'Welcome to the New World Job Order'
By Jack Rasmus
john rasmus <email@example.com>
THIS PAST OCTOBER, WAL-MART, the largest employer in the U.S. with revenues of more than $310 billion a year, announced it was going to double the number of its workers employed part-time--from 20 percent to 40 percent of its total work force--while reducing full-time jobs by yet unknown thousands at the company. Given Wal-Mart's total U.S. employment of 1.3 million, that means 260,000 more Wal-Mart workers will now make roughly half of what full-time employees earn. What little health and other company-paid benefits the 260,000 had as full-time employees will be reduced or eliminated. Wal-Mart will save an estimated $3.042 billion a year in wages and benefits by doubling its part-time work force to 40 percent, for a total of 520,000 part-timers.
Wal-Mart also announced in October a "cap" on wages that will impact many thousands more of its workers. In addition, both part-time and full-time workers will have to work erratic work schedules and be on call nights and weekends, with as little as 24hour notice of work shift changes.
Like "just-in-time" inventory introduced throughout most industries and companies in recent years, Wal-Mart workers now will be "picked off the shelf" at the last minute by Wal-Mart managers to satisfy day-to-day shifts in sales demand, creating in effect a just-in-time work force - a trend that hasn't been seen since the early 1930s in the longshore and trucking industries.
Just-in-time employment will undoubtedly allow Wal-Mart to reduce its total employment significantly over the near term, saving the company further millions of dollars annually in addition to the $3.42 billion above. Workers who miss work due to illness will face new company rules for discharge due to health related absences‹a change designed to further drive out more full-time workers.
The above combined actions by Wal-Mart will result in a significant shift in income, from Wal-Mart's employees as a group to the bottom line of the company's annual profit and loss statement. The combined total from the announced changes could easily amount to $5 billion a year in direct savings to the company and, in turn, in lost income to workers. It was not surprising that Wal-Mart's stock price jumped by more than 10 percent in the days immediately following the above cost saving (and income shift) announcement.
The broader point, however, is that Wal-Mart is just one of many contemporary examples of the radical restructuring of jobs by Corporate America - a restructuring that is now ushering in a de-facto "New World Jobs Order" in the U.S.
Dismantling the Manufacturing Base
Since the 1980s corporate restructuring of jobs and jobs markets in the U.S. has assumed a number of forms. High on the list in terms of impact on workers and their incomes has been the dismantling of the manufacturing base and the shipment offshore of eight million jobs since the 1980s. Occurring first in basic manufacturing industries in the 1980s, offshoring subsequently spread to the tech industry in the mid-1990s and in recent years has migrated to other major sectors of the economy, such as business professional services and business "back office" operations. All three sectors--manufacturing, technology, and business professional/back office services--continue to shift jobs offshore at significant rates.
The dismantling of the U.S. manufacturing base, in particular, is about to enter a new phase with the imminent exportation of at least 200,000 more U.S. auto industry jobs to China, India, and Mexico over the next three years, as auto assembly and auto parts companies shut down scores of factories.
Offshoring in recent years has also spread to personal services such as health care, the sector of the services industry once thought completely immune to the trend. Health care professionals at Kaiser, a west coast HMO, for example, have recently brought to light efforts by government-subsidized clinics in Singapore to encourage U.S. health insurance companies to send patients there for heart by-pass operations that can be performed at a third the cost. The foreign clinics in question even offer to pay patients' airline and travel costs. U.S. health insurance companies have also begun to send patients to India where hospital costs are 80 percent compared to the U.S., according to the North Carolina company, IndUS health, a major player in this emerging market.
As Princeton University economist Alan Blinder, a former U.S. Federal Reserve Board vice-chair, admitted in Foreign Affairs: "We have so far barely seen the tip of the offshoring iceberg, the eventual dimensions of which may be staggering."
