American companies are suppressing wages for many workers
mobile.nytimes.com
mobile.nytimes.com
"Thirty years ago, she says, you could walk into any hotel in America and everyone in the building, from the cleaners to the security guards to the bartenders, was a direct hire, each worker on the same pay scale and enjoying the same benefits as everyone else. Today, they’re almost all indirect hires, employees of random, anonymous contracting companies: Laundry Inc., Rent-A-Guard Inc., Watery Margarita Inc. In 2015, the Government Accountability Office estimated that 40 percent of American workers were employed under some sort of “contingent” arrangement like this—from barbers to midwives to nuclear waste inspectors to symphony cellists. Since the downturn, the industry that has added the most jobs is not tech or retail or nursing. It is “temporary help services”—all the small, no-brand contractors who recruit workers and rent them out to bigger companies.
The effect of all this “domestic outsourcing”—and, let’s be honest, its actual purpose—is that workers get a lot less out of their jobs than they used to. One of Batt’s papers found that employees lose up to 40 percent of their salary when they’re “re-classified” as contractors. In 2013, the city of Memphis reportedly cut wages from $15 an hour to $10 after it fired its school bus drivers and forced them to reapply through a staffing agency. Some Walmart “lumpers,” the warehouse workers who carry boxes from trucks to shelves, have to show up every morning but only get paid if there’s enough work for them that day.
“This is what’s really driving wage inequality,” says David Weil, the former head of the Wage and Hour Division of the Department of Labor and the author of The Fissured Workplace. “By shifting tasks to contractors, companies pay a price for a service rather than wages for work. That means they don’t have to think about training, career advancement or benefit provision.”"
1 - http://highline.huffingtonpost.com/articles/en/poor-millenni...
I think this:
>“By shifting tasks to contractors, companies pay a price for a service rather than wages for work. That means they don’t have to think about training, career advancement or benefit provision.”
was an attempt at explanation. But I don't see how it leads to lower wages.
At the end of the day, it's always supply and demand. The contracting just helps with creating a third party to deal with employment laws and all that hassle.
I recently stayed at a hotel and didn't even need to talk to anyone. Bought the room on via the hotel's app, the digital key in the app opened the door using the phone's NFC, the receipt was received via email.
Previously you could start in the hotel kitchen and then become a line chef or a waiter or bartender and then a manager. And you'd be able to do so by showing you were competent and hardworking and moving up within the organization.
Now, in the extreme case, each of those roles is handled by a different outsourcing firm. The manager is quite possibly not directly taking resumes from people who walk in off the street, they're getting workers from a temp service who only supply low level kitchen help.
Put another way: who is typically going to make more? The person who has worked for Hilton Hotels for 20 years or the person who bounced around between a half dozen temp agencies doing work inside the same Hilton Hotel for 20 years?
Let's say in some city the factory was closed due to outsourcing and 3K people are now jobless. They are not applying to be a security guards in city hotels -- there are no vacancies announced, and hotel managers are not aware of opportunity to lower their costs.
But then some dude opens SecurityGuards LLC, hires former factory workers and starts sending out proposals for security contractors, paid by hour. Once proposal reaches hotel manager desk and evaluated, their current bouncer is fired and contract with SecurityGuards is signed. Hotel manager collects yearly bonus for efficient cost control.
So, the root cause is global wage arbitrage, but it appears that owners of contractor businesses are the bad guys here.
A big one in the UK is it enables dodging of Employer’s NI
Basically, a contractor can turn part-time work into a full-time job.
If you hire a cleaner directly you don't want to have to go through the hassle of hiring a new cleaner every few months so you pay them well so they will stay. Since they are your employee you probably include them in other items you give to other full time employees, such as profit sharing and vacation.
If, instead of hiring directly, you pay "Acme Cleaning Services" you know someone will show up every night to clean, even if it isn't the same person. The cleaner is no longer "part of the team." Acme Cleaning Services treats their employees like replaceable cogs in a machine, all they do is hire lots of low skilled labor and keeping pay low lets the company get more business.
