Change the Worker, the Job, or What? Joel Rogers University of Wisconsin-Madison JR Commons Center (COWS, MIP, MSC, CSI), Apollo, G4A Institute for Progressive Policy Research symposium on Working Out of Poverty: A Progressive Labour Market, London, May 8, 2008 What Im going to talk about US situation, and high road strategy Examples Some policy takeaways I made some slides for you Like this slide. And this one.
I really wonder about power point sometimes Productive Democracy Economic Strategy Social Contribution Equality of opportunity State/Civil Society Relation Privileged Govt. Branch National/State Relation Redistributive Peak Asset Redistribution Tax Strategy Trade Strategy Social Democracy
NeoLiberalism Productive Democracy Effective demand Enabled but not required Thick Active/distinct Executive Affirmative national Late in life No Progressive on private income Strategic
protection Inequality Required but not enabled Thin Passive/distinct Judiciary Limiting national None No Regressive on private income Unprincipled free trade Effective supply
Strongly encouraged and enabled Deep Active/integrated Legislature Progressive federalism Early in life Yes Tax universalism Goal of sustainable development, not integration per se And So On High freedom, opportunity, contribution and wide ownership and democratic power a consistent story/narrative/frame/etc. that asserts democracy as a source of productivity and invention, not just morality, and organizes politics to realize both
US situation US inequalities Top .1 percent of households take 22 percent of income Top .1 percent take 9 percent, about double that in UK (4.7%), more than five times that in France (1.6%).
About a fifth of adults in private sector working for poverty wage jobs or less; about a third at less than 1.5 times that About half of these dead-end jobs (i.e, with no serious prospect of advancement); almost all pretty limited Minimum wage going to $6.55 (7/08); in current dollars, was nearly $10 in 1968. Productivity has more than doubled since then Very little antipoverty effort, outside the EITC Welfare reform famous but very limited Crazy levels of deregulation and ideology trumping evidence Taxes low, getting more unequal, not sustainable given infrastructure, education, health care, and declared military needs The end of shared prosperity Index 1973=100 The end of shared prosperity
Index 1973=100 Same story, upside down Country Country Total tax receipts as % of GDP Total tax
receipts as % of GDP Australia 30.6 Luxembourg 41.8 Austria 43.9 Mexico
16.0 Belgium 45.7 Netherlands 42.1 Canada 38.2 New Zealand
20 06 20 08 20 10 20 12 20 14 Percentage of GDP 22.00 TPC Adjusted
Baseline Year 10 US Metros and Non-US economies Germany $2.4T, UK $1.7T, France $1.7T, Italy $1.6T, Brazil/Russia $1.5T, Canada/Korea/Mexico $1T Switzerland Turkey Sweden Taiwan Saudi Arabia Austria +
Poland Norway Indonesia Denmark South Africa = $3.51 trillion $3.42 trillion An iron law of urban decay? Incomes rise and investment moves out Revenues decline
Public goods deteriorate Middle class flees Tax base erodes Poverty concentrates Or a wasting of obvious assets? Big Strategic location/regional linkages Population and firm density, with agglomeration effects Buying power and complementary skill sets, innovation Infrastructure (ports, airports, other transportation networks) Higher wages/productivity More easily organized Lower waste Centers for research, education, health care, knowledge economy, finance, business services, hospitality, etc. More diverse, tolerant, attractive to youth and immigrants
High road low road Two ways to compete: high road and low road. Ones good for workers and the others not. Ones sustainable and the others not. Ones socially accountable and the others not. Both are profitable. High Road vs. Low Road Firms Low Road Competition based on price, resulting in ...
Economic insecurity Rising inequality Poisonous labor relations Little firm commitment to place Environmental damage High Road Competition based on value (distinctive performance), requiring ... Continuous improvement/invention Better trained and equipped workers More varied and abundant public goods and producing
Higher worker incomes & profits Reduced environmental damage Greater firm commitment to place Some dashboard metrics Value-Added / FTE > average for its industry Avg. Hourly Wage >= 3 * Federal Minimum Wage Hourly Worker Payroll + Benefits >= 0.5 * Value-Added Healthcare Coverage for >= 85% of Hourly Workers
Employer Healthcare Premium >= $5,000 / Covered Worker Employees Using Computers >= 67% of Employees Employee Turnover Rate < 20% So whats the basic program? Close off the low road, help pave the high road, help workers and firms stuck on the first to roll along the second. Grounds for hope 1. 2. 3.
