The Financial Times had a forward-thinking comment by Richard Florida, director of the Martin Prosperity Institute at the University of Toronto’s Rotman School of Management. It argues that investment in technology and better management can turn many now low end service sector jobs into better paid and higher quality work.
One key aspect, which the piece glosses over a bit, is that though the 1970s, the benefits of productivity gains were shared among workers, management, and investors. Increasingly, from the 1980s onward, they have increasingly been diverted to upper management and investors/financiers. For Florida’s suggestions to have their intended effect, we need a shift in practice on how profits resulting from productivity gains are whacked up.
From the Financial Times:
Consider this simple fact: the US economy remains on track to generate 15m new jobs over the next decade… half of 15m newly created jobs – 7.1m of them – will be much lower-paying, low-skill work in the routine service sector: among them are 835,000 home health and personal care aides, 400,000 new customer service positions, 400,000 food preparation workers and 375,000 retail sales clerks. More than 60m American workers already do this kind of work, or 45 per cent of the workforce.
Although some such jobs, at call centres for example, have proven vulnerable to offshoring, a great many are not: it is impossible to cut hair, serve food or care for the elderly from Bangalore or Mexico. The problem is that on average, service workers earn only half of what factory workers make – and only a third of what professional, technical and knowledge workers are paid. The key is to upgrade these jobs and turn them into adequate replacements for the higher-paying blue-collar jobs that have been destroyed.
It has happened before. Yet the blue-collar jobs we pine for were not always good jobs: we made them good 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….
In our own day programmes such as the Malcolm Baldridge Award for Quality and ISO certification initiatives help to spread ideas throughout the manufacturing sector. Service jobs are the last frontier of inefficiency, providing abundant low-hanging fruit for the innovation and productivity improvements that can undergird higher wages. Yet they have no comparable assistance.
Thousands upon thousands of corner stores, dry cleaning shops, day care centres, restaurants and hair salons open and close every year. But while governments bend over backwards to help high-tech start-ups and university spin-offs, they do next to nothing for new service companies. This is part of the reason such companies have a high rate of failure.
Last fall, the City of Toronto and the Martin Prosperity Institute organised a summit with representatives from the public, private and non-profit sectors to develop new strategies for upgrading service work. President Barack Obama should now do the same thing on a national scale. Such an agenda could push measures that would help service businesses learn what it takes to succeed – from advice about business planning, to budgeting and sales, to quality management and marketing, to efforts to engage employees and develop their skills. Such a movement is badly needed. Without it, those who warn of a jobless future in America are much more likely to be proved right.
Yves here. 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.