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“What We Have Right Now Is A Really Brutal Economy”: Here’s How To Fix It

For the majority of workers in the U.S., the American Dream is unraveling in the face of unstable contract work, rolled-back benefits, and grueling labor conditions. These experts have some ideas to build a new path.

“What We Have Right Now Is A Really Brutal Economy”: Here’s How To Fix It
[Source Images: cosmin4000/iStock, kikkalek5050/iStock]

Lawrence Katz, a professor of economics at Harvard University, likes to think of the American economy as a big apartment building. “There’s always been a penthouse and some middle units that weren’t as nice but were getting better, and some bottom units,” he says during a webinar hosted by the U.S. Partnership on Mobility from Poverty, of which he is a member. “Today, what’s happened is the penthouse has gotten really great, and people who were born near the penthouse stay there. The middle used to grow rapidly from generation to generation, but now it’s not changing very much, and, unfortunately, the bottom units have been flooded and have got a cockroach infestation and are not showing signs of improving.”

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The reason for the polarization between the top of the economic apartment and the bottom, Katz says, are the oft-cited forces of wage stagnation and the attendant widening inequities in the country. The economy has technically crawled its way out of the recession of 2008; the stock market, this year, is at an all-time high.

[Source Images: cosmin4000/iStock, kikkalek5050/iStock]
While the latter point has become the favorite fodder for Donald Trump’s claims of economic stability, soaring stocks have little impact on the livelihood of most Americans. Only 18% of people own shares, and the majority of those are among the wealthiest in the country. People on the lower end of the economic spectrum–and people in the middle–rely chiefly on income for their wealth, and that situation is becoming untenable.

The connection between having a job and making a living is quickly unraveling. In 2015, almost a quarter of working adults in the U.S. made poverty-level wages, and full-time, in-house jobs are being outsourced to contracting agencies, for whom people perform the same labor but at greatly reduced wages and often with no benefits. On top of that, the power of unions has dissolved in recent years, leaving workers with no outlet for organizing and collective bargaining, and we’re beginning to confront the fact that automation will make many low-wage jobs, like food preparation and service, obsolete.

What has resulted from all of this is that the “American Dream”–the idea that any child born in the U.S. has a chance to grow up to be at least as successful, if not more so, than the generation that preceded them–is becoming more more like a tormenting nightmare. In the 1940s and ’50s, around 90% of American children grew up to have more financial resources and better jobs than their parents. “If you fast-forward to the present, a current American adult has only around a 50% chance of doing better than their parents,” Katz says.

This phenomenon is what inspired the formation of the U.S. Partnership on Mobility from Poverty, which launched in 2016 through the Urban Institute with funding from the Bill and Melinda Gates Foundation, and convenes 24 scholars, advocates, nonprofit executives, and policy experts to unpack why the American economy has begun to fail so many–and how to correct it. This winter, the Partnership is releasing a series of reports that dive into specific approaches to increasing mobility from poverty and, as they’ve termed the series, “restoring the American Dream.”

[Source Images: cosmin4000/iStock, kikkalek5050/iStock]
A significant part of this project will necessarily take on the future of work, and Katz, along with Ai-jen Poo, director of the National Domestic Workers Alliance, have authored a report outlining six specific recommendations to improve working conditions and foster economic mobility for everyone in 21st century America.

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Poo has spent the past 20 years working with and advocating on behalf of domestic workers like nannies and house cleaners. Two decades ago, she says, “this type of work was important, but at the time, it seemed very marginal, and these types of working arrangements existed in the shadows of our economy.” But now, conditions that those workers lived, like lack of a clear job description or contract, irregular hours, no time off, low wages, and no benefits, are becoming increasingly mainstream, and bleeding into gig-economy roles and jobs that were once better protected, like janitorial and food service work.

