
American companies are suppressing wages for many workers - ColinFCodeChef
https://mobile.nytimes.com/2018/02/28/opinion/corporate-america-suppressing-wages.html
======
michaelbuckbee
The linked article mentions outsourcing, but it was this other _fantastic_
article [1] on the structural issues of the current wage economy that really
helped me understand just how different things are:

"Thirty years ago, she says, you could walk into any hotel in America and
everyone in the building, from the cleaners to the security guards to the
bartenders, was a direct hire, each worker on the same pay scale and enjoying
the same benefits as everyone else. Today, they’re almost all indirect hires,
employees of random, anonymous contracting companies: Laundry Inc., Rent-A-
Guard Inc., Watery Margarita Inc. In 2015, the Government Accountability
Office estimated that 40 percent of American workers were employed under some
sort of “contingent” arrangement like this—from barbers to midwives to nuclear
waste inspectors to symphony cellists. Since the downturn, the industry that
has added the most jobs is not tech or retail or nursing. It is “temporary
help services”—all the small, no-brand contractors who recruit workers and
rent them out to bigger companies.

The effect of all this “domestic outsourcing”—and, let’s be honest, its actual
purpose—is that workers get a lot less out of their jobs than they used to.
One of Batt’s papers found that employees lose up to 40 percent of their
salary when they’re “re-classified” as contractors. In 2013, the city of
Memphis reportedly cut wages from $15 an hour to $10 after it fired its school
bus drivers and forced them to reapply through a staffing agency. Some Walmart
“lumpers,” the warehouse workers who carry boxes from trucks to shelves, have
to show up every morning but only get paid if there’s enough work for them
that day.

“This is what’s really driving wage inequality,” says David Weil, the former
head of the Wage and Hour Division of the Department of Labor and the author
of The Fissured Workplace. “By shifting tasks to contractors, companies pay a
price for a service rather than wages for work. That means they don’t have to
think about training, career advancement or benefit provision.”"

1 - [http://highline.huffingtonpost.com/articles/en/poor-
millenni...](http://highline.huffingtonpost.com/articles/en/poor-millennials/)

~~~
OscarCunningham
What is it, in particular, about contracting that allows businesses to pay the
same people less? What can they do with the contracting that they couldn't do
without it?

I think this:

>“By shifting tasks to contractors, companies pay a price for a service rather
than wages for work. That means they don’t have to think about training,
career advancement or benefit provision.”

was an attempt at explanation. But I don't see how it leads to lower wages.

~~~
lotsofpulp
It doesn't. The real reason is due to reduced demand for labor, partly due to
increased efficiency from technology, partly due to reduced spending, etc.

At the end of the day, it's always supply and demand. The contracting just
helps with creating a third party to deal with employment laws and all that
hassle.

I recently stayed at a hotel and didn't even need to talk to anyone. Bought
the room on via the hotel's app, the digital key in the app opened the door
using the phone's NFC, the receipt was received via email.

------
tabeth
And why wouldn't they? It's time to bring back mechanisms, legal or otherwise,
to prevent this from happening again. Usually the collective workforce of a
company has significant leverage over a company, but with the advent of
globalization, the "gig economy", and technological unemployment in some ways
this leverage is harder to capitalize on, or even worse, nonexistent.

I don't know if there's any empirical proof for this, but like competition
between companies, I think "competition" or tension between employees and
employers for a given organization is also good for capitalism.

~~~
baq
yeah that's what unions are really about - to think about the employees for
the employees good, where HR thinks about them for the good of the company.
implementations of that idea are of varying quality which unfortunately gives
them a bad rep.

~~~
0xcde4c3db
> implementations of that idea are of varying quality which unfortunately
> gives them a bad rep.

Also giving them a bad rep: propaganda efforts by big employers. Back when I
worked for them, Walmart showed new hires a training video that could be
summed up as "just say no to card checks; union organizers are trying to trick
you into giving up your rights, and you don't need a union anyway because we
value our associates so much".

~~~
Brockenstein
Arguably, unions were so successful that people started asking "what do we
need them for anymore?" It's shortsightedness that companies were/are all to
happy to exploit.

------
Spooky23
All of the major unions have been broken, with the public sector unions coming
up next re: the Janus case.

Even though there was always a limited number of union workers, their
collective bargaining set the standard. That’s not really a factor these days.

