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Creating (Crummy) Jobs

March 11, 2019 (2,212 words)

Many a member of my once-dominant post-WW II “baby boom” generation (b. 1946-1964) began life with decidedly liberal tendencies. But we were mugged by reality as we grew into adulthood, and calcified as conservatives.

This is not necessarily as terrible as it sounds. Among other things, we developed a practical side and became reliable. We learned to make the most of what we were given. In other words, we became our parents.

And it’s not just the clever and the cognitively-blessed of my generation who have made their mark. Sure, the doctors and lawyers and fancy-pants corporate players, the bond traders, real estate developers, and management consultants have all excelled in truly remarkable fashion, attaining a level of prosperity our parents couldn’t begin to imagine.

But even the lesser mortals among us, for the most part, have been able to secure gainful employment which has provided a happy life of comfort and ease, compared to that of our immediate forbearers.

… a widely held consensus about the rules of engagement

While our personal industriousness has contributed mightily to what I and my contemporaries have achieved, we also have the “system” to thank. It generated all that post-WW II opportunity, and it came with a widely held consensus about some basic rules of engagement. Those rules featured a modicum of concern for the well-being of everyone involved, with at least a passing attempt being made to balance the interests of capital with those of labor.

Now, as we baby boomers continue our collective fade into the background, settling into what for many of us is a relatively stress-free retirement, we may not fully realize just how much things have changed since the halcyon days of the 1970s and 1980s, when we were first coming up and making our way in the world.

Or maybe we do. How many of us have spent the last decade or two struggling with the disappearance of “people skills” among our younger co-workers, and the decreasing importance of developing a strong personal rapport with those we work with, as everything has become so high tech?

How many have cowered in fear of being unceremoniously let go in yet another round of downsizing and restructuring? How many have experienced a jarring lay-off in their fifties, to face the near impossible task of finding new employment even remotely commensurate with one’s experience and ability?

Even if we escape the ax, the winds of change can turn the final chapter of our career into a frustrating death march, as we often find ourselves counting the days until we can stop showing up.

… certain workplace changes are inevitable

For those still in the thick of it, certain workplace changes are inevitable, and one has no choice but to adapt. The world no longer needs hat makers, for instance, or door-to-door milkmen. Soon, we are told, all long distance freight haulers will be replaced by self-driving vehicles.

But what we are experiencing at present is more than just an inevitable evolutionary process of jobs being lost in an “old” industry only to be replaced in another, brand new one.

We are witnessing an unraveling of the underlying consensus about the need for employers to relate in a socially-responsible way to their employees. For a time in this country – the middle of the 20th century, at least – there was a measure of deference shown toward those who merely work for, while having no ownership stake in, a commercial enterprise.

But that deference has evaporated. A number of qualified observers continue to analyze the origins and ongoing effects of this phenomenon in illuminating detail. Readers pressed for time may appreciate getting the gist of the story in a few broad strokes. So here goes…

… detailing the unraveling in a few broad strokes

The unraveling may have started in 1962, when Milton Friedman popularized the notion that business has but one social responsibility: to be profitable. Mr. Friedman was not the first libertarian economist to reach this conclusion, but he did succeed in making it a widely-accepted mantra.

The next milestone may be said to have occurred in 1968, when Bruce Henderson, founder of the Boston Consulting Group (BCG), came up with the famed analytical tool known as The Experience Curve, which was then expanded into the widely distributed pamphlet, Prices Go Down Forever, in 1974.

This BCG exclusive described a path to increased profitability through continued growth and expansion. Mr. Henderson’s spin was to suggest the resulting efficiency of scale be applied to lowering one’s prices, to the point of driving one’s competition out of business.

Then along came The Anti-Trust Paradox, published by Robert Bork in 1978. In it Mr. Bork (who would go on to be an unsuccessful nominee to the Supreme Court a decade later) argued against a century of concern over monopolies and their corrosive effect on the social fabric.

In Bork’s view, big business should not be thought of as inherently bad, and smaller, inefficient companies should not be “protected” from being acquired by larger well-run companies. Mr. Bork’s unique insight was to suggest “consumer welfare,” in the form of lower consumer prices, should be our new guiding principle in these matters, moving forward.

The roll-back of anti-trust legislation that occurred in the 1980s during the Reagan era, which kicked off the merger and acquisition frenzy that is still with us, was inspired and justified in large measure by the work of this single theorist.

… conspiring to create a cultural conundrum

These and other circumstances have conspired to create a cultural conundrum. As consumers we find ourselves blessed with unprecedented access to a wide range of low cost goods, available through ever-more convenient venues. As wage earners who need to make a living, however, we feel a bit cursed, as our work lives have become increasingly constrained and precarious.

All while corporate profits have continued to skyrocket. Evidence of which can be found in our current “bull market,” which just turned ten years old, and counting. This refers to the long rally the stock market has been experiencing since March 2009, after the financial system almost collapsed.

As reported in The New York Times on Saturday, March 9: “The rally has generated over $30 trillion in wealth. So why aren’t more Americans celebrating? They’re still scarred by the financial crisis, and the fruits of the recovery fell mostly to the rich.”

