In August 2010 I wrote a posting titled “unemployed = 21st century draft horse?” that questioned the extent to which American employers were likely to want to re-hire the lowest skilled workers in the U.S. Today’s New York Times has a related article: “The Vanishing Male Worker.” The article starts off with a guy that has been fired from two jobs that don’t require especially high levels of skill. It quotes an economist:
“They’re not working, because it’s not paying them enough to work,” said Alan B. Krueger, a leading labor economist and a professor at Princeton.
The (mostly American, presumably) readers take up this idea eagerly. There are hundreds of comments supporting raising the minimum wage and other non-market approaches to getting the least-attractive-to-employers Americans into well-paid jobs.
The employers’ perspective was not sought by the New York Times.
My own casual discussions with employers reveal a picture in which anyone with a reasonable level of attention to detail already has a job. A friend is an attorney in Denver, Colorado, where the cost of living is close to the national average. She is trying to hire an administrative assistant. This job requires no legal knowledge. The worker has simply to show up on time, be able to use Web sites such as Orbitz to book travel, be organized enough to keep a calendar, etc. How much will she have to pay to get someone qualified? “At least $70,000 per year,” was her answer, and in fact she hasn’t been able to find anyone good so far.
[In response to comments, I researched the Bureau of Labor Statistics numbers on what admin assistants get paid. It seems that roughly $50,000 per year is a national median, with a range of $32,000 to $75,000 per year going from the 10th to the 90th percentile. Thus the lawyer’s expectation of her (large) firm paying $70k/year for a high quality assistant is not unreasonable Returning to the median $50,000 number, that’s about 3X current minimum wage for a job that requires no specialized training or degrees (i.e., a diligent high school graduate could be effective in the role). In my opinion this supports the theory that any American who can be effective in a modern workplace is already highly sought-after by employers and therefore continued economic expansion won’t result in a flood of job offers to the men featured in the New York Times article.]
So… was the 2010 posting prescient? Or will the seventh year of “recovery” somehow make American employers enthusiastic about those working-age Americans who’ve spent the past six years at home?
[Note that government regulation over the past six years has made low-skill workers less attractive to employers. Obamacare requires that more employees be provided with health insurance (a big fraction of the total cost of hiring a low-skill worker). Minimum wages are higher in some places and for some employers, e.g., those with government contracts. The Lilly Ledbetter Fair Pay Act (2009) opens up new fields of potential litigation.]
As a scientist, it is strange how some parts of the economy just can’t find anyone with enough skills to book airline reservations, whereas science requires ten years of training and has hordes of applicants for every opening. Though positions for scientists are probably more rare than administrative assistants, the pay is almost competitive!
According to politicians and many employers we still have a shortage of scientists and according to employers, maybe a shortage of administrative assistants.
I think the 2010 posting was dead on. The increased risk/cost of hiring someone without good skills is making certain workers obsolete. As a scientist who is not protected by licensing, unions or even a language barrier, the skills of foreign workers seem to be only increasing. Making employment extremely competitive, even for us “highly” trained scientists. I predict that things may get much worse, even those in medicine may start to feel the downward pull on the value of their skills. The only safe place may be deeper in the halls of government. Attempting to obtain skills from mediocre educational institutions at inflated prices is probably a poor plan for the unemployed.
I am not sure how your attorney friend has posted the job but my office comes up with posts that turn people away. They say it is for legal reasons. Examples:
– “lift heavy items” aka 20 copies of a 1/2 inch printouts for a class and you can make several trips if you somehow need to.
– “work flexible hours to meet organizational needs and objectives” aka we have one weekend a year we need you to show up and help set up and talk to people
Generally attorney office jobs come with the preconception of crazy hours and even crazier bosses so maybe that’s what’s stopping people.
I know so many responsible people who make a lot less money so I am having a hard time believing her story. I am getting personal here but to me it speaks badly about her that none of her friends or contacts were able to help her. They must not want to subject their friends to her.