Another form of corporate-driven job restructuring has been the importation of millions of skilled, professional workers over the last decade as a consequence of corporate efforts to expand the U.S. government's H-1B visa program. In the case of H-1B visas--a kind of reverse offshoring--jobs are not physically exported, but are allocated to foreign professionals who are imported to the U.S. We're not talking about unskilled, S-1 visa workers filling entry-level, low pay, manual labor jobs in agriculture, construction, and personal services. H-1B jobs are professional-technical jobs typically paying $70,000 a year and up. These jobs often displace highly educated U.S. workers who have been laid off since the dot.com bust of 2000, as well as new college graduates in areas of electrical, computer, hardware-software engineering, and related disciplines.
A program originating in the mid1990s, H-1B visas grew by 500,000 between 2000-2004 right through the George W. Bush recession of 2001-2003. During that same period, for example, the communications industry in the U.S. lost one million jobs while it created about 500,000 new jobs‹i.e., just about the total of those imported on H-1B visas. Not surprisingly, corporate elements are demanding a doubling of H-1B quotas in the new immigration bill and have proposed to expand the program to new areas, such as long-haul trucking operations.
Disappearing Unions, Missing
Workers, and Reappearing Retirees
Corporate restructuring of jobs and job markets in the U.S. has also taken other forms. The de-unionization of much of the private sector work force, now less than 8 percent unionized, and the corresponding Balkanization of once industry-wide union collective bargaining contracts, are both further examples of changes that have taken place since 1980. Other, somewhat less known, but no less dramatic changes in job markets include the rapid growth of jobs in the underground economy where millions now work off the books and outside minimum government standards and legal protection. Or the development of a missing labor force where nearly five million workers have disappeared from official government totals of those potentially available for work - apparently neither employed or unemployed, but labeled missing by economists who can't seem to account for where they've gone. Or the equally significant re-entry into the work force since 2001 of millions of workers over 65 who can no longer survive financially in retirement and who are forced to compete for entry level jobs and wages with young workers just entering the work force. Like offshoring, all these additional forms of job restructuring exert significant downward pressure on wages and earnings of workers in the U.S.
Corporate and government apologists frequently cite the growth of service industry employment in health care, hospitality, and other personal services as the positive side of the job restructuring picture in the U.S. But what is often overlooked is what's happening to jobs within the services sector. Big name retailers like Sears, Target, and others are rapidly shifting to part-time jobs as well. The major department store chain Mervyns announced it was terminating all full-time employees and replacing them with part-time and temporary employees. Soon big box retail will be virtually all part-time/temp employment. A similar trend has been growing in the hotel, hospitality, and related industries.
It's not just services. Trucking companies are dramatically reducing their traditional work force of permanent drivers and leasing out their vehicles to independent contractors. Virtually the entire coastal port operations of the U.S. are served now by independent contract drivers and the trend is quickly spreading inland. Newspapers are breaking up union bargaining units throughout the country and hiring reporters and support staff on temporary assignments as freelancers. Middle managers and skilled clericals are being cut loose by companies across the board and then hired back on a temporary basis as "consultants." Even custodial workers are being told to get their own equipment and supplies and come back to discuss new terms of employment.
Workers in manufacturing, too, are feeling the heat: 3,000 workers in the HP manufacturing facility in Boise, Idaho in 2005 discovered that HP management overnight arbitrarily reclassified everyone as "independent contractors" instead of employees. As many as 25 percent of the work force today in many auto and other basic manufacturing plants are temporary employees and in some factories two-thirds or more. The number of temp workers in auto are about to grow exponentially as the largest auto parts company, Delphi Corp., with 134,000 employees worldwide, is in the process of closing 19 of its 21 remaining plants and shedding over 40,000 more U.S. jobs while expanding its Mexico production (where it is currently the largest manufacturing company of any kind). Scores more Big 3 auto assembly plants are scheduled for similar shutdown as GM and Ford form joint production operations, establish auto financing operations, and otherwise increase car production in partnership with Chinese and Indian auto companies.
As the dismantling of the U.S. auto industry accelerates, tens of thousands of temporary workers in many plants in that industry will receive wages about half of what unionized auto workers once made and few if any benefits. This shift from full-time, permanent jobs to part-time, temp, and contract work is not a recent phenomenon. It has been deepening and accelerating in the U.S. economy for the past quarter century.