Here are some reasons why:
1) loss of corporate identity / camaraderie
2) reduced working training & quality... and loss of control over how work it performed. If you retain control over work methods, they’re supposed to be employees
3) double downward pressure on wages as companies compete and then the contracting firm takes a cut. Pressure increases as subcontractors show up
4) subcontracting! You hire firms with no capabilities, which then hire subcontractors who hire people who know what they’re doing (maybe, see above). Why are these companies making profits? It should all go to the workers.
5) false flexibility. Your HR system might be painful, but good luck getting rid of a toxic contractor if they’re the cheapest person who can do the work. You can take your contract to a new company but they’ll hire the same people you already had.
Contracting obviously has its place - no firm can do everything- but staff replacement just sucks.
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Not paying people but still requiring them to do things (like show up to work or keep their schedule free) is disgraceful. Hiring part-time workers is not disgraceful.
If we want more full-time workers for stable employment, we need to a better job disentangling our social justice policy goals (retirement savings, health care, maternity leave, etc.) from full-time employment agreements (at least exclusively those agreements). If we want a dynamic labor market and employees with the ability to tell their bosses to stuff it, we need to stop leaning so hard on the employer/employee relationship.
It clearly isn't working.
I'd still say employers need to be held accountable for how they treat part time workers though. For example, they can drop your hours to next to nothing, forcing you to leave the job rather than firing you. They can juggle your part-time days around at random making it insanely difficult to hold two part-time jobs.
You make valid points about the employer/employee relationship, but even if things like benefits were fixed, holding two or three part time jobs can be extremely difficult.
My wife works in pharmacy, retail - and the things she sees from retails stores regarding employees is disgusting. The store seems straight up hostile towards it's employees. It really puts it into perspective how much better I have it, as I've worked salary for ~15 years now.
Sure. I just think the best people for that job are the workers themselves. Making less of life dependent on full time employment will give employers less leverage over employees.
> ...even if things like benefits were fixed, holding two or three part time jobs can be extremely difficult.
It can be. But it can also be simple. You could work Mondays, Wednesdays, and Fridays for one boss and Saturdays for another. Or you could work on a mostly commission basis for two different bosses. The challenges are typically where bosses are getting away with getting something for nothing. There is no minimum wage for "be available these hours" or "get approval before taking on another job".
Sure, but that assumes you have the power to dictate your schedule. That right there depends on some respect from employers to employees.
Clearly I'm biased as I have seen disgusting things in retail. In the examples I've seen, they want you 7 days a week, regardless if they will actually pay you on those days.
This is made worse by the job market that gives employers quite a bit of bargaining power. Why take the employee who only wants to work Mon/Wed/Fri, when there's someone else willing to take whatever they can get?
Companies need to be incentivised to hire their own people again.
Eh, your explanation doesn't make much sense.
You are saying they're more expensive but you are probably just looking at the employee vs contractor take per hour.
Employees need unemployment insurance paid to the state, contractor does not.
Employees need health care, contractor does not.
Employees expect raises, contractors?
Hard to lower employee wages, with contractors it's just a negotiation at end of contract terms.
I don't know if there's any empirical proof for this, but like competition between companies, I think "competition" or tension between employees and employers for a given organization is also good for capitalism.
Also giving them a bad rep: propaganda efforts by big employers. Back when I worked for them, Walmart showed new hires a training video that could be summed up as "just say no to card checks; union organizers are trying to trick you into giving up your rights, and you don't need a union anyway because we value our associates so much".
ie. Its illegal but worst case is we get fined 10% of what we will make anyway. Best case is we get away with it.
The other part is that they are not enforced due to the lack of resources to enforce them. Which again leads to the "have no teeth" since the laws are so broadly "interpreted" it can take years to pursue one case. This part is the hard part since it really is the crux of the problem and no one is working on it nor has any monetary incentive to do so.
