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November 22, 2005

The First Rungs of the Ladder - Continued

There have been some excellent comments on my previous post about the lack of entry level jobs in France, Western Europe in general, and the US in particular.  The comments deserve a post of their own.

Abby commented: “I'll accept this as long as we're willing to have the rest of society guarantee some sort of minimum income. What I mean by that is that society, as a whole, needs to guarantee that a minimum standard of health care is available to everyone--even if that costs more than what the employee is worth to the employer in total compensation.”

Son Jarah in an offline comment called for a negative income tax (aka earned income credit). I think they’re both right.  If we try to force employers to pay more than competitive compensation, we simply lose jobs to somewhere else.  But sometimes the competitive compensation for a particular skill level in a particular job may not be enough to buy necessities, especially for a single provider for many.  As Abby points out, the cost of health care is often where the crunch comes.

Reducing the cost of health care is another subject for another post.  So is my opinion that employer-paid health care is inefficient and, in fact, absurd.  Employers should pay salaries which are then used to buy what the employees want and need.  Putting all that aside, though, an entry level job may not be “worth” what the employee needs.  I do think a compassionate society socializes the cost of necessities through a mechanism which rewards work and avoids perverse incentives.  Easier said than done but the formula’s not rocket science either.

Brad Respess commented: “The first and second rungs of the ladder in our nation remain for those hungry for success. In our community (in metro Atlanta), easily over 100 hispanic male immigrants wait in fast-food parking lots between my house and my office for an opportunity to work each morning….

“And how many new real estate brokers, salesman, or entrepreneurs take no salary as they start their business?...”

Unfortunately, as I said in my original post, the jobs the immigrants are waiting for in the parking lot are probably illegal.  The immigrants may well be illegal themselves.  But we need them to support us as we retire and they need the low-wage jobs as a starting point.  They’ll progress beyond them; you can count on that.  But the hypocrisy of keeping immigrant labor under the table means both that society loses tax income and the immigrants are open to exploitation since they don’t dare go to the police.

Brad’s point about commission compensation and entrepreneurs is a good one which I missed.  I don’t think, however, that these are entry level jobs  but more like the third or fourth rungs on the ladder which brings us to the next comment.

Candice commented: “As an aside - one of the biggest problems with New Orleans, actually, is that since our oil industry disappeared and moved to Houston in the 80s, there are no middle rungs. The lower ones are full of foodservice and other tourist-related low-paying jobs. It was a largely underemployed city….”

The first rungs on the ladder are essential but most people don’t want to stay there.  There does need to be a way up.  As Brad suggested above, commission jobs are one way for some people to “prove” exactly how much they’re worth.  Local entrepreneurship is another. Almost everywhere I’ve lived, the ethnic immigrants who were hired as manual laborers for gardening a generation ago, now own the gardening services and employ a more recent wave of immigrants – often from a very different part of the world.

The best workers become supervisors and move into the middle class.  Walmart says that is providing these middle rungs as well as a legion of entry level jobs.  I don’t know whether this is true or spin or both.  To the extent it is happening, this is a very good thing.

Don Ryan commented: “…The promises made to the older generation (ie, lifetime healthcare, above market wages, etc.) have brought down the house. GM is now at the point where, short of offering substantial discounts such as its employee pricing, it can't offer a new car that the American public will pay for en masse….”

With hindsight it is very clear that unfunded future benefit plans will kill any company (or be shed through bankruptcy). Why?  Because it is possible to start a new company in the same industry that doesn’t have these liabilities and therefore has a lower cost basis.  GM is paying both the people who currently make cars AND the people who used to make cars.  A new competitor only pays those who are actually making cars.  One more good reason why compensation ought to be paid directly rather than through “benefits” – especially if those benefits are only a promise for a future which may never come.

Wife Mary has just been to China for a couple of weeks.  She was hugely impressed by the economic expansion happening there; but she was also told quite clearly and more than once: “We are in a race with India.  We are deliberately ignoring environmental issues, worker safety, and retirement to make sure we win.”  Mary knows well that the people who are working for relatively low wages in relatively unsafe conditions without adequate health care earned even less under worse conditions before.  She knows they have greater individual opportunity than they had before.  But she worries that globalization could be a race to the bottom.  That everyone may be forced DOWN the ladder of opportunity.

I’m an optimist; I don’t that’ll happen.  The wage differential between Japan and the US which was once so worrisome has all but disappeared.  Wages are rising in China and India.  In fact, India outsources to China.  A global economy is NOT a zero sum game.  Increased trade is good for all economies – although it can be very hard on people whose jobs move away.  As living standards rise, so do prevailing wages.  One of the few economic bright spots for sub-Saharan Africa is investment and outsourcing to there by India and China. As a people get more prosperous, they demand intangibles like a clean environment.

We can’t stop globalization and we shouldn’t want to.  We have to make sure we don’t outsource opportunity by kicking out the bottom rungs of the ladder in our own country; but, as Abby and Jarah suggest, we can make those rungs livable and should.   Not only France but also the US has third world problems imbedded in its first world affluence.

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