From Permanent to Temporary
During Reagan's two terms (from 1980-1988) involuntary part-time jobs alone grew by 50 percent‹i.e., two and a-half times faster than full-time jobs. Also, the number of temporary supply services (i.e., temp agency) jobs tripled during the period. Actually, the numbers were much higher as temp agency jobs do not account for temp workers directly hired by companies. The latter numbers are as least as large as temps hired indirectly through agencies, according to several studies. In fact, collection of data for temp agency jobs did not even begin until the end of 1982, which eliminates the first two years from the temp totals for the decade. Even so, the official government estimates of temp help agency jobs show they grew by 800,000 during the Reagan period. About 1.6 million temp jobs were actually added during this period when jobs from sources other than temp agencies are considered.
When new part-time and temporary job gains are combined for the decade, a total of 6.3 million new part-time/temp jobs were created. That's about 30 percent of the net job growth over the decade and represents a growth rate of nearly twice that of traditional jobs.
A raft of independent studies in the late 1980s/early 1990s showed the continued growth of part-time/temp workers from 1988 through 1994. The studies provoked an official U.S. government response under Clinton in the form of a series of four ad hoc reports by the U.S. government between 1995-2000 in an effort to come up with better government data for estimating temp job growth. Despite conservative assumptions, the four studies showed a continued growth in the easily estimated temp agency workers, which grew to 3 million by the end of the 1990s compared to the official 800,000 count in 1989. The reports still did not estimate company direct-hired temp workers, but did show a sharp rise in unincorporated self employed contract workers - like consultants, freelancers, and other temporary work for hire occupations. By the end of the 1990s, there were 7 million temp workers of various kinds and another 22.3 million part-time workers.
After George W. Bush took office in 2001 efforts to more accurately estimate the growth of part-time, temp, and other new categories of self-employed contract work were abruptly halted. The last of the Clinton reports was completed in 2000. No subsequent studies were conducted under Bush, leaving the estimation of the shift to part-time, temp, and contract work to private studies.
During George W. Bush's first term the trends continued. In the wake of the Bush recession of 2001, both part-time and temporary jobs surged. By 2004, part-time jobs had grown from roughly 22 million in 2000 to 25.3 million. Temp agency jobs similarly grew by 1 million during Bush's first term and all forms of temp jobs rose to around 8.5 million by mid-2004. Combined part-time and temp jobs had thus increased from a combined 29.3 million in 2000 to 33.8 million by 2004‹a gain of 4.5 million in just four years.
Under George W. Bush other new categories of jobs--also best characterized as temporary--began to appear in larger numbers, i.e., independent contract workers, self-employed consultants, undocumented informal day contract labor, and what is sometimes referred to as the "unincorporated self-employed."
Initially driven by company cost-cutting in the 2001 recession downturn, many companies found independent contractor arrangements useful and profitable to continue even after economic recovery began in late 2004. According to government statistics, the ranks of the unincorporated self-employed had by the end of 2004 grown to 9.8 million - surging 400,000 a year in 2002 and 2003. The numbers are, moreover, likely conservative since they still do not account for the growth of hundreds of thousands of undocumented, "informal" contract workers who typically are employed on a day-to-day or week-to-week basis in construction, personal services, and other "off book" jobs.
Excluding this latter category, by the end of George W. Bush's first term there were approximately 43.6 million part-time, temp, and independent contract/ self-employed jobs in the U.S. This amounted to about 33 percent of the total U.S. employed non-farm work force.
Calculating the Benefits to Corporate America
U.S. "free trade" policies and tax changes since 1980 have provided major incentives to corporations to dismantle the country's manufacturing base. Various studies show there is at least a 20 percent pay differential between new jobs created in the U.S. due to "free trade" and jobs exported from the U.S. due to that same trade.
A 20 percent wage reduction involving 8 million jobs has a major impact on average wages and earnings. It amounts at minimum to $80 billion a year in cost savings and income shifted from workers to the corporate bottom line. Secondary or spill-over effects undermining both union and non-union pay levels in the high job export industries also lower overall wage and earnings levels further. A conservative estimate is that U.S. corporations saved $100 billion a year from exporting jobs since 1980. But an even greater relative income shift has resulted from corporate restructuring to part-time, temporary, and other forms of independent contract/self-employed work since 1980.
