Low-wage employers are getting a comeuppance

There’s something going on in the labor market that’s caught my eye. Low wage workers seem to be rebelling.

It’s hard to miss the stories in the news. Despite a 6.1 percent unemployment rate nationally in the United States, workers don’t seem to be anxious to return to the workforce. As a result many employers, mostly those who pay low wages, have been squawking that they can’t find enough workers.

There may be a lot of reasons that low wage workers aren’t anxious to return to the workforce. For women, finding childcare at all, not to mention affordable care, is still a problem, particularly since children under 12 don’t yet have an approved covid-19 vaccine. Not all students are physically back in the classroom. Parents can’t leave underage kids at home to fend for themselves, at least not if they want to keep their kids.

But covid-19 has also exposed that many of these jobs offer double jeopardy: both low wages and high risk. The high risk part is new because now the unvaccinated can kill you. It’s not too surprising then that employers seem to be squawking most loudly in states with the lowest vaccination rates. If you work in Alabama or Mississippi where the vaccination rate is in the thirties or forties, chances of getting covid-19 remains very real. Even if vaccinated, it’s reasonable to be leery and want to wait to see what happens.

It’s even more reasonable to shop around for a different job, one that allows working from home if having to deal with your kids suddenly telecommuting recurs. It’s a lot safer than working behind the deli at the local Kroger. There are no commuting expenses to deal with, and knowledge workers tend to be paid decently, if not well. I’d be hunting for one of these jobs if I were in that position.

The governors in these principally red states know what playbook to follow: cut any extra unemployment benefits as soon as possible to get these lazy-assed freeloaders back to work! They are a burden on society, just not really on the state, since these extended unemployment benefits are paid by the federal government and these benefits usually get injected quickly right into their local economy. There are few things that annoy red state governors more than idle people not toiling away at multiple jobs for meager pay rates.

In any event, a lot of these employees seem to be operating from a new playbook which is: if you want me to apply, pay me what I’m worth! At least some employers are figuring it out and are paying a living wage — $15/hour or more — simply to stand up their businesses again. These employers don’t seem to be complaining about finding workers. It’s the ones offering $7.50/hour or $9/hour or $2.30/hour plus tips that are complaining. Their whole business model seems to be collapsing.

Bigger companies seem to have figured out that they don’t have much choice. Amazon may have sky high accident rates, but their warehouse workers at least make $15/hour even while rushing around trying to meet crazy productivity targets. Lots of other companies have followed suit and have even bested Amazon’s rates, including Costco. I’ve never seen a help wanted sign out at our local Costco. It’s probably because they start employees out at $16/hour.

In reality, it’s stretching it to call $15/hour or $16/hour a living wage. In case you haven’t noticed, home prices are going through the roof, and since most of these employees rent, their rents are rising much faster than the general cost of living. There’s a lot of inflation going on right now, particularly in stuff you have to have, like food. Expecting someone to take a job for $7.50/hour in inflationary times is stupid. Employees are going to shop around for the best value, which might mean two $15/hour jobs instead of the three $9/hour jobs they used to string together.

In any event, this seems to be new. The free market is acting, well, freely! The supply of workers willing to work for $9/hour is much smaller than the number of $9/hour jobs out there. We don’t expect meat prices to fall because we find it too expensive – we just start eating more vegetables instead. Why should employers expect employees to discount their wage rate if some other employer is willing to pay them more?

Cry me a bier. What’s happening is called a comeuppance. Employers need to figure out whether they want to stay in business by paying employees more money, or go out of business. It is likely that our labor force will continue to shrink with so many baby boomers like me retiring and with few immigrants coming into the country to increase the job pool. In many ways, Trump’s foolish immigration policies just made the situation worse. While crying, these employers might want to take a long and hard look in the mirror. They might discover who’s really to blame for their mess.

The transition

Some adolescents are eager to sample adult life long before they are physically and emotionally ready to do so. Others prefer to have little to do with growing up and might not grow up at all without firm parental involvement. My daughter is likely in the latter category. After she graduated in June, my wife and I set the firm expectation that she had to get a job.

Our daughter Rosie is part of an emerging trend: the gap year. A gap year is a year “off” (at least from education) between the end of high school and the start of college. My wife and I supported her decision. For a young woman for whom most life changes are a challenge, a year dealing with a regular job should help her clarify her choices. It was our hope that if nothing else this job would show her what life might be like if she did not go to college.

Rosie had managed to graduate high school without working a real job. The summary of her job experience was occasional babysitting and volunteer work. Both my wife and I held part time jobs in high school. Both of us needed the money. As one of eight children in a middle class household, I knew that if I wanted a college education, I would have to pay for most of it myself. I started working as soon as I was legally allowed. My parents chipped in a few thousand bucks toward my college education. I had saved about $7000 from working part time. Student loans and a cheap public university filled the rest of the gap.

Frankly, it irked me that Rosie had managed to get through high school without having had a real job. As I remarked in another entry an entry-level job, aside from providing a source of money was an invaluable education in life. High school has its stresses but it is surreal. Mopping floors at 10 PM or listening to surly customers bitch about their woes while maintaining a pleasant smile was real. Perhaps sensing that real life was not much fun, she seemed content to be a slacker.