There is not logically, morally, or non-exploitative business reason to have a non-compete for a minimum wage employee. Yet this case will probably drag out for at least 6 months if it is handled "expediently"
There are so many people in China and India (and allover the world but these 2 have the largest populations) that are smarter, more creative, and much more driven than us in the US that it's inevitable that we regress towards the median.
Our lifestyles are maintained primarily through moats dug a long time ago. However technology continues it flattening rampage making each human equally valuable by unlocking more and more of their potential. What was gated physically and socially is not so anymore due to the ubiquity of computers and the internet.
Ironically it's the executives making these decisions by seeing the equality in all humans. It's not that they can't reduce their own salaries and bonuses but if there are willing and driven people, by denying them they are basically giving charity to the "middle class" that expects them to do so without a thanks. In this situation it's the middle class demanding more without seeing that they are actually asking for charity that results in a schism between the ideal and reality and all the dehumanization that comes with it.
Even though there was always a limited number of union workers, their collective bargaining set the standard. That’s not really a factor these days.
1) Far too many humans on earth to have better bargain power in exchange of labor.
2) No workable formula where enormous wealth generated in this world to be more equally distributed.
From what I can tell, all of the same factors that are driving down wages in the US - increased consolidation, far more 'temp' positions brokered by temp agencies - apply to Canada as well, and have had the same effect.
Based on the share of the workforce that is represented by unions. Canada is currently at ~30%, the US peaked at ~30% and is at less than 10% today.
> Unions have shrunk, membership are down, political clout is down, and a newly unionized company is a rare bird indeed.
Unionization is indeed down, but what I said is that it is still about as strong as the strongest years in the US. Canada had even stronger unions through the 80s, when it peaked at just shy of 40%. Interestingly, much of the same wage issues we face today were still present at that time. Wages have been stagnant since at least the 70s, according to the Canadian government (and American data echos this).
In terms of unionization rate, in 2016 Canada was at 28.4% [1]. By comparison, the US peak was 34.8% in 1954 [2] . (It is now 10.7% [3], which is slightly higher than 10%, not less than.)
While the "~" can justify a rounding to the nearest 10% instead of 5%, that ended up hiding a difference of 6.5%, or 1/5th of the total unionized population. From what I can tell, the current rate of around 28% corresponds to the US unionization rate in about 1970 [3], and not its peak in 1954.
The US peak of 34.8% is closer to the Canadian peak of 37.9% in 1984 than it is to 30%, and corresponds to the Canadian unionization rate in 1991 [1].
The coverage rate for both countries is of course higher. For 2017 in Canada it was 30.4% [5] and in US is was 11.9% [3].
[1] "http://www.statcan.gc.ca/daily-quotidien/170908/cg-a003-eng....
[2] "At their peak in 1954, 34.8% of all U.S. wage and salary workers belonged to unions" - http://www.pewresearch.org/fact-tank/2014/02/20/for-american... .
[3] http://unionstats.gsu.edu/All-Wage-and-Salary-Workers.htm . The BLS gives the same unionization numbers for 2017 (but no coverage numbers) at https://www.bls.gov/news.release/union2.nr0.htm .
[4] http://www.statcan.gc.ca/daily-quotidien/170908/cg-a003-eng....
[5] https://www.statista.com/statistics/442980/canada-union-cove...
Looking at places like Connecticut/Illinois/New Jersey it is causing starvation of public services to meet pension obligations despite already high taxation.
They are caught in a trap since if they raise taxes further (and/or decrease services) they will lose those most capable of moving- who also happen to pay the most taxes. This is already starting to play out[1].
Private sector unions are tasting the fruits of their corruption via the mafia and general unwillingness to integrate with long term industry needs, ala the German model.
Its incredibly unfortunate, since a modern, ethical and foresightful private union would serve the greater good of the country better than just about anything else I can think of.
