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.

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. ...

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.

Tuesday, November 1, 2011

America’s Jobs in a Recession

The ups and downs of jobs usually lag behind the ups and downs of Gross Domestic Product (GDP) that define the start and finish of recessions. Based on changes in GDP the latest recession ran from the end of 2007 until June 2009 but establishment employment reached a high in January 2008 and declined until February 2010. The full decline in establishment jobs was just under 8.8 million from the January 2008 high to the February 2010 low. (1)

Jobs increased by over a million in the last 10 months of 2010 and continue to rise, albeit slowly. The gains are welcome but as the old saw goes the devil is in the details. America’s job trends can be explained in sobering detail using published data from the Bureau of Labor Statistics, a.k.a. BLS. Data is not manna from heaven but has to be produced with a consistent set of definitions and procedures to be comparable between industries, occupations and over time. At BLS they produce labor data within the North American Industry Classification (NAICS) that defines a carefully crafted set of industries. They publish nearly a thousand national data series within these definitions.

Some industries showed little or no employment effect from the recession. For example, health care picked up 663.5 thousand jobs during the recession; a 4.25 percent increase. In the 20 years from 1990 to 2010, health care employment had its low in January 1990 and its high December 2010. Since 1990 there are no months with lower employment than the same month a year before. It continues to increase in the months of 2011.

In addition to health care, education and government services escaped the latest recessionary job losses. From January 2008 until February 2010 private education was up 133.7 thousand jobs and public education added another 37.3 thousand jobs. The Federal government had enough new jobs to offset smaller job losses at state and local government for net gain of 88 thousand more government jobs.

The combined increase of jobs in government, health care and education during a recession magnifies job losses in other service sectors and makes them more vulnerable to recessionary decline. Private service-providing employment dropped 4.6 million jobs during the recession months, a 4.9 percent loss. Given that health care, education and government increased during the recession, other service sectors had to decrease more than 4.9 percent; some dropped much more.

Take wholesale and retail trade where jobs dropped 8.2 percent after reaching an employment high of 21.6 million at the start of the recession in December 2007. The widely reported shift of jobs out of manufacturing and into the service economy does not always mention that replacement jobs came in discretionary services prone to abrupt decline in recession. In wholesale trade, durable goods jobs at merchant wholesalers for auto parts, home furnishings, construction materials and others dropped almost 13 percent. In retail trade, automobile dealers lost 19.2 percent of pre recession jobs; furniture and home furnishings store jobs dropped 22.4 percent; building material and garden supply jobs were down 11 percent.

Trucking employment dropped 12.8 percent from January 2008 until February 2010, the biggest drop in transportation jobs. Combined transportation and warehousing had 9 percent recessionary job losses, but individual sub sectors in air, rail and water transportation, couriers, messengers, warehousing and other support activities were off from 7.5 to 10 percent of jobs. Only local commuter transit was spared from recessionary job losses.

As Americans lost 3.8 million manufacturing jobs from 1990 until 2008, they took 3.6 million new jobs in administrative support. In the North American Industry Classification (NAICS) documentation manual, firms providing administrative and support services perform routine support activities for day-to-day operations of other businesses on a contract or fee basis.

Some of the 3.6 million new administrative support jobs in the 1990 to 2008 period included 1.44 million new jobs in temporary help services, and 517 thousand new jobs in professional employer organizations, which are jobs contracted with client firms to fine-tune employment with the ebb and tide of business. Count 382.6 thousand more jobs in landscaping services, 217.8 thousand more jobs in security guard companies and investigation services, 230.1 thousand more jobs in janitorial services, 140.8 thousand more jobs at telemarketing bureaus and telephone answering services. Include 87.8 thousand more jobs at collection agencies where employment more than doubled since 1990.

Combined administrative support services jobs built up to over 8 million before the latest recession wiped out more than 1 million of them, a 13 percent decline. Employment services including temporary help services proved especially susceptible with a 23.4 percent drop in jobs.

The expanded use of consumer credit and the build up in sub prime home mortgages helped fuel the build up and then collapse of financial services jobs at credit intermediaries for both deposit and non-deposit institutions. Jobs at deposit institutions like banks, savings and loan, and credit unions had modest but steady growth after 2000. Jobs at non deposit institutions like credit card issuers, consumer lenders, and real estate credit jumped 378.5 thousand to its highest employment of 776.3 thousand jobs in 2006. Housing related jobs in real estate and construction also reached their highest employment totals in 2006 as the housing bubble peaked prior to the recession.

Recessionary job losses in credit intermediation were slightly bigger than trade: an 8.43 percent drop. The non-deposit portion of credit intermediation lost 15.1 percent of pre-recession employment, down 219.4 thousand jobs from the 776.3 thousand high for 2006. Real estate jobs including jobs at offices of real estate agents and brokers were down 7.3 percent following their 2006 highs.

Construction took the worst losses from the housing bubble and recessionary declines: a 25.9 percent drop totaling 1.94 million jobs. Only 190.7 thousand jobs were lost in heavy and civil engineering construction, primarily for utilities and highway, street and bridge construction. The rest were for jobs in building construction and specialty trade contractors needed in home construction. Construction losses also affected professional employment where jobs at architectural and engineering service firms were off 11.7 percent, a decline of almost 170 thousand jobs.

Jobs in leisure and hospitality services declined sharply in the tech bubble recession of 2002 and again in the 2008, but otherwise they have acted as replacement jobs for jobs lost in manufacturing and jobs lost from slow growth in service sectors that utilize labor saving computer technology. Since leisure and hospitality combine arts, entertainment, recreation, accommodations and food services, these jobs are supported by discretionary spending prone to decline in a poor economy.

The necessity of eating does not extend to eating at restaurants. Going out to have others cook and serve turns out to be one of many ways to create leisure and hospitality jobs vulnerable to recessionary loss. Restaurants lost 356.3 thousand jobs in the recession but other jobs dependent on discretionary spending include hotel and motel accommodations, music and concerts, team sports, racetracks, nature parks, amusement parks, gambling casinos, golf courses, ski resorts, marinas, fitness centers, ice rinks, swimming pools, bowling alleys, day camps, and a few more. Fitness centers reached a high of 512.3 thousand jobs in 2008 after more than a decade of steady growth, but jobs dropped more than 5 percent in the 2008-2009 recession.

Exercise can be a walk in the park or walk on a treadmill; one has jobs, one does not. The latest recession gives a blunt reminder how easy it is to switch from one to the other. The growing reliance on jobs from discretionary spending is one result of the long term growth in labor productivity. As the growth of productivity in manufacturing and services like publishing, communications, finance and trade reduce jobs more people are forced to find work in low productivity services.

Health care, education and government services have millions of low productivity jobs that continue to be a major source of new jobs. Even though these jobs are more resistant to recessionary decline they depend more on tax financing, or tax subsidies, and political support than other low productivity services. Otherwise Americans are working in a higher percentage of low productivity jobs in discretionary services at restaurants, hotels, gambling casinos, pet care, landscaping, child care, and loans and credit cards. In the next recession these jobs will melt away; by the thousands, or millions.

Note (1) Labor data are from the Bureau of Labor Statistics, U.S. Department of Labor

Friday, October 14, 2011

Job Training and Public Policy

Free traders, privatizers and devoted deregulators everywhere know job losses in manufacturing make up bad news, which is why they forecast new investment and expansion into sectors with higher productivity and more jobs for the future. They talk vaguely of new high tech jobs, always careful to mention computers and computer technology. They warn these new jobs take college degrees and so they advise, “Get some training.”

Holding out training and education as the path to better jobs shifts the responsibility for failure, or a menial job with low pay, on to the individual and away from business and government policy. Alan Greenspan, the former Federal Reserve Chairman, was very cleaver doing that. When he would testify on Capital Hill an inquiring committee member would ask why America has so many low paid jobs. He would answer people need to get some training so they are ready for today’s new high tech jobs. Today’s jobs require high skills, he would say. In other words, people could have better jobs if they would only take the initiative to get that training; Mr. Greenspan cannot be held to blame.

Committee members would usually stop their questions following his “Get some training” answer. After all making college pay depends on a financial return, which requires complicated calculations. The need for calculating compound interest gives the impression that investment returns are precise and use only one procedure. However, there are different procedures, even though the actual arithmetic is always precise.

Economists, for example, like to include time in college as time away from work. If time in college is time away from work then lost or foregone wages as well as tuition payments will be a cost of college and included in calculations. Those less devoted to the economist’s way might wonder why time in college is time away from work. Many go to college and work. The time in college might come from leisure or free time instead of work. The matter is in doubt and depends partly on preference.

