How to End 30 Years of Wage Stagnation
Photo of the national strike in Milan on October 31, 2013. Thousands of tourism workers took to the streets to protest against layoffs and cutbacks in the tourism industry. Photo from Shutterstock.
Why you can trust us
This article was originallly published by theconversation.com
Discussions about the future of work are clearly in the air.
Last week, Secretary of Labor Tom Perez convened a three-day symposium on the issue. Simultaneously, the Brookings Institution hosted a discussion about the implications of the “gig” economy for work and employment policy. At MIT, we are also planning a similar conversation for early next year.
And in Silicon Valley, leaders of high-tech companies and worker advocates have recently started discussing new ways to offer benefits to contract workers following several high-profile cases in which Uber drivers and others have sued to be considered regular employees and gain the accompanying benefits.
We have to address the fact that so many young people have been scarred by starting their careers in the “lost decade.”
All this couldn’t come at a better moment, but time is of the essence. Unless talk leads to actions to change the course of the economy and labor market, the next generation of workers is destined to experience a lower standard of living than their parents—the opposite of the American Dream.
I share a deep concern that is motivating this flurry of discussion. This concern for the next generation is the major theme of my current research, book, and online MIT MOOC (massive open online course) devoted to Shaping the Future of Work. The central challenge we face is to update our employment policies to catch up with changes in the economy, workforce, and employment structures.
How can we do it?
Confronting our problems head-on
My hope is that everyone participating in these discussions is ready and willing to face our problems squarely by putting on the table the tough choices and changes in strategy and behavior America needs from labor, business, and government to turn things around and build a better future for the next generation.
I’ve been in far too many soft-minded discussions that avoid the tough issues. It is always easier to agree on the need for better education and training or to cheerlead the practices of leading companies without asking how do we make these the norm rather than the exception. We need to go beyond these polite discussions.
We have to address the fact that so many young people have been scarred by starting their careers in the “lost decade” when wages weren’t rising even for college graduates and 40 percent of those with bachelor’s degrees started out underemployed, working in jobs that neither utilize their education nor provide further training and development opportunities.
The evidence shows workers who start their careers this way have a very hard time getting on track to higher-paying job opportunities.
Here are three of the tough questions that need to be front and center in these discussions, each of which will call for big changes in labor, business, and government strategies.
How do we rebuild worker bargaining power?
The primary challenge facing workers and the economy is how to end 30 years of wage stagnation and reverse the income inequality that is holding back economic growth.
Bargaining power in the heyday of rising wages (prior to 1980) came largely from unions threatening strikes and spreading collectively bargained wages across firms within industries. Those sources of power dried up in the 1980s.
We cannot shape the future of work unless we update labor law to provide all workers… the ability to organize and negotiate to improve their working conditions.
Today, workers, supported by future unions and professional associations, need to use their knowledge and skills as a key source of power. This requires two things. First, workers will have to gain and periodically refresh the skills they need to remain competitive in their labor markets over the full course of their careers. Second, organizations and technical “apps” are important to mobilize them and help them move jobs from bad to good employers.
The ability to exit workplaces with below-standard employment practices may be as important a source of power for the workforce of the future as direct bargaining to change those practices was for workers in the past.
This means that labor organizations have to build the capacity to support and maintain members’ skills and provide the information, portable benefits, and mobility supports needed to move from one employer to another over the full course of their working careers.
Various groups are working on “apps” to provide information on good and bad employers. Putting them to use to mobilize workers and enforce high-quality employment practices may just be the next generation workforce’s best source of bargaining power.
How do we get more employers to take the high road?
Employers beware. These discussions will also not be easy on you.
You will be challenged to end the era of financialization of the American corporation that now has dominated for 30 years. The American economy can no longer afford to let corporations fixate on maximizing short-term shareholder returns at the expense of other stakeholders, particularly employees.
This was not the corporate mantra of the era when wages moved in tandem with productivity. The good news is a large body of research has shown how to compete on the basis of high productivity and high wages, and yes, we all have our favorite visible examples of companies that do this, such as Southwest Airlines, Costco, Kaiser Permanente, SAS, and, our New England favorite, Market Basket .
Employers beware. These discussions will also not be easy on you.
The key question for discussion here: How do we go from these examples as the exceptions or outliers to make them the norm in business?
This will require more than cheerleading. It will require broader use of alternative forms of corporate governance, from employee stock ownership to benefit corporations to cooperatives and, perhaps, to bringing workers’ voices directly into corporate boardrooms.
Tough issues indeed.
How do we end 30 years of labor policy gridlock?
Perhaps the toughest question to put on the table is how to end the 30-year gridlock over labor policy.
We cannot shape the future of work unless we update labor law to provide all workers, regardless of whether they are hourly employees, managers, or independent contractors, the ability to organize and negotiate to improve their working conditions. Other employment policies that set the floor on working conditions such as such as minimum wages and overtime, equal employment opportunity, Social Security, health insurance, etc., also need to be extended to those now excluded.
But let’s be realistic. Congress is so divided today that there is little hope for immediate solutions. Maybe a first step could be taken by building consensus out of these meetings that fundamental change and updating of employment policies are needed.
Perhaps those participating in these discussions with the labor secretary and in various think tanks and universities could call for an era of policy experimentation. We could ask this administration—or, if necessary, the next one—and, where necessary, the Congress to authorize the secretary of labor to experiment with and evaluate a variety of new approaches to worker voice, a “third way” of classifying workers in the gray area of employee-contractor status and to work in coalition with community, business, and labor groups to complement and extend the reach of labor standards enforcement.
Creating the legal spaces needed to try new ideas like works councils, advisory bodies made up of representatives of all workers and managers in an enterprise, or regional or sectoral negotiations over wages would be a good starting point. Expanded use of the type of statewide and industry-level wage boards pioneered this year by Gov. Andrew Cuomo in New York would be another option. So too would giving weight to employment practices that generate high productivity and good wages in choosing among bidders for government contracts.
Together, actions like these might just unleash the broad-based experimentation and innovation needed to identify the best options for national policy reform when the political forces eventually align to make this possible.
So let the discussions begin. But let us not avoid the hard issues.
Stay tuned. I’ll report on what comes out of the labor secretary’s confab and the others to come down the road.