0: https://www.forbes.com/sites/adammillsap/2016/06/01/public-p...
1: http://www.courant.com/opinion/editorials/hc-ed-tax-migratio...
Legally-mandated golden parachutes?
Also, companies are still free to strive to keep their knowledgeable workers happy, with an attractive total comp and good work environment.
It's one thing for knowledge work (even there I'd like to see it go away), but there's zero justification for preventing a guy who gets fired from Jimmy John's from trying to work at Subway or Quizno's.
Perhaps rather the market has become overly populated with workers and there isn't much choice in which opportunities you pursue.
Also, a big problem with the "free market" is inability and/or disincentive to price externalities, such as environmental damage. Although, it still seems to be a better system than others, we need to work on that front.
> Whenever I raise the point that it is immoral to shut us up in a close room twelve hours a day in the most monotonous and tedious of employment, I am told that we have come to the mills voluntarily and we can leave when we will. Voluntary! Let us look a little at this remarkable form of human freedom. Do we from mere choice leave our fathers’ dwellings, the firesides where all of our friends, where too our earliest and fondest recollections cluster, for the factory and the Corporations boarding house? By what charm do these great companies immure human creatures in the bloom of youth and first glow of life within their mills, away from their homes and kindred? A slave too goes voluntarily to his task, but his will is in some manner quickened by the whip of the overseer.
> The whip which brings us to Lowell is NECESSITY. We must have money; a father’s debts are to be paid, an aged mother to be supported, a brother’s ambition to be aided, and so the factories are supplied. Is this to act from free will? When a man is starving he is compelled to pay his neighbor, who happens to have bread, the most exorbitant price for it, and his neighbor may appease his conscience, if conscience he chance to have, by the reflection that it is altogether a voluntary bargain. Is any one such a fool as to suppose that out of six thousand factory girls of Lowell, sixty would be there if they could help it? Everybody knows that it is necessity alone, in some form or other, that takes us to Lowell and keeps us there. Is this freedom? To my mind it is slavery quite as really as any in Turkey or Carolina. It matters little as to the fact of slavery, whether the slave be compelled to his task by the whip of the overseer or the wages of the Lowell Corporation. In either case it is not free will, leading the laborer to work, but an outward necessity that puts free will out of the question.
Wrath? It was barely a slap on the wrist or a mild scolding.
The affect of bad data on the labor market almost looks like the affect of fake news in politics doesn't it?
This is the most shocking part of the article for me. How could economists for years have denied something so plainly obvious?
And this is why we are surprised every time the economy crashes, yet again.
Unions give actual power to workers (and are great at motivating them to vote according to their interests!) instead of just passing laws out of the goodness of our heart to protect them and hoping they last through billions of dollars in corporate bribes.
Giving a union the power to shut down a production line doesn't do much good when a new line can be setup overseas in hours. Corporate power has to be fought at the state and nation level
What we need are mechanisms to ensure that there's always a constant and steady stream of gigs available for any person to work. Many of these gigs might not be full-time or part-time jobs but rather micro-jobs or micro-tasks, that some entity needs to have completed to fulfill some larger mission, which is irrelevant to the gig worker.
The requirements for completing a task could range from simply "Being a human" to "Specialized skills in a specific domain". Profiles for workers could contain all sorts of information that could help them find relevant work quickly and easily, consisting of things like education and trade skills to even body metrics and IQ if necessary. And of course workers can be rated based on previous work history to help them better find future jobs without needing to keep a resume.
A worker should not need to get anything more out of their job than payment for services rendered. Healthcare should be handled by the government, and vacation time is handled by whenever the worker doesn't feel like working.
Unemployment is best handled by keeping your own savings I'd say, though that's tough for some to grasp in a nation with little financial education.
Every time a discussion on unions or any sort of organization to "push back" against the big companies in just our own industry is met with a good 50% of HN readers dismissing the idea outright.