Despite the need for choice in computing educational returns a common procedure compares interest adjusted wage differences over time with interest adjusted tuition and fees over the same time. The process requires interest calculations because money paid for college tuition and expenses could be used to buy stocks and bonds or other interest earning assets. Tuition and expenses amounts to an investment in a higher paying job, even though college students may want to go to college for other reasons. Millions of America’s jobs like cashier need only general workforce skills whereas jobs needing college degree skills like nurse, accountant or teacher earn a higher wage that allows estimating a financial return for the wage difference.

Another method converts college tuition and expenses into an estimate of the minimum salary increase that will make college a paying investment. Suppose in-state tuition at public college is $8,000 per year each year for four years. In some states like North Carolina, the state tuition is reported as $7,008, while in others like Michigan it is $12,634. Some are above, some below $8,000, but we let $8,000 be a representative tuition for 2010. In the first year $8,000 invested in stocks and bonds would earn interest or dividends. Similarly in the second year, except $16,000 would be invested and the second year earns interest or dividends on $16,000. At the end of four years at the time of graduation the principal invested and the interest earned is a total amount, which will equal $36,307.77 at 5 percent interest. Our thanks for the $36,307.77 total go to the built in spreadsheet functions on MS Excel.

Borrowing the tuition does not change the calculation unless interest rates differ between borrowing and investing. To have the college investment pay, a higher income stream from a higher paying job must be equal to, or greater than, monthly earnings on $36,307.77. If we presume the same 5 percent interest rate, then borrowing only changes $36,307.77 of equity investment into $36,307.77 of debt. Either way the college investment amount is $36,307.77 after four years.

The principal amount of $36,307.77 earning 5 percent interest over the next 10 years and compounding monthly will be equal to $59,799.24. Start at graduation and $384.97 of extra income each month over the next 10 years using 5 percent interest will be $59,799.02. The $384.97 equals the minimum extra monthly earnings necessary to pay for a college education at an interest rate of 5 percent. A lower interest rate will lower the amount of necessary earnings; higher interest rate will raise the amount. Using a 2,080 hour year means $4,619.64 a year of extra wage and salary makes college a paying investment. Experiment yourself. Use the Excel help file under FV, which stands for future value. The spreadsheet entries above are =FV(.05/12,120,0,- 36,307.77,1) and =FV(.05/12,120,-384.97,0,0).

Remember that graduation from college for the many who attend college right after high school implies entry into the labor force at age 22. The social security retirement age is 67 years. Congress and the country are expecting 45 years of work. Forty-five years of work means that all the BA graduates since 1965 to the present have not reached retirement age. The total comes to 47.2 million. (1)

The education and skills training necessary to fill America’s occupations varies widely but the Bureau of Labor Statistics developed a skills classification to reflect the current education and training needed for jobs reported within its occupational categories. The BLS categories include occupations that typically require college degree training: baccalaureate degree, masters, doctorate, and professional degree. The term required has a broad use because in some occupations the degree is absolutely necessary to be considered, where in other occupations a college degree is not strictly required but the skills needed for entry are such that candidates without a degree are much less likely to be considered, much less employed.

In 2010, 27.5 million jobs in the U.S. economy needed a BA degree or above for jobs reported from Bureau of Labor Statistics occupational data using the Bureau of Labor Statistics skills classification. Because those with professional, doctorate or masters degree usually have a baccalaureate degree before starting a graduate program, the 47.2 million eligible BA degree holders reported by the National Center for Educational Statistics can be directly compared to 27.5 million jobs that need a BA degree or above. The difference suggests plenty of qualified candidates for America’s jobs that need college degree skills, or conversely that many people with college degrees take jobs that do not need college degree skills.

Making college pay is a financial matter, not a matter of degrees, job title or status. People with college degrees take jobs that do not need college degree skills, but college will pay as long as those with a college degree earn more than a high school graduate in the same job. If college does not pay, it would be necessary to have a college graduate in a high school job and earning no more than high school graduates.

In the present circumstance of jobs, tuition and interest rates, “Get some training” remains good advice, but only for individuals. What works for individuals does not make a public policy applied to the larger society. The number in the labor force with BA degrees keeps going up because new BA degree graduates now exceed 1.5 million a year which is nearly triple the graduates from 45 years ago who are leaving the labor force. More are already attending and finishing college, but jobs needing college degree skills remain stuck under 28 million and continue to be 19 to 22 percent of employment reported in the occupational employment survey.

There is no increase in Americans attending college that will relieve America from low wage jobs and unemployment. Increasing the supply of well trained job applicants does not create the demand to employ them, nor assure them a higher wage to make that training pay. Politicians who want you to “Get some training” give you good personal advice for now, but they are really changing the subject.

Note (1) National Center for Education Statistics, U.S. Dept. of Education

Thursday, July 28, 2011

Wisconsin Jobs and Governor Walker

Governor Walker needs new jobs more than most governors given the controversies over deficit reduction and public employees. The governor’s plan to create private sector jobs sounds like lots to expect from deficit reduction and business tax cuts, but the Bureau of Labor Statistics publishes enough about jobs to assess his chances for success.

Wisconsin reached a monthly average high of 2,884,400 establishment jobs in 2007, but it had 2,833,800 jobs in 2000. In 2010 the monthly average of statewide employment was down to 2,725,900, an average that is off by 107,900 jobs since 2000. The decline in jobs came as a net decrease of 128,500 private sector jobs and a 20,700 net increase in public sector jobs.

Like most states Wisconsin has a decline in manufacturing jobs. In 1990 it held fifth place for states with 22.8 percent of statewide jobs in manufacturing. It reached first place in 2009 even though manufacturing jobs dropped to 15.7 percent of Wisconsin establishment jobs. Now manufacturing jobs are down 165,300 from the high of 594,700 in the 1990’s.

Wisconsin has the best record of states in limiting manufacturing job losses, yet it still needs 165,300 new jobs to replace jobs lost in manufacturing. That will be difficult because some Wisconsin services have a decade long record of decline. Wholesale and retail trade, utilities, information services that include publishing, broadcasting, phone and Internet, real estate services, and repair-maintenance services show a modest but steady decline in jobs and declining percentage of Wisconsin jobs from 2000 to 2010.

Higher labor productivity limits manufacturing jobs but labor saving computer technologies have limited jobs in service industries like wholesale and retail trade. The use of computers for barcodes, inventory management and Internet sales raise sales per work hour and limits jobs. Digital technologies allow Craigslist to supply free classifieds with a few dozen out of state jobs, while netflix knocks out jobs at video stores. Higher quality for automobiles, appliances and machinery limits the need for repairs and the need for repair jobs.

Wisconsin job losses occurred in 11 industry sectors defined and reported by the Bureau of Labor Statistics. Combined these sectors dropped 8 percent of Wisconsin jobs from 2000 to 2010: 55 to 47 percent. While some jobs in construction or transportation should recover in a stronger economy, jobs already decimated from computer technologies and higher labor productivity and with a decade or more of decline will not recover their previous share of Wisconsin jobs.

Percents must total one hundred which guarantees an 8 percent loss equals an 8 percent gain for other industries. Expect new jobs to come from the limited number of services that had higher growth over the last decade. Health care picked up 73 thousand jobs, which were more new jobs than all other private sectors combined. Health care, government jobs including education combined with private education jobs many at colleges were the big gainers since 2000. These three accounted for over 70 percent of the 8 percentage gains over the last decade. The remainder of replacement jobs came from selected professional and financial services, accommodations, restaurants, personal services like salons and laundries and non-profit membership associations.

The governor’s plan eliminates government as a source of new jobs, but health care also needs government support, which the governor apparently opposes. Tax incentives to generate investment capital are risky for creating state jobs because the funds might leave Wisconsin for investment elsewhere.

People in Wisconsin should ask themselves, “Where will I work in the economy the governor wants to have?” I confess it might be in another state.

Thursday, April 28, 2011

Texas Jobs

In the Time magazine April 4, 2011 issue on page 20 you will find a story “Where the Jobs Are.” There is a U.S. map with a red line pointed to the state of Texas. The caption reads Texas added 211,800 jobs in 2010.

I checked the Bureau of Labor Statistics, Current Employment Survey file for statewide Texas jobs and found the numbers to compute the increase. As Time reported Texas establishment jobs were up 211.8 thousand for the 12 months ending December 2010.(1)

Citing the 12 month increase when jobs are going up generates a larger number than comparing another commonly cited figure: the monthly average of jobs for the year. Texas reached its highest monthly average of 10.6 million establishment jobs per month in 2008. Jobs declined to 10.3 million in 2009, but the monthly average improved by only 35 thousand in 2010.

Texas jobs from 2000 to 2010 are up by an average monthly increase of 910.4 thousand, a bigger increase than any other state. However, Texas also had the biggest increase in population in the same period, which was up 4.3 million between 2000 and 2010. Despite the new jobs, population growth was four times faster than jobs.