In the 1980s part-time workers received approximately 60 percent of full-time wages. Only 22 percent of part-time workers had health benefit coverage. Similarly, during that decade temporary workers received only 75 percent of permanent employee wages and only 23 percent of them had health benefits. By the close of the 1990s the picture deteriorated further. Temp workers' wages had declined from 75 percent to 60 percent of the pay of full-timers.
With 30 million new part-time, temp, and contract workers getting on average a third less pay and 75 percent to 80 percent less in benefits, the aggregate annual wage savings for corporate America due to this restructuring amounts to roughly $350 billion a year in pay and benefits alone.
Even allowing for possible overlap and double counting between the shift in income due to exporting 8 million jobs, on the one hand, and from the 30 million net increase in part-time/temp/contract work on the other, that's still at least $300$400 billion a year in savings to corporate America. That does not include other significant cost savings. For example, only 11 percent to 20 percent of this New World Jobs Order work force receives any kind of employer-provided pension; they get 50 percent to 80 percent less holiday, vacation, or other paid leave; and companies save on employment search, hiring, and training costs and avoid as well having to pay state unemployment or disability insurance contributions in many cases. Most of this new second-class work force are excluded by law from access to protective labor legislation like the Occupational Safety and Health Act, Fair Labor Standards Act, and Family Leave and Worker Retraining Acts. Courts are even split on their rights under the Civil Rights and Disability Rights Acts.
In yet another important area, most temp workers are exempted by the National Labor Relations Board from belonging to union collective bargaining units and receiving the benefits of union contracts at their work. Independent contract workers are explicitly prevented from engaging in collective bargaining based on the Sherman Anti-Trust Act. Both groups are thus prevented by law from even attempting to redress their second-class job status and consequent lower pay and benefits.
America's New Two-Tier Workforce
During the Great Depression the picture was one of millions of U.S. workers on the move, criss-crossing the country looking for any kind of work. The overall picture today is one of millions of U.S. jobs moving in, out, and across U.S. external borders or being radically recast in new forms by corporations intent on reducing costs and expanding profit margins. But it is also a picture of vast armies of workers moving across and between virtual internal borders of under-employment, temporary and semiemployment, underground employment, official and hidden unemployment, and missing employment‹that is, moving in and out of the underground economy, in and out of the missing labor force, disability status, retirement, and in and out of part-time, temporary and independent contract work‹as they desperately attempt to survive corporate restructuring of jobs and the now three-decade-long freeze that has occurred in the real value of their wages and earnings.
Large pools of easily manipulated, second-class labor, and what amounts to nothing less than a two-tier workforce today in the U.S., have been created by Corporate America over the past quarter century, and their numbers continue to grow.
Those who wonder why there are 47 million workers in the U.S. today without any form of health insurance should consider the effects of corporate job restructuring and the 43.6 million part-time, temp, independent contract, and related self-employed. Not more than 10 to 20 percent of the 43.6 million have any health insurance. They make up the majority of the more than 32 million workers out of that 47 million who have jobs today but still cannot afford (or are excluded by employers from) health insurance coverage. When the 7-8 million official unemployed and additional 8-9 million Œhidden' unemployed are added to the 43.6 million, 60 million workers in the U.S. don't have a regular, permanent, full-time job any more in America. That's more than 40 percent of the entire employed U.S. work force.
The two forms of job restructuring are also fundamentally responsible for the weakening and undermining of American labor, both in terms of the decline in numbers of unionized workers and in terms of the declining effectiveness of traditional collective bargaining.
Any effective strategy aimed at restoring the growth of union labor and the effectiveness of union bargaining in America, and in turn halting the current $1 trillion shift in relative income in the U.S., will have to address this corporate restructuring of jobs in America. Both the dismantling of entire industries and the continuing mass exportation of jobs, as well as today's continuing creation of a two-tier work force with tens of millions of second-class workers, must be checked before there can be an end to the current massive shift of incomes between classes in America.
Jack Rasmus is author of The War At Home: The Corporate Offensive From Ronald Reagan To George W. Bush (Kyklos Productions, 2006; www.kyklosproductions.com).