In this opinion piece, Reich argues that “uncertain” work – with “no predictable earnings or hours” is becoming a pervasive reality in America. To quote: “It’s estimated that in five years over 40 percent of the US labor force will have uncertain work; in a decade, most of us.”
Trouble is, that “40 percent” link doesn’t work. Trouble is, Reich doesn’t include any data to back up his gloomy picture of where the US labor market is heading. Guess I’m going to have to do the work for him. My go-to resource? The Bureau of Labor Statistics, of course! I recommend the BLS to anyone interested in making accurate statements about the state of working America.
Reich argues that workers are becoming “fungible” – that is, interchangeable and easily replaced. Hence, the uncertainty about hours and earnings. One would think fungibility and uncertainty would be reflected in actual labor market conditions, such as less full-time work, more layoffs, and an increasing number of multiple job holders. But it just ain’t so.
Let’s start with working hours. The BLS publication Trends in hours of work since the mid-1970s examined trends in working hours in the US between 1976 and 1993 and concluded that “the average length of the workweek for most groups has changed little since the mid-1970s”. In 1993, 76% of wage and salary workers were employed full-time (35 hours a week or more). And in July 2015? BLS stats showed that 80% of workers were full-time. I don’t see a trend here – at least, not a trend for reduced working hours.
Ok, so maybe, per Reich, people are having to work multiple jobs to get their full-time hours. Luckily, the BLS has the numbers: fewer workers hold multiple jobs now than they did 20 years ago, although the total number employed is much greater. So much for that theory.
Well, then, perhaps the uncertainty that Reich sees all around him is due to higher rates of layoffs. Maybe people are super-nervous about losing their jobs. Luckily, the BLS does annual Job Opening and Turnover Surveys – and surprise, surprise - the layoff and discharge rates in the last year were less than what they were in 2005, and there is no trend that more workers are getting separated from employers. Furthermore, the current median time with the same employer has been trending upward trending upward for the last 20 years and is currently 4.6 years.
Reich's proposed fixes to the perceived problem of uncertainty are also questionable. First: “Whatever party – contractor, client, customer, agent, or intermediary – pays more than half of someone’s income, or provides more than half their working hours, should be responsible for all the labor protections and insurance an employee is entitled to.” Please think that through. For instance, a worker's hours may vary by employer/contracting party every week. (This situation is commonplace for many of the self-employed - think handymen and bookkeepers). Such a system would create perverse incentives. For instance, contracting parties may want to minimize the amount of work they send any single person (not to mention reducing what they pay) to avoid reaching the threshold for benefits, harming both the contractor and the contractee. And how would the contracting party even know that they pay more than half someone’s income? Will there be a minimum number of hours worked before this kicks in? Who will be keeping tabs?
Reich also proposed a rather generous one-year "income insurance" for workers whose monthly income has dipped below 50% of their five-year average. How would this affect worker and job search behavior? One way would be to incentivize dropping out of the job market for those who are so inclined. The result would be a lower labor market participation rate. Anything that significantly lowers labor market participation rates will reduce tax revenue and GDP, which weakens the safety net and ultimately harms more workers than it helps. Plus, extended (unemployment or income) insurance isn’t an unmitigated good – while essential during economic slowdowns, in recovering economies, it can serve as a drag on further growth. There is plenty of research to bear this out – but, then again, Reich isn’t an economist and maybe he’s just not keeping up with the field.
On the other hand, a modest Basic Income Guarantee along the lines I’ve proposed in previous posts would go a long way to softening the blows of outrageous fortune, without bankrupting the state, adding to the regulatory and tax burden, or disincentivizing work.