Or maybe your lawyer friend is bad at hiring like most people and businesses.
Was she listing the position where good candidates would find it? In the 12 jobs I have had 10 I found about via word of mouth, 1 I convinced them to hire me and the last was through a traditional listing service.
Is she a good boss? Lawyers have a reputation for abusing administrative assistants.
Tekumse, Brian: I think you guys are proving my point about the American worker! It is always the employer’s fault and/or employers are too stupid to see the value in us brilliant Americans (which is why those fools are always opening up offices research labs, and factories in Asia). Also the workplace is full of potential for abuse, which is why we all need to be at home cashing SSDI checks.
Anyway, when I mentioned “my friend the lawyer” I did not not mean to imply that she is a solo practitioner. She is a partner at one of the world’s more successful law firms (which happens to have an office in Denver). They have a full-blown HR department (i.e., she is not handling the front-line recruiting personally), gold-plated benefits, palatial offices, etc. If someone is being abused in that office it was being done very quietly indeed the last few times that I was there. They’ll find a good admin assistant for my friend eventually (the last one decided to go back to school). My point was that for a job that should require only a good high school education they won’t be able to get anyone for less than about $35 per hour (plus benefits worth another $10 at least).
The NYT multi-part article ran a few thousand words and never mentioned “immigration.” Forty years of uncontrolled legal and illegal immigration has created a huge labor surplus, increased unemployment, and pushed down wages, especially at the lower to middle-income levels.
^Immigration has, however, created tens (hundreds?) of thousands of government jobs for local, state, and federal law enforcement, prosecutors, defense attorneys, jailers, and the private sector support.
There seems to have been a deterioration in the employer-employee relationship in the past 50 years. When I started my IT career a job at IBM was assumed to be for life. It wasn’t guaranteed but the understanding between IBM and the employee was that IBM would do anything it had to to keep you on, even if they shut down your division. This, for a variety of reasons mostly external to IBM, is no longer the case. Part of being a well run company, attractive to investors, is an unsentimental approach to hiring and firing, meaning the day your marginal usefulness is negative is the day the security guards escort you out the door.
Employees react to this as one would expect. Our parent’s work ethic so prized by employers is no longer a virtue, but the actions of a chump who doesn’t realize that everyone is in it for the money. Maybe your friend needs to pay 70K for an assistant – I’ve known legal assistants to lawyers and they did a lot more than answer phones and make airline reservations. Part of the reason for that is the day that assistant looks at your lawyer friend crosswise – she’s gone.
By the way, what’s wrong with an economy that pays hardworking high school grads $45 bucks an hour? That, basically, describes the United States after World War 2. Seemed to work out okay for my parents, uncles and aunts.
“They’re not working, because it’s not paying them enough to work”
This can only be true when the dole is far too lucrative.
Government handouts are competing effectively (with employers) for the time and efforts of the low-skilled populace.
Why should a minimally-skilled person seek a job — any job — when government checks enable one to live comfortably, eating (out) at McDonalds, texting on a smartphone, and playing 99-weeks-of-xbox on their flat-screen TV? If this society were free of both government handouts and government regulations on employers, people who wanted to eat would compete with each other for jobs. Not the other way around as it is now.
Brian: I’m sure that IBM back in the mainframe monopoly days was quite pleasant for all concerned (except customers!). But I am not sure that IBM’s loyalty to workers was the reason that everyone stayed on the East Fishkill plantation. There was minimal funding available for start-ups. There was no Google. To you it looks like reciprocal loyalty but maybe the programmers just had nowhere better to go?
“what’s wrong with an economy that pays hardworking high school grads $45 bucks an hour?” Nothing would be wrong with that. In fact, that is the economy that we have! I am paying some hardworking high-school grads substantially more than $45 per hour to work on a new-to-us house. And then I get to pay them again to hook up the hot water pipe to the hot water connection on the faucet instead of the one clearly marked “cold” (on blue tape). And to put the light switch outside of the closet where the architect drew it instead of inside where you wouldn’t be able to get to it through the clothes. And to re-wire the speakers so that the “left” connector drives the speaker on the left side of the wall. And to put recessed electric and HDMI outlets behind both wall-mounted TVs instead of just one.
