Neil Irwin of the New York Times published a very interesting article on rising income inequality in America earlier this week.
The article was published by the Upshot, a team of wonks over at the Times who write nerdy, in depth, data driven policy articles. My favorite type of article.
The article took a nuanced look at the evolution of corporate culture and the rise of income inequality. It is worth a read in its own right.
But today I want to pull out just one piece of that story. A part of the story that struck me because it is a drum that I keep beating.
We are living and working in a fundamentally different economy than our parents.
A Tale of Two Janitors
The Times article compares two janitors.
Ms. Evans was a janitor at Kodak 35 years ago. Ms. Ramos is a janitor at Apple today. After adjusting for inflation, their pay is just about equal.
Ms. Evans had four weeks of paid vacation every year, college tuition assistance, and annual bonuses. When the building that she was paid to clean shut down, Kodak helped her find work in another part of the company.
She used her tuition assistance to go to school at night. She finished her degree and moved into an information technology position. She kept working hard and getting promoted until eventually she became the Chief Technology Officer for Kodak.
Ms. Ramos has no paid vacation, no college tuition assistance, and no annual bonuses. If she needs to skip a day of work, she has to lose a day of pay. She has no opportunity for advancement, because she is an employee of an independent contractor hired by Apple rather than an employee of Apple.
A Race to the Bottom
This is part of a larger trend in the American economy.
Companies are outsourcing to contractors for work far more often than they used to. Contractors, in an effort to secure as much work as possible, keep their prices as low as possible. The biggest tool for lowering costs is to decreasing the pay and benefits of their employees.
Companies want cheap contractors, so contractors want cheap workers. It becomes a race to the bottom.
Another downside for contractors (and upside for companies) is that companies can end your contract at any time without much fanfare. Laying off employees is seen as a big deal. Firing contractors is not.
This contributes to an increasing instability for workers. Irwin’s article compares computer programmers today that need to jump from company to company every few months to a forklift operator in the old economy who had far more job security.
Outsourcing to contractors allows companies to decrease their overhead costs and increase their profits. Like much of the rest of the economy, this rewards shareholders at the expense of workers in a way that was unthinkable in prior generations.
A Complex Problem
This is not as simple as telling companies to treat their workers better, however.
Companies across the world are lowering their costs and maximizing their profits. It is not easy to buck that trend and succeed.
Apple is one of the largest companies in the world. Kodak used to be, but has gone through bankruptcy, extensive layoffs, and a severe drop in stature and market share.
Shareholders are profiting at the expense of workers. The people that actually show up and do the work are struggling while those of us who invest and make money off of their labor are doing fine.
It shouldn’t work like this. It never used to work like this. It needs to be fixed.
But there is no simple solution.
Adjusting and Adapting
We need policy changes at the governmental level. We need corporate leaders to find ways to help their workers while helping their companies. We need big changes to fix the economy.
In the meantime, we need to do what we can to help ourselves and others succeed in a broken system.
We need to recognize that we are not in our parents’ economy anymore, and our parents’ career choices are not going to work for us.
Our parents could often go to a company for life right out of school. They were loyal to the company and the company was loyal to them. They could work hard and the company would give them opportunities to advance.
That isn’t true at the vast majority of companies for us. We need to recognize that our companies are not loyal to us. They are not giving us opportunities to improve ourselves. They are not giving us opportunities to advance.
We need to make those opportunities for ourselves. We need to find time to improve ourselves on our own. We need to find time to hunt for opportunities on our own.
We need to be prepared to live in a world with less stability. We need to build up the financial resources to be prepared if our paychecks stop suddenly. We need to learn how to make more money in unorthodox ways. We need to be prepared to up and move if our only opportunities are farther away.
It is much harder to have a successful career than it used to be. We need to recognize that and adjust accordingly.
We Need to Invest
Companies are rewarding their shareholders at the expense of their workers. Become a shareholder and get some of that reward.
The earlier you can get in on that growth, the better off you will be. So get your expenses down and get your investments up.
This isn’t our parents’ economy anymore. Let’s recognize that and find a way to make it work for us.