The NJ on Sunday begins a series looking at the state of jobs in Delaware, pointing out what we already know — that very low wage jobs are increasing, jobs in the middle are disappearing (or taking much less money) and there is employment in the upper end if you have the right education and skill set. And while the Governor and Alan Levin have been working at “economic development”, there’s been little increase in the kinds of jobs that are most needed here immediately. It is difficult to say that the Governor and his DEDO Director haven’t been working hard at this — I think they have. But most of what passes for economic development since the Great Recession pretty much everywhere is a numbers game — figuring out how to boost the number of jobs in your state without paying much attention to either the quality of those jobs or the ROI any taxpayer subsidy might provide for Delaware taxpayers. Governments are chasing the same limited pool of jobs and working at a classic race to the bottom strategy to get them. Almost all of them are providing taxpayer subsidies to get those jobs in their states, and clawback provisions in case the employer doesn’t fulfill promises are still too rare.
Fast food jobs in Delaware skyrocketed in the last decade, with low-paying food prep and service jobs seeing 29 percent growth – or more than 8,600 jobs added during the period. At the same time, better paying construction jobs have fallen by 30 percent, or losing more than 5,000 jobs, and production occupations fell by almost 27 percent, a loss of more than 5,300, according to a News Journal analysis of data from the U.S. Department of Labor.
Meanwhile, top-salaried positions for the more educated jumped 12.3 percent, adding more than 7,200 jobs.
It’s the low-paying jobs that are already getting an employer handout in form of food assistance and Medicaid for some of these workers. I’m not sure how many of these low-wage ventures get DEDO or municipal help, but it is for certain that Amazon jobs are not a replacement for auto manufacturing. So that while the State is busily trying to entice companies here, we have companies here who already get support via safety net payments to their staff. If that isn’t a good enough reason to support a minimum wage, I don’t know what is. Because the thing we know is that taxpayers pay either via incentives given out by DEDO or they pay via safety net payments for people who are working, but whose employers don’t pay enough to keep them off of food stamps or Medicaid. There aren’t any proposals to raise the minimum wage enough to change that equation and certainly there are no legislators who are thinking of ways to get this hidden handout back for taxpayers.
Gov. Jack Markell, greeted by the Great Recession’s economic upheaval when he took office in January 2009, said he’s witnessed the way automation and global competition have devastated the state and national workforce.
This is less about automation, than it is about global competition, which lets companies seek very cheap labor to make their products. Even with our low minimum wage, Americans are not cheap labor. But if you accept that no one is even going to make a plastic fork in this country ever again, there’s no reason not to look hard and be creative about the small, but important effort to “re-shore” American job (see here and here). Thinking about how to help bring back some highly skilled manufacturing jobs, not just increases the overall pool of jobs, but can help companies get better quality, reduce vagaries in transportation and supply chain, take advantage of an underutilized labor source here that is absolutely ripe for these jobs and help to increase badly needed exports. I don’t want to oversell this as a magic wand, but it is definitely time to think about how to get back the higher-end manufacturing that fled to cheaper countries. We won’t be the manufacturing powerhouse we used to be, but we can get back and excel at high-skilled, high-end manufacturing that requires and good deal of quality. This is the kind of manufacturing that Germany has been good at keeping for themselves.
Over the last decade, the bottom 10 percent of workers saw real wage declines of 4.9 percent, while the top 10 percent of Delaware occupations saw pay skyrocket 22.3 percent, according to data compiled for The News Journal by the Delaware Department of Labor. For workers in jobs that make up the middle 60 percent of Delaware’s economy, wages fell 5.2 percent.
This, I think, is a feature, not a bug in our current economic climate. The jobs that are left here are basically those that can’t be offshored easily — knowledge work or service work. Because of the disappearance of the working middle, there is a great deal more competition in the service industries and it is easy for employers to take advantage of workers who are desperate for anything. So wages are depressed, vacation and sick pay disappear, employer insurance gives way to Medicaid and you’ve created a workforce that is pretty much captured by businesses that can make a very great deal of money by paying highly productive people no where near the value of their production.
Another thing with the automation claim is that it *may* not sync up with the data of those work sectors greatest hit. A paper by Tali Kristal in the American Sociological Review makes the point that it was unionized jobs that took the biggest hit:
“Some economists contend that computerization is the primary cause and that it has increased the productivity of machines and skilled workers, prompting firms to reduce their overall demand for labor, which resulted in the rise of corporate profits at the expense of workers’ compensation,” Kristal said. “But, if that were the case, and computerization was the principal cause for the decline in labor’s share of national income, then labor’s share should have declined in all economic sectors, reflecting the fact that computerization has occurred across the board in the past 30 to 40 years.”
This is not the case, however, as Kristal showed in her study, in which she considered data on 43 non-agricultural private industries and 451 manufacturing industries from 1969 through 2007.
“It was highly unionized industries — construction, manufacturing, and transportation — that saw a large decline in labor’s share of income,” Kristal said. “By contrast, in the lightly unionized industries of trade, finance, and services, workers’ share stayed relatively constant or even increased. So, what we have is a large decrease in labor’s share of income and a significant increase in capitalists’ share in industries where unionization declined, and hardly any change in industries where unions never had much of a presence. This suggests that waning unionization, which led to the erosion of rank-and file workers’ bargaining power, was the main force behind the decline in labor’s share of national income.”
In addition to the erosion of labor unions, Kristal found that rising unemployment as well as increasing imports from less-developed countries contributed to the decline in labor’s share.
“All of these factors placed U.S. workers in a disadvantageous bargaining position versus their employers,” said Kristal, who also demonstrated that while employers gained most of the benefits from computerization, much of computer technology’s effect on the decline in labor’s share of national income was indirect, and channeled through its role in reducing unionization. The direct effect of computerization on the decline in labor’s share was relatively modest, Kristal said.
(The author also writes in TPM today — the paper itself seems to be gated.)
One forecasting group predicts that Delaware won’t return to its previous employment peak until 2016. Wish there was more data here, but there you have it. Can anyone see a reasonable path to getting back to healthier employment numbers? And no, tax cuts aren’t the answer.