Anyway, with minimum wages that are set by popular vote Americans can pretty much vote themselves any level of compensation they desire. If you think $45 per hour is a good number I do not doubt that you could find a majority of citizens in your state to vote for that.
This story is tragically common. Employer/employer’s friend says they can’t find someone for love or money. Others, who have no doubt had friends/relatives/themselves looking for work for ages, respond by making this point. Perhaps the employer could post the job ad and the two groups could get together?
Even back in the day, IBM was not the ONLY place for programmers. You had Burroughs, Sperry, GE, RCA, Control Data, etc. In addition, not all the programming was done in house – I think that large banks, the social sec. administration, etc. had their own programming staff as well as universities, military contractors, etc. Now all these companies would have offered probably similar employment experiences, with IBM being probably best in class in terms of pay, benefits and prestige (sort of like Google today), so you would have little reason to switch, but it was not impossible.
To this day, if you want the large company experience you usually have to be prepared to be sent from place to place as if you were in the army. My daughter accepted an offer for an internship from GE last summer with verbal assurances that she would be in Lynn, in the Boston area and at the last minute they told her, oops, no , you’re going to Cincinnati (which actually turned out to be more pleasant than she expected). This year she had an offer from Boeing – at first they told her Seattle and even before she had a chance to accept, they called her up and said, oops, we’d like to send you to South Carolina. So working for these companies has always been a bit of a devil’s bargain, especially if you are rooted to a particular area and are not willing to move.
Even when “lifetime” employment was the custom, companies with large defense or aerospace contracts would often lay off thousands when a particular project ended. They would try to offer you employment in some other project (which could be thousands of miles away) but they didn’t have anything new starting you could be out on the street. Japanese companies really did the “lifetime” thing – this was never 100% true in the US.
Phil,
Been reading your posts for years, but I must call baloney on the lawyer not being able to find an assistant in Denver for 70K a year.
Something is very, very wrong if your attorney friend is being truthful about the lack of interest and competency from the applicants.
An employee of mine from Denver says at $70,000 per year, applications for an administrative assistant would be like an avalanche.
There’s more to this than is being told…
Mark: I don’t think that the original posting said anything about a “lack of interest” from Americans in the executive secretary job. I don’t think that there is any employer in the U.S. that has trouble filling up a desktop with resumes from applicants. Nor did it say that what the employer expected to pay would be listed in any advertisement (I don’t think it is conventional for employers to give a specific number). The original posting only says that my law firm partner friend hasn’t yet found someone whom she wishes to hire. It does not follow from that that there is any shortage of people in Denver who would want to sit near her desk, sink their feet into the inch-thick carpet, and collect a $70k paycheck.
http://www.bls.gov/oes/current/oes436011.htm says that a $70k/year salary would be somewhere between the 75th and 90th percentile for executive secretary compensation nationwide and roughly at the mean in San Francisco or NY. So what she expects to pay is generous for Denver and perhaps she will ultimately end up finding someone for less. But even the median numbers reported by the BLS for this job show that compensation for a diligent person with high school graduate skills is about 3X minimum wage.
Also remember that a law firm partner who handles multi-million dollar cases might not be satisfied with a median quality executive assistant. If she wants to hire someone with above-average capabilities and attention to detail then shouldn’t she expect to pay close to the 90-percentile number? Let’s take this back to software engineering. The BLS says that the median salary for a software engineer is $93,350 per year (http://www.bls.gov/ooh/computer-and-information-technology/software-developers.htm ). That’s for all levels of experience. Yet companies that want to hire above-average programmers will offer more than this even to people fresh out of college.
