posted March 11, 2007
Welcome To The New World Job Order

“Welcome to the New World Job Order�
Jack Rasmus
Copyright 2006

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% to 40% of its total workforce—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, and a total of 520,000 part timers, will now make roughly half of what full time employees earn. What little health and other company paid benefits the 260,000 once had as full time employees will be reduced or eliminated as well. A simple estimation shows Wal-Mart will save $3.042 billion a year in wages and benefits by doubling its part time work force to 40%.

Wages and benefits will be further reduced at the company in other ways: Announced in October as well was a virtual wage freeze in the form of a ‘cap’ on wages that will impact many thousands more Wal-Mart workers. In addition, both part time and full time workers will now have to work highly erratic work schedules and be on call nights, weekends, and at any time with as little as twenty-four hours notice by management 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’ workforce—i.e. a new kind of ‘virtual shape up’ 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 $3.042 billion above. And workers who miss work due to illness will now face new, more draconian company rules for discharge due to health related absences—a change designed to further drive out even more full time workers at the company. As full time Wal-Mart worker, Ramiro Gonzales, of El Paso, Texas, recently put it, “They’re trying to make ways that you can mess it up so they can let you go, especially if you’re a full-timer�.

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% in the days immediately following the above cost saving (and income shift) announcement.

The broader point, however, is that Wal-Mart’s actions are symptomatic of much larger and more fundamental changes going on in the U.S. economy and job markets. Wal-Mart is just one of many contemporary examples of the radical restructuring of jobs by Corporate America that has been going on for the past two decades—a restructuring that is now accelerating and ushering in a de-facto ‘New World Jobs Order’ in the U.S.

Corporate Job Restructuring—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 of the country and the shipment offshore of 8 million jobs since the 1980s. Occurring first in basic manufacturing industries in the eighties, 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 today 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 two hundred thousand more U.S. auto industry jobs to China, India and Mexico over the next three years, as auto assembly and auto parts companies in the U.S. shut down scores of factories in the U.S. while they ramp up new plants and merge with auto companies in China, India, and elsewhere.

As the Wall St. Journal recently reported, China is the “new frontier� for American auto companies: “On the outskirts of this city (Nanjing) in eastern China…Ford is finishing work on two sprawling new factories, one to make engines and the other to assemble cars….Ford also has plants in Chongquing in western China and in Thailand. In addition, the company is opening a new research and development center in Australia and mulling expanded production in India�.

Offshoring in recent years has also begun its 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, the west coast HMO, for example, have recently brought to light efforts by government-subsidized clinics in Singapore encouraging U.S. health insurance companies to send patients there for heart by-pass operations performed at a third the cost at U.S. hospitals. 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% compared to the U.S., according to the North Carolina company, IndUShealth, a major player in this emerging market. In short, offshore outsourcing is increasingly impacting not only traditional sectors of the economy like manufacturing but is beginning to do so in services industries such as health care, education, and personal finance.

As Princeton University economist, Alan Blinder, a former U.S. Federal Reserve Board vice-chairman, admitted in the journal, Foreign Affairs, the in-house publication of the influential U.S. political-corporate think tank, the Committee on Foreign Relations: “We have so far barely seen the tip of the offshoring iceberg, the eventual dimensions of which may be staggering.�

The H-1B Visa Program—‘Reverse’ Offshoring

Another form of corporate-driven job restructuring (and a kind of virtual mirror image of traditional offshoring) has been the importation of millions of skilled, professional workers into the U.S. 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; they remain in the U.S. but are allocated to foreign professionals who are instead imported to the U.S. We’re not talking here about unskilled, S-1 visa workers filling entry-level, low pay, manual labor jobs in agriculture, construction, and personal services—jobs that are largely refused or not taken by American workers. H-1B jobs are high paying, professional-technical jobs typically paying $70,000 a year and up. These are jobs often displacing highly educated American workers who have been laid off since the dot.com bust of 2000 wanting to return to work, as well as new graduates who have been training at college in areas of electrical, computer, hardware-software engineering and related disciplines who are looking to enter the market.