That, Poo and Katz say, will necessitate a complete overhaul in how we classify workers. It’s no longer adequate to divide workers into simple categories of W2 (full-time) and 1099 (part-time or independent). The goal, Poo and Katz write in the report, is to get all workers, regardless of employment arrangement, “on the same safety net footing.” That, they say, will necessitate policy reforms to expand the interpretation of parties responsible for providing benefits. While the authors were vague on what, exactly, that might look that, one could easily imagine, for instance, holding Uber accountable for providing its drivers benefits.

Alongside more universal access to benefits and responsibility on the part of contracting agencies, Katz and Poo recommend the widespread adoption of employer “codes of conduct,” created in conjunction with workers, living-wage advocates, and potentially unions, which would require employers to maintain equal, livable wages across both in-house and contract workers doing the same jobs. In 2001, for instance, Harvard University instituted a Wage and Benefits Parity Policy, which essentially dictated that the university “could contract workers out for the sake of efficiency, but not to undercut labor standards and wages,” Katz says. The policy is still in place today, and the authors feel it could serve as a model for other workplaces that are outsourcing work to contract agencies.

[Source Images: cosmin4000/iStock, kikkalek5050/iStock]
But there’s a limit to how far codes of conduct can stretch: It’s unclear if they would have any bearing on jobs in more informal, or gig, economy work. For that, Poo and Katz recommend creating a new wave of worker organizations and unions that could unite workers across sectors but in similar labor conditions to advocate for livable conditions. Part of that might be creating portable benefits for workers who do a variety of temporary and contract work. Alternative employment arrangements are far less likely to provide benefits to their workers, and even if they do, it’s often difficult to transfer benefits across myriad employment arrangements. A portable benefits system would function somewhat like a fund that a worker’s various employers would pay into, and which the worker could then use to purchase a suite of benefits. (Poo’s organization, the NDWA, is piloting a service called Alia that would allow the multiple household employers who hire cleaners to pay into the benefits for people who work in their homes.)

And for people facing barriers to traditional employment, like low literacy or a criminal record, Katz and Poo recommend job guarantees and wage subsidies, both of which would require policy changes at the federal level. Wage subsidies incentivize employers to hire workers with limited skills or barriers to employment by offering a tax credit or a direct payment for those work places that commit to doing so. The subsidies, Poo says, could also be used internally to support on-the-job training for these workers, and they would be phased out once the worker gains enough skills and experience to merit a full wage from the company. And though job guarantees–a government program that would provide work to people unable to obtain it in the private sector–have not really seen the light of day since the New Deal, Poo and Katz believe that combining job guarantees with wage subsidies could provide people at the lower end of the economic spectrum, like young people without a college education, a more secure financial situation.

All of these strategies aim to take wage and workplace inequity from multiple angles. But how do they stack up against the more wide-sweeping proposal to cure our economic woes–universal basic income, which would provide everyone a flat annual stipend from which to grow their personal wealth?

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The answer, the authors say, is that it should not be an either-or discussion; there’s a way for the disparate strategies to work in tandem. “Jobs are changing, and we need to have a very strong safety net,” Katz says. “Something like UBI would make sure that everyone has some stability, but there’s strong evidence that things that link to work end up being more beneficial in the long run.” If UBI in the U.S. took the form of, instead of just a flat payment, a vastly expanded Earned Income Tax Credit with guarantees to jobs, Katz says, it might be more politically viable.

But fundamentally, “a universal basic income is complimentary to the solutions we’ve laid out here,” Poo says. “What we have right now is a really brutal economy, where there’s very little resilience and buffer for the majority of working people in this country,” she adds. “A universal basic income supports resilience in this rough economy, and it supports, not replaces, our proposals.” Updating the safety net in the U.S. for the 21st century is a project that is long overdue, and these ideas that put the comfort and dignity of workers at the core, not the bottom line of companies, are a step in the right direction.

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About the author

Eillie Anzilotti is an assistant editor for Fast Company's Ideas section, covering sustainability, social good, and alternative economies. Previously, she wrote for CityLab.

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