Maybe your point is that Americans are such a stellar group of achievers that even a median-quality American would be a huge asset in any workplace. Therefore, since we Americans are almost all fantastic, my friend should be able to hire someone fantastic at the median wage of about $50k/year.
My own casual discussions with employers reveal a picture in which anyone with a reasonable level of attention to detail already has a job.
This is an odd reaction to that NY Times article. A number of men are mentioned who had pretty good salaries just a few years ago but can’t jobs that pay well now. So what happened. Did they previously possess a “reasonable level of attention to detail” and then lose that ability. Or did the economy undergo a major shift in just a few years such that attention to detail is now much more important than it previously was?
Also, there’s a contradiction in these two statements:
This job requires no legal knowledge. The worker has simply to show up on time, be able to use Web sites such as Orbitz to book travel, be organized enough to keep a calendar, etc.
Also remember that a law firm partner who handles multi-million dollar cases might not be satisfied with a median quality executive assistant. If she wants to hire someone with above-average capabilities and attention to detail then shouldn’t she expect to pay close to the 90-percentile number?
How much attention to detail could be required to keep a calendar and order plane tickets from a website?
Vince: Since you know something that American employers don’t know, i.e., that almost any American worker has what it takes to be highly effective in the job of an admin assistant, you could make some money using that knowledge. Currently there are two market inefficiencies that you’ve identified. One is that employers are paying more than minimum wage for this job (about 3X more on average). The second inefficiency is that employers are paying 2.34X as much at the 90th percentile compared to the 10th percentile. The BLS says that there are 755,210 people with this job. So if you had a staffing firm to work on the first market inefficiency you would be paying about $20,000 per year to each worker. If you offer each worker to employers for 10 percent less than they are paying now, you would have a profit potential of a little over $18 billion per year.
If you had a business based on the second inefficiency, you could pay workers at the 10th percentile level and sell them to employers, minus 10 percent, and your profit potential would be about $2.67 billion.
Vince: To your first question, why were the men in the article employed 5 or 10 years ago but now they are not… The lead man profiled was a union member and therefore not part of a market economy. The next guy profiled had been a government worker and, once again, not part of the market economy. The third guy profiled suffered an injury and was no longer able to do physical work. The implication is that he does not have the skills required for desk-based work. The last jobless guy was an Army National Guard employee, i.e., not part of the market economy.
Thus the nytimes article cited offers no example of someone who was in demand from a private business and is no longer being demanded, absent some sort of personal change (such as the injury).
(And you might ask… why can’t these folks get another government job? I think the answer there is age discrimination. The government allows itself to use age as a filter for hiring in a way that would be illegal if private employers did it.)
Vince: Since you know something that American employers don’t know, i.e., that almost any American worker has what it takes to be highly effective in the job of an admin assistant, you could make some money using that knowledge.
I’m not claiming that I know all of the facts regarding this situation. It doesn’t sound like it makes sense. Perhaps your friend held back some relevant information when she told you the story. Is it possible that there are skills required other than attention to detail, like experience with Microsoft Word or email?
Perhaps this law firm needs “think outside the box”. For example, the University of Denver is a well regarded institution. Why not hire two college students to work 20 hours per week each at the $20/hour with no benefits. The pay and the working conditions would be a lot better than the part time jobs that most college kids take. Restrict interviews to junior and seniors who have a B average or better. Wouldn’t it be possible to find some students who exhibit attention to detail?
Vince: It doesn’t make sense to you that a firm that wants to hire an executive assistant who is at least at the 85th percentile in competence would have to pay roughly the 85th percentile of compensation and also spend a few weeks or months screening candidates? That’s because you don’t believe that “competence” is a relevant concept for admin assistants, as implied by your earlier comment [if almost anyone can do a job then it doesn’t make sense to single out a subset as incompetent or competent]? Or because you think that markets are not efficient?
[And yes, of course being able to use email or Word is required. How else would an admin assistant know what to put into a calendar if unable to exchange email with people with whom the lawyer was going to meet?]
