Physical therapy services are part of health care that is delivered by people working in three occupations: Physical Therapists, Physical Therapist Assistants and Physical Therapist Aides. The three and their Standard Occupational Classification codes are defined below.
29-1123 Physical Therapists
Assess, plan, organize, and participate in rehabilitative programs that improve mobility, relieve pain, increase strength, and decrease or prevent deformity of patients suffering from disease or injury.
31-2021 Physical Therapist Assistants
Assist physical therapists in providing physical therapy treatments and procedures. May, in accordance with State laws, assist in the development of treatment plans, carry out routine functions, document the progress of treatment, and modify specific treatments in accordance with patient status and within the scope of treatment plans established by a physical therapist. Generally requires formal training.
31-2022 Physical Therapist Aides
Under close supervision of a physical therapist or physical therapy assistant, perform only delegated, selected, or routine tasks in specific situations. These duties include preparing the patient and the treatment area.
Physical therapists need a license that usually requires a master’s degree for entry. Around 85 percent work in health care, 5 percent in education and a few try to work as self employed. Physical therapy assistants and aides are tied to working for, or with, physical therapists. Physical therapy assistants do not have specific educational requirements and only about 20 percent have a BA degree or above in any field.
Physical therapy services are like many services in and out of health care in that the occupational definition and work of physical therapist establishes that physical therapists can do all of the work of physical therapy assistants and physical therapy aides. Physical therapy assistants can do all the work of physical therapy aides. Employers have the financial incentive to limit the work of physical therapists to that part of physical therapy that requires the training and license of a physical therapist. By splitting the work into more specialized parts they can hire much cheaper assistants and aides to do the other work and limit the number of jobs they must have for the higher paid work. That goes on in millions of America’s jobs.
National employment as physical therapists reached 185,440 as of 2011, which the Bureau of Labor Statistics classifies as a job needing at least BA degree skills. Jobs are up by an average of 5,912 a year since 2000 with a growth rate far above the national average. Physical therapy assistants had 67,550 jobs in 2011 with jobs up an average of 2,130 a year since 2000 and a growth rate above the national average. Physical therapy aides had 47,640 jobs with jobs up an average of 1,184 a year and growth above the national average.
In general physical therapy degree training is either BA, or usually MA, but any degree training for an assistant might be an associate’s degree in some allied health program. Expect though that no one wants to do physical therapy degree training to be a physical therapy assistant. There is no AA degree in physical therapy as such, but various exercise and health degrees. Therefore, much of the work of the assistant is on the job training. The physical therapy aide job requires some on the job training but should be considered dead end work by itself.
Job growth is not the only measure of new hiring. Job openings equal job growth and the number of net replacements. Net replacements are people who permanently leave an occupation for another occupation or retirement and must be replaced before there can be any job growth. Job openings for physical therapists have been averaging around 8,705 per year in recent years; openings for physical therapy assistants are expected to average 3,525 a year; for physical therapy aides 2,324 a year.
Averages are not used much in wage data. A few high wages pull up the average and make it unrepresentative. Instead a distribution range of wages is published with the 10th, 25th, median, 75th, and 90th percentiles of wages. A 10th percentile wage means 10 percent working in this job have wages equal to or less than the 10th percentile wage and so on. Annual wages are converted to hourly wages by dividing annual by 2,080.
The entry wage in the 10th percentile for physical therapists is reported as $54,710 in 2011. The median wage is $78,270, and the 90th percentile wage is $110,670. Yearly reported wage increases barely keep up with inflation especially in the higher range of salary. Buying power continues to erode at the median and 90th percentile wage levels despite increases in monetary wages. Entry level wages boosted buying power at the 10th and 25th percentile wage levels compared to the 8 to 10 years ago.
The entry wage in the 10th percentile for physical therapy assistants is reported as $32,030 in 2011. The median wage is $51,040, and the 90th percentile wage is $71,200. Yearly reported wage have been keeping up with inflation. Buying power is up moderately over the last 7 to 8 years.
The entry wage in the 10th percentile for physical therapy aides is reported as $17,180 in 2011. The median wage is $23,680, and the 90th percentile wage is $35,340. Yearly reported wage increases are not keeping up with inflation. Buying power is about the same or a little lower over the last 7 to 8 years.
New BA, MA and doctorate degrees in Physical Therapy are part of 11 different Rehabilitation and Therapeutic Professional degree specialties and those 11 are part of 164 degree programs in health professions and related clinical sciences. BA degrees in physical therapy programs totaled 550 for the year ending 2009. The total is down from the recent high of 778 degrees in 2005. However, the MA degree and Doctorate degree are more important than a BA degree in physical therapy. The MA degree had 1,360 graduates in the year ending June 2009, but that was down from 4,687 in 2002. The doctorate degree had 7,192 degrees in the year ending June 2009, but that was up from 966 in 2001. Therefore the doctorate degree is replacing other physical therapy degrees as the education level for physical therapy.
Monday, May 7, 2012
Thursday, April 26, 2012
Social and Human Service Assistants
Standard Occupational Classification #21-1093 Social and Human Service Assistants
SOC Definition--Assist professionals from a wide variety of fields, such as psychology, rehabilitation, or social work, to provide client services, as well as support for families. May assist clients in identifying available benefits and social and community services and help clients obtain them. May assist social workers with developing, organizing, and conducting programs to prevent and resolve problems relevant to substance abuse, human relationships, rehabilitation, or adult daycare.
Examples of other common names in use--Addictions Counselor Assistant, Case Work Aide, Clinical Social Work Aide, Family Service Assistant, Human Services Worker, Social Work Assistant
Social and human service assistants exclude those working in occupations (21-1015) Rehabilitation Counselors, (39-9021) Personal and Home Care Aides, (43-4061) Eligibility Interviewers, Government Programs, and (29-2053) Psychiatric Technicians.
Social and human service assistants work in both public and private social assistance establishments. Around 32-36 percent work in private sector firms doing individual and family services, community food and housing services, and vocational rehabilitation services. About 25 to 28 percent work in government social assistance about evenly split between local and state government. They are also employed directly in the health care industry: 16 to 17 percent in nursing and residential care facilities, 5 to 6 percent in outpatient care centers, 4 to 5 percent in hospitals. Religious, civic and social organizations also sponsor some social assistance and hire 5 to 6 percent of social and human service assistants. Almost none are self employed, virtually all work for establishments.
Social and human resource assistants are one of a group of occupations common to social assistance. Include six counseling specialty occupations and four social work occupations as work common to social assistance. Social and human resource assistants are the lowest paid of social assistance occupations. Like many other jobs in education and health care that have aide or assistant in their job titles social and human resource assistants do the time consuming parts of coordinating and delivering services or treatments to clients in order to save time for higher paid professional staff. However, licensing and certification for most social service occupations, especially social work, are less severe than health care. For this reason, social and human resource assistants, especially those with BA degrees, should explore possibilities for advancement once they are familiar with the work.
National employment as Social and Human Service Assistants reached 359,860 as of 2011. Jobs are up by an average of 8,995 a year since 2000 with a growth rate far above the national average. In the recently updated BLS Education and Training Classification assignments for social and human service assistants list high school diploma or equivalent as the entry level education minimum, none for work experience in a related occupation and short term on the job training up to a month as necessary preparation to do the work.