The figure Time magazine cites suggests a better future for Texas jobs, but the Bureau of Labor Statistics publishes 159 data series that give statewide details of Texas jobs by industry sector and sub sector. As the old saw goes the devil is in the details.

Texas had just under a million manufacturing jobs back in 1990, which was 13.3 percent of statewide employment. Only 811 thousand remain, which is now 7.8 percent of Texas jobs. The 5.5 percentage decline means Texas needs faster than average growth in service industry employment to make up for the declining share in manufacturing.

Trouble is higher productivity restricts jobs in services not just manufacturing. Computer technology limits jobs in wholesale and retail trade where the use of computers for barcodes, inventory management and Internet sales raises sales per work hour and limits jobs. Amazon computers put Borders books in bankruptcy as netflix knocks out jobs at video stores.

Craigslist offers free classified advertising with a few dozen out of state jobs while fewer and fewer bother with the Yellow Pages. More enjoy the convenience of on-line banking from their home computer while fewer drive to a bank to exchange paper with a teller. More use continuously updating Internet stock quotations instead of newspapers.

Services like wholesale and retail trade, newspapers, communications and finance including insurance and real estate dropped as a percentage of statewide jobs between 1990 and 2010, which makes them like manufacturing because they have to be replaced by a declining number of other services.

In all, 12 sectors defined by the Bureau of Labor Statistics lost 11 percent of Texas jobs from 1990 to 2010. Small share losses in natural resources, accommodations and personal services should recover with a better economy, but jobs lost to productivity gains and computers will not recover their previous share of Texas jobs.

The reality of shifting jobs between service sectors together with the long term decline in manufacturing limits the opportunities for Texas jobs. Percents must total one hundred which guarantees an 11 percent loss equals an 11 percent gain for other industries, but the sectors that gained a percentage of Texas jobs over the last two decades will have to continue to do so if Texas can meet its job requirements.

The biggest share of replacement jobs came in health care. Health care picked up 643 thousand new jobs equal to a 3.6 percent bigger share of statewide jobs. Public and private education jobs are up 485 thousand jobs over the last decade, 1.6 percent of statewide jobs. Texas has to support education and further health care expansion and concentrate on producing its health care needs within its borders to expect to meet the need for new jobs.

Private sector services in selected professional and business support services gained another 3.3 percent of Texas jobs. These include 280 thousand more jobs in careers like accounting, architecture, engineering, computer design, management consulting, and scientific research, but also business support services with 318 thousand new jobs in administrative and facilities services, employment services, temporary help services, telemarketing, security, janitorial maintenance, landscaping and a few more.

Professional services give a chance to bring in spending from outside Texas to support jobs with exported services. For 20 years growth rates nearly double the statewide average helped Texas meet its job needs with professional services. However, professional services are increasingly produced and delivered by computer as part of competition in the high productivity global economy. The reality of competition from other states and other countries makes it risky to expect above average job growth for professional services.

After professional services it was leisure and hospitality jobs including 401 thousand more jobs at restaurants that gained percentage share of Texas jobs. Construction, transportation, and repair services, mostly auto repair, also made small percentage gains.

Like so many other states, Texas jobs are shifting out of high productivity industries in the global economy and into low productivity industries in the local economy. Low productivity is the friend of jobs, but low productivity jobs can be divided into career jobs with generally self supporting salaries in health care and education and lower paid jobs in business support, leisure and hospitality as janitors, waiters, waitresses, maids, cashiers, ushers and ticket takers.

In politics the Democrats promise jobs and fail to deliver, the Republicans promise jobs and fail to deliver, and back and forth. Jobs are a long term problem. I reference 1990 and 2000 to emphasize that point. If Texas politicians want jobs they will need to put away their free enterprise slogans and develop some new policy for the long term. But that is a topic for another article.


Note(1) All job and employment number citations are from the Bureau of Labor Statistics, United States Department of Labor, Current Employment Survey. No exceptions.

Friday, April 1, 2011

Ohio Jobs and Governor Kasich

Ohio Governor Kasich has picked a tough policy challenge for himself, but far more with jobs than politics. Ohio ranks second for statewide jobs losses over the last decade. Only Michigan did worse.

Ohio establishment jobs are down a monthly average of 603 thousand in 2010 compared to 2000. The Governor's plan to turn jobs around looks doubtful. In the mean time the U.S. Bureau of Labor Statistics publishes plenty about Ohio jobs to assess his chance for success. Note (1)

All of Ohio’s 603 thousand job losses came from the private sector. Ohio state and local government including public education is up by 5 thousand jobs, but losses to federal jobs in Ohio offset the gains. Ohio had 785 thousand government jobs in 2010, the same as 2000, even though statewide establishment jobs dropped from 5.6 to 5 million.

Ohio had just over a million manufacturing jobs back in 1990, which was 21.7 percent of statewide employment. Only 624 thousand remain, which is now 12.4 percent of Ohio jobs. The 9.3 percentage decline means Ohio needs faster than average growth in service industry employment to make up for the declining share of manufacturing.

Trouble is higher productivity restricts jobs in services not just manufacturing. Computer technology limits jobs in wholesale and retail trade where using computers for barcodes, inventory management and Internet selling raises sales per work hour and limits jobs. Amazon computers put Borders books in bankruptcy as netflix knocks out jobs at video stores.

Craigslist offers free classified advertising with a few dozen out of state jobs while fewer and fewer bother with the Yellow Pages. More enjoy the convenience of on-line banking from their home computer while fewer do paper transactions with Ohio’s 21 thousand remaining bank tellers. More use continuously updating Internet stock quotations instead of newspapers.

Computer technologies helped decimate trade jobs in Ohio, which declined 144 thousand since 2000. Information services like newspapers and communications and finance including insurance and real estate lost another 56 thousand jobs with them. Worse these services are like manufacturing because they have a declining percentage of Ohio jobs that have to be replaced by a declining number of other services.

In all, eight industry sectors defined by the Bureau of Labor Statistics lost 8.6 percent of Ohio jobs from 2000 to 2010. Small share losses in construction, utilities, and transportation should recover with a better economy, but jobs lost to computers will not recover their previous share of Ohio jobs.

The biggest share of replacement jobs came in health care. Health care picked up 134 thousand new jobs equal to a 4 percent bigger share of statewide jobs. Government jobs including education did not increase, but government jobs excluding education picked up 1 percent of Ohio jobs. Even though public education jobs are off slightly, private education more than made up the difference. Public and private education jobs are up 1.1 percent of statewide jobs over the last decade.

A service sector defined by the Bureau of Labor Statistics to report jobs for offices of holding companies and corporate, subsidiary and regional managing offices added 23 thousand jobs, a .6 percent share increase. Ohio has lost so many jobs there were small percentage gains for utilities, transportation, selected professional services, accommodations, restaurants, and personal services even though all these services lost a few thousand jobs from 2000 to 2010.

Governor Kasich plan cuts spending and jobs in the principal sectors that did well enough to relieve the misery of statewide job losses over the last decade. Free enterprisers like Governor Kasich ignore the shift out of high productivity employment and the necessity of looking for anything leftover. Increasingly what is left are jobs in health care, education, government and a smorgasbord of low productivity services in accommodations, restaurants, business and personal services.

More health care means more jobs. Ohio desperately needs to keep its manufacturing jobs, but Governor Kasich and the Washington establishment ignore jobs moving abroad in search of cheap labor. Ohio has many jobs left to lose. Gains will be harder, especially with Governor Kasich on the attack.

Note (1) All job and employment number citations are from the Bureau of Labor Statistics, United States Department of Labor, Current Employment Survey. No exceptions.

Friday, March 25, 2011

There is Power in a Union

There is Power in a Union: The Epic Story of Labor in America, Philip Dray, (NY: Double Day, 2010), 674 pages, $35.00

There is Power in a Union has the narrative history of America’s labor movement from its early beginnings in Lowell, Massachusetts in the 1820’s until 2010. It is a survey, but at 674 pages it is a thorough survey with room for details.

At Lowell, young women from the surrounding farms manned the looms in the textile mills for $2.25 to $4.00 a week. Many lived in boarding houses as the mills expanded and Lowell grew to 18,000 people by the mid 1830’s, but the young women grew restive working 12 and 14 hour days in the dusty, noisy mills. When management ordered a wage cut after a bad year, the women staged a defiant and unified strike; 800 walked out of the mill at once.

The women lost their strike. Management had a big inventory, but it was the beginning of a more expansive effort to organize labor. As industrial production developed labor organizing developed with it. The Lowell Female Labor Reform Association was part of a broader effort to set a 10 hour work day throughout New England factories.