~~~
randomdata
Interestingly, unionization in Canada is still as strong as the strongest
years in the US. Despite that, wages are every bit as stagnant as the US and,
looking at income data, there is a lot of mirroring between the two countries.
The substantial decline of unionization in the US is one thing, but what is
Canada doing wrong?

~~~
nullymcnull
I am curious as to where you are getting the idea that "unionization in Canada
is still as strong as the strongest years in the US". That's pretty much the
opposite of my personal experience and observations, and it's not the
consensus I've been hearing (which is that organized labour has been at an
absolute nadir in the past few decades, as much in decline as in the US).
Unions have shrunk, membership are down, political clout is down, and a newly
unionized company is a rare bird indeed. Perhaps the high rate of unionization
in the public sector skews the stats here, because in the private sector,
things are pretty much a mirror of the US situation.

From what I can tell, all of the same factors that are driving down wages in
the US - increased consolidation, far more 'temp' positions brokered by temp
agencies - apply to Canada as well, and have had the same effect.

~~~
randomdata
_> I am curious as to where you are getting the idea that "unionization in
Canada is still as strong as the strongest years in the US"_

Based on the share of the workforce that is represented by unions. Canada is
currently at ~30%, the US peaked at ~30% and is at less than 10% today.

 _> Unions have shrunk, membership are down, political clout is down, and a
newly unionized company is a rare bird indeed._

Unionization is indeed down, but what I said is that it is still about as
strong as the strongest years in the US. Canada had even stronger unions
through the 80s, when it peaked at just shy of 40%. Interestingly, much of the
same wage issues we face today were still present at that time. Wages have
been stagnant since at least the 70s, according to the Canadian government
(and American data echos this).

~~~
eesmith
When you say "represented by unions", do you mean the unionization rate or the
coverage rate?

In terms of unionization rate, in 2016 Canada was at 28.4% [1]. By comparison,
the US peak was 34.8% in 1954 [2] . (It is now 10.7% [3], which is slightly
higher than 10%, not less than.)

While the "~" can justify a rounding to the nearest 10% instead of 5%, that
ended up hiding a difference of 6.5%, or 1/5th of the total unionized
population. From what I can tell, the current rate of around 28% corresponds
to the US unionization rate in about 1970 [3], and not its peak in 1954.

The US peak of 34.8% is closer to the Canadian peak of 37.9% in 1984 than it
is to 30%, and corresponds to the Canadian unionization rate in 1991 [1].

The coverage rate for both countries is of course higher. For 2017 in Canada
it was 30.4% [5] and in US is was 11.9% [3].

[1] "[http://www.statcan.gc.ca/daily-
quotidien/170908/cg-a003-eng....](http://www.statcan.gc.ca/daily-
quotidien/170908/cg-a003-eng.htm)

[2] "At their peak in 1954, 34.8% of all U.S. wage and salary workers belonged
to unions" \- [http://www.pewresearch.org/fact-tank/2014/02/20/for-
american...](http://www.pewresearch.org/fact-tank/2014/02/20/for-american-
unions-membership-trails-far-behind-public-support/) .

[3] [http://unionstats.gsu.edu/All-Wage-and-Salary-
Workers.htm](http://unionstats.gsu.edu/All-Wage-and-Salary-Workers.htm) . The
BLS gives the same unionization numbers for 2017 (but no coverage numbers) at
[https://www.bls.gov/news.release/union2.nr0.htm](https://www.bls.gov/news.release/union2.nr0.htm)
.

[4] [http://www.statcan.gc.ca/daily-
quotidien/170908/cg-a003-eng....](http://www.statcan.gc.ca/daily-
quotidien/170908/cg-a003-eng.htm)

[5] [https://www.statista.com/statistics/442980/canada-union-
cove...](https://www.statista.com/statistics/442980/canada-union-coverage-
rate-by-province/)

------
expertentipp
Post-contractual non-compete without any compensation. It’s starting to be a
thing even in EU. 5-10 years ago I could sign an employment contract
blindfolded, now it’s a freaking minefield where in couple of years I can end
up without a job, unemployable, and owning multiple monthly salaries to the
employer. We have too many bored lawyers.

