Sunday, August 11, 2013

The Changing Face of the American Workplace

The US economy was once the envy of the world.  From 1865 to 1965, the US economy grew faster than any large economy in the world.  The great American middle class came into prominence during this period and American income and wealth had no rivals anywhere in the world.  For most of these years, there was no Federal Reserve or central bank in the United States, though central banks had a long history in every other large country in the world.  For most of these years, there was little business regulation and no income tax.  The Federal Reserve and the Federal income tax came into existence in 1913, coming on the heels of the best 60 years of economic growth in the history of the US.

Not that everything was rosy.  Financial panics and the great depression occurred during this 100 year span.  Unemployment rose and fell.  Markets rose and fell.  The dynamics of American growth were chaotic, though powerful.  But, with all of the chaos and panic, the American pie grew at an unprecedented rate, matched, in world history, only by modern China.  The standard of living of the average American grew at the fastest pace ever.  Unemployment levels above 6 percent were considered a sign of a 'recession.'  The current 7.6 percent unemployment rate would have been seen as an extreme economic slowdown  (not an economic recovery).

Since 1965, the American economy has grown at a dramatically slower pace.  The American middle class has consistently struggled, except for the 20 year period that followed the inauguration of Ronald Reagan.   The financial position of the average American is today untenable, if proper account is taken of the federal, state and local government debt.  America is headed for financial disaster and the American middle class is sitting in the passenger seat.

In the driver's seat is the new political class.  The fastest growing demographic in America is the American government or quasi-government employee.  On the defensive is the American private economy.  Besieged by so much regulation that most companies are not even aware of most of the regulatory burden that they face, small business is no longer the engine of American economic progress -- government is where the real growth is taking place.  Government employment has been the largest source of employment growth in the US economy since 1965.

Unfortunately, government doesn't produce anything but problems for the private sector.  Most government employees (including public school teachers, university professors, and bureaucrats of all stripes) view the private sector with suspicion.  They see private businesses as quasi-criminal enterprises bent on polluting the environment and exploiting their employees.  This culture dominates the media characterizations, not only in the daily news, but in television series and movies.

So what does all of this mean for the workplace in modern America?  Private businesses realize that they are the target of the political classes and they make adjustments.  They know that if they hire full time employees, their regulatory burden goes up.  They know if they hire 50 employees or more, they fall into certain categories that must face significantly higher costs of complying with the modern legal environment that has been imposed upon them.

So, what happens?  Small business reacts by hiring as few full time employees as possible.  Part time workers are easier to fire and are not subject to Obamacare and other regulatory burdens.  Many companies keep their companies deliberately smaller to avoid certain employment trigger levels that put companies under a much more severe regulatory regime.  Employees that are 'protected' under current laws -- minorities, women, persons over the age of 55 -- involve far greater expense to a private business than other employees.  So, fewer of them are hired.  Protecting an employee with legislation simply means making that employee more expensive to the employer.   Employers aren't stupid (a common assumption of the political class that supports these 'protections).'

So, today, the workplace is a very rigid bureaucratic environment.  The blizzard of paperwork that employees face is nothing compared to the blizzard of paperwork that companies face.  There is more concern with what might be said at the water cooler than what the work output might be.  Private email communications are now perused for politically incorrect comments.  Free speech doesn't apply to the workplace.  In financial service companies, mistakes or errors are seen as criminal (the 'whale' episode at JP Morgan is a modern instance).  Gone are the old processes of free people making free decisions in free markets.  Now you have to worry about whether Barney Frank or Elizabeth Warren is looking over your shoulder.

All of this means that America is in a period of relative economic decline.  The middle class will remain an endangered species as the political class bent on the destruction of the middle class continues to claim that all they care about is the middle class.  Gradually, less and less of America is based upon free market economics and more and more is driven by un-elected elites, who have spent most of their lives either in politics or academia.  The workplace is now a bureaucratic environment with rigid rules and little or no room for initiative and energy.  The dull and the routine is more and more a description of the modern American workplace.

The workplace is also becoming more and more a land of part-timers.  Businesses in America, like their European counterparts, are increasingly reluctant to hire people that, by law, they cannot fire.  Workers now have protections and guarantees that mean, even if workers received no wages at all, they are still very, very costly to business.  Increasingly, wages are a smaller and smaller fraction of the costs to an employer of hiring an employee.  The result is a much reduced take home pay and more and more of worker income is siphoned off to worthy causes, favored by elite bureacrats in the Elizabeth Warren mold -- bureacrats with virtually no life experiences similar to that of ordinary American workers.

A hundred years ago, a young employee could take a job at a reduced wage or no wage at all as a way of entering the work force and learning a trade.  Minimum wage laws, promoted by big unions, are designed to block such work force entrants and preserve a monopoly for existing workers.  These laws are effective and help destroy a large part of the Horatio Alger culture that once was.  The elite that make these rules don't face such problems since they, by and large, go to elite colleges and universities and find that entry into the work force doesn't involve wage and salaries anywhere near the minimum wage.

It is no accident that college students are in the forefront of the call for a "living wage."  A living wage virtually guarantees that the college students will not face future competition from folks whose start in life is not as pampered as their own.  The poor simply can't get through the front door, since their skill set rarely justifies a "living wage."  Meanwhile, those who support the "living wage' think of themselves as bastions of morality, while crushing the hopes of folks who would simply like to have an opportunity to move up in the world through their own work efforts.

Great wealth creates idle time for the wealthy.  It is no accident that the wealthiest US politicians are also those who most vociferously support the agenda of ever bigger government.  Why not?  It will never effect them.  As fewer and fewer Americans derive their living from the free market, the free market has fewer and fewer defenders.  The wealthy and the new bureacrats are the power brokers in modern America.  Their contempt for the American middle class and for free enterprise is on display every day in our media and in their political program.  It has changed the face of America and the American workplace.  Meanwhile, folks like Obama ponder why part-time workers are replacing full time workers in America.  He blames that on greedy businesses.  But, the reality is that Obama policies are one of the key reasons that full time workers are becoming an endangered species.

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