A program originating in the mid-1990s and initially heavily impacting the technology industry, imported H-1B professionals now number in the millions. H-1B visas grew by 500,000 between 2000-04 right through the George W. Bush jobless recession of 2001-03. During that same period, for example, the Communications industry in the U.S. lost 1 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 now demanding a doubling of H-1B quotas in George W. Bush’s new immigration bill and have proposed to expand the program to totally new areas, such as long-haul trucking operations in the U.S. Like traditional offshoring, H-1B visa reverse offshoring is expanding into totally new areas of the economy and impacting jobs that once were considered outside its area of influence.

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 workforce, now less than 8% unionized, and the corresponding balkanization of once industry-wide union collective bargaining contracts, are both further examples of radical changes that have taken place in the character of jobs in the U.S. 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 the phenomenon in recent years called the ‘missing labor force’, where nearly five million workers have disappeared from the official government totals of those potentially available for work—apparently neither employed or unemployed but labeled simply 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 large numbers of workers over 65 years old 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 themselves. Like offshoring, all these additional forms of job restructuring exert significant downward pressure on wages and earnings of workers in the U.S.

Wal-Mart Writ Large—Creating A ‘Just in Time’ Army of Second-Class Labor

The flip side of restructuring by dismantling the manufacturing base has been the often cited, corresponding growth of service sector jobs 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 itself. And one does not have to look very deeply to discover equally disturbing job restructuring now spreading there as well.

What offshoring has meant in terms of job loss and pay and benefit compression in manufacturing, technology, and now business professional services—the explosive growth of various forms of part-time, temporary, independent contract work, self-employed consulting, and similar employment has been no less devastating to jobs, pay and benefits in the services, retail, and other non-manufacturing sectors of the economy.

The developments at Wal-Mart—with its major shift from full time to part time jobs, just in time hiring, and consequent decline in wages, benefits, and working conditions—are a prime example of job restructuring taking place in the services sector. Like Wal-Mart, big name retailers Sears, Target and others are also 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 toward more part-time employment has been growing in the hotel, hospitality and related industries. It is becoming increasingly rare in these industries for workers not to work two or more part time jobs in order to make ends meet and maintain a standard of living for their families. Often one job (usually a union job) is worked just to secure health insurance benefits for the family, while a second (and sometimes a third weekend) job is added to provide a total income that once a single head of household earned and was able to raise a family on.

And it’s not just services. Trucking companies are dramatically reducing their traditional workforce of regular, permanent drivers and leasing out their vehicles to drivers employed as 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 back on temporary assignments as freelancers. Middle managers and marketing-human resources-database 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, as building service companies increasingly turn to outsourcing such work.

Workers in manufacturing too are feeling the heat. 3000 workers in the HP manufacturing facility in Boise, Idaho last year awoke to discover that HP management overnight arbitrarily reclassified everyone as ‘independent contractors’ instead of employees. As many as 25% of the work force today in many auto and other basic manufacturing plants are temporary employees, and in some factories two-thirds and more. And the number of temp workers in auto are about to grow exponentially. The largest U.S. auto parts company, Delphi Corp., with 134,000 employees worldwide (and currently the largest manufacturing company of any kind in Mexico) is in the process of closing 19 of its 21 remaining plants in the U.S. and shedding over 40,000 more American jobs while expanding its Mexico production. Scores more ‘big 3’ auto assembly plants are scheduled for similar shutdown as GM and Ford build plants, 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 are now being hired and will soon constitute a majority of workers in many plants in that industry as they fill in for workers laid off or ‘bought out’ with severance packages. The temps that remain will receive wages about half of what unionized auto workers once made and few if any benefits.

Workers in manufacturing, technology, and business professional services are in effect being squeezed in a restructuring vise—the screws tightening from one end as a consequence of offshoring, H-1B visa policies, and other corporate practices eliminating jobs, and from the other end as a result of the displacement of traditional full time, permanent jobs with temp, part time, and independent contract work. Claims that service industry workers have been somehow immune from both these forms of job restructuring are a myth. As noted, offshoring has already deeply penetrated business professional services, while corporations are simultaneously probing aggressively new ways to extend offshoring to personal services in health care and elsewhere. Meanwhile, workers in the services sector find themselves particularly hammered on the anvil of corporate job restructuring with the replacing of their regular full time, permanent jobs with part time, temp, and independent contract work.