4. Possible to increase firm productivity dramatically, raising wages and promoting investment here Huge amount of wasteful consumption can be eliminated, increasing disposable income National economy largely regional, and regions can be organized to provide the place-specific productive infrastructure that adds value, reduces waste, and captures the benefits of doing both locally Doing (1) & (2) in (3) will increase competitiveness while grounding the economy reducing credible capital exit threats, increasing wage and government income, moving toward sustainability through democratic action Very wide variation in productivity
Source: Performance Benchmarking Service 200000 180000 160000 140000 120000 100000 Upper Third 80000
Middle Third 60000 40000 20000 0 Lower Third Working Class Consumption So why dont we choose the high road?
The basic economics of the firm Value added/employee drives wages, owner return, and reinvestment Reinvestment / Employee Wages / Employee Owners' Compensation / Employee Profits / Employee
Value Added / Employee Taxes / Employee Qualified workers for quality jobs Getting to living wage jobs Entry-level employment that prepares workers for and connects them to future opportunities Reliable and understood methods of access to decent paying sectors & jobs Routine career advancement through incremental moves Why is that so hard these days?
Deregulation, privatization, de-unionization Changes in work organization outsourcing, contingent/temporary work, cellular production, etc. in smaller establishments, generally in service sector End of job ladders, employer-based welfare state, industry wage norms Old world vs. new world Old World New World Training alone wont do it Training alone only creates jobs for the trainers
Implausible to get the commitment to training needed, based on current returns Employer variation swamps variation in human capital Many jobs just dont have more rungs Adults more complicated than kids (need to handle social insurance and nonactuarial risk) This said of course you should Ease transitions and access to training (modularize, bridge programs, etc.) Establish presumptive career pathways If youre worried about poor adults, get them literate, get them tied to credentialing programs, fix leaks in the system, measure public systems by moving people through critical points of transition
Another way of saying this: the 5 As Adult focused since current workforce is tomorrows and the day afters, and because returns are clear if tied to demand Aligned across agencies, through the pipeline, with employer needs Accessible through the states, to all types of students Affordable focus more on adult education, use more Perkins Career/Technical Education on adults, provide aid for short-term non-degree courses, focus TANF and WIA money on adult education Accountable measure employment and income outcomes, track across agencies and programs, guide investment strategically Demand side strategies
Standards (public or private): minimum wage, living wage, community benefit agreements, PLAs, unionization, community organization, show me the money on EWD, etc. Upgrading (public or private): technical assistance, extension services, subsidies or tax discrimination, productivity bargaining, linkage WRTP Partnership of 100 employers and unions Intermediates employers, community, training providers, and funding Dedicated to qualified workers for quality jobs Programs in incumbent workers training, modernization, and recruitment
Has improved the behavior of employers, unions, CBOS, and public training system Critical to RSA program under Clinton. Influential nationally in thinking about sectoral partnerships. Regional high road partnerships WRTP roots Manufacturing in the early 1990s (apprenticeship a wreck, international competition growing, labormanagement relations bad to worse) Labor and management leaders agree to work together on training and workplace modernization, shifting compensation to skills plus, but providing those skills more broadly Agree to do this collectively, to have real labor market impact and realize economies of scale and scope in
operation Gradually WRTP builds enough linkages and trust to adjust to new workforce issues in the late 1990s (skills shortages, welfare reform, etc.) WRTP evolution in a decade Worker participants expanded from incumbent to future workers Sector expansion from manufacturing to construction, healthcare, hospitality, IT, transportation Coordinating role expansion from employers/unions to government/community Program expansion from stand-alone project to motor of system EWD (economic and workforce development) reform Becomes independent of COWS!!