There is no lack of entry-level jobs in our area of Northern Virginia. Yet many of them were simply unacceptable to our daughter. With threats of pain and suffering, we could have forced her to apply at a McDonalds or a Target. That tack seemed counterproductive. Since she would have to navigate her own way through real life, we felt it better to work with her than against her. My wife and I became her coaches. Still there was a big gap between our expectations and hers. Ours were that as soon as graduation was over she would be pounding the pavement. Hers was that a couple of times a week, and only if we nagged her and drove her around, she would apply at places where she wanted to work. After applying at a few places, she preferred to wait to see if they would call her. They did not.

To make a long story short she mostly managed to slack off all summer, sleeping in past noon and staying up nearly until dawn. She applied with lackluster enthusiasm at places like the local drug store, but really wanted to work in a bookstore. An interview with a Barnes & Noble though never resulted in a call back. She was this close to being forced to apply for a job at Target when, after a second interview the local Books-a-Million finally offered her a job. If she was relieved, it was hard to tell. My wife and I felt like popping the champagne. It had been an aggravating summer.

We are still nervous. For a young woman who spent most of her summer in a comfy chair with her laptop computer, a real job was going to be a big change. Could our daughter go from slacker to productive retail drone overnight? The answer appears to be yes. She has only finished four days on the job but we are amazed by the transition. While we wait to pick her up in the parking lot after her shift, we can watch her through the large open windows, scurrying from place to place. Her legs hurt, she says. This is not surprising, since they were little used all summer. Already she navigates around the store as if it were a second home, working with intensity and energy that astounds us. She often finds the working at the store interesting. She likes her coworkers, finds many of her chores boring but is too busy running from one task to another to care too much.

I guess underneath that slacker young woman was a woman ready to engage life, but scared by the transition. Now much of that fear is behind her. She has learned to apply for jobs and to interview. She did not like it, but she has acquired a life skill all of us but Paris Hilton must learn. Our job was to encourage first then coax and cajole when necessary. While the process took longer than we expected it is gratifying to see the fruit of her efforts at last. From navigating the buses, (they run only during rush hours) to vacuuming the store after it closes, she has moved from inertia into full engagement. She is learning to leave work at 12:15 in the morning and be back at 10 the same morning for another eight-hour shift. Moreover, she is doing so with both grace and a pragmatic attitude.

While I am still wondering if the other shoe will drop, I am beginning to relax. I know there is much more to this parenting business but I am also seeing that it does eventually end. Flush with her own money (she still must pay us $200 a month in rent, since she is not going to school) she is beginning to make her own choices in the real world. At the end of the month, she turns eighteen. Our joint account will become her own private account. Her checks have arrived. Her check card is already in use.

She still has some catching up to do with her peers. She has expressed little interest in getting her driver’s license. The State of Virginia requires anyone under 19 to go to a driving school, even though my wife and I have taught her how to drive. She will decide if she wants to accelerate the process or wait until she is 19 to take her driving test. The hassle of taking the bus to work (when it runs) or depending on her parents to drop her off and pick her up (when they are not running) may force her to rethink her lackadaisical attitude.

Over the next year, her hazy plans for becoming an English teacher may well change. She understands that public school teachers do not make much money. Working for modest wages may put this choice into context for her. I would not be surprised if her career plans take a new and unexpected path over the next year. For now, she keeps her goal modest: she wants to save up enough money to buy a Vespa. Unlike my wife and me, she will probably not have to worry about how she will afford college. We can give that one gift. She can graduate college and likely start debt free.

This coaching business is challenging for me. I certainly know what I would do if I were in her shoes. Yet I will never be in her shoes. She has treaded a different path in life than mine. My job is to express confidence, provide unconditional love, give an unvarnished picture of the road ahead and, if she asks, help her think through some tough choices. I am sure that she will have some stumbles along life’s path. Perhaps her cautious attitude is now something of an asset. Modern life is incredibly complicated, so caution is warranted, provided it does not amount to dysfunction. Yet life cannot be avoided forever. At some point, it must be engaged. It is heartening to see her engage it at last with a surprising spirit of determination and vigor.

Overpaid at $11.59 an hour

I am very grateful that I did not make retail a career. It is a scummy business, operating on very low margins and subject to the constantly changing whims of consumer demand. If you do decide to make retail a career then with a few exceptions expect to be treated shabbily. We need no further proof of this than recent press reports that the electronics retailer Circuit City is firing its retail salespeople because it apparently thinks they are overpaid.

Steven Rash, 24, said he was one of 11 workers fired at a Circuit City in Asheville, N.C. The store manager broke the news during a meeting at 8:15 a.m. and escorted them out of the store. Rash said he has worked for the retailer for seven years and was one of the most junior members of the affected group.

He said he earned $11.59 an hour and worked from 15 to 20 hours a week. He received four weeks of severance pay. Though he has a full-time job at Bank of America, he said he needs to find part-time work to help pay his student loans.

