Change the Worker, the Job, or What?

Joel Rogers

University of Wisconsin-MadisonJR 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 I’m 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

Social Democracy NeoLiberalism Productive Democracy

Economic Strategy Effective demand Inequality Effective supplySocial Contribution Enabled but Required Strongly encouraged

not required but not enabled and enabledEquality of opportunity Thick Thin DeepState/Civil Society Relation Active/distinct Passive/distinct Active/integratedPrivileged Govt. Branch Executive Judiciary LegislatureNational/State Relation Affirmative national Limiting national Progressive federalismRedistributive Peak Late in life None Early in lifeAsset Redistribution No No YesTax Strategy Progressive on Regressive on Tax universalism

private income private incomeTrade Strategy Strategic Unprincipled Goal of sustainable

protection “free trade” 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 Total tax

receipts as % of GDP

Country 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 35.6

Czech Republic 40.4 Norway 41.6

Denmark 50.4 Poland 35.2

Finland 46.2 Portugal 34.3

France 45.8 Slovak Republic 35.3

Germany 37.7 Spain 35.1

Greece 37.1 Sweden 52.2

Hungary 39.2 Switzerland 34.4

Iceland 36.3 Turkey 31.3

Ireland 32.3 United Kingdom 36.3

Italy 43.3 United States 28.9

Japan 26.2 EU average 41.6

Korea 23.6 OECD average 37.3

Normalized tax rates by quantiles, 1960/2004

Revenue & outlays as %GDP, 1962-2015

10.00

12.00

14.00

16.00

18.00

20.00

22.00

24.00

26.00

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

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1988

1990

1992

1994

1996

1998

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2004

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2008

2010

2012

2014

Year

Per

cen

tag

e o

f G

DP

TPC Adjusted Baseline

Actual Predicted

TPC Adjusted Baseline

Outlays

Revenue

10 US Metros and Non-US economies

Switzerland TurkeySweden Taiwan Saudi ArabiaAustria

=

$3.51 trillion

$3.42 trillion+

Poland NorwayIndonesia Denmark South Africa

Germany $2.4T, UK $1.7T, France $1.7T, Italy $1.6T, Brazil/Russia $1.5T, Canada/Korea/Mexico $1T

• Incomes rise and investment moves out

• Revenues decline• Public goods deteriorate• Middle class flees • Tax base erodes • Poverty concentrates

An iron law of urban decay?

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. One’s good for workers and the other’s not. One’s sustainable and the other’s not. One’s socially accountable and the other’s not. Both are profitable.

Competition based on price, resulting in ...

• Economic insecurity• Rising inequality• Poisonous labor relations• Little firm commitment to place• Environmental damage

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

High RoadLow Road

High Road vs. Low Road Firms

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%

Close off the low road, help pave the high road, help workers and firms stuck on the first to roll along the second.

So what’s the basic program?

Grounds for hope

1. Possible to increase firm productivity dramatically, raising wages and promoting investment here

2. Huge amount of wasteful consumption can be eliminated, increasing disposable income

3. 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

4. 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

Middle Third Upper ThirdLower Third

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2000

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8000

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Very wide variation in productivity

Source: Performance Benchmarking Service

Working Class Consumption

So why don’t we choose the high road?

The basic economics of the firm

Value added/employee drives wages, owner return, and reinvestment

Wages /Employee

Profits /Employee

Value Added /Employee

Reinvestment /Employee

Owners'Compensation /

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

New WorldOld World

Old world vs. new world

Training alone won’t 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 don’t have more rungs• Adults more complicated than kids (need

to handle social insurance and non-actuarial risk)

• Ease transitions and access to training (modularize, bridge programs, etc.)

• Establish presumptive career pathways

• If you’re 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

This said … of course you should

Another way of saying this: the 5 As

• Adult focused … since current workforce is tomorrow’s and the day after’s, 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, labor-management 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!!

• 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

Demand-driven coordination

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?

43%

23%

34%

Below $9,000

$9,000 To $20,000

Over $20,000

• Average annual household income was $12,000

• 90% non-white

• 32% had high school dipoma

• 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, we’ll 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

Source: Barbara J. Lipman, “A Heavy Load: The Combined Housing and Transportation Burdens of Working Families,” Center for Housing Policy, October 2006

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5

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35

Housing Transportation Food Health Care

Per

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All Households

Working Families, Income$20,000 - $50,000

More cars or more wealth?

0

5

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15

20

25

19

76

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.07

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80

.02

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.09

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81

.04

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81

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82

.06

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Year.Month

Mill

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ars

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Pe

rce

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of

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ble

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om

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av

ed

Monthly Car Sales

Personal Savings Rate

Rebuilding America?

82.0 billion new squarefeet from replacement

131.4 billion new square feet

295.6 billion square feet in 2000

427.3 billion square feet in 2030

213.4 billion new square feet of built

space

Source: Nelson, “Toward a new Metropolis”

Transportation 32%

Buildings 43%

Industry 25%

Source: Pew Center on Global Climate Change

Residential 21%

Commercial 17%

Industrial 5%

Building contribution to CO2 emissionsBuilding contribution to CO2 emissions

Building contribution to CO2 emissions

Building contribution to CO2 emissions

Building contribution to CO2

Basic idea of Me2

Combine a mix of private and public financing for comprehensive application of cost-effective retrofit measures to Milwaukee’s 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 can’t 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. It’s about adding value, not just values, to the private economy. It’s about setting the rules for free competition, not “managing the economy.” It treats markets as tools, not gods. It doesn’t “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 sector’s 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 won’t 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 that’s how labor markets are organized

• Don’t diss waste reduction, or not think of it as an equity issue

• This demands a much smarter government, but that’s gettting easier