However, survey data percentages are published for the social and human service assistant occupation. Survey results show an educational distribution of 2.4 percent of social and human service assistants have less than a high school degree, 14.4 percent have a high school degree, 20.9 percent have some college, but no degree, 9.5 percent have an associate’s degree, 37.9 percent have a baccalaureate degree, 13.5 percent have a master’s degree and 1.4 percent have a doctorate degree.
Job growth is not the only measure of new hiring. Job openings equal job growth and the number of net replacements. Net replacements are people who permanently leave an occupation for another occupation or retirement and must be replaced before there can be any job growth. Job openings for Social and Human Service Assistants have been averaging around 12,800 per year in recent years.
The basic wage data from the BLS occupational employment survey includes a wage distribution. Averages are not used much in wage data. A few high wages pull up the average and make it unrepresentative. Instead a distribution range of wages is published with the 10th, 25th, median, 75th, and 90th percentiles of wages. A 10th percentile wage means 10 percent working in this job have wages equal to or less than the 10th percentile wage and so on. Annual wages are converted to hourly wages by dividing annual by 2,080.
The entry wage in the 10th percentile for Social and Human Service Assistants is reported as $19,180 in 2011. The 25th percentile wage equals $22, 930. The median wage is $28,740, the 75th percentile wage equals $36,440 and the 90th percentile wage is $45,710. Yearly reported wage increases barely keep up with inflation across the whole salary distribution. Buying remains about the same for the past decade.
SOC Definition--Assist professionals from a wide variety of fields, such as psychology, rehabilitation, or social work, to provide client services, as well as support for families. May assist clients in identifying available benefits and social and community services and help clients obtain them. May assist social workers with developing, organizing, and conducting programs to prevent and resolve problems relevant to substance abuse, human relationships, rehabilitation, or adult daycare.
Examples of other common names in use--Addictions Counselor Assistant, Case Work Aide, Clinical Social Work Aide, Family Service Assistant, Human Services Worker, Social Work Assistant
Social and human service assistants exclude those working in occupations (21-1015) Rehabilitation Counselors, (39-9021) Personal and Home Care Aides, (43-4061) Eligibility Interviewers, Government Programs, and (29-2053) Psychiatric Technicians.
Social and human service assistants work in both public and private social assistance establishments. Around 32-36 percent work in private sector firms doing individual and family services, community food and housing services, and vocational rehabilitation services. About 25 to 28 percent work in government social assistance about evenly split between local and state government. They are also employed directly in the health care industry: 16 to 17 percent in nursing and residential care facilities, 5 to 6 percent in outpatient care centers, 4 to 5 percent in hospitals. Religious, civic and social organizations also sponsor some social assistance and hire 5 to 6 percent of social and human service assistants. Almost none are self employed, virtually all work for establishments.
Social and human resource assistants are one of a group of occupations common to social assistance. Include six counseling specialty occupations and four social work occupations as work common to social assistance. Social and human resource assistants are the lowest paid of social assistance occupations. Like many other jobs in education and health care that have aide or assistant in their job titles social and human resource assistants do the time consuming parts of coordinating and delivering services or treatments to clients in order to save time for higher paid professional staff. However, licensing and certification for most social service occupations, especially social work, are less severe than health care. For this reason, social and human resource assistants, especially those with BA degrees, should explore possibilities for advancement once they are familiar with the work.
National employment as Social and Human Service Assistants reached 359,860 as of 2011. Jobs are up by an average of 8,995 a year since 2000 with a growth rate far above the national average. In the recently updated BLS Education and Training Classification assignments for social and human service assistants list high school diploma or equivalent as the entry level education minimum, none for work experience in a related occupation and short term on the job training up to a month as necessary preparation to do the work.
However, survey data percentages are published for the social and human service assistant occupation. Survey results show an educational distribution of 2.4 percent of social and human service assistants have less than a high school degree, 14.4 percent have a high school degree, 20.9 percent have some college, but no degree, 9.5 percent have an associate’s degree, 37.9 percent have a baccalaureate degree, 13.5 percent have a master’s degree and 1.4 percent have a doctorate degree.
Job growth is not the only measure of new hiring. Job openings equal job growth and the number of net replacements. Net replacements are people who permanently leave an occupation for another occupation or retirement and must be replaced before there can be any job growth. Job openings for Social and Human Service Assistants have been averaging around 12,800 per year in recent years.
The basic wage data from the BLS occupational employment survey includes a wage distribution. Averages are not used much in wage data. A few high wages pull up the average and make it unrepresentative. Instead a distribution range of wages is published with the 10th, 25th, median, 75th, and 90th percentiles of wages. A 10th percentile wage means 10 percent working in this job have wages equal to or less than the 10th percentile wage and so on. Annual wages are converted to hourly wages by dividing annual by 2,080.
The entry wage in the 10th percentile for Social and Human Service Assistants is reported as $19,180 in 2011. The 25th percentile wage equals $22, 930. The median wage is $28,740, the 75th percentile wage equals $36,440 and the 90th percentile wage is $45,710. Yearly reported wage increases barely keep up with inflation across the whole salary distribution. Buying remains about the same for the past decade.
Monday, April 9, 2012
Wisconsin Jobs for 2011 and 2010
On April 2nd a year ago I wrote a 600 word piece on Wisconsin jobs through 2010. At the time Governor Walker delighted attacking and taunting state employees, but I recall part of his taunt was “I will create jobs in the private sector.” In 2010 the monthly average of statewide jobs was down 15.3 thousand from 2009. In 2011 the monthly average of statewide employment was up 11.9 thousand from 2010, not enough to replace the prior year’s losses and still 93 thousand jobs below the statewide average for 2000.
The 2011 Wisconsin increase was 40th of the 50 states and the District of Columbia. An increase of 11.9 thousand new jobs is an annual growth rate of .44 percent, less than half the national average. Alabama, Mississippi and Arkansas actually lost jobs as did Missouri and Montana, but none of the losers have as many jobs as Wisconsin. Utah with only 1.2 million statewide jobs managed to create more than 25 thousand new jobs. For a state like Wisconsin with 2.7 million jobs the 2011 increase was measly at best.
In the national economy three sub sectors of durable goods manufacturing in fabricated metals, machinery and automobiles generated a little over 200 thousand new jobs. Wisconsin was able to ride the wave of national increase by picking up 11 thousand durable goods manufacturing jobs with 9 thousand of the jobs in fabricated metals and machinery. Other manufacturing in Wisconsin nudged upward but with barely a thousand new jobs.
Otherwise there is not much good news to report on Wisconsin jobs. Construction employment dropped 4 thousand jobs with declines across all three construction sub sectors: building construction, heavy and civil engineering including highway construction and specialty trade contractors. Wisconsin construction employment in 2011 dropped to 3.3 percent of statewide employment. Even though construction employment is down in the national economy construction has 4.2 percent of national establishment jobs.
Private sector services did a little better with a net increase of 10.6 thousand jobs, but 6.9 thousand of the new jobs were in employment services and from temporary help services. Government employment was down 6.8 thousand with 2.2 thousand of the lost jobs in the public elementary and secondary schools.