Organizing trades was common in the early years with many of the early labor unions evolving from the discontented in the laboring ranks. Organizers built a following honing their speaking skills preaching a philosophy of personal rights and fair play.

Readers feel the growing violence and mayhem in the era after the Civil War and especially following the 1873 depression as labor relations soured badly when the Erie Railroad failed to meet payroll in March 1874, claiming financial setbacks. Worse came in July 1877 when the Baltimore and Ohio Railroad announced a second wage cut in a year. Oddly the rail workers were not organized but left work anyway. Management brought in scabs, then the police, then the militia, but the violence escalated and spread to other cities and to organized labor in a national labor revolt. One sage from the period was quoted: “The rapidly spreading railroad strike was difficult for authority for the simple reason that it was unorganized.”

Unions primarily sought higher wages and shorter hours in the years before the civil war, but that changed after 1873. Many lost faith in the political system as government and the courts entered labor disputes on the side of business. Courts ruled that labor unions were illegal conspiracies and jailed and executed organizers. Government sent the army along with plenty of ammunition.

Readers learn the background and personal qualities of the socialist and anarchist philosophers of the era who wrote for hundreds of socialist and anarchist daily and weekly newspapers. Outspoken writers like Albert Parsons, August Spies, Johann Most, Emma Goldman, Alexander Berkman and Eugene Debs contrast with the more conservative Terence Powderly, or the more goal oriented and practicable Samuel Gompers, or the dedicated and determined Mother Jones, and Jacob Coxey.

Dray follows a general chronology which at times feels like an account of one strike after another. The tide of strikes and shutdowns in 1877 was followed with accounts of the McCormick Reaper strike and Haymarket Square bombing in Chicago, the Homestead strike in Pittsburgh and the Pullman Palace Car strike in Chicago; all that by 1894.

Narrative in these chapters highlights the varied and chaotic nature of labor protest and the organizing of new unions from the late nineteenth century well into the twentieth. Strikes by unions were everywhere in everything: mining, manufacturing, transportation, government services. Out west Bill Hayward organized the Western Federation of Miners in 1893 after a failed copper strike. In the east, Eugene Debs organized the American Railway Union while Samuel Gompers organized the American Federation of Labor as an amalgamated craft union. A coalition of groups, east and west, organized the Industrial Workers of the World in 1905 as an industrial union open to all.

Organizing inevitably translated into action. Dray narrates the peculiar details of the United Mineworkers strike of 1902, the International Ladies Garment Workers strike of 1909, the Triangle Shirtwaist fire, the Lawrence Massachusetts “Bread and Roses” strike of 1912, the Patterson New Jersey Silk strike of 1913, the awful events in Ludlow Colorado during the strike against John D. Rockefeller’s Colorado Fuel and Iron Company in 1913, and two Arizona Copper strikes and violence in 1917. The year 1919 was another bad year with a general strike in Seattle, the Boston Police strike and strikes in the steel and coal industries.

The election of Franklin Roosevelt brought moderation from government as well as an advocate in Secretary of Labor Francis Perkins, who announced that the Department of Labor should be the Department FOR labor. Labor leaders like John L. Lewis and Sidney Hillman got a chance to influence new labor policy and legislation as insiders: the Norris LaGuardia Act, the National Labor Relations Act.

Labor got new rights and respect and Dray covers the depression era’s legal and political events with expanded detail, but the labor protest continued. Strikes in Toledo at Electric Autolite by the American Federation of Labor, in San Francisco by the International Longshoreman, in North Carolina by the United Textile Workers, in Minneapolis by the Teamsters turned 1934 into days of rage and violence. The renowned GM sit-down strikes in Flint Michigan, the Ford strike where company toughs beat up Walter Reuther at the “Battle of the Overpass” and the violent and deadly Republic Steel strike came in 1937.

The World War II years turned out to be an interlude which Dray covers in a few pages, but the post war labor movement started changing immediately after the war. An industry steel strike, miner’s strike and railroad strike soured public opinion and gave business the opportunity to get Congress to pass limitations to organized labor in the Taft-Hartley amendments to the National Labor Relations Act, events covered in detail.

Much of the 1950’s labor news was the McClellan Committee hearings of corruption and misuse of union funds by labor leaders. Robert Kennedy made a name for himself questioning the Teamsters Dave Beck and Jimmy Hoffa. Labor proved defiant but Congress passed the Landrum-Griffin Act with more restrictions on labor.

Business opposition to organized labor remained the same, but organized labor divided in search of a new identity and a broader social justice. Dray captures the frenetic pace and the internal division of what was inevitably a varied and messy process. Internal battles developed as more people recognized the connection between civil rights, social justice, the Vietnam War and the labor movement. Martin Luther King was one of those people and Dray covers his efforts on behalf of labor including the Memphis sanitation strike. The Vietnam War split organized labor and there is extensive narrative describing these divisions. The principal labor antagonists were Walter Reuther and George Meany, although there were others. Walter Reuther comes off as the more reflective, thoughtful and effective representative of labor interests. Readers feel the end of an era with his loss in a plane crash.

Remaining narrative in these late chapters includes discussion of automation, health and safety issues, the history and background of farm labor and the rise of Cesar Chavez, the Karen Silkwood episode, the Patco strike and Clinton era disputes at Hormel, Caterpillar, United Parcel Service and Russell Athletic wear.

There is Power in a Union is an American book with virtually nothing about foreign labor movements. It reads easily and it is extremely well documented with a lengthy bibliography and thousands of text citations. It was possible to find some of the obscure citations on Internet media services from 19th century newspapers like the New York Times in 1874 and 1877. It was new to me to read entire articles of America’s yellow journalism.

As I finished reading I realized an advantage to a history that combines the separate elements of working America in a unified narrative. It is possible and probably common to know the labor movement in separate details as labor law, human resources, labor economics, labor organizing or specific historical events. In Dray’s narrative there was room to address many details, sometimes in twenty or thirty pages, but events in time move along in a chronology that helps reveal common and long lived threads running through America’s labor movement and American culture.

The accounts of a steady stream of strikes reveals a long and continuous managerial class refusing to bargain or respect strikers who were fired and replaced with scabs. Angry strikers picketed plant sites and blocked gates followed by violent clashes between strikers and requested police, militia or federal troops and attacks from a hostile press. It was a scenario repeated over and over with one class of people lined up against another. It is calmer and less violent now, but is it different? I doubt it, but do some reading and decide for yourself.

Tuesday, March 8, 2011

Boehner vs. Bush on Jobs

Back on August 11, 2005 the Associated Press ran a story reporting President Bush’s comments on a transportation-spending bill. “President Bush calls the massive $286.4 billion transportation spending bill he signed into law Wednesday a job creator.” The article goes on to describe the bill that pays for 6,000 favored projects in the districts of nearly every member of Congress. Even though the legislation is $30 billion more than the President recommended he is quoted as “proud to sign it.”

Where is George Bush when we need him? Instead we look at the grim-face of glum and gloomy John Boehner. The Washington Post wrote “House speaker John Boehner dismissed concerns Tuesday about the potential for federal job cuts, saying he thinks the government can’t afford to keep so many workers.” Boehner was quoted when he said “Over the last two years since President Obama has taken office, the federal government has added 200,000 new federal government jobs. And if some those jobs are lost in this, so be it.”

Actually the Federal government excluding the Post Office has 140,800 more jobs since January 2009 as reported by the Bureau of Labor Statistics, which does not offset the losses to jobs in state and local government. State jobs excluding education are down 82.6 thousand from their high in August 2008. Local jobs excluding education are down 203 thousand from their high in July 2009. State and local education jobs reached a high in September 2008, but they are also down by 145 thousand jobs as of December 2010.

Government including education at the state, local and federal level has 22.2 million jobs as of December 2010, which is 17 percent of total establishment employment. Government employment undercounts jobs that are the result of government taxing and spending such as employment in the highway, street and bridge construction industry. These jobs are on private payrolls even though their jobs are really the result of government spending. The terms government contractor, outsourcing and privatization all connote private businesses, but they are private businesses doing government funded and government sponsored work. Government employment added to government sponsored employment is more than a mere 22.2 million: much more.

Private sector jobs dropped 653 thousand during the eight years George Bush was in office from January 2001 to January 2009, which was also a 1.2 percent drop in the percentage share of private sector jobs. Yet the record shows Republican George Bush understood the connection between spending and jobs even as he pursued policies favored by business.

Now Republican Boehner blithely promotes government spending and job cuts with a glib put down, “So be it.” If government jobs are allowed to decline, private sector jobs will decline with them. If Mr. Boehner doubts that he should talk with George Bush.

