Richard Florida advises American companies that America’s future depends not just on more jobs but on better jobs:
When my father came back from the second world war, his poorly paid factory job had been transformed. He was able to buy a house, put his two sons through college and participate fully in the American dream. Some of this was due to the power of unions. Most of it was because of the enormous improvements in productivity wrought by improved technologies and management techniques.
The same thing can and must happen in the service sector. It is starting already. Companies such as Wegmans, Whole Foods, the Container Store, Best Buy and Zappos already account for a fifth of the top 100 best places to work in America. A typical hourly worker at the Container Store earns about $30,000 a year, not nearly as much as a GM factory worker but about 50 per cent more than the average for hourly-wage retail workers. Retail outlet Trader Joe’s mandates that full-time workers earn at least their community’s median household income, while its “store captains” can make six-figure salaries. These companies recognise that better conditions lead to better customer experiences – and an improved bottom line.
to which Yves Smith adds:
When I lived in Australia, the minimum wage there (A$13 an hour) was a living wage. Frankly, it produced a much more pleasant society to live in, and workers at low-end retail jobs seemed much happier about their work. And prices were not out of line either in local currency terms (except for technology, don’t get me started on that, but that was largely a function of a cheap Australian dollar then). So this isn’t as crazy an idea as it sounds, but investing in productivity and improved business operation will make it far more viable to blaze a path to higher quality jobs.
There are several inter-related points to make here. Both Florida and Smith are preaching a gospel I’ve been evangelizing for twenty years.
I gather that neither of them has ever sat in a meeting at a large company that decided that, even if there were a strong case that capital investment would lower costs of production, their employment strategy would continue to emphasize the lowest paid workers possible even at the expense of increased productivity to preserve management flexibility. I have. Many times. Many different companies.
Businesses operate under assumptions with operational strategies based on those assumptions. That’s called a business model. Many companies operate today under a business model that assumes a continuing supply of unskilled workers. Examples of such businesses include the companies that Mr. Florida is writing about in his op-ed. Fast food. Commodity retail.
That’s been a good assumption for forty years. Forty years ago many of the companies that depend on entry-level workers go their start by employing the young Baby Boomers who were coming into the labor market, particularly the part time market in a seemingly endless supply. When that supply dried up it was supplanted by entry-level workers from other countries, particularly Mexico but now frequently from South Asia as well.
As long as that assumption holds true convincing many managers to invest in technology is going to be a hard sell.
As to Yves Smith’s observation, I can only note that Australia is an island. It does not have a long land border with a country with a per capita income a quarter its own and the ocean that delayed its settlement by Europeans for so long now protects the descendants of those European settlers from labor competition from poorer immigrants.
The companies enumerated in Mr. Florida’s article aren’t the leaders in their industries. They’ve created niches within their industries as corporate good citizens. We won’t see the kind of behavior from most companies that we’re seeing from the few mentioned until the leaders adopt a different business model and the leaders won’t adopt a different business model as long as their assumptions hold true.
Basically, we can either have open borders or we can have good jobs for average people in the United States. We can’t have both.