The loss of government jobs pulled the annual growth rate in service employment down to .17 percent compared to 1.08 percent in the national economy. Private sector service jobs that exclude government losses did a little better at .6 percent a year but that was a third of the national growth rate in this category, which was 1.79 percent.
Lost service jobs in Wisconsin for 2011 covered a broad spectrum of industries in transportation, utilities, information services that include publishing, broadcasting, phone and Internet, along with losses in financial services in banking, credit, real estate, arts-entertainment-recreation, accommodations, restaurants, personal services like salons and laundries, and non-profit membership associations. Restaurants?
The total of losses in the private service sectors was a modest 6.8 thousand for the year, but Governor Walker promised more jobs, not less. Even though employment services including temporary help services added 6.9 thousand jobs, these jobs are part of a larger sub sector called administrative support services that includes services like telemarketing, security services, credit bureaus, janitorial and landscaping services and a few more. After excluding jobs from employment services and temporary help services the remaining support services lost jobs in 2011.
Wisconsin service sectors with more jobs had token gains and generally at growth rates well below the national average. For example, wholesale and retail trade added 2.4 thousand jobs in 2011, but that was a growth rate of .58 percent a year compared to 1.40 percent in the national economy. Health care employment inched up 3 thousand jobs, but here again the Wisconsin increase represents a growth rate of .83 percent when the national economy did much better at 1.63 percent.
Professional services like the law, accounting, computer design continues to be a smaller share of Wisconsin jobs than the national economy: 3.3 percent for Wisconsin, almost 5.9 percent nationally. Wisconsin added 1.6 thousand professional jobs in 2011 at an annual growth rate of 1.75 percent a year, but the same jobs were increasing at 3.36 percent a year in the national economy.
One other Wisconsin service sector picked up 3 thousand jobs, which came in a service sector called management-of-companies. This sector results from the use of establishments to report job data because a firm may have many establishments at different locations where some establishments within the firm might be just head offices or administrative offices. Unfortunately the management sub sector is a small sector even though the increase here is a little above the national growth rate.
Based on the Bureau of Labor Statistics data cited above, the private sector job performance equals failure on the governor’s private sector pledge to create jobs. Job gains in manufacturing give optimists a reason to feel better than last year, but Wisconsin depends on manufacturing for 16 percent of its jobs, which makes it vulnerable to changes in the national recovery. The poor performance in construction and private sector services does not suggest Wisconsin manufacturing will be able to pull the rest of the economy along.
Remove the 6.9 thousand new jobs from employment services and the 6.8 thousand jobs lost from government service and the net private service sector increase comes to 3.7 thousand jobs for all of 2011. If Wisconsin private service sector job growth equaled the national average, Wisconsin would have had 20.5 thousand more private sector service jobs in addition to the manufacturing gains.
Being somewhat acquainted with the vitriol and class divisions in Wisconsin politics I wonder if there are more than a few voters hoping jobs will decline. Those people will vote for Governor Walker, but the Wisconsin voters who work should remember that neighboring Minnesota, Illinois, Indiana and Michigan all did significantly better than Wisconsin on jobs in 2011.
The 2011 Wisconsin increase was 40th of the 50 states and the District of Columbia. An increase of 11.9 thousand new jobs is an annual growth rate of .44 percent, less than half the national average. Alabama, Mississippi and Arkansas actually lost jobs as did Missouri and Montana, but none of the losers have as many jobs as Wisconsin. Utah with only 1.2 million statewide jobs managed to create more than 25 thousand new jobs. For a state like Wisconsin with 2.7 million jobs the 2011 increase was measly at best.
In the national economy three sub sectors of durable goods manufacturing in fabricated metals, machinery and automobiles generated a little over 200 thousand new jobs. Wisconsin was able to ride the wave of national increase by picking up 11 thousand durable goods manufacturing jobs with 9 thousand of the jobs in fabricated metals and machinery. Other manufacturing in Wisconsin nudged upward but with barely a thousand new jobs.
Otherwise there is not much good news to report on Wisconsin jobs. Construction employment dropped 4 thousand jobs with declines across all three construction sub sectors: building construction, heavy and civil engineering including highway construction and specialty trade contractors. Wisconsin construction employment in 2011 dropped to 3.3 percent of statewide employment. Even though construction employment is down in the national economy construction has 4.2 percent of national establishment jobs.
Private sector services did a little better with a net increase of 10.6 thousand jobs, but 6.9 thousand of the new jobs were in employment services and from temporary help services. Government employment was down 6.8 thousand with 2.2 thousand of the lost jobs in the public elementary and secondary schools.
The loss of government jobs pulled the annual growth rate in service employment down to .17 percent compared to 1.08 percent in the national economy. Private sector service jobs that exclude government losses did a little better at .6 percent a year but that was a third of the national growth rate in this category, which was 1.79 percent.
Lost service jobs in Wisconsin for 2011 covered a broad spectrum of industries in transportation, utilities, information services that include publishing, broadcasting, phone and Internet, along with losses in financial services in banking, credit, real estate, arts-entertainment-recreation, accommodations, restaurants, personal services like salons and laundries, and non-profit membership associations. Restaurants?
The total of losses in the private service sectors was a modest 6.8 thousand for the year, but Governor Walker promised more jobs, not less. Even though employment services including temporary help services added 6.9 thousand jobs, these jobs are part of a larger sub sector called administrative support services that includes services like telemarketing, security services, credit bureaus, janitorial and landscaping services and a few more. After excluding jobs from employment services and temporary help services the remaining support services lost jobs in 2011.
Wisconsin service sectors with more jobs had token gains and generally at growth rates well below the national average. For example, wholesale and retail trade added 2.4 thousand jobs in 2011, but that was a growth rate of .58 percent a year compared to 1.40 percent in the national economy. Health care employment inched up 3 thousand jobs, but here again the Wisconsin increase represents a growth rate of .83 percent when the national economy did much better at 1.63 percent.
Professional services like the law, accounting, computer design continues to be a smaller share of Wisconsin jobs than the national economy: 3.3 percent for Wisconsin, almost 5.9 percent nationally. Wisconsin added 1.6 thousand professional jobs in 2011 at an annual growth rate of 1.75 percent a year, but the same jobs were increasing at 3.36 percent a year in the national economy.
One other Wisconsin service sector picked up 3 thousand jobs, which came in a service sector called management-of-companies. This sector results from the use of establishments to report job data because a firm may have many establishments at different locations where some establishments within the firm might be just head offices or administrative offices. Unfortunately the management sub sector is a small sector even though the increase here is a little above the national growth rate.
Based on the Bureau of Labor Statistics data cited above, the private sector job performance equals failure on the governor’s private sector pledge to create jobs. Job gains in manufacturing give optimists a reason to feel better than last year, but Wisconsin depends on manufacturing for 16 percent of its jobs, which makes it vulnerable to changes in the national recovery. The poor performance in construction and private sector services does not suggest Wisconsin manufacturing will be able to pull the rest of the economy along.