~~~
mindvirus
For non competes, I wish the law was that companies could bench you, but
they'd have to pay you 200% of your best comp of the past 5 years. I think
it'd solve a ton of problems.

~~~
JumpCrisscross
> _I wish the law was that companies could bench you, but they 'd have to pay
> you 200% of your best comp of the past 5 years_

Legally-mandated golden parachutes?

~~~
TheCoelacanth
It's not a payment for if they get rid of you like a golden parachute. It's a
payment for if they want to use the legal system to prevent you from earning a
living by working for another company.

------
kyledrake
Non-compete clauses are a pretty weird thing and I've seen them in contracts
before. Definitely read up on them. I've refused to sign contracts with them
before. They're totally unenforceable in California and a few other states.

[https://wikipedia.org/wiki/Non-
compete_clause](https://wikipedia.org/wiki/Non-compete_clause)

~~~
pjonesdotca
Mostly unenforceable in Canada as well.

------
jacknews
In addition it seems to me that labor is not a free market, simply because
there is no choice to not offer your labor, since you'd starve. In large parts
of the world anyway, and globalization has brought them into the 'free'
market.

~~~
tdb7893
Food always seemed a pretty free market to me, even though it's necessary. I
was taught that free market is more about competition and access to
information while necessity of the product mainly affected price inelasticity
but that was econ 101 so idk if it's entirely accurate.

~~~
lotsofpulp
Shopping for groceries might be close to a free market, but the production of
food certainly isn't.

Also, a big problem with the "free market" is inability and/or disincentive to
price externalities, such as environmental damage. Although, it still seems to
be a better system than others, we need to work on that front.

~~~
nine_k
Do you mean large subsidies to US farmers? Wholesale food markets dominated by
few huge buyers, Walmart-style?

~~~
lotsofpulp
I'm referring to subsidies to US farmers and underpriced water also. I'm not
familiar with other countries, but the domination by Cargill and Monsanto and
John Deere also probably detract from a free market.

------
gaius
_a flagrant monopsonistic tactic that brought down the wrath of the Justice
Department._

Wrath? It was barely a slap on the wrist or a mild scolding.

~~~
zentiggr
Describing it as wrath is in proportion to the overwhelming lack of action
against corporate issues these days... so yes, slap on the wrist on an
objective scale, but 'hey, look, they DID something!'

------
CompelTechnic
One thing I wonder- to what extent has the digitization of the job search
process contributed to reduced wages? I can imagine several mechanisms that
would cause this to reduce wage growth: 1\. Widely available data on wages
tends to introduce a lagging effect on wage inflation, because workers tend to
look at data that is a least a couple of years old (imagine what pool of data
is currently being used on glassdoor.com to create the salary estimate of that
junior developer job you just looked at) 2\. Recruiters have large amounts of
data on current wages, and can negotiate from a greater position of power. 3\.
Recruiters have a larger pool of candidates to draw from and force to compete
against eachother.

~~~
swiley
More like "widely available outdated data." Better (real time) access to data
would help the situation, but the wording there makes it sound like you mean
to say the opposite.

The affect of bad data on the labor market almost looks like the affect of
fake news in politics doesn't it?

------
emodendroket
> For a long time, economists believed that labor-market monopsony rarely
> existed, at least outside old-fashioned company towns where a single factory
> employs most of the residents. But in recent decades, several compelling
> studies have revealed that monopsony is omnipresent. Professionals like
> doctors and nurses, workers in factories and meat processing plants, and
> sandwich makers and other low-skill workers earn far less — thousands of
> dollars less — than they would if employers did not dominate labor markets.

This is the most shocking part of the article for me. How could economists for
years have denied something so plainly obvious?

~~~
pixl97
> How could economists for years have denied something so plainly obvious?

And this is why we are surprised every time the economy crashes, yet again.

------
wfo
Interesting the authors cite unionization as an effective protection against
this in the past but do not recommend it as a remedy for the future. The
problem with simply passing laws as they suggest is that those laws once in
place will be opposed by everyone with power simultaneously and forever, with
no powerful organized collective force to defend them it is just a matter of
time until corporate power grinds them into dust.