Thursday, February 24, 2011

Obama’s Failure on Jobs

President-elect Obama set a goal to create 2.5 million jobs in the first two years of his administration, which he revised upward to 3 million in the early months after taking office. When he made his pledge in December 2008 the seasonally adjusted monthly average for jobs was already down 3.6 million from December 2007. By December 2010 jobs were down another 4.1 million to 130.2 million. (1)

The loss of 7.7 million jobs underestimates America’s job needs because the adult civilian population keeps growing. At current population growth America needs 1.7 million new jobs a year to keep up with the increase of the working age population. Like “Alice through the looking glass” America needs all the jobs it can get just to stay in place. Yet the December 2010 job totals are 303 thousand below December 1999. More than a decade of job growth, gone.

Like many democrats President Obama maintains a genial and sympathetic tone toward labor while taking the labor vote for granted and defending poor job news. On January 7th he applauded 103 thousand more jobs reported by the Bureau of Labor Statistics, but failed to mention that 24.5 thousand of the new jobs came at restaurants, along with another 16.1 thousand more jobs at establishments doing amusements, gambling and recreation and 15.9 thousand more jobs in temporary help services.

President Obama and too many others continue to act as though Americans can spend their way into full employment. That policy started with Franklin Roosevelt and continues today. When jobs lag behind we hear proposals for a tax break or two, and the great cry sounds to “get some training” but spending into jobs remains the primary policy.

The president’s plans for more jobs will fail because working Americans no longer earn enough on the job to spend our way to higher employment. To keep ourselves employed we must have steadily rising spending in areas where labor productivity is not growing too fast. America cannot rely on new spending in agriculture, mining, and manufacturing to create jobs since the relentless tide of productivity growth keeps restricting these jobs to a smaller percentage of America’s establishment employment.

Gains in labor productivity in service industries in the 1990’s were enough that jobs in information services like newspapers, broadcasting, phone and the Internet started dropping after 2000, along with other service industry jobs limited by productivity gains. Computer technology increases labor productivity in trade with barcodes, inventory management and Internet sales. Retail and wholesale sales volumes per work hour are up and sometimes at rates comparable to productivity in manufacturing. The expanded use of computers and digital technologies in financial services like banking, lending and insurance limits job growth as Americans slowly shift to a paperless economy and computers replace driving to the bank to exchange paper with a teller.

Jobs in just four sectors of manufacturing, trade, information services and finance have a twenty year record of lower than average growth that guarantees a gradually declining share of America’s jobs. Combined these sectors had 40 percent of establishment employment in 1990, which means they needed 12.1 million more jobs just to maintain 40 percent of jobs in 2010. Instead these jobs declined to just under 4 million to 30.6 percent of establishment jobs, assuring that 16.1 million jobs shifted to other sectors.

As the economy changes a limited number of service sectors have to absorb an ever bigger share of America’s jobs. Health care including social services, primary, secondary and post-secondary education and professional services were the three big gainers from 1990 to 2010. Professional services have jobs in law firms, accounting, architecture, engineering, computer design, management consulting, scientific research, advertising, and veterinary services.

These three sectors have more than two-thirds of percentage job gains from 1990 to 2010. Otherwise it is restaurants, amusements, gambling and recreation, along with temporary help services mentioned above and a few more office and business support services that became replacement jobs for the sectors decimated by higher labor productivity and computer technologies.

The need for more health care, education and professional service jobs to meet America’s job requirements strains our politics and creates ominous signs for the future. Health care relies substantially on government support and funding from taxes, which are taxes and funding many in Congress clamor to cut.

Education relies on local property taxes to fund slightly over 8 million public school jobs, and state funding goes for 2.4 million more education jobs, many at state colleges. Falling home prices and foreclosures threaten local school finance. State budgets are in deficit, which further threatens education jobs. Local public school jobs reached a seasonally adjusted high in September 2008, but lag 160 thousand below their high as of December 2010. Jobs in neighborhood schools are spread out geographically and help maintain a core of jobs in many communities. If these jobs are allowed to decline, other jobs will decline with them.

Professional services reached their highest employment in April 2008, but these jobs remain 363 thousand below their 2008 high. For twenty years these jobs acted as a vital source of career employment for people with college degree skills. Professional jobs are up almost 3 million from 1990 and another 900 thousand since 2000, but there are ominous signs for the future.

Architecture, engineering and related services, computer systems design and related services and management and technical consulting services are the three biggest professional service sub sectors with nearly 50 percent of 2010 jobs, but it is computer based work no longer constrained by borders. More and more of it is moving abroad.

Since 2000 private sector employment is down 2.2 million, a decrease of 1.36 percent of establishment jobs. Government jobs at the local, state and federal level including education are up 1.7 million with a corresponding 1.36 percent increase in the government share. The shift to government occurred even though jobs in health care, private schools and professional services gained in percentage share of America’s jobs from 2000 to 2010. The private sector has not delivered jobs.

In our politics the Democrats promise jobs and fail to deliver, the Republicans promise jobs and fail to deliver, and back and forth. They will continue to fail if they treat jobs as a short term recessionary problem. Jobs are a long term problem. I deliberately reference 1990 and 2010 to emphasize that point. It is time for Americans to accept their long term employment problems and discuss long term solutions.

Note(1) All job and employment number citations are from the Bureau of Labor Statistics, United States Department of Labor, Current Employment Survey. No exceptions.

Saturday, January 29, 2011

A Presidency in Peril

Robert Kuttner, A Presidency in Peril: The Inside Story of Obama’s Promise, Wall Streets’s Power, and the Struggle to Control our Economic Future, (White River Junction, VT, Chelsea Green Publishing, 2010), 274 pages, $25.00

In his second book on the Obama presidency, Robert Kuttner contrasts what President Obama promised in his campaign with what he is delivering as president. He promised a progressive program of change from his predecessor: George Bush. By 2010, the Obama promises started looking like more of the same.

The book opens with a short declaration: Barak Obama is at risk of being a failed president. Kuttner delves briefly into the Obama personality before going on in journalistic fashion to explain how and where he deserted his campaign promises and stopped doing what he said he would do in his campaign.

Following the introduction, the next five chapters take the reader through the issues and policies of Obama the campaigner compared to Obama the President. First, in the Politics of Capture, Kuttner contrasts the campaign and the campaigners with the group that took over after the election. The careers and experience of those that took control had a record of policies and positions from previous work on Wall Street or in previous administrations. The record left by Robert Rubin, Lawrence Summers, Rahm Emanuel and a few others lets Kuttner differentiate the influence of the new people from the progressive speeches of the campaign.

Chapter two titled Continuity and Collusion sketches the fateful choices and feeble policies toward the mortgage mess, bank failures and the timid recession stimulus plan. The discussion emphasizes the similarities of the Bush policies with the Obama policies. Even though Kuttner evaluates the Bush-Obama policies in historical perspective and makes alternative policy suggestions chapter two and the three chapters that follow become a well documented issue oriented narrative of disappointment in Obama, the President and politician.

When Kuttner narrates the reform efforts of former Federal Reserve chair Paul Volker to restore the Glass-Steagall banking act, Obama voters feel what they voted to change slipping away. When Kuttner recounts the reform efforts of Elisabeth Warren to create a new consumer financial protection agency, and describes the tepid efforts to control financial derivatives, Obama voters feel disappointed as the Obama administration abandons reform for the status quo.

In crony capitalism we meet the insiders from Citi bank and Goldman Sachs and the double standard of negotiations and policies between financial bailouts and the bailout of the auto industry. By now readers realize Kuttner was taking daily notes and doing regular interviews as he followed the path of the Obama administration during its first year. Readers get details of policy discussions between Obama insiders and their differences with dissenters in Congress, the independent agencies and the administration.

Chapter six, titled Political Malpractice, returns to the theme of a presidency in peril. It starts with a reminder that a Republican, Scott Brown, easily beat a Democrat, Martha Coakley, in the Massachusetts special election to fill Senator Kennedy’s senate seat. In a famously democratic state the Republican won by 57 to 37 percent as disgusted voters switched parties. Kuttner cites other polls, commentary and events to reinforce the mood of the voters and their growing refusal to accept the President’s apparent identification with narrow financial interests or his refusal to fight for the changes he supported before the election.

The final chapter begins by comparing Obama in the first year with other Democrats, especially Bill Clinton and Harry Truman. The feisty and blunt talking Truman abandoned private negotiation for public confrontation: highlighting differences between the parties in the process. The Harry Truman review stands out in stark contrast to Obama with his bland explanations of behind the scenes dealing.

Kuttner digresses with fiscal, tax and global economic policy suggestions that deliver more for working people, before returning to Obama the organizer and the need for a social movement. In a section, It takes a Movement, he remembers the “stunning capacity to inspire Americans after decades of dashed hopes and failed politicians,” but then admits Obama the organizer is dead, or transformed into an organization man who wants to be accepted by the group he needs to confront.