This shift from regular full time, permanent jobs to part-time, temp and contract work is not a recent phenomenon of the George W. Bush years. Like offshoring and the dismantling of the manufacturing base of the country, it has been deepening and accelerating in the U.S. economy for the past quarter century.

From Full Time/Permanent to Part-Time/Temporary

With the onset of the Reagan recession in the early 1980s (and in parallel with the corresponding first wave of offshoring of manufacturing jobs at that time), both part time and temporary jobs in the economy exploded. During Reagan’s two terms, from 1980-1988, involuntary part time jobs alone grew by 50%–i.e. two and a half times faster than full time jobs. No less than 2.7 million new involuntary part time jobs were created during this period. Voluntary part time employment also grew by another 2 million during the Reagan years. 4.7 million new additional part time jobs were thus created during the 1980s, increasing the total number of part time jobs from around 15 million at the start of the decade to about 19.6 million at its end.

A similar significant surge in temporary jobs also occurred under Reagan. The number of Temporary Supply Services (i.e. Temp Help Agency) jobs tripled during the period. And the numbers were actually much higher. Temp Agency jobs do no account for ‘directly hired’ temp workers by companies. The latter numbers are as least as large as temps hired ‘indirectly’ through agencies according to several studies. Not only are directly hired temp jobs underrepresented in the data but so were temp work categories such as ‘on call’ work, leased contract jobs, independent contract work, and similar categories. 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 added during the period when jobs from sources other than Temp Help 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 thus created. That’s about 30% of the net job growth over the decade and represents a growth rate of nearly twice that of traditional jobs. Nothing remotely similar to such a shift from full time, permanent jobs to part time/temp jobs had ever been seen in the U.S. economy up to that time.

The process and trend continued during George Bush senior’s term in office, 1988-1992.
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 US 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 around as many as 7 million temp workers of various kinds, and another 22.3 million part time workers.

After George W. Bush’s taking 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 since 2001.

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.

From Full Time/Permanent to Self-Employed/Independent

Under George W. Bush other new categories of jobs—also best characterized as temporary—began to appear in larger numbers in the total mix. Adding to the ranks of temp agency hires, temps hired directly by companies, and growing numbers of leased and on call workers—all forms of temporary employment—were now the fast-growing job categories of independent contract workers, self-employed consultants, undocumented ‘informal’ day contract labor, and what is sometime referred to as the ‘unincorporated self-employed’.

These latter categories are not the typical small business professional, operator or owner, such as doctors, lawyers, architects, small business franchisees, agents of larger corporations, local store owners, restaurants, and the like, which are typically incorporated businesses and employ at least a small number of support staff to help run the business. In contrast, the independent contractor, ‘informal’ contract worker, and otherwise self-employed consultant is largely the sole employee, works ‘off the books’, is a sole or ‘limited liability’ proprietor, employs no staff, and is typically (with some exception since 2000) not incorporated. Their ranks are being boosted by the millions of workers, professionals, technical workers and low level managers pushed out, thrown out, or otherwise ‘bought out’ by corporations over the course of the last half-decade as a result of recession and corporate restructuring; by retirees re-entering the job market out of economic necessity, and by those reduced to part-time work force to take on supplemental, second moonlighting jobs in order to maintain income levels. Their numbers grew significantly in the wake of Bush’s 2001 recession, as corporations cut them lose by the millions and then rehired many back on a temporary, contract basis in order to save costs. Jobs in marketing, human resources, information technology, installation and maintenance services, accounting, security, and whole areas of clerical administration were especially affected. 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 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 therefore approximately 43.6 million part- time, temp and independent contract/self-employed jobs in the U.S. This amounted to about 33% of the total U.S. employed non-farm workforce.

TABLE

Unincorporated
Year Part-Time Temporary Self-Employed Total

1980 15.0 mil. 0.5 mil. 7.0 mil. 22.5 mil.