Unions give actual power to workers (and are great at motivating them to vote
according to their interests!) instead of just passing laws out of the
goodness of our heart to protect them and hoping they last through billions of
dollars in corporate bribes.

~~~
pixl97
The current problem with unions is labor arbitration. Unions were great when
transportation was slow and expensive and communication didn't move at the
speed of light. Now capital is more important than labor, and capital can be
moved almost freely and at the speed of light. Labor on the other hand is
stuck in it's national borders, and much of it has a huge amount of debt.

Giving a union the power to shut down a production line doesn't do much good
when a new line can be setup overseas in hours. Corporate power has to be
fought at the state and nation level

------
matte_black
Like global warming, this may be a problem that we are unable to do anything
about except adapt. We need to lean into the gig economy, instead of pulling
away.

What we need are mechanisms to ensure that there's always a constant and
steady stream of gigs available for any person to work. Many of these gigs
might not be full-time or part-time jobs but rather micro-jobs or micro-tasks,
that some entity needs to have completed to fulfill some larger mission, which
is irrelevant to the gig worker.

The requirements for completing a task could range from simply "Being a human"
to "Specialized skills in a specific domain". Profiles for workers could
contain all sorts of information that could help them find relevant work
quickly and easily, consisting of things like education and trade skills to
even body metrics and IQ if necessary. And of course workers can be rated
based on previous work history to help them better find future jobs without
needing to keep a resume.

A worker should not need to get anything more out of their job than payment
for services rendered. Healthcare should be handled by the government, and
vacation time is handled by whenever the worker doesn't feel like working.

~~~
pjonesdotca
The major problem I see for the "gig economy" is that as a contract worker one
is essentially on their own for things like health insurance and unemployment
benefits. While neither are things often talked about on the HN boards, here
outside the Valley those become real concerns for employees with families.

~~~
matte_black
Health insurance I agree is a problem that needs to be solved independently
from employers. In fact, if we actually manage to solve healthcare at some
point in the future the gig economy will only grow more as it will become more
feasible to move from employer to employer.

Unemployment is best handled by keeping your own savings I'd say, though
that's tough for some to grasp in a nation with little financial education.

------
hiram112
Corporate America has trained the plebs well.

Every time a discussion on unions or any sort of organization to "push back"
against the big companies in just our own industry is met with a good 50% of
HN readers dismissing the idea outright.

And even talking about cutting off the supply of H1Bs - or at least the body
shops that probably aren't as prolific at the top companies which are
overrepresented here - is flagged and downvoted in minutes.

It doesn't surprise me, given the age of the average HN reader. Once you have
a family, house, and have experienced age discrimination at 40, you'll have
different views, I'm guessing. Maybe even sooner for many here if the blatant
discrimination of white and asian males gets more traction.

I guess the thing that is so disappointing to me about this industry is that
we're supposed to be smarter than the rest. But we have completely ignored the
history of this country and the battles that our predecessors fought.

~~~
wfo
Tech folks are incredibly smart on technical subjects. When it comes to
politics, power dynamics, seeing through propaganda, empathy, we are not
trained in or likely to be interested in any of these "softer" but very
important issues at all and it shows. Why do you suspect there are so many
Libertarians in tech? It is the quintessential political philosophy of a smart
successful person who does not understand these issues.

------
turc1656
No-poaching agreements are very clearly illegal and _should_ have resulted in
immediate charges being levied against a metric shit-ton of people as the only
way that works with all these franchises is if many people are involved. The
DOJ has formally acknowledged these practices are illegal and a serious
violation of existing laws:
[https://www.justice.gov/atr/file/903511/download](https://www.justice.gov/atr/file/903511/download)
Well...it's been nearly 18 months since that announcement. Why haven't I seen
a whole bunch of people get charged with felony antitrust violations, as per
the DOJ's own statements about its intent to "proceed criminally against naked
wage-fixing or no-poaching agreements"?

Where are the handcuffs?

------
shady-lady
Suppressing wages & over-working employees.

For salaried jobs in all companies, the only requirement for unpaid overtime
should be responding to emergencies. So for engineering, this would mean
_always_ 40hr week unless dealing with out of hours production downtime.

There is way too much abuse happening(frequently implicitly).