Separately, I do think that the value of a more detail-oriented admin assistant can be quantified. I remember spending time with an executive at the Boulder City, Nevada airport (KBVU). His private jet had arrived nearly an hour early… at Boulder Municipal airport (KBDU) in Colorado.
The NY Times article tells me that being laid off can push marginal workers from being “employable” to permanently “unemployable”. Isn’t that a reason to avoid booms and busts (with their mass layoffs) – a feature of unregulated market economies.
Anonymous: I’m not sure that we know what a feature of an “unregulated market economy” would look like in our current world since there aren’t any (maybe you could go back to Hong Kong in the old days but technology has changed quite a bit since then).
That said, you are probably right that, as long as we’re giving over 40+ percent of our economy to the government, we should question why we need to have employment rates drop precipitously during downturns. I think the standard economics approach to dealing with the issues raised by the nytimes article is eliminating the minimum wage (since there are a lot of Americans whose marginal productivity is lower than the current minimum wage), eliminating welfare programs except perhaps for people who are 100% disabled, and establishing a negative income tax so that people whose earnings are low can still have a reasonably comfortable standard of living (see http://en.wikipedia.org/wiki/Negative_income_tax ). This guarantees essentially full employment at all times.
Of course with the Earned Income Tax Credit we sort of have this already here in the U.S., but it was bolted onto our existing mosaic of welfare programs and it isn’t very large, so it isn’t a fair test of the real idea. I think the criticism of the negative income tax is that employers will be able to pay workers 1 cent/hour and have the government pay $30/hour to bring the worker up to what he or she would get with the existing patchwork of welfare. But on the other hand I’m not sure how that works unless the employers collude. Since not every American worker is good at doing work, won’t employers have to offer $31/hour to attract the better-than-average workers? Or maybe the employers can still pay 1 cent/hour but compete with fringe benefits that the government hasn’t yet figured out how to tax/value?
(I am wondering if we have inadvertently implemented most of the negative income tax system here in the U.S., actually, at least for people who do work. Some of the biggest expenses for a family are housing, health care, food, and telecommunications. If you fall below a certain income threshold you get all of these things for less money than you would pay if you earned a median income, the net result being that your ability to consume is about the same as if you earned that median income (simplified reference; source). Maybe we could save ourselves a lot of admin costs and also encourage more folks to go to work if we tore down what we have and bit the negative income tax bullet (recognizing that any of its bad features are ones that we are already suffering),)
I enjoy this blog and am grateful for its many insights, including those in the 2010 “draft horse” post. Still, there is a recurring theme of tut-tutting bovine American workers who have the bad taste to be born with IQs below the 90th percentile and who aren’t more readily embracing their destiny as low-wage serfs in the new economy. Obviously this kind of analysis is an easy sell to people who had the good sense to be born winners in the IQ lottery — people for whom the American economy still offers expansive opportunity. Which is why it seems unnecessary to force the point with strained examples like the one in this post.
In the original post, you suggest that $70K/year can’t buy a even a minimally competent chair-warmer, then after some pushback in the comments from people who know this to be untrue, you make it clear that in fact your friend doesn’t want to hire a minimally competent chair-warmer. If that’s the case, then what is the point of the example? It doesn’t seem scandalous to me that if an employer wants an excellent employee she is compelled to pay an excellent wage. Is that scandalous to you? Is it an indictment of a fat and spoiled workforce?
Rob: I guess the original posting wasn’t very clear. When I wrote “she hasn’t been able to find anyone good so far” I meant that she hadn’t yet found someone in whom she felt comfortable relying. Given that the job does not require any specific skills or training and offers a reasonably high rate of pay, assuming that her perception of candidates is correct, that is relevant information about the quality distribution of American workers. The BLS numbers confirm what she told me, i.e., that average pay for a job requiring no specialized skills, degrees, or training is 3X minimum wage and that employers compete with higher salaries for the better quality admin assistants (with a significant sized population of 755,000+).
