The Cost of Work

A while back, Derek Thompson wrote a good piece on The Atlantic about the overall costs of employment. Contrary to what some are suggested overall compensation for labor hasn’t actually fallen very much as a percentage of the GDP. Rather, wages themselves have as other costs of employment have filled in the gaps. In other words, we’re seeing less money than ever, but employers are not paying less (as a percentage of the GDP, at any rate). Those of us who have been following wages either know this (that our wages are being cut by the increased costs of health insurance) or at least shouldn’t be surprised by it, but it’s worth pointing out when someone ponies up a graph about how selfish employers are being by either not employing enough of us or not paying us enough.

This is an argument for disentangling health insurance from employment, effectively telling companies that we want them to hire but once they do they are on the hook for our outlandish health care costs. But that’s not all. Thompson goes on to point out:

Liberals and conservatives share a similar goal that businesses should hire more people. Liberals do a better job (or perhaps a louder job) of protecting workers’ rights. Conservatives, I think, do a better job (or perhaps a louder job) of pointing out that protecting workers is expensive, and it probably leads to fewer hires. That’s right. All this non-wage compensation is a hurdle for employers. Why else would the president think that lowering the payroll tax would stimulate hiring?

If your final goal is to make workers cheaper, you’ll probably want to argue for: (1) defined contribution plans that don’t guarantee high retirement payouts; (2) a smaller or eliminated payroll tax; and (3) a private market for health insurance without government subsidies for employers. The rebuttal would be that defined benefit is better for workers; Social Security reduces elderly poverty; and an out-of-office market for health care is exactly what Obamacare is all about in the long run.

I’m less than entirely interested in the partisan ramifications. But this points to a natural tension. Namely, the more expensive we make employing people, the less people that corporations are going to want to employ. This applies to health insurance, of course, but also to the other things he mentions. This isn’t an argument to make employing people as cheap and easy as possible in any and all circumstances, but it does make me wonder that, in these dour economic times, those who are complaining about the conditions of those who do have jobs and the number of people who do not are talking, to some extent, at cross-purposes.

So long as we’re going to spend the money anyway, I don’t really have a problem with the government (for instance) hiring people and putting them to work on this project or the other. I could even be convinced that getting these people work is a positive in and of itself, even if they’re pushing a rock back and forth. The problem, as I see it, is that there is the natural desire, once they have work, to express horror and outrage at the fact that these workers might not be paid as much as their civil service counterparts. Contractors would not only be hired, but subject to Davis-Bacon laws, for instance. And employees should have the same pension opportunities as other employees. Because if we don’t, the government might start favoring these temp employees over the real-deal ones that have dedicated their lives to government work.

When Rick Perry was announcing for president, some people pointed out that Rick Perry’s “small” government state actually hires a whole lot of government workers. They (or other campmen) also point out, with respect to teachers, that they are not unionized and are paid comparatively little. These are supposed to be knocks on Rick Perry and Texas (the number of workers demonstrating hypocrisy, their compensation demonstrating stinginess and thirdworldliness), but to me these two things actually go hand-in-hand. Labor flexibility may drive down wages, but also frees up resources to hire more people.

To move back to the private sector, the more we demand of employers, the more onerous hiring seems to be. Requiring employers to document every misstep to fire someone that they want to fire, for instance, makes overall costs of employment greater. Not just in terms HR costs and the like, but also the costs of non-productive and toxic employees who are a poor fit for their job or their company as a whole. The more vacation time we require, the more dead-time employers are paying for. Even the more unpaid time off we require, the more of a productivity drag is created by someone not being there to do a job they evidently needed to pay someone to do.

On the other side of things, of course, work conditions in the United States are hardly the envy of the West. And some things, like eliminating overtime pay, can actually reduce the need of employers to hire people more. While it’s not true that one guy working 80 hours a week is as productive as two working 40, employers wouldn’t have to work hard at convincing themselves that 4 employees working 50 hours a week are more productive than 5 working 40. It might even be true. And without at least some of the protections that make employment cost an employer more, the employers enjoy a very significant power advantage. This is especially true in exactly the sort of dour economy we are presently facing. And even when it’s not true, a lot of employers seem to have convinced themselves that it is.

So I’m not entirely sure how we work out way out of this. I think that, to some extent, we have to look at it on an issue-by-issue basis. Unfortunately, there is such a temptation (one I am not immune to) to “take sides” and assume that we need to look at employers as entities to be contained rather than empowered or look at anything that benefits an employer as inherently benefiting the employed and would-be employed. In either case, we can decline to want to “give in” on anything under the rubric of giving an inch and losing a mile. With politics and business both being as tribal as they are, this is a hard thing to accomplish. Much more difficult than either demonizing employers or painting those that are upset with their work conditions as lazy and entitled.

Will Truman

Will Truman is the Editor-in-Chief of Ordinary Times. He is also on Twitter.