It is clearly hard for Kuttner to accept his own words because he takes nearly nine pages to describe the historical trials and tribulations that go with organizing effective social movements and the part presidents might play in them. When he writes “Interacting with a President who has been a source of both great hope and disappointment is a tricky affair,” he expresses the same frustration there was with President Clinton and President Carter. Their label was Democrat but they failed to lead social movements or stand up for working people and Democratic causes.

Kuttner ends with a note of optimism that the economy is weak enough, the Republicans empty enough and President Obama practical enough to bring change for a larger social and national interest. Maybe, but Kuttner does a better job showing that the disappointed are a large enough group to elect a Harry Truman candidate who will think big. Who that might be is a good question. I have to confess that reading A Presidency in Peril makes me doubt it is Barak Obama.

Sunday, January 23, 2011

Michigan Jobs

A Comprehensive Review and Analysis of Michigan Jobs (2,175 words)

The dismal state of the Michigan job market continues to be a topic of news and politics. Michigan jobs trended upward through the 1990’s reaching a monthly average high of 4.68 million establishment jobs in 2000, which turned out to be the beginning of a continuous decline. Note (1) By 2009 monthly average jobs were down to 3.88 million, a drop of 70 thousand jobs from 1990 to 2009, and a drop of 800.1 thousand jobs from 2000 and 2009.

Michigan is the only state with a decline in statewide employment from 1990 to 2009. The decline between 2000 and 2009 is the biggest drop among all 50 states and the District of Columbia and the biggest percentage decline, 17.1 percent. Michigan jobs are still dropping, down 32 thousand for 2010 through October.

Given the reality of Michigan labor markets it is not surprising that candidates for state office in the November election typically discussed plans for new jobs, and sometimes in confident tones. Such a long slide makes it hard to blame one party, or one policy, but either party that holds elected office will want to improve the outlook on jobs. Let’s review their circumstance and weigh their prospects for success.


Michigan had 839 thousand manufacturing jobs in 1990. In the early 1990’s manufacturing jobs dropped briefly below 800 thousand, but ended the decade with a high for manufacturing in Michigan: 898 thousand jobs. By 2009 manufacturing jobs were barely 462 thousand, a loss of 376.6 thousand jobs from 1990 to 2009 and a loss of 435 thousand jobs after 2000.

Even though Michigan suffered heavy manufacturing job losses other states had the same problem. In 1990, Michigan manufacturing employment ranked 10th among the 50 states in percentage of statewide employment with 21.3 percent of statewide jobs. North Carolina ranked first with 26.4 percent of statewide jobs in manufacturing.

Even though North Carolina began to lose manufacturing jobs sooner than Michigan, North Carolina went from 824 thousand manufacturing jobs in 1990 to 447 thousand in 2009. The North Carolina drop of 376.2 thousand jobs is almost identical to the Michigan manufacturing loss of 376.6 thousand in the same years, 1990 to 2009.

North Carolina relied on the Textile industry in similar fashion as Michigan relied on the automobile industry. North Carolina lost 240 thousand textile industry jobs between 1990 and 2009, whereas Michigan lost 208 thousand automobile jobs in the same period. Even though Michigan manufacturing job losses are severe they do not look worse than North Carolina, yet Michigan lost 800.1 thousand statewide jobs from 2000 to 2009 while North Carolina was able to maintain statewide employment in the same period at 3.9 million jobs.

High Productivity Services

Both Michigan and North Carolina need new jobs to replace their lost manufacturing jobs before they can add jobs. That means both states must have faster than average growth in service industry jobs to make up for the decline in manufacturing. Trouble is there are major sectors of the service economy where the jobs don’t grow, or grow too slowly to maintain their share of statewide jobs.

For example, wholesale and retail trade jobs in Michigan declined by 54 thousand from 1990 to a low of 604 thousand in 2009, a loss of 1.1 percent of statewide jobs. Using computer technology in trade, especially for barcodes and inventory management and for Internet sales, increases labor productivity. Retail and wholesale sales volumes per work hour are up and sometimes at rates comparable to productivity in manufacturing.

The expanded use of computers and digital technologies has raised productivity and slowed the growth of jobs in information services like newspapers, broadcasting, phone services and in financial services like banking, lending and insurance as America slowly shift to a paperless economy. The share of these jobs decline as America and Michigan gets more news from the Internet, and electronic banking replaces driving to the bank to exchange paper with a teller.

Health Care, Education and Professional Services

From 1990 to 2009 when Michigan lost 70 thousand jobs, Michigan’s declining sectors lost 475 thousand jobs. The declining sectors guarantee that the difference of 405 thousand jobs shifted to other sectors of the Michigan economy, especially health care, education and professional and technical services.

Health care including social services in the national economy continues to create more jobs month after month where it now has 12.5 percent of America’s establishment jobs. The recent expansion of health care insurance passed by Congress will help the states generate new jobs. Michigan health care has 160 thousand new jobs since 1990 with 13.7 percent of statewide jobs, above the national average and up from 9.4 percent.

Education employment for public and private elementary, secondary and post secondary education continued to grow from 1990 to 2009. Michigan reached a peak of 437 thousand jobs in the years from 2003 to 2005 and then dropped back to 421 thousand in 2009. The share of education in statewide jobs continued to go up reaching 10.9 percent in 2009, even though 2009 education totals are up only 61 thousand jobs since 1990.

Professional and technical services have jobs in law, accounting, architecture, engineering, computer design, management consulting, scientific research, advertising, and veterinary services. Michigan increased professional services jobs between 1990 and 2009 going from 202 thousand to 221 thousand jobs. The 2009 total is 5.7 percent of statewide employment, just equal to the national average in professional services jobs. Michigan needs to expand these services but professional service jobs are down from a high of 276 thousand in 2000 to 221 thousand in 2009.

Low Productivity Services

Health care, education and professional services accounted for 240 thousand of the 405 thousand of the jobs that shifted from declining sectors from 1990 through 2009. The remaining 165 thousand of the 405 thousand replacement jobs shifted into local business support services and leisure and hospitality services, where low productivity helps maintain jobs that pay modest wages.

There were 92 thousand replacement jobs shifted to business support services with jobs in administrative and facilities services, employment services, temporary help services, telemarketing, security, janitorial maintenance, landscaping and a few more. These new jobs are a 2.5 percent increase in the share of Michigan jobs between 1990 and 2009.

An additional shift of Michigan jobs were scattered into leisure and hospitality services such as accommodations, restaurants, performing arts, spectator sports, amusement parks, casinos, golf and country clubs, fitness and recreation centers, selected personal services, and a broad category of non-profit associations that includes foundations, advocacy and civic groups, professional associations and a few more. The total of these replacement jobs come to 73 thousand from 1990 to 2009.

Michigan vs. North Carolina

North Carolina avoided a general decline in statewide employment that plagues Michigan. North Carolina and Michigan had about the same performance in jobs from 1990 to 2000. Differences show up in the period from 2000 to 2009 when North Carolina did better in health care adding 131 thousand jobs and better in education adding 79 thousand jobs. Michigan added only 83 thousand health care jobs and 8 thousand jobs in education. North Carolina did better in professional services adding 31 thousand jobs; Michigan was down 55 thousand professional service jobs in the 2000 to 2009 period.

Otherwise North Carolina maintained itself with local services jobs and by adding 48 thousand jobs in state and local government, excluding education. Michigan had a decline of 14 thousand state and local government jobs excluding education from 2000 to 2009 and much bigger losses in trade, which dropped 141 thousand jobs compared to a loss of only 13 thousand jobs in North Carolina. Even though Michigan has gambling and gambling jobs and North Carolina does not, Michigan lost 19 thousand jobs in leisure and hospitality; North Carolina gained 66 thousand leisure and hospitality jobs.

North Carolina has 448 thousand manufacturing jobs left after losses every single year since 1995; 462 thousand manufacturing jobs remain in Michigan. Both states needs these jobs, but other states want them, the Federal government continues to ignore manufacturing moving abroad and rising labor productivity continues to limit jobs. In the last decade, North Carolina did better than Michigan generating more service jobs buying and selling within their state than Michigan was able to do. In spite of the difference both states have a declining share of manufacturing jobs and a growing share of jobs in local services.

Reality Check

The reality of shifting jobs between service sectors together with the long term decline in manufacturing limits the options for Michigan jobs. As of 2009 35.2 percent of Michigan jobs remain in manufacturing and the service sectors decimated by higher labor productivity and the use of computer technologies. Even though jobs in wholesale and retail trade are restricted from higher labor productivity, the Michigan loss of 141 thousand trade jobs between 2000 and 2009 is especially high. Michigan must do better in trade to have a chance at job growth.