Remove the 6.9 thousand new jobs from employment services and the 6.8 thousand jobs lost from government service and the net private service sector increase comes to 3.7 thousand jobs for all of 2011. If Wisconsin private service sector job growth equaled the national average, Wisconsin would have had 20.5 thousand more private sector service jobs in addition to the manufacturing gains.
Being somewhat acquainted with the vitriol and class divisions in Wisconsin politics I wonder if there are more than a few voters hoping jobs will decline. Those people will vote for Governor Walker, but the Wisconsin voters who work should remember that neighboring Minnesota, Illinois, Indiana and Michigan all did significantly better than Wisconsin on jobs in 2011.
Saturday, January 28, 2012
Wages and the Wal-Mart Effect
Wal-Mart has spawned a cottage industry in books and articles about Wal-Mart stores and what’s wrong with them for America. Discussion varies among many topics but low wages and high turnover get plenty of attention. Allow me to quote from a 2009 addition to the list of Wal-Mart books: the Retail Revolution by Nelson Lichtenstein. note(1) A Wal-Mart exec is quoted: “It’s hard to believe but turnover drops millions of dollars to the bottom line in cost savings for the company. When an experienced associate leaves the company he or she is replaced by an entry level associate at a lower wage. Turnover of associates, for this reason, actually appears from an expense standpoint, to be a competitive advantage.”
Nearly ten million people work as cashiers, retail salespersons, and first line supervisors/managers of retail sales workers. More than 80 percent of these three jobs are in the retail sector. Together they make up 6.8 percent of America’s jobs in 2010. (2)
The effect on wages from high turnover varies by occupation and industry. In the retail industry high turnover generates a specific pattern of wage compression for jobs like cashier and retail salesperson: lower wage employees replace higher wage employees. The pattern is not unique to Wal-Mart, but given its size, employment totals and the admission that turnover helps profit, it is a specific pattern of wage changes that deserves the title, Wal-Mart Effect.
The Wal-Mart Effect can be defined and illustrated using data from the Occupational Employment Survey published annually by Bureau of Labor Statistics (BLS), U. S. Department of Labor. BLS Survey data partitions occupational wages at five percentile ranks: 10th, 25th, median, 75th and 90th percentiles. For example, the 10th percentile wage rate for an occupation is the wage where 10 percent of all workers earn that amount or less and where 90 percent of all workers earn that amount or more. For cashiers in Table I the 10th percentile wage of $12,200 in 2002 meaning 10 percent of America’s cashiers have annual earnings of $12,200 or less and 90 percent have annual earnings of $12,200 or more.
Table I – Cashiers
For cashiers the 10th percentile wage increased to $15,720 by 2010, a 28.9 percent increase in wages for the eight year period. The consumer price index increased by 21.1 percent in the period, which means the lowest paid cashiers got a 6.31 percent increase in inflation adjusted buying power.
Conversely, the 90th percentile wage of $22,810 in 2002 meaning 90 percent of America’s cashiers have annual earnings of $22,810 or less and 10 percent have annual earnings of $22,810 or more. The 90th percentile wage increased to $25,780 in 2010, a 13 percent increase. However, at the 90th percentile wage the increase fell well below the inflation rate, causing a 6.75 percent decrease in buying power for the highest paid cashiers.
The cashier example illustrates the Wal-Mart Effect which can be defined for any occupation where the lowest 25 percent of inflation adjusted wages increase over time as the highest 25 or 50 percent of inflation adjusted wages decrease over the same time period.
Cashiers had 3.3 million jobs in 2010, but wages for retail salespersons in Table II shows the Wal-Mart Effect for the nearly 4.2 million Americans working as retail salespersons. Table III shows the Wal-Mart Effect for more than 1.1 million first line supervisors/managers of retail workers.
Table II – Retail Salespersons
Table III - First-line supervisors/managers of retail sales workers
What happens to the individuals who leave Wal-Mart or the retail industry is not known. We can hope some of them got higher paying jobs in another occupation, but what happens to individuals is irrelevant to what is certain for jobs: the Wal-Mart Effect degrades an occupation and its jobs, whoever holds them. In the eight year period the highest paid of the 3.1 million cashiers lost buying power to the lowest paid cashiers as wages compressed into a narrower distribution of real wages.
The Wal-Mart Effect depends partly on company policy. The more companies do as Wal-Mart does and actively pursue high turnover as a profitable strategy the more likely wages will show the Wal-Mart Effect. Occupations needing college degree skills or other specialized occupational skills tend to be more resistant to the Wal-Mart Effect. Increasing or stable employment also makes it harder for an employer to eliminate more experienced staff. However, skills are not a guarantee because one of the worst examples of the Wal-Mart Effect occurs in the airline industry where Pilots, Co-pilots and Flight Engineers have lost 20 thousand jobs over the last decade and low paid pilots have replaced high paid pilots by the thousand.
Table IV shows the distribution of wages for 1.5 million Elementary School Teachers, Except Special Education, an occupation resistant to the Wal-Mart Effect. Wages in education typically come from a predetermined salary scale published by the local School Board. Individual pay is determined from a grid or spreadsheet of pay steps that depend on education and years of experience. Pay scale pay in education reflects the opinion that teachers can be trusted to improve with experience and education.
Table IV – Elementary School Teachers, Except Special Education
Recent media reports on education incorporate increasing amounts of coverage from critics who attack teachers and teaching. Growing opinion from outside of teaching expect teachers to produce a quality product measured by student test scores. Manufactured products fail as a result of defective materials and workmanship and so the logic follows that students must fail from defective teaching and poor teachers.
The solution reformers demand will adjust teacher salary in proportion to student test scores. Critics emphasize their concern for education, but a merit pay plan puts teacher pay into competition, promotes higher turnover, and increases the chances school districts will cut their budgets with Wal-Mart Effect savings.
Pay scales act as a partial substitute for seniority rules that require layoffs to be in reverse order of years of service. Seniority rules usually have to be negotiated within collective bargaining agreements, but where pay scales have general acceptance then job skills and time on the job make an occupation resistant to the Wal-Mart Effect. The political attack on unions increases the chance that more occupations will show Wal-Mart Effects.
Of the more than 800 occupations reported in the Occupational Employment Survey 68 show the Wal-Mart Effect from 2002 to 2010. Regrettably the job count in these 68 occupations total 23.4 million, mostly concentrated in three occupational categories: sales and related occupations, food preparation and serving occupations, and personal service occupations.
Over 90 percent of retail sales workers including supervisors of sales workers show the Wal-Mart Effect along with almost half of food service workers. Waiters and waitresses escaped Wal-Mart Effect changes probably because they have the best access to customers and customer tips. In restaurant and food service occupations like fast food cooks, dishwashers, and serving staff like counter attendants and hosts and hostesses at restaurants, lounges, and coffee shops turnover helped replace higher wage jobs with lower wage jobs. Among personal service occupations a little over 40 percent show Wal-Mart Effect wage changes, which include hairstylists, barbers, and especially 686 thousand personal and home care aides where turnover can be expected to be high.