“It’s not just a part-time job,” he said. “It’s about paying the bills.”

Like most people working retail, Steven Rash is working part time. Retailers, like many small employers, prefer part time workers for the obvious reasons: they do not have to pay them benefits, they are readily expendable and can typically be easily replaced, because their job is not highly skilled. My wife does not work retail but is one of the part-time work force who falls into this category. In her case, she works as a level-one computer troubleshooter for a doctor’s practice with a staff of about 50. I will not say how much she earns, but I can say when she was working full time she made about $10 more an hour than she makes in her current position, and she was then surviving on a school teacher’s pay. Now she keeps the computers working at two offices in this practice for very modest wages and typically works 20-30 hours a week.

It is a good thing that she has my financial wherewithal to rely on. If we were divorced, she would be in serious financial straits. Even if she could convert her job into a full time position, could she even afford to keep a roof over her head? (We live in the metropolitan DC area, and rents start at $1200 a month.) I doubt she could afford to live alone. Despite working in a doctor’s office, she would have minimal benefits. The practice she works for is feeling squeezed too, perhaps because Medicare is squeezing them with reimbursement rates that do not cover their expenses. It trickles down to substandard wages and high employee turnover. She says in a typical month about 10 people on the 50 person staff leaves for better offers. The same is true in the retail business too. At the wages they are paid, there is little incentive to stick around. There is even less incentive to feel any loyalty for your employer.

Mr. Rash depends on $11.59 an hour to pay off his student loans. He was probably drawn to Circuit City, not because it paid well, but because it paid better than other scummy retailers like Wal-Mart. Still, $11.59 an hour is hardly the sort of salary that would let you lead an opulent lifestyle. By my calculations, if he could have converted his sales job to a full time job he would make $24,000 a year.

For him his “expensive” $11.59 an hour salary is now moot. The severance pay will pay for a month of student loans. He can take some comfort in that. Many retailers would not even provide a severance check. Nevertheless, likely his next second job will pay even less. Circuit City is helping to lower the bar and to ensure even more Americans cannot earn a living wage. Way to go, Circuit City.

Mr. Rash is also fortunate in one other respect: he has a full time job. It is likely that Bank of America offers him some benefits. I do not know how typical he is of most Circuit City workers. Clearly though not all retail workers are part time workers nor depend on the income just to pay student loans. Many likely depend on these second, third or, in some cases, first jobs, to pay basic expenses.

Today I flew out of Denver International Airport. I happened to overhear one of the people working in one of the screening areas. “It’s a good thing I have my retirement to fall back on,” I heard him say. “Because this job pays $18,000 a year. I could not afford to live on this wage.”

I hope for his sake that he works part time. Because if he has a full time job, then he is earning $8.65 an hour, which would be the wage the airlines are willing to pay to deter future terrorist attacks. I do not know if Denver International is one of these airports that are required to use federal screeners. At these wages, I suspect not. It is hard for me to believe that any federal employee would be required to do this sort of grinding work, day in and day out, on Wal-Mart wages.

Not everyone in the retail business though is being screwed. As The Washington Post reports, Circuit City’s CEO is doing fine. While grunt salesmen and women suffer, his salary last year was $716,346. He also got $704,700 in bonuses, $3 million in stock awards and $340,000 in stock options. Imagine how much more he will get this year for this latest brilliant idea.

The Washington Post also reports that the average hourly wage for retail worker, as of March 2005, was $11.14 an hour. Therefore, it is unlikely then that Steven Rash was underpaid. He was likely earning the market rate. This makes me wonder if this latest strategy by Circuit City will prove to be counterproductive. Call me dubious, but I do not think this strategy will help the Circuit City bottom line. Were I a Circuit City stockholder, I would be calling for CEO Philip J. Schoonover’s head or cashing in my stock. Where will this strategy take Circuit City, already suffering from competition from retailers like Wal-Mart and Best Buy? My bet is that it will probably take it right off a cliff. As a stockowner and thus an owner of the company, I would want a retail employee who is motivated to work in the best interest of the company, not some retail drone counting the minutes until closing time.

I have empathy for retail workers because I was one of them myself. In the intervening 27 years, I have been only marginally successful in changing the retail worker market dynamics. I have joined the Wake Up Wal-Mart campaign, which has resulted in a few, modest successes. I have also supported politicians who advocate living wages with significant campaign contributions. I do know one thing: any company that improves its bottom line at the expense of its workers earns my disdain and contempt. Other retailers like Costco and Wegmans have figured out ways to pay living wages to their employees in highly competitive markets and have thrived. So can apparently scummy retailers like Wal-Mart and Circuit City. Their “leadership” is simply bereft of creative ideas.

Although I have not shopped at a Circuit City in years, it now joins a growing list of retailers that include Wal-Mart that I will boycott until it treats its employees decently. They are not cattle. They are people. Employees deserve nothing less than to be paid a living wage and to be treated with respect.

Continue reading “Overpaid at $11.59 an hour”