep individual desks, will not reduce their footprints if people work only part-time from home.  As well, some business activity, especially restaurant lunches, will not resume around employees’ houses but will, truly, “disappear into the ether.”  Providing technical and other resources to support remote work, though, is indeed a good area for future ventures, and, yes, it will widen the social and political gap between educated people with good jobs and everyone else.

Then we have the opposite side, with “Google’s Plan for the Future of Work:  Privacy Robots and Balloon Walls” (Daisuke Wakabayashi, The New York Times, May 3rd).  A picture here showed something far better than possible at home offices, a semi-circular Campfire meeting room with seats for people physically present alternating with large screens displaying the life-size heads and shoulders of remote attendees.  There were other views of innovative office space, such as movable work areas with heating and ventilation ducts to match, outdoor conference areas, and lower density plans.  Many of these ideas may become the norm even when the pandemic is a decade or more in the past, but the question remains:  What would happen to these offices if, in 2035 or 2040, Google discovers a great innovation called “independent work” or letting employees do their tasks where they live?  Then they wouldn’t need to commute, would be more productive, would be able to balance work and life better, would like it more…

Employment, Unemployment, the Economy, and the Pandemic: Where We Are Now and Where We Are Headed, Beyond the Numbers

Per last week’s post, the May jobless numbers were favorable, but mainly because our Covid-19 progress was so good.  How are we doing otherwise, and where might we be going?

Before the month started, the National Bureau of Economic Research released a working paper, “The Donut Effect of Covid-19 on Cities,” by Arjun Ramani and Nicholas Bloom.  It’s 12 printed pages and academic, but comes down to two ideas.  First, many people are leaving the centers of large cities but not small ones, but, second, they are staying in the same metropolitan areas.

Moving on to June 1^st, we learned “How the World Ran Out of Everything,” from Peter S. Goodman and Niraj Chokshi in The New York Times.  The authors accurately blame “Just In Time” inventory management, in which suppliers must provide parts or raw materials quickly when their customers need them.  That achieves its purpose of cutting carrying costs when everything moves smoothly, but in times such as the past year-plus, with a widespread set of pandemic-related problems as well as a ship blocking the Suez Canal, it has not.  From a customer’s standpoint I have long been grouchy about that system, as some places practiced it so aggressively that I might find what I wanted unavailable simply because another customer had just been there.  Two lessons for all participating in Just In Time:  Things do not always work smoothly, and business you lose from not having product may disappear forever.

Could it be that “U.S. labor market worse than it appears, Fed paper suggests” (Reuters, June 1^st)?  Yes, this article’s indication that statistics “suggesting labor market slack should be given more weight than those pointing to tightness,” seems right, as latent demand, as shown by the AJSN, is still pushing 20 million new positions, and we have the real possibility that applicants will return quicker than their opportunities.  On the other side, “Americans Don’t Want to Return to Lousy Low Wage Jobs,” as put by Daniel Alpert in The New York Times also on June 1^st.  That is the case now, but over the next few months the issues of Covid-19 safety, extra-high unemployment benefits (with “all extra federal supplements” over by September 6^th), and child-care availability will be resolved, and the bulk of laborers will have no choice, even if wages return to their 2019 levels.  It could well happen, also, that we get “a contraction in household incomes this autumn.”

In the meantime, “Companies struggling to hire workers, coping with rising prices, Fed says” (Megan Henney, Fox Business, June 2^nd).  That is also a temporary situation, and what is happening by about August should tell the true ongoing story.  There were some good scattered remarks in the June 4^th Lauren Bauer et al. Brookings Up Front blog post “Examining the uneven and hard-to-predict labor market recovery,” such as April’s 266,000 jobs gain hiding 6.6 million going “from being employed to unemployed or out of the labor force,” applications filed by startups “likely to employ people” rising from 2019’s 110,000 average to 150,000 even since July, and that some employees may be taking time off “after a very difficult year,” but we know we are recovering, with only the pace unknown.

In the June 4^th Times, Giovanni Russonello told us “Was the Jobs Report Good?  It’s in the Eye of the Beholder.”  It was an interview with frequent business reporter Ben Casselman, who said that “the report was exactly good enough to allow everyone to hold on to their existing beliefs, and for us all to get to do it again a month from now,” and “that things are getting better… just not as quickly as anyone would like.”  Casselman pointed out that between the mid-May data collection time and the article date, 12 million Americans have been fully vaccinated, and noted that inflation should not be a large concern since it was “tame” even with pre-pandemic 3.5% joblessness.  Then, in the same publication on the same date, we had former chief Department of Labor economist Betsey Stevenson’s “The Jobs Report Takeaway:  A Huge Reallocation of People and Work Is Underway.”  Her observations include “the unemployed aren’t leaving work, they are changing work, and change takes time” with “a giant mixer” between those looking and those hiring, and, like it or not, it will be a while to achieve movement of “workers into the jobs in which they can be most productive.”  We don’t know the extent or permanence of these coronavirus-caused shifts, but we know there will be some.