… our practical nature and responsible attitude

Many of my salt-of-the earth family and friends are instinctively conservative by virtue of their practical nature and responsible attitude. But this political orientation makes it difficult for them to detect certain fault lines. They have not gotten burned by allowing the market to set wages and benefits, for instance, as so many of our less fortunate neighbors have gotten burned.

There remains a core belief among the conservative electorate in a system still quaintly referred to as free enterprise, said to be based on open competition. They don’t see the discrepancies inherent in our highly rigged system, because they have emerged relatively unscathed, and none the worse for wear.

Such well-intentioned souls are too easily misled. When author David Halberstam described the fall of the once-mighty Detroit auto industry in 1986’s The Reckoning, it was received by those of my acquaintance as a cautionary tale of complacency that bred inefficiently.

But this straightforward conclusion is undermined by a disturbing fact that escapes the notice of all who simply purchase cars, and don’t have to earn a living making them. The foreign manufacturers who came in and cleaned Detroit’s clock did so with a non-union workforce, offering a wage and benefit package literally half what the old-line union workers had been getting.

… invoking “ lean-and-mean” at the expense of the little people

The Detroit auto industry of a previous generation may have had their great reckoning coming. But why in our brave new world does being lean-and-mean always express itself at the expense of the little people on the lowest rung of the economic ladder?

We are relentlessly told any increase in wages or benefits will inevitably result in an increase in final cost to the consumer. But no one ever questions the mathematical equation behind this assertion. We are never given any sort of transparent explanation of how it all must fall on the lowly line workers.

In a previous generation, domestic auto makers were profitable, consumers were able to afford their product, and the people who worked on the assembly line made a decent living. What changed?

While no doubt there are many contributing factors, the short answer would appear to be the enlightened thinking of Milton Friedman, Bruce Henderson, and Robert Bork. Along with the kill-or-be-killed strategies dispensed by our leading business schools, as detailed in books such as The Management Myth (Matthew Stewart, Norton, 2009), and Ahead of the Curve (Philip Delves Broughton, Penguin, 2008).

… a dramatic shift away from social responsibility

It is the radical shift away from any sense of social responsibility in the employer-employee dynamic that is directly responsible for the growing gap between executive and non-executive compensation.

We all know about market disrupters these days, and such firms and their founders are cited as being on the cutting edge of commerce. The efforts of these attractive disrupters always yield lower prices and easier access. But that good news for consumers is the direct result of dispensing with the social contract that once existed in the workplace.

All the innovation would be easier to swallow, from the perspective of those who are stuck having to earn a living, if the “new economy” jobs were at least as life-sustaining as the old ones made obsolete. But so many of our clever market disruptors specialize in creating employment that leaves a lot to be desired in the way of job security, wages, benefits, and working conditions.

When Amazon started in the book-selling business it was winning people over with its response time. One’s local bookseller may have dropped the ball on a special order more than once, while Amazon came through with flying colors, and no delay. So why did Amazon also decide to chop their sell price to the bone?

It’s not complicated. The business plan was to drive everyone else out of business and corner the market for themselves. They operated at a loss for years, surviving on successive rounds of Wall Street funding, and only just recently starting turning a profit. But oh my, what a profit they have started to turn. They would never have achieved this financial windfall had they not swung for the fences.

… admiring the organizational wizardry of Amazon

We can appreciate the service Amazon provides, while taking advantage of the low prices it offers. We can also admire its business acumen and organizational wizardry – as long as we don’t have to work there ourselves.

Its mammoth order fulfillment centers are popping up everywhere, and employ hundreds of thousands. True, Amazon pays higher than the minimum wage, but not nearly enough to qualify as a “living wage” that can support a family.

To its credit it does offer medical coverage and other benefits, including stock options. But the coverage is skimpy, and it and all the other benefits only kick in after a year on the job. Lasting that long proves difficult for many, due to the high-pressure “Hunger Games” working conditions.

Because of its recently established market dominance, everyone now seems to know someone who works for Amazon. But no one knows anyone who says it’s a good place to work.

These days, the only alternative to Amazon for the chronically unemployed is the gig economy. This “nebulous collection of online platforms and apps” has been heralded by its proponents as just about the best thing to ever happen to working people.

… the best thing to ever happen to working people

You get to be your own boss, choose your own hours, and control your own income. It’s brining entrepreneurship to the masses. It will reverse income inequality. All while enhancing worker rights.

Or maybe it’s just the latest smoke screen designed to take advantage of working people in yet another, completely novel way.

Allow me to close with this excerpt from the jacket of a new book published this month by the University of California Press.

“In Hustle and Gig, Alexandrea J. Ravenelle shares the personal stories of nearly eighty predominantly millennial workers from Airbnb, Uber, TaskRabbit, and Kitchensurfing. Their stories underline the volatility of working in the gig economy: the autonomy these young workers expected has been usurped by the need to maintain algorithm-approved acceptance and response rates.

“The sharing economy upends generations of workplace protections such as worker safety; workplace protections around discrimination and sexual harassment; the right to unionize, and the right to redress for injuries.”

And then there is Alexandria Ocasio-Cortez, the newly elected U.S. Representative from Queens, NY, who frames the latest twist on employment this way:

“Spoiler alert: the gig economy is about not giving people full-time jobs. So it should be no secret why millennials want to decouple your (health) insurance status from your employment status.”

Robert J. Cavanaugh, Jr.
March 11, 2019

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