In a 2004 article in Workforce Management author David Shuit reported Wal-Mart turnover of 600,000 to 700,000 a year. (3) It is an amazing number for a company that analysts like to describe in superlative terms. It makes Wal-Mart unrivaled in its ability to convert wages to profit by promoting high turnover, which is why the consequence for wages should be known as the Wal-Mart Effect
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(1) Nelson Lichtenstein, The Retail Revolution: How Wal-Mart Created a Brave New World of Business (New York, NY: Piccador, A metropolitan book Henry Holt and Company, 2009) page 150
(2) Occupational Employment Survey, United States Department of Labor, 2002, 2010.
(3) Douglas P. Shuit, “People Problems in Every Aisle,” Workforce Management, February 2004, pp. 27-34
Nearly ten million people work as cashiers, retail salespersons, and first line supervisors/managers of retail sales workers. More than 80 percent of these three jobs are in the retail sector. Together they make up 6.8 percent of America’s jobs in 2010. (2)
The effect on wages from high turnover varies by occupation and industry. In the retail industry high turnover generates a specific pattern of wage compression for jobs like cashier and retail salesperson: lower wage employees replace higher wage employees. The pattern is not unique to Wal-Mart, but given its size, employment totals and the admission that turnover helps profit, it is a specific pattern of wage changes that deserves the title, Wal-Mart Effect.
The Wal-Mart Effect can be defined and illustrated using data from the Occupational Employment Survey published annually by Bureau of Labor Statistics (BLS), U. S. Department of Labor. BLS Survey data partitions occupational wages at five percentile ranks: 10th, 25th, median, 75th and 90th percentiles. For example, the 10th percentile wage rate for an occupation is the wage where 10 percent of all workers earn that amount or less and where 90 percent of all workers earn that amount or more. For cashiers in Table I the 10th percentile wage of $12,200 in 2002 meaning 10 percent of America’s cashiers have annual earnings of $12,200 or less and 90 percent have annual earnings of $12,200 or more.
Table I – Cashiers
For cashiers the 10th percentile wage increased to $15,720 by 2010, a 28.9 percent increase in wages for the eight year period. The consumer price index increased by 21.1 percent in the period, which means the lowest paid cashiers got a 6.31 percent increase in inflation adjusted buying power.
Conversely, the 90th percentile wage of $22,810 in 2002 meaning 90 percent of America’s cashiers have annual earnings of $22,810 or less and 10 percent have annual earnings of $22,810 or more. The 90th percentile wage increased to $25,780 in 2010, a 13 percent increase. However, at the 90th percentile wage the increase fell well below the inflation rate, causing a 6.75 percent decrease in buying power for the highest paid cashiers.
The cashier example illustrates the Wal-Mart Effect which can be defined for any occupation where the lowest 25 percent of inflation adjusted wages increase over time as the highest 25 or 50 percent of inflation adjusted wages decrease over the same time period.
Cashiers had 3.3 million jobs in 2010, but wages for retail salespersons in Table II shows the Wal-Mart Effect for the nearly 4.2 million Americans working as retail salespersons. Table III shows the Wal-Mart Effect for more than 1.1 million first line supervisors/managers of retail workers.
Table II – Retail Salespersons
Table III - First-line supervisors/managers of retail sales workers
What happens to the individuals who leave Wal-Mart or the retail industry is not known. We can hope some of them got higher paying jobs in another occupation, but what happens to individuals is irrelevant to what is certain for jobs: the Wal-Mart Effect degrades an occupation and its jobs, whoever holds them. In the eight year period the highest paid of the 3.1 million cashiers lost buying power to the lowest paid cashiers as wages compressed into a narrower distribution of real wages.
The Wal-Mart Effect depends partly on company policy. The more companies do as Wal-Mart does and actively pursue high turnover as a profitable strategy the more likely wages will show the Wal-Mart Effect. Occupations needing college degree skills or other specialized occupational skills tend to be more resistant to the Wal-Mart Effect. Increasing or stable employment also makes it harder for an employer to eliminate more experienced staff. However, skills are not a guarantee because one of the worst examples of the Wal-Mart Effect occurs in the airline industry where Pilots, Co-pilots and Flight Engineers have lost 20 thousand jobs over the last decade and low paid pilots have replaced high paid pilots by the thousand.
Table IV shows the distribution of wages for 1.5 million Elementary School Teachers, Except Special Education, an occupation resistant to the Wal-Mart Effect. Wages in education typically come from a predetermined salary scale published by the local School Board. Individual pay is determined from a grid or spreadsheet of pay steps that depend on education and years of experience. Pay scale pay in education reflects the opinion that teachers can be trusted to improve with experience and education.
Table IV – Elementary School Teachers, Except Special Education
Recent media reports on education incorporate increasing amounts of coverage from critics who attack teachers and teaching. Growing opinion from outside of teaching expect teachers to produce a quality product measured by student test scores. Manufactured products fail as a result of defective materials and workmanship and so the logic follows that students must fail from defective teaching and poor teachers.
The solution reformers demand will adjust teacher salary in proportion to student test scores. Critics emphasize their concern for education, but a merit pay plan puts teacher pay into competition, promotes higher turnover, and increases the chances school districts will cut their budgets with Wal-Mart Effect savings.
Pay scales act as a partial substitute for seniority rules that require layoffs to be in reverse order of years of service. Seniority rules usually have to be negotiated within collective bargaining agreements, but where pay scales have general acceptance then job skills and time on the job make an occupation resistant to the Wal-Mart Effect. The political attack on unions increases the chance that more occupations will show Wal-Mart Effects.
Of the more than 800 occupations reported in the Occupational Employment Survey 68 show the Wal-Mart Effect from 2002 to 2010. Regrettably the job count in these 68 occupations total 23.4 million, mostly concentrated in three occupational categories: sales and related occupations, food preparation and serving occupations, and personal service occupations.
Over 90 percent of retail sales workers including supervisors of sales workers show the Wal-Mart Effect along with almost half of food service workers. Waiters and waitresses escaped Wal-Mart Effect changes probably because they have the best access to customers and customer tips. In restaurant and food service occupations like fast food cooks, dishwashers, and serving staff like counter attendants and hosts and hostesses at restaurants, lounges, and coffee shops turnover helped replace higher wage jobs with lower wage jobs. Among personal service occupations a little over 40 percent show Wal-Mart Effect wage changes, which include hairstylists, barbers, and especially 686 thousand personal and home care aides where turnover can be expected to be high.
In a 2004 article in Workforce Management author David Shuit reported Wal-Mart turnover of 600,000 to 700,000 a year. (3) It is an amazing number for a company that analysts like to describe in superlative terms. It makes Wal-Mart unrivaled in its ability to convert wages to profit by promoting high turnover, which is why the consequence for wages should be known as the Wal-Mart Effect
.
------
(1) Nelson Lichtenstein, The Retail Revolution: How Wal-Mart Created a Brave New World of Business (New York, NY: Piccador, A metropolitan book Henry Holt and Company, 2009) page 150
(2) Occupational Employment Survey, United States Department of Labor, 2002, 2010.
(3) Douglas P. Shuit, “People Problems in Every Aisle,” Workforce Management, February 2004, pp. 27-34
Wednesday, December 28, 2011
Where will you work in the Free for All
Rosy job reports annoy me. Some of America’s best neo-realistic fiction derives from a one month up tick in jobs. The media looks for any excuse to tell us this month will be the first step in a crescendo of more jobs, but more jobs will not reverse current job trends, nor solve America’s job problems.