1990 19.7 2.1 8.7 30.5

2000 22.3 7.0 9.2 38.5

2004 25.3 8.5 9.8 43.6

Calculating the Benefits to Corporate America

U.S. Government free trade policies and tax changes since1980 have provided major incentives to corporations to dismantle the country’s manufacturing base, resulting in the offshoring and loss of more than 8 million jobs. Various studies show there is at least a 20% 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% 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. That’s just direct savings. 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 US corporations saved $100 billion a year in 2004 from exporting jobs since 1980. Restructuring jobs by dismantling high paying sectors like manufacturing, technology and business professional services, and offshoring that work, clearly results in significant total savings and net income gains to corporations.

But an even greater relative income shift has resulted from corporate restructuring since from what was once a largely full time, permanent workforce to part-time, temporary, and other forms of independent contract/self-employed work since 1980.

In the 1980s part time workers received approximately 60% of full time wages. Only 22% of part time workers had health benefit coverage. Similarly, during that decade temporary workers received only 75% of permanent employee wages and only 23% of them had health benefits. By the close of the 1990s the picture deteriorated further. Temp workers’ wages had declined from 75% to 60% the pay of full timers.

Since 1980 there has been, conservatively, a net increase of approximately 10 million part time workers, more than 7 million temp workers, and several million more contract workers—totaling around 30 million. With 30 million new part-time, temp, and contract workers getting on average a third less pay and 75%-80% less in benefits, it is not difficult to estimate the aggregate annual wage savings for Corporate America due to this restructuring. It amounts roughly to around $350 billion a year in pay and benefits alone, saved by (and shifted to) corporations at the expense of workers in the U.S.

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 from these two particular forms of job restructuring now devastating the American worker.

And that does not include other significant cost savings to companies. For example, only 11%-20% of this ‘New World Jobs Order’ workforce receive any kind of employer provided pension; they get 50%-80% less holiday, vacation, or other paid leave; 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 workforce 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 of law, 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. And 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.

Some Concluding Remarks

During the great depression of the 1930s the picture was one of millions of American workers physically on the move, from one job to the next, between cities, across states, criss-crossing the country looking for any kind of work.

The overall picture today is one of millions of American jobs moving in, out, and across US 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 not simply moving from location to location as before, but today moving across and between virtual ‘internal borders’ of under-employment, temporary and semi-employment, 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 second-class labor and what amounts to nothing less than a ‘two-tier workforce’ in the U.S. have been created by Corporate America over the past quarter century and their numbers continue to grow. That is, more easily manipulated pools of labor within the economy that allow corporations to avoid and weaken unions and bargaining, avoid and negate protective legislation for workers, and which accelerate today’s general corporate trend of abandoning healthcare and retirement benefits for their workers.

Those who wonder why there are 47 million workers in the U.S. today without any form of health insurance whatsoever 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%-20% 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 43.6 million part-time, temporary, independent contract, and unincorporated self-employed are combined with the 7-8 million official unemployed and an additional 8-9 million ‘hidden unemployed’— the number of workers in the U.S. without regular, permanent, full time jobs totals close to 60 million.

In other words, 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% of the entire employed U.S. workforce.

Of all the various forces at play over the past two decades responsible for the massive shift in relative incomes between the 108 million non-supervisory production and service workers, on the one hand, and Corporate America and the wealthiest 10% households in the U.S. on the other—a shift in relative income now equivalent to more than $1 trillion a year—the corporate restructuring of jobs and job markets in America is responsible for close to half of that $1 trillion shift. Restructuring by increasingly exporting millions of high paying jobs in manufacturing, technology, and now business professional services, plus restructuring by converting full time permanent jobs that remain in the U.S. to lower paid-fewer benefit part-time, temporary, and contract work, have the combined effect of shifting $300-$400 a billion to corporations and the wealthiest households.

The two forms of job restructuring together are also fundamentally responsible for the weakening and undermining of American labor since 1980, both in terms of the decline in the 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 head-on the above corporate radical 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’ workforce with tens of millions of ‘second-class’ workers, must be checked before there can be an end in turn to the current massive shift of incomes between classes in America.

Jack Rasmus

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