Maybe your point is that she is too picky. But even the average admin assistant is getting paid 3X minimum wage. If we assume that most people currently making minimum wage would prefer to be getting paid 3X minimum wage, that means there are a lot of Americans who, despite having spent 12+ years in the world’s most expensive educational system, don’t have what it takes to meet employers’ standards for an admin assistant and are therefore potentially “draft horses”.
PhilG,
I agree with much of what you say, though as a scientist, it does not seem to matter how much labor, nor how well trained it is, employers will always seem to cry “shortage” should they have to deal with anything less than the top 90th percentile. Despite layoffs reaching new highs for scientists, the shortage rhetoric persisted.
Though employees will also cry “underpaid” should they have to deal with anything less than 90th percentile pay….
philg: Current levels of welfare spending would cover something like a $1.50/hour negative income tax for the bottom quarter of American workers, not $30/hour. Wouldn’t combining no minimum wage with a negative income tax (more transparent than existing welfare payments) make it much easier for employers to capture those payments through lower wages? To the extent that this occurs, the negative income tax looks like it transfers government benefits from poor people to employers (compared with what we have now). Of course, there are social benefits from subsidizing employment rather than providing a hodgepodge of benefits. However, it seems to me that for the poor to break even a negative income tax would cost a lot more than existing welfare spending.
Anonymous: $1.50/hour for the bottom quarter of American workers would be $3000/year per worker, assuming 2000 hours per year. The BLS says (in http://www.bls.gov/news.release/empsit.t01.htm ) that there are about 144 million workers in the U.S. So one quarter of those would be 36 million. 36 million times $3000 = $108 billion.
That’s just a tiny fraction of current welfare spending in the U.S. Medicaid alone is over $400 billion per year; see http://kff.org/medicaid/state-indicator/total-medicaid-spending/ . http://www.latimes.com/nation/politics/la-na-obamacare-subsidies-20140617-story.html says that nobody really knows how much will be paid out in Obamacare subsidies, but it will probably be roughly $16.5 billion in 2014. http://www.obpa.usda.gov/budsum/FY15budsum.pdf shows more than $100 billion spent on food subsidies at the federal level. Maybe nobody knows what states spend? https://www.cbo.gov/publication/43432 says that SSDI was $119 billion in 2011 and is on its way to cost $204 billion per year. I think public housing may have a direct budget of close to $100 billion per year (federal, state, and local). But maybe nobody knows the real cost since a lot of public housing is now done by forcing private developers to give away a percentage of their units to people designated by the government. I’m not sure if anyone has calculated how much property tax would have been paid, for example, if those units had instead been sold at market rates.
Let’s say that the grand total is roughly $1 trillion. That should be enough to give $15/hour to the bottom quarter of American workers.
Indeed, there was a sign error in my calculation, and I wasn’t including Medicaid or SSDI (as you indicated the totally disabled should continue to receive direct payments). $15.00 may be a tad optimistic but is close enough for this discussion. Next problem: It seems quite vulnerable to fraud (an employee could pay an employer to say they worked for them). Or does everyone get a minimum
Anonymous: When I said “except perhaps for people who are 100% disabled” I did not mean to include everyone on SSDI (see http://apps.npr.org/unfit-for-work/ for how “[SSDI] disability has also become a de facto welfare program for people without a lot of education or job skills.”)
I do think that the potential for fraud has been an obstacle to implementing what economists claim is the ideal welfare system. On the other hand, our current system is not free of fraud. There are doctors who get paid for Medicaid patients who don’t exist. There are people who earn a decent income in the cash economy who get taxpayer-funded housing, health care, food stamps, etc.
Any time an American can get cash without working there is going to be fraud. See http://www.desmoinesregister.com/story/news/crime-and-courts/2014/12/19/bettendorf-iowa-woman-fakes-birth-to-collect-child-support/20635873/ for example…