Journalists and reporters ought to recognize one of America’s long term job trends because newspaper publishers are one of a group of service industries that have 20 years of a declining count and percentage of America’s jobs. Other service industries using computer technology also have a declining share of America’s jobs, which assures fewer service industries remain to generate replacement jobs and enough new jobs to meet the job requirements of a growing population.
President Lyndon Johnson noticed the long term decline of production jobs back in 1964 when he predicted that the nation would be capable of maintaining its present levels of production in 1975 with 20 million fewer workers. (1) He made the prediction during a period when automation was getting lots of attention. Calculating inflation adjusted GDP dollars per establishment job in 1964 and again for 1975 allows the comparison he was suggesting. He was off in the count; it was 4.5 million fewer workers to produce 1964 production in 1975.
When Lyndon Johnson made his prediction manufacturing was 27 percent of America’s establishment jobs, which was down from a high of 39 percent in 1943. By 1975 it was 22 percent, now it is 8.8 percent. The declining share of America’s jobs in manufacturing reflects part of a long term trend that has advanced far enough since Lyndon Johnson’s day to threaten America’s ability to maintain self supporting work.
Advancing computer technologies have raised productivity in service industries over the last 20 years, which inevitably leads to a smaller share of establishment jobs. For example, retail trade started 1990 with 12.1 percent of America’s jobs. The decade of 1990 to 2000 was a period with job growth faster than population growth. The American economy added 22.3 million jobs when 13.5 million new jobs would have been able to keep up with population growth, but retail ended the decade with only 11.6 percent of America’s jobs.
In contrast the decade of 2000 to 2010 was a period of slow job growth with a precipitous decline of jobs in the recession of 2008 and 2009. The American economy lost nearly 2 million jobs over the decade, but retail trade continued to lose share ending the decade with only 11.1 percent of America’s jobs, a loss of another half percent of America’s establishment jobs.
Over the last two decades other service sectors in addition to retail lost share to higher labor productivity from computer technologies and the ever wider use of the Internet. Services losing percentage share of establishment jobs include wholesale trade, utilities, newspaper, book and periodical publishers, radio and television broadcasting, land line and cell phone communications, banking and financial services.
Declining service sectors and manufacturing, construction and mining defined by the Bureau of Labor Statistics lost 10.5 percent of America’s jobs from 1990 to 2010. The biggest share of expanding service jobs came in health care, education and government service. Another important sector for expanding jobs came in selected professional services like accounting, architecture, engineering, and computer design. Remaining new jobs were in low productivity services like restaurants, gambling, fitness centers, pet care, landscaping, temp work, security, prisons, business support and personal services. These sectors support millions of jobs, but also 10.5 percent more of America’s jobs than 1990.
America needs 1.5 million new jobs a year just to keep up with population growth, but higher productivity keeps shifting the burden of new jobs onto a declining number of service industries. By 2010 manufacturing, construction, mining and the high productivity service sectors have declined to 38.5 percent of America’s jobs. Jobs in these combined sectors have a twenty year record of lower than average growth that guarantees a gradually declining share of America’s jobs. These service sectors had 49 percent of establishment employment in 1990. To have a 49 percent share in 2010 required 13.7 million more jobs. Instead these sectors lost 3.7 million jobs: 17.4 million jobs shifted to other sectors.
It takes an optimistic job forecast to predict that 38.5 percent will not fall further. In effect, job losses in high productivity manufacturing and service sectors assure new jobs will have to come in low productivity service sectors confined to services with just 61.5 percent of jobs as of 2010.
Where will we work in the free-for-all? It’s a question more of us will have to ask in the next decade, but now is the perfect time to start.
-------------
(1) Foster Rhea Dulles, Labor in America: A history, (NY: Thomas K. Crowell Co. 1966) p. 403.
Journalists and reporters ought to recognize one of America’s long term job trends because newspaper publishers are one of a group of service industries that have 20 years of a declining count and percentage of America’s jobs. Other service industries using computer technology also have a declining share of America’s jobs, which assures fewer service industries remain to generate replacement jobs and enough new jobs to meet the job requirements of a growing population.
President Lyndon Johnson noticed the long term decline of production jobs back in 1964 when he predicted that the nation would be capable of maintaining its present levels of production in 1975 with 20 million fewer workers. (1) He made the prediction during a period when automation was getting lots of attention. Calculating inflation adjusted GDP dollars per establishment job in 1964 and again for 1975 allows the comparison he was suggesting. He was off in the count; it was 4.5 million fewer workers to produce 1964 production in 1975.
When Lyndon Johnson made his prediction manufacturing was 27 percent of America’s establishment jobs, which was down from a high of 39 percent in 1943. By 1975 it was 22 percent, now it is 8.8 percent. The declining share of America’s jobs in manufacturing reflects part of a long term trend that has advanced far enough since Lyndon Johnson’s day to threaten America’s ability to maintain self supporting work.
Advancing computer technologies have raised productivity in service industries over the last 20 years, which inevitably leads to a smaller share of establishment jobs. For example, retail trade started 1990 with 12.1 percent of America’s jobs. The decade of 1990 to 2000 was a period with job growth faster than population growth. The American economy added 22.3 million jobs when 13.5 million new jobs would have been able to keep up with population growth, but retail ended the decade with only 11.6 percent of America’s jobs.
In contrast the decade of 2000 to 2010 was a period of slow job growth with a precipitous decline of jobs in the recession of 2008 and 2009. The American economy lost nearly 2 million jobs over the decade, but retail trade continued to lose share ending the decade with only 11.1 percent of America’s jobs, a loss of another half percent of America’s establishment jobs.
Over the last two decades other service sectors in addition to retail lost share to higher labor productivity from computer technologies and the ever wider use of the Internet. Services losing percentage share of establishment jobs include wholesale trade, utilities, newspaper, book and periodical publishers, radio and television broadcasting, land line and cell phone communications, banking and financial services.
Declining service sectors and manufacturing, construction and mining defined by the Bureau of Labor Statistics lost 10.5 percent of America’s jobs from 1990 to 2010. The biggest share of expanding service jobs came in health care, education and government service. Another important sector for expanding jobs came in selected professional services like accounting, architecture, engineering, and computer design. Remaining new jobs were in low productivity services like restaurants, gambling, fitness centers, pet care, landscaping, temp work, security, prisons, business support and personal services. These sectors support millions of jobs, but also 10.5 percent more of America’s jobs than 1990.
America needs 1.5 million new jobs a year just to keep up with population growth, but higher productivity keeps shifting the burden of new jobs onto a declining number of service industries. By 2010 manufacturing, construction, mining and the high productivity service sectors have declined to 38.5 percent of America’s jobs. Jobs in these combined sectors have a twenty year record of lower than average growth that guarantees a gradually declining share of America’s jobs. These service sectors had 49 percent of establishment employment in 1990. To have a 49 percent share in 2010 required 13.7 million more jobs. Instead these sectors lost 3.7 million jobs: 17.4 million jobs shifted to other sectors.