Demand-driven coordination Employers certify job demand Public system and CBOs identify and evaluate applicants Trainers prepare applicants for available jobs WRTP coordinates this and establishes a common public presence and agenda Employers get more certainty, government gets more leverage on investments, workers get opportunity and reward to effort, region and industry gets economies of scale and scope in coordination in satisfying EWD needs Example of Milwaukee Jobs Initiative Approximately 2000 placed in full time jobs at an average wage of over $10.50/hour plus family health benefits
73% of participants still working after a year, with 41% at the same or better wage Independent verification by Amp Associates showed MJI projects among most cost-effective in country at getting and keeping central city residents into better jobs Who got the MJI jobs? 23% 43% Average annual household income was $12,000 90% non-white 32% had high school dipoma 34%
Below $9,000 $9,000 To $20,000 Over $20,000 50% had received public assistance How to start
Map the economy Get a picture of sectoral/regional foundations, and their supply chains and value flows Benchmark practice to desired value added Identify local barriers to value-added Convene regional table on both demand and supply sides Offer a value proposition (if you take the HR, well help you in these particular ways) Make all subsidies conditional on performance Use your purchasing power throughout Cooperate across programs, regions Support display of best/emerging/mistaken practice Waste not, ye surly workers
Working Class Consumption Typical Household Budget in 28 Metropolitan Areas 35 All Households 30 Working Families, Income $20,000 - $50,000 Percent 25 20 15
10 5 0 Housing Transportation Food Health Care Source: Barbara J. Lipman, A Heavy Load: The Combined Housing and Transportation Burdens of Working Families, Center for Housing Policy, October 2006 1976.01 1976.08 1977.03
1997.08 1998.03 1998.10 1999.05 1999.12 2000.07 2001.02 2001.09 Millions of Cars 25 20 20 15 15
10 10 5 5 0 0 Year.Month Percent of Disposable Income Saved More cars or more wealth? 25
Monthly Car Sales Personal Savings Rate Rebuilding America? 131.4 billion new square feet 213.4 billion new square feet of built space 82.0 billion new square feet from replacement 295.6 billion square feet in 2000 Source: Nelson, Toward a new Metropolis
427.3 billion square feet in 2030 Building Building contribution contribution to to CO2 CO2 emissions emissions Building contribution to CO2 emissions Building contribution to CO2 emissions Building contribution to CO2 Transportation 32% Residential
21% Buildings 43% Commercial 17% Industrial 5% Industry 25% Source: Pew Center on Global Climate Change Basic idea of Me2 Combine a mix of private and public financing for comprehensive application of cost-effective retrofit measures to Milwaukees building stock, with on-bill payment and maximum benefits
captured locally. Could generate up to 4,300 person years of employment for measure installation (more with administration, materials, and multipliers) and save Milwaukee residents >$120M annually. An offer they cant refuse? To buy and install cost-effective energy efficiency measures in their homes and businesses with no up-front payment, no new debt obligation, the assurance that their utility costs will be lower, and the guarantee that each customer will make monthly payments only for as long as the customer remains at that location and the measures continue to work. Me2 work and money flows
This is about adding value, reducing waste, and capturing the benefits of doing both in smart, organized, democratic places. It bets on the productivity of democracy. Its about adding value, not just values, to the private economy. Its about setting the rules for free competition, not managing the economy. It treats markets as tools, not gods. It doesnt throw money at problems, but is prepared to make specific scaled investments of proven social value.This demands accountability of government as well as citizens. It applies the private sectors metrics revolution and benchmarking to government and public administration. It aims at greater government efficiency, which is not the same as simply cutting prices. It values experiment and learning. It is clear on its values but works collaboratively. It is against business as usual but for social wealth creation. It
recognizes the business contribution to society, but that of everybody else as well. Policy takeaways Training wont do it alone, and tends not to do well with those most in need; you can fix the latter problem, but it not enough Demand-side strategies important, and need not be limited to minimum wage and social wage Regional aspect important, since thats how labor markets are organized Dont diss waste reduction, or not think of it as an equity issue This demands a much smarter government, but thats gettting easier
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