And even talking about cutting off the supply of H1Bs - or at least the body shops that probably aren't as prolific at the top companies which are overrepresented here - is flagged and downvoted in minutes.
It doesn't surprise me, given the age of the average HN reader. Once you have a family, house, and have experienced age discrimination at 40, you'll have different views, I'm guessing. Maybe even sooner for many here if the blatant discrimination of white and asian males gets more traction.
I guess the thing that is so disappointing to me about this industry is that we're supposed to be smarter than the rest. But we have completely ignored the history of this country and the battles that our predecessors fought.
I see no reason to be "ethical" anymore when it comes to employment because I know that it will be one sided - in this case I will act purely in my own interest, just like the businesses do. There's zero reason to play the game where the other side gets to change rules at will and forces you to get along with it.
Where are the handcuffs?
For salaried jobs in all companies, the only requirement for unpaid overtime should be responding to emergencies. So for engineering, this would mean always 40hr week unless dealing with out of hours production downtime.
There is way too much abuse happening(frequently implicitly).
[0] I realize the article said they stopped, but I still can't help but be very upset about it.
I bring all this up, because I'm not sure it will be quite as applicable in other industries. It seems that many workers aren't willing to move for work and don't have the competitive salaries in other cities required to bring up the salary. I'm sure it's possible that the scheme could be broken up through other methods, but I'm having trouble seeing an avenue there.
It doesn't seem like smaller startups pay that well - though maybe that is fair due to the chance to hit it big.
What I will tell you is that software engineers in the rest of the country, especially in industries that have been decimated by offshoring and H1Bs (banking, insurance, and large companies in general) do not pay that well after about age 35 or so once you hit your ceiling (anywhere from $90K in the Midwest to $150k in high COL East Coast) no matter how talented you are.
I made way better money than most of my peers at 25 - they were still in grad school and paying off loans. By 30, I was still making more, but they were quickly catching up.
I'm imagining by 40, I won't be much ahead of anyone with a professional degree or even those who went into government and now have seniority, pensions, etc.
What I've seen so far with offshoring, H1Bs in my 20s was the first big warning sign for me. Then as I got into my 30's and started seeing how management treats older works, I'm beginning to realize that age discrimination in tech is for real - second warning sign.
And finally, if this whole war on white / asian males picks up steam in other companies, I'm probably going to attempt to pivot out of the industry completely. There is not much of a bright future.
I'm imagining by 40, I won't be much ahead of anyone with a professional degree or even those who went into government and now have seniority, pensions, etc"
I have seen that myself. I used to make more than people my age but over the years non tech friends have advanced steadily and have passed me. People in government often make around 150k too but they get a very nice pension in addition.
If something like that became standard, it would be used as a tool to further divide our socioeconomic classes. Social pressures from friends, family, children, as well as economic pressures will force people into signing these non-compete contracts.
The issue is that, as a member of a overpopulated labor pool, a low-skilled worker has no bargaining power and so without bans on things like non-competes, corporations could walk all over their labor force. That is a social regression.
It may be rather eye opening for you.
At the same time these clauses reduce the number of potential employers for any given candidate, so any given employer has less incentive to meet a higher salary demand.
Without the non-compete Subway workers would apply for work at 5 Guys, which would force Subway to become a more competitive employer.
No matter what rung of the ladder you're on, non-compete's hurt employees and benefit employers just as they were intended to do.
Then why in the blue fuck does Subway need a non-compete in the first place?
NC's are suppose to help a company maintain the value in investing in its employees so they are less likely to leave, or to keep said employees from taking customers. In the low value end this make no sense. There is little to no investment in the employee, and there is little risk of the employee taking high value customers.
Statista has the largest employer at 12.7% market share and "Other" at 55%: https://www.statista.com/statistics/307965/market-share-of-f...
Research Gate has similar figures, though I believe this one is international: https://www.researchgate.net/figure/Market-Share-of-major-pl...