It takes an optimistic job forecast to predict that 38.5 percent will not fall further. In effect, job losses in high productivity manufacturing and service sectors assure new jobs will have to come in low productivity service sectors confined to services with just 61.5 percent of jobs as of 2010.
Where will we work in the free-for-all? It’s a question more of us will have to ask in the next decade, but now is the perfect time to start.
-------------
(1) Foster Rhea Dulles, Labor in America: A history, (NY: Thomas K. Crowell Co. 1966) p. 403.
Tuesday, December 27, 2011
The Revolt of the Rank and File
Excerpted from the periodical The Nation, Vol. 109, October 25, 1919
The most extraordinary phenomenon of the present time, the most incalculable in its after effects, the most menacing in its threat of immediate consequences, and the most alluring in its possibilities of ultimate good, is the unprecedented revolt of the rank and file. ...
The common man, forgetting the old sanctions, and losing faith in the old leadership, has experienced a new access of self-confidence, or at least a new recklessness, a readiness to take chances on his own account. In consequence, as is by this time clear to discerning men, authority cannot longer be imposed from above; it comes automatically from below. ...
It is by no means impossible, then, that the apparent shift of power indicated by the new movement may bring in the beginning fresh acts of spoliation, a wild riot of red ruin, as many thoughtful observers fear. Such is particularly likely to be the case in the first instance, indeed, if this movement is to be met with nothing but sheer unthinking opposition, with forcible suppression by means of the policeman's club and the soldier's machine gun, if Gary and Huntington and the muzzled steel-towns of the Monongahela Valley are to be the sole reply to this manifestation of the workers' purpose to rule their own lives. Unhappily, our capitalists and politicians seem able to conceive the problem in no other terms. They appear to feel that we are shut up to a choice between ruthless suppression (by the use of armed force, if necessary) of this mutiny of the rank and file, and submission to a "dictatorship of the proletariat," in the worst sense of that horrendous term. ...
This new mass movement of workers cries aloud, not for opposition, but for cooperation; for it cannot be suppressed. It needs understanding, sympathetic guidance, education, rationalization, spiritualization. It needs prophets and teachers, men who shall be at once brave and honest and thoughtful and humble, men who shall have faith and vision and patience. Leaders it will in time find or create; but they must be leaders in a new sense. Theirs it will be not to rule or exercise authority on the one hand, or to assure their own power by flattering the mob on the other, but to discover and proclaim the truth of industrial and social relations, no matter whether it be at the moment popular or not. The future has no place for the soldier; the lawgiver and judge must hold their places by speaking with the voice of reason, not of force. It is time, then, for the powerful and possessing classes, before it is too late, to give up their preoccupation with authority and property, to recognize in this new movement, not the emergence of merely hostile and destructive forces, but the next step in the long march of the human race toward liberty. Let them not fight that movement, but work with it and in it. ...
The most extraordinary phenomenon of the present time, the most incalculable in its after effects, the most menacing in its threat of immediate consequences, and the most alluring in its possibilities of ultimate good, is the unprecedented revolt of the rank and file. ...
The common man, forgetting the old sanctions, and losing faith in the old leadership, has experienced a new access of self-confidence, or at least a new recklessness, a readiness to take chances on his own account. In consequence, as is by this time clear to discerning men, authority cannot longer be imposed from above; it comes automatically from below. ...
It is by no means impossible, then, that the apparent shift of power indicated by the new movement may bring in the beginning fresh acts of spoliation, a wild riot of red ruin, as many thoughtful observers fear. Such is particularly likely to be the case in the first instance, indeed, if this movement is to be met with nothing but sheer unthinking opposition, with forcible suppression by means of the policeman's club and the soldier's machine gun, if Gary and Huntington and the muzzled steel-towns of the Monongahela Valley are to be the sole reply to this manifestation of the workers' purpose to rule their own lives. Unhappily, our capitalists and politicians seem able to conceive the problem in no other terms. They appear to feel that we are shut up to a choice between ruthless suppression (by the use of armed force, if necessary) of this mutiny of the rank and file, and submission to a "dictatorship of the proletariat," in the worst sense of that horrendous term. ...
This new mass movement of workers cries aloud, not for opposition, but for cooperation; for it cannot be suppressed. It needs understanding, sympathetic guidance, education, rationalization, spiritualization. It needs prophets and teachers, men who shall be at once brave and honest and thoughtful and humble, men who shall have faith and vision and patience. Leaders it will in time find or create; but they must be leaders in a new sense. Theirs it will be not to rule or exercise authority on the one hand, or to assure their own power by flattering the mob on the other, but to discover and proclaim the truth of industrial and social relations, no matter whether it be at the moment popular or not. The future has no place for the soldier; the lawgiver and judge must hold their places by speaking with the voice of reason, not of force. It is time, then, for the powerful and possessing classes, before it is too late, to give up their preoccupation with authority and property, to recognize in this new movement, not the emergence of merely hostile and destructive forces, but the next step in the long march of the human race toward liberty. Let them not fight that movement, but work with it and in it. ...
Monday, November 7, 2011
Candidate Cain and the Economics of Restaurants
The media continues to press presidential candidate Cain with a few tough questions, but it is time to ask him about minimum wages for restaurant staff. Given his record as past president of the American Restaurant Association he knows about sub minimum wage for tipped employees.
The Federal minimum wage went up to $7.25 an hour on July 24th 2009 but not for tipped employees whose minimum wage remains at $2.13 an hour. When the Fair Labor Standards Act was passed in 1938 restaurant workers, among others, were excluded from the minimum wage. In 1966 they were finally included, but only at 50 percent of the minimum wage. Some in the restaurant owners complained they shouldn’t have to pay any wages because their waiters and waitresses earned plenty from their tips.
Until 1996 the tipped wage went up when Congress raised the minimum wage, but in 1996 and again in 2007 the restaurant industry lobbied Congress to leave the tipped minimum at $2.13 an hour. The Federal tipped minimum has remained at $2.13 an hour since 1991, which makes it only 29 percent of the present $7.25 an hour minimum wage.
The sub minimum wage for tipped employees allows business to further bid down wages where there is a surplus of labor like there is today with 14 million unemployed. The definition of tipped employees governing the sub minimum wage further contributes to a surplus by enlarging the number of occupations and pool of people that can be paid a sub minimum wage. That is because the sub minimum wage can be applied to employees in occupations that customarily receive as little as $30.00 a month in tips.
First, recognize that the monthly minimum wage at $7.25 an hour is $1,160 a month at 40 hours a week and 4 weeks per month. However, the $2.13 an hour sub minimum wage for tipped employees is just $340.80 a month, which means a tipped employee needs $819.20 a month in tips to get themselves up to the minimum wage.
Under federal rules governing the Fair Labor Standards Act employers who pay a sub minimum wage must verify that tips are enough to bring an employee up to at least the minimum wage, a practice known as taking the tip credit. Taking the tip credit requires detailed recordkeeping because employers are required to verify that tips are enough to make up the difference of the minimum and sub minimum wage. If tips are not enough to equal the minimum wage then the employer is expected to make up the difference.
