A couple days ago, GOP Presidential front-runner Jeb Bush made an interesting remark about the job market.
"My aspiration for the country — and I believe we can achieve it — is 4 percent growth as far as the eye can see," he told the New Hampshire Union Leader. "Which means we have to be a lot more productive, workforce participation has to rise from its all-time modern lows. It means that people need to work longer hours and, through their productivity, gain more income for their families. That's the only way we're going to get out of this rut that we're in."
Unions, progressive groups and even Hillary Clinton jumped all over the part about working longer hours. Americans have been working more in recent years, they pointed out, and stopped earning more in proportion to their ever-growing productivity back in the 1970s. Bush quickly qualified, saying he was talking about the people who can't find full-time work, not everybody else who's got more work than they can handle.
The economics behind the argument tell us a lot about how liberals and conservatives look differently at the U.S.'s labor situation, and how neither set of prescriptions fully gets at the roots of the problem.
Bush may have been reacting to the noise that advocates have been making about the lack of full-time hours in the retail and food service industries, especially after Wal-Mart and McDonald's raised their minimum wages but declined to make any commitments around their mix of full-time and part-time workers. The rise of the temporary workforce has also garnered significant attention, as companies seek to tailor their labor supply to how busy they are day by day. And while the number of people working part-time because they couldn't find full-time work has fallen since the height of the recession, it remains elevated.
Bush attributed that stubborn problem to lackluster economic growth, and said that policies that raise the cost of doing business — like health-care reform — are at fault for a decline in new business starts. But despite anecdotal evidence that some companies have been keeping workers part-time so as to avoid having to offer them health insurance under the Affordable Care Act, economists haven't seen evidence of that in the statistics.
Here's what he didn't mention: The fact that overtime protections haven't kept up with inflation, which has allowed companies to overload low-level managers without paying them time-and-a-half (which the Obama administration is trying to fix through an updated overtime rule). And companies have also found it convenient