Politicians seldom advocate government jobs as a solution to job needs, but Michigan cannot afford to sit by and let these jobs decline, no matter how unpopular taxes and spending come to be. Government jobs are spread out geographically and help maintain a core of jobs in many communities. If these jobs decline, other jobs will decline with them.

In Michigan and North Carolina, like other states all over the country, jobs are shifting out of high productivity industries and into low productivity industries like leisure and hospitality and personal services. Low productivity is the friend of jobs, but few politicians want to brag about new jobs in leisure and hospitality as waiters, waitresses, maids, cashiers, ushers and ticket takers. Low productivity jobs tend to have low pay and families need two or three of these jobs to pay the bills and survive.

The state legislatures and the governors of Michigan and all states will need to support health care expansion and concentrate on producing as much health care within their respective states as possible if they expect to meet the needs of new jobs. Think of more health care and job growth as the same.

Public education has helped provide new jobs in Michigan for nearly 20 years, which needs to continue if Michigan wants jobs. In the last few years private schools have added jobs while local public school are down more than 40 thousand jobs since just 2004. Private schools and all the state’s colleges have a chance to bring in out of state students and create jobs.

Professional services give a chance to promote services and jobs that brings in spending from outside the state to support jobs with exported services. Health care and education tend to be local services, whereas professional services are increasingly produced and delivered by computer in the global economy. Michigan must expand professional services if it expects to have more jobs.

Combine the 35.2 percent of high productivity sectors where jobs decline with the low productivity sectors where the wages are low, add in government jobs excluding education, and the total comes to 63.3 percent of Michigan jobs. Jobs in health care, education and professional services account for another 30.3 percent of Michigan jobs in 2009, but the percentage has to increase for these jobs to replace the declining sectors. The alternative is more low paid jobs in low productivity services.

Just three other sectors remain with 6.4 percent of Michigan jobs: natural resources, construction, and transportation with public utilities. All are in decline with fewer jobs now than in 1990 and fewer than 2000. Natural resources, which is logging and mining, has 7 thousand jobs left. Construction and transportation and utility jobs are also off from 1990 and 2000. Construction is down from a high of 210 thousand jobs to a monthly average 118 thousand for October of this year.

Michigan politicians make broad promises to create jobs that will be hard to keep. If they concentrate on health care, education, and professional services and bolster the sagging trade sector, then new jobs could generate enough income and spending to boost employment in the supporting sectors. If they review state tax incidence and the financial sector they might be able to make changes that keep more Michigan generated savings and profits in Michigan for reinvestment and job growth. If they revise Michigan labor law, especially overtime rules, they might be able to spread the work to more people and lower the unemployment rate.

Jobs are a long term problem. I deliberately reference 1990 and 2000 to emphasize that point. In our politics the Democrats promise jobs and fail to deliver, the Republicans promise jobs and fail to deliver, and back and forth. They fail because they look for a quickie solution and pursue some other agenda. Michigan could be different. Your job will depend on it.


Note(1) All job and employment number citations are from the Bureau of Labor Statistics, United States Department of Labor, Current Employment Survey. No exceptions.

Wednesday, January 5, 2011

Overtime Rules

The Fair Labor Standards Act includes overtime rules that define overtime pay at wages not less than one and half times regular pay rates after 40 hours of work in a workweek. Any use of overtime means more work for some that could go for more jobs to others. Requiring higher overtime pay for employers gives financial incentive to avoid the added expense of overtime and hire more employees at regular pay, which helps spread available work to more people. The incentives will be more effective if overtime rules apply to all employment. Instead the Fair Labor Standards Act as amended provides exemptions from overtime requirements for broad categories of employees employed in a bona fide executive, administrative, or professional capacity, selected computer employees, outside sales employees, motion picture employees, and other more narrowly defined categories. (1)

Exemptions from overtime rules go back to the 1940’s but changes drafted during the Bush administration and adopted in August 2004 revised Fair Labor Standards Act rules with new language referred to as white collar rules. The new regulations in Title 29 Code of Federal Regulations Part 541 define an employee’s salary and duties to determine exempt work that qualifies for an exemption from overtime pay.

Executive Employees

The general rules for executive employees that qualifies for an overtime pay exemption under white collar rules means an employee “compensated on a salary basis not less than $455 a week, exclusive of board, lodging or other facilities, whose primary duty is the management of the enterprise or a customarily recognized department or subdivision, who customarily and regularly directs the work of at least 2 or more full time employees, who has authority to hire and fire other employees, or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.” (2)

The definition of management and primary duty in the regulations that establishes exempt work incorporates the traditional managerial prerogatives like hiring, firing, paying, promoting and disciplining as primary duties if they are the principal, main, major or most important duties. (3) Nevertheless, executive employees can be exempt from overtime if they have other non-exempt duties because the regulations allow an employer to exempt an employee who does some exempt work and other activities directly and closely related to exempt work.

The phrase ‘directly and closely related’ means tasks that are related to exempt duties and that contributes to or facilitate performance of exempt work. “Thus, ‘directly and closely related’ work may include physical tasks and menial tasks that arise out of exempt duties, and the routine work without which the exempt employee's exempt work cannot be performed properly.” (4)

The 40-hour work week continues to be the standard full time workweek as it has been for more than eighty years, but exempting executive managers from overtime pay converts three managers working 40 hour weeks into two managers working 60 hour weeks. Using overtime rules to turn three jobs into two makes it easier for employers to economize on wage costs, especially in high wage occupations like executive managers. A lower wage cost with exempt overtime hours also assures fewer jobs in exempted occupations like management.

Occupational Employment Survey data reported by the Bureau of Labor Statistics shows managerial jobs in decline from 1999 to 2009. Managerial occupations were 6 percent of America’s jobs in 1999 with employment just over 8 million. By 2009 managerial occupations were down to 6.1 million jobs and 4.7 percent of the total of occupational employment. The job totals in managerial occupations are for establishment employment, meaning they are jobs at firms, non-profit associations or government.

Undoubtedly the decline in managerial jobs resulted from a combination of factors. It is common now for business to issue laptop computers, cell phones, and Blackberry’s to employees, which makes them available to work overtime in the evening, weekends, or the middle of the night. There are few reports business treats these additional hours of work as time and a half for overtime, but using new technology helps reduce jobs in management anyway.

Administrative Employees

Second on the list of overtime exemptions are the general rules for administrative employees. Any employee employed in a bona fide administrative capacity must be “compensated on a salary or fee basis at a rate of not less than $455 per week, exclusive of board, lodging or other facilities, whose primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers, and whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.” (5)

“In general, the exercise of discretion and independent judgment involves the comparison and the evaluation of possible courses of conduct, and acting or making a decision after the various possibilities have been considered. The term ‘matters of significance’ refers to the level of importance or consequence of the work performed. The phrase ‘discretion and independent judgment’ must be applied in the light of all the facts involved in the particular employment situation in which the question arises.” (6)

The regulations include a list of example decisions that an employee might make to satisfy the requirement to exercise discretion and independent judgment and also summary wrap up. “The exercise of discretion and independent judgment implies that the employee has authority to make an independent choice, free from immediate direction or supervision. However, employees can exercise discretion and independent judgment even if their decisions or recommendations are reviewed at a higher level. Thus, the term ‘discretion and independent judgment’ does not require that the decisions made by an employee have a finality that goes with unlimited authority and a complete absence of review.” (7)

Section 541.203 of the regulations explains specific example occupations that generally meet the requirements for the administrative exemption: insurance claims adjusters, employees in the financial services industry, executive assistant or administrative assistant, human resources managers, and purchasing agents. A description of the usual duties and decisions for these occupations provides the nature of decision making that will allow exemption from overtime status. For example, “An executive assistant or administrative assistant to a business owner or senior executive of a large business generally meets the duties requirements for the administrative exemption if such employee, without specific instructions or prescribed procedures, has been delegated authority regarding matters of significance.” (8)

Educational establishments also come under rules for administrative employees. Employees qualify as exempt from overtime at educational establishments when “compensated for services on a salary or fee basis at a rate of not less than $455 per week exclusive of board, lodging or other facilities, or on a salary basis which is at least equal to the entrance salary for teachers in the educational establishment by which employed; and whose primary duty is performing administrative functions directly related to academic instruction or training in an educational establishment or department or subdivision thereof.” (9)

These educational employees are cited as generally meeting the requirements for overtime exemption: superintendent, assistants with educational duties, principals and vice principals, department heads, academic counselors and other employees with similar responsibilities.