Notice though that tips received up to $819.20 per month are in lieu of normal obligations to pay wages to employees. Even if tipped employees receive tips at or above $819.20 a month, wage costs drop from at least $7.25 an hour to as low as $2.13 an hour. Even when tips are less than $819.20 a month all of the tips recorded become a cost saving for their restaurant owners.
Fair Labor Standards rules also permit valid tip sharing agreements among tipped employees where tips are accumulated and redistributed by predetermined formula. Valid means agreements must be in writing and only include those who customarily receive $30 a month or more in tips. At a full service restaurant a number of different staff will meet the minimum tip requirement, but waiters and waitresses commonly get the largest share of tips over those who work as hosts, hostesses, runners, bartenders or other dinning room attendants and staff.
Tip pooling potentially saves on wage costs by helping to eliminate wage gaps among tipped occupations. Without tip sharing, wages plus tips for waiters and waitresses will tend to be higher than wages and tips for a host or hostess or bartenders, bus staff and other staff with less access to customers. Wage gaps make it harder to get people to do the host and hostess job without paying higher wages as long as we expect that people will want to leave low wage jobs for higher wage jobs. Tip sharing relieves that pressure by transferring tips from waiters and waitresses to hosts, hostess, bartenders and so on. Tip sharing improves the economic situation of these other staff, but at the expense of waiters and waitresses and not their employer. Tip sharing, like the sub minimum wage, saves wage costs for restaurant owners and relieves them of the normal obligation to pay wages.
Tipped employees work mostly in the full service restaurant industry, hotel and motel accommodations, personal services and attendants at parking lots and car washes. The Bureau of Labor Statistics defines 22 occupations in industries that customarily receive tips where employment came to 9.5 million in 2010. Food and beverage serving workers had 7.6 million of these jobs and 2.2 million of them as waiters and waitress. Personal appearance workers had 457 thousand employed in tipped occupations with the majority of them as hairdressers and hair stylists. Maids, bellhops, concierge and other transportation and tourism workers had 964 thousand jobs with nearly 866 thousand as maids. Parking lot attendants, and those cleaning vehicles, mostly at car washes, have another 413 thousand jobs. The total is nearly 7.5 percent of national establishment employment.
Despite the business and restaurant opposition that surrounds Congressional proposals to change the minimum wage, the regulations for the Fair Labor Standards Act provide many exemptions and legal ways to avoid and undermine the minimum wage in addition to the sub minimum wage for tipped employees. In practice the Federal minimum wage does not apply to millions of jobs or wages.
The record shows that America’s restaurant association lobbies to undermine the already low minimum wage. We know there are millions of cheapskates who support the sub minimum wage, but it’s time to ask Mr. Cain if he is one of them, or one of us who work for a living.
The Federal minimum wage went up to $7.25 an hour on July 24th 2009 but not for tipped employees whose minimum wage remains at $2.13 an hour. When the Fair Labor Standards Act was passed in 1938 restaurant workers, among others, were excluded from the minimum wage. In 1966 they were finally included, but only at 50 percent of the minimum wage. Some in the restaurant owners complained they shouldn’t have to pay any wages because their waiters and waitresses earned plenty from their tips.
Until 1996 the tipped wage went up when Congress raised the minimum wage, but in 1996 and again in 2007 the restaurant industry lobbied Congress to leave the tipped minimum at $2.13 an hour. The Federal tipped minimum has remained at $2.13 an hour since 1991, which makes it only 29 percent of the present $7.25 an hour minimum wage.
The sub minimum wage for tipped employees allows business to further bid down wages where there is a surplus of labor like there is today with 14 million unemployed. The definition of tipped employees governing the sub minimum wage further contributes to a surplus by enlarging the number of occupations and pool of people that can be paid a sub minimum wage. That is because the sub minimum wage can be applied to employees in occupations that customarily receive as little as $30.00 a month in tips.
First, recognize that the monthly minimum wage at $7.25 an hour is $1,160 a month at 40 hours a week and 4 weeks per month. However, the $2.13 an hour sub minimum wage for tipped employees is just $340.80 a month, which means a tipped employee needs $819.20 a month in tips to get themselves up to the minimum wage.
Under federal rules governing the Fair Labor Standards Act employers who pay a sub minimum wage must verify that tips are enough to bring an employee up to at least the minimum wage, a practice known as taking the tip credit. Taking the tip credit requires detailed recordkeeping because employers are required to verify that tips are enough to make up the difference of the minimum and sub minimum wage. If tips are not enough to equal the minimum wage then the employer is expected to make up the difference.
Notice though that tips received up to $819.20 per month are in lieu of normal obligations to pay wages to employees. Even if tipped employees receive tips at or above $819.20 a month, wage costs drop from at least $7.25 an hour to as low as $2.13 an hour. Even when tips are less than $819.20 a month all of the tips recorded become a cost saving for their restaurant owners.
Fair Labor Standards rules also permit valid tip sharing agreements among tipped employees where tips are accumulated and redistributed by predetermined formula. Valid means agreements must be in writing and only include those who customarily receive $30 a month or more in tips. At a full service restaurant a number of different staff will meet the minimum tip requirement, but waiters and waitresses commonly get the largest share of tips over those who work as hosts, hostesses, runners, bartenders or other dinning room attendants and staff.
Tip pooling potentially saves on wage costs by helping to eliminate wage gaps among tipped occupations. Without tip sharing, wages plus tips for waiters and waitresses will tend to be higher than wages and tips for a host or hostess or bartenders, bus staff and other staff with less access to customers. Wage gaps make it harder to get people to do the host and hostess job without paying higher wages as long as we expect that people will want to leave low wage jobs for higher wage jobs. Tip sharing relieves that pressure by transferring tips from waiters and waitresses to hosts, hostess, bartenders and so on. Tip sharing improves the economic situation of these other staff, but at the expense of waiters and waitresses and not their employer. Tip sharing, like the sub minimum wage, saves wage costs for restaurant owners and relieves them of the normal obligation to pay wages.
Tipped employees work mostly in the full service restaurant industry, hotel and motel accommodations, personal services and attendants at parking lots and car washes. The Bureau of Labor Statistics defines 22 occupations in industries that customarily receive tips where employment came to 9.5 million in 2010. Food and beverage serving workers had 7.6 million of these jobs and 2.2 million of them as waiters and waitress. Personal appearance workers had 457 thousand employed in tipped occupations with the majority of them as hairdressers and hair stylists. Maids, bellhops, concierge and other transportation and tourism workers had 964 thousand jobs with nearly 866 thousand as maids. Parking lot attendants, and those cleaning vehicles, mostly at car washes, have another 413 thousand jobs. The total is nearly 7.5 percent of national establishment employment.
Despite the business and restaurant opposition that surrounds Congressional proposals to change the minimum wage, the regulations for the Fair Labor Standards Act provide many exemptions and legal ways to avoid and undermine the minimum wage in addition to the sub minimum wage for tipped employees. In practice the Federal minimum wage does not apply to millions of jobs or wages.
The record shows that America’s restaurant association lobbies to undermine the already low minimum wage. We know there are millions of cheapskates who support the sub minimum wage, but it’s time to ask Mr. Cain if he is one of them, or one of us who work for a living.
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