On June 6^th, also in the New York Times, Heidi Shierholz worked to get us together with “Republicans, Don’t Ignore the Evidence on ‘Labor Shortages.’”  She wrote that “the main problem in the U.S. labor market remains one of labor demand, not of labor supply,” that we are still 7.6 million positions down from February 2020, and that higher pay is a sign of “a healthy labor market.”  All true, but we don’t yet know ongoing significances.  Then, in the June 8^th Times, we had advice from Glenn Hubbard on “How to Keep the Economy Booming – And Meet the Demand for Workers,” including that “policy should support returning to work and matching workers to jobs by supporting re-employment and training for new skills, not just boosting demand.”  Indeed, it is clear to me that, now, all unemployment benefit recipients should be required, as pre-pandemic, to apply for jobs. 

Just how strong will the economy be late this summer?  The title of Neil Irwin’s “Hot Vax Summer Is Looking Lukewarm,” in the June 4^th New York Times, came out more pessimistic than the author may have intended – “lukewarm” is quite a bit cooler than “warm” – but by now it seems likely that we will not be completely back that soon.  With the share of Americans becoming fully vaccinated creeping along, to only 43% having that status as of yesterday, we are not going to have an easy “reopening spurred on by vaccination.”  As well, “at the job creation rate of the last three months, it would take 14 months to return to February 2020 employment levels.”  So let’s expect our July and August prosperity to be warm, like the weather, but hardly a heat wave.  And that is where we stand.

May: In Strong Employment Month, Latent Demand Increased with AJSN Showing We Could Fill 19.9 Million More Jobs

With last month’s issue causing concern about the intensity of the expected recovery, this morning’s Bureau of Labor Statistics Employment Situation Summary was a particularly important one.  Last time was superficially disappointing, but once we got under the surface, especially in conjunction with our pandemic results, it was generally good. 

This time, though, was better even at first glance.  Although the number of net new nonfarm payroll positions, at 559,000, did not reach the consensus 650,000 to 675,000 prediction, it was still a healthy gain.  Seasonally adjusted unemployment fell from 6.1% to 5.8%, with the unadjusted version off from 5.7% to 5.5%.  The count of those jobless dropped 500,000 to 9.3 million, with those on temporary layoff down 300,000 to 1.8 million and people out for 27 weeks or longer decreasing 400,000 to 3.8 million.  The two measures of how many Americans are either working or one step away, the labor force participation rate and the employment-population ratio, were mixed, with the former down 0.1% to 61.6% and the latter up the same amount to 58.0%.  The total of people working part-time for economic reasons, or holding on to part-time work while thus far unsuccessfully seeking full-time propositions, gained 100,000 to 5.3 million.  Average hourly private nonfarm payroll earnings increased substantially again, this time 16 cents higher to reach $30.33 – that continues to reflect higher wages as well as lower paying positions still unrestored.

The American Job Shortage Number or AJSN, the measure showing how many new positions could be quickly filled if all knew they were easy and routine to get, increased 169,000, to reach the following:

    

The largest differences from April were the effect of those unemployed, reducing the AJSN by 351,000, along with people not looking for a year or more, adding 278,000 to the metric, and a jump in those non-civilian, institutionalized, or off the grid, which was in effect a correction since newly implemented census results showed about two million more Americans than previously projected, which added 201,000.  If the overall population were the same for both months, the AJSN would have been almost unchanged.  The AJSN’s share from official joblessness for May was 39.9%, down from April’s 42.0%.  The statistic may now be somewhat overstated, due to those getting unemployment compensation not being required to search for work, but that was nothing new in May, has already changed in some states, and will follow in more.   

The overall results here were only slightly positive, so how did we do at the same time with the coronavirus?  Per the New York Times, the 7-day average of new daily cases fell 53% from April 16^th to May 16^th, reaching 33,040.  The same average of deaths was off 18% to 611, and the number of people hospitalized, calculated the same way from the same dates, lost 25% and is now at 33,693.  The number of daily vaccinations, though, decreased 44% to 1,886,917, reflecting, with 41% of Americans now fully vaccinated, quickly dropping demand. 

It is simple, then to evaluate how we did with employment this time.  We did fine.  We can see that the increase in people going back to work, though not massive, did not interfere with national pandemic recovery.  While this month was not flawless, the turtle took another solid step forward.