------
JustSomeNobody
How utterly pathetic that a company like Jimmy Johns, whose employees probably
make single digit per hour salaries, would do this[0]! This is just one more
way the rich crap on the poor.

[0] I realize the article said they stopped, but I still can't help but be
very upset about it.

------
nukeop
There was similar wage suppression (or should I say, wage theft scheme) in
Silicon Valley until very recently. That's why the wages skyrocketed. If the
scheme could be broken up in one industry, it can happen again in others.

~~~
ThirdFoundation
I wonder if the current high wages in Silicon Valley are a function of job
competition in other cities (tech jobs in Austin, Denver, NYC, etc) plus a
highly mobile workforce. Tech workers tend to skew younger and are also able
to work remotely in many cases.

I bring all this up, because I'm not sure it will be quite as applicable in
other industries. It seems that many workers aren't willing to move for work
and don't have the competitive salaries in other cities required to bring up
the salary. I'm sure it's possible that the scheme could be broken up through
other methods, but I'm having trouble seeing an avenue there.

~~~
hiram112
The SV wages I'm seeing seem to be concentrated in a few really wealthy
companies who basically enjoy monopoly status in their domains.

It doesn't seem like smaller startups pay that well - though maybe that is
fair due to the chance to hit it big.

What I will tell you is that software engineers in the rest of the country,
especially in industries that have been decimated by offshoring and H1Bs
(banking, insurance, and large companies in general) do not pay that well
after about age 35 or so once you hit your ceiling (anywhere from $90K in the
Midwest to $150k in high COL East Coast) no matter how talented you are.

I made way better money than most of my peers at 25 - they were still in grad
school and paying off loans. By 30, I was still making more, but they were
quickly catching up.

I'm imagining by 40, I won't be much ahead of anyone with a professional
degree or even those who went into government and now have seniority,
pensions, etc.

What I've seen so far with offshoring, H1Bs in my 20s was the first big
warning sign for me. Then as I got into my 30's and started seeing how
management treats older works, I'm beginning to realize that age
discrimination in tech is for real - second warning sign.

And finally, if this whole war on white / asian males picks up steam in other
companies, I'm probably going to attempt to pivot out of the industry
completely. There is not much of a bright future.

~~~
maxxxxx
"I made way better money than most of my peers at 25 - they were still in grad
school and paying off loans. By 30, I was still making more, but they were
quickly catching up.

I'm imagining by 40, I won't be much ahead of anyone with a professional
degree or even those who went into government and now have seniority,
pensions, etc"

I have seen that myself. I used to make more than people my age but over the
years non tech friends have advanced steadily and have passed me. People in
government often make around 150k too but they get a very nice pension in
addition.

~~~
softawre
what sort of government work pays 150k?

~~~
maxxxxx
The people I know work in DC at GAO, FBI and NSA make around that amount if
you include paid overtime and bonus.

------
charmander_IRL
Why are low skill non-competes bad? You can just lateral into another low
skill job in an unrelated industry. It’s not as if you have a huge amount of
human capital sunk into sandwich prep.

~~~
zelon88
It still causes the same problem. It limits the opportunities people have
available to them. Lets say 5 Guys opens up shop right next to Subway and is
offering $3 more per hour than Subway. With non-compete's at Subway, those
workers would be stuck and there would be no onus on Subway to improve their
wages or benefits.

Without the non-compete Subway workers would apply for work at 5 Guys, which
would force Subway to become a more competitive employer.

No matter what rung of the ladder you're on, non-compete's hurt employees and
benefit employers just as they were intended to do.

------
kauffj
The claim that sandwich-making is monopsonic seems dubious.

Statista has the largest employer at 12.7% market share and "Other" at 55%:
[https://www.statista.com/statistics/307965/market-share-
of-f...](https://www.statista.com/statistics/307965/market-share-of-fast-food-
restaurant-corporations-in-the-us/)

Research Gate has similar figures, though I believe this one is international:
[https://www.researchgate.net/figure/Market-Share-of-major-
pl...](https://www.researchgate.net/figure/Market-Share-of-major-players-in-
the-fast-food-industry_fig1_260796941)

~~~
karmajunkie
The claim is not that it is intrinsically monopsonistic but becomes so through
the use of non-compete clauses.