Professional Employees

The general rules for professional employees apply to the learned professions, creative professions, teaching, law and medicine. “To qualify for the learned professional exemption, an employee's primary duty must be the performance of work requiring advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction.” (10)

Having an academic degree is cited as prima facie evidence of meeting the requirement of learning customarily acquired by a prolonged course of specialized intellectual instruction. “However, the word ‘customarily’ means that the exemption is also available to employees in such professions who have substantially the same knowledge level and perform substantially the same work as the degreed employees, but who attained the advanced knowledge through a combination of work experience and intellectual instruction.” (11)

The regulations have a list of example professions and a selection of occupations that meet the requirements for the learned professions exemption. Exemptions apply to professions of law, medicine, theology, accounting, actuarial computation, engineering, architecture, teaching, and various types of physical, chemical and biological sciences and pharmacy. Some example jobs signal how far employers can push the definition of learned professions. Jobs that generally meet the requirements for exemption are listed in the regulations: certified medical technologists, registered nurses, dental hygienists, physician assistants, chefs, athletic trainers, funeral directors and embalmers.


“To qualify for the creative professional exemption, an employee's primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor as opposed to routine mental, manual, mechanical or physical work.” (12)

Creative professionals that generally meet the requirements for overtime exemption are listed in the regulations: actors, musicians, composers, conductors, and soloists; painters, cartoonists, essayists, novelists, short-story writers and screen-play writers and journalists.

There are some stipulations for journalists. “Journalists may satisfy the duties requirements for the creative professional exemption if their primary duty is work requiring invention, imagination, originality or talent, as opposed to work which depends primarily on intelligence, diligence and accuracy.” (13)

Teacher exemptions apply to “Any employee with a primary duty of teaching, tutoring, instructing or lecturing in the activity of imparting knowledge and who is employed and engaged in this activity as a teacher in an educational establishment by which the employee is employed.” (14)

Teachers at public or private schools who are permanent, conditional, standard, provisional, temporary, emergency, or unlimited, or certified or not certified, or doing extracurricular activities such as coaching athletic teams or acting as moderators or advisors in such areas as drama, speech, debate or journalism have exempt status for overtime. (15)

The exemption for law and medicine applies to “Any employee who is the holder of a valid license or certificate permitting the practice of law or medicine or any of their branches and is actually engaged in the practice thereof; and any employee who is the holder of the requisite academic degree for the general practice of medicine and is engaged in an internship or resident program pursuant to the practice of the profession.” (16)

Three additional exemptions close out the white collar rules. A computer industry exemption applies to any computer employee compensated on a salary or fee basis not less than $455 a week, and to any computer employee compensated on an hourly basis at a rate not less than $27.63 an hour. (17) Exemptions apply to outside sales employees who make sales or obtain orders or contracts for services and customarily and regularly work away from the employer’s place or places of business. (18) An employee in the motion picture producing industry who is compensated at a base rate of at least $695 a week is also exempt. (19)

Hourly pay and the State of Exemptions

Exempt status eliminates the financial incentive to spread work and hire more people.
Salary and fee basis requirements defining the white collar rules in Title 29 Code of Federal Regulations part 541 does not permit exempt status for most hourly paid jobs. There are exceptions but as a practical matter hourly pay will be preferred for some jobs, especially where work fluctuates, or work has intermittent weeks with less than forty hour schedules.

The Current Population Survey reports the number and percentage of wage and salary workers paid at hourly rates. (20) In 2006, hourly rated employees were 76.5 million and 59.7 percent of wage and salary workers. By 2009 the numbers were down to 72.6 million and 58.3 percent. Having 58.3 percent paid hourly rates leaves 41.7 percent paid on a salary, fee or other basis, which comes to 51.9 million jobs.

Since few hourly paid employees are eligible for white collar exemptions the 51.9 million wage and salary workers not on hourly pay gives a number that meets the first criteria for exempt status: pay on a salary or fee basis. Pay by the hour or by salary continues to be the sole discretion of the employer and as my summary of overtime rules suggests, the new language in the regulations allows more discretion to adjust primary duties to meet the duty tests for exemption from overtime pay.

No agency has a count of salary or fee based employees with exempt status, but the 51.9 million total is big enough to include all employment reported for management, business operations, financial administration, and professional occupations reported by the Bureau of Labor Statistics.

A little over 12 million work in managerial occupations, business operations and other financial administration and the broad wording in the regulations give reason to believe they all qualify, or could easily be adjusted to qualify, for exempt status. Since the regulations specifically include 1.4 million executive secretaries and administrative assistant as exempt administrative employees, financial administration occupations like accountant, loan officer and financial analyst could be expected to meet at least one of the requirements for executive, administrative or professional exemptions as well.

The Bureau of Labor Statistics defines seven major groups of occupations as professional employment with 27.5 million jobs in 2009. (21) Education has the most jobs in professions with 8.5 million in teaching or the exempt duties related to teaching. Health care has another 7.2 million practitioners, which includes 15 thousand athletic trainers specifically cited as an exempted occupation.

Given that embalmers and chefs are not defined in the Standard Occupational classifications as professional jobs but specifically included as learned professions in the overtime rules, we can expect the generous definition of learned professions includes more than the 27.5 million jobs.

Millions of business and professional jobs that support middle class and career minded Americans have no legal right to overtime. Truth is these are just the white collar rules; there are many more overtime exemptions in other parts of Title 29 of the Code of Federal Regulations. Airline employees, seasonal and recreational employees and firefighters working in small public fire departments with less than 5 firefighters are three of many more exemptions from overtime pay.

The Fair Labor Standards Act gives Americans the legal right to the minimum wage and overtime pay beyond 40 hours a week. That comes up at the beginning of the Fair Labor Standards as amended and its regulations. By the end of the regulations millions and millions of Americans have no legal right to overtime pay.

The rules that regulate exempt status for overtime pay are in addition to Fair Labor Standards rules for compensable work. (22) Employees are legally entitled to be compensated for hours worked. Exempt status means exemption from overtime pay at time and half, not exemption from pay for time worked.

Compensable time has a definition and a regulation because disputes can arise over compensable time as well as overtime. If an employee is asked to do an errand on the way to work reasonable people might disagree whether errands on the way to work are compensable time. When disputes occur new and amended definitions are drafted, adopted and published as they have been over the years for many different work disputes under the Fair Labor Standards Act. However, employers are still expected to pay wages and salary for compensable time worked up to and over forty hours if that occurs. Employers cannot legally expect employees to work for free or to work free overtime hours.

Still we have to expect free overtime hours happen anyway. In education, for example, phrasing in teacher contracts makes no allowance for over time: “Teacher shall perform such duties as deemed necessary, shall attend all assigned meetings, shall be present at school during school hours, shall be present at school or other location outside school hours as directed in connection with school events or activities.”

Teacher work days fill up with student contact hours, emails and calls from parents and assigned meetings that leave little time for grading or preparation. Grading and preparation occur in the evenings and weekends. Millions of America’s public school teachers work beyond 40 hours a week, but I am unaware they receive additional compensation for overtime hours. Their overtime appears to be free work; a donation or part of their dedication.

In office based occupations pressure to get the job done and be part of the team make it easy to ignore some extra hours. Salaried employees are not typically encouraged to clock their overtime hours and those who do might be reluctant to request additional pay. Just like unpaid interns, salaried employees may choose not to complain about free overtime as bad for career advancement. Legal rules mean nothing when employees choose to go along or feel good at being dedicated, even without pay.

Economizing on wage costs is a universal practice. Even though laptop computers and overtime rules help save labor costs and reduce jobs there is a difference between them. The former is applied technology; the latter applied politics. When the Bush administration expanded overtime exemptions by writing new overtime rules, they made it easier to economize on wage cost by eliminating the financial incentive to restrict overtime and spread work to more people. Exemption from overtime pay for millions of jobs and free overtime for others helps to build America’s surplus of labor.


(1) Title 29 Code of Federal Regulations, part 541, available at

(2) 29 CFR part 541.100

(3) 29 CFR part 541.102

(4) 29 CFR part 541.703

(5) 29 CFR part 541.200

(6) 29 CFR part 541.202

(7) 29 CFR part 541.202

(8) 29 CFR part 541.203

(9) 29 CFR part 541.204

(10) 29 CFR part 541.301

(11) 29 CFR part 541.301

(12) 29 CFR part 541.302

(13) 29 CFR part 541.302

(14) 29 CFR part 541.303-541.304

(15) 29 CFR part 541.303

(16) 29 CFR part 541.304

(17) 29 CFR part 541.400

(18) 29 CFR part 541.500

(19) 29 CFR part 541.709

(20) Bureau of Labor Statistics, U.S. Department of Labor, Characteristics of Minimum Wage Jobs

(21) Data here are from Bureau of Labor Statistics, U.S. Department of Labor, Occupational Employment Survey, May 2010.

(22) Title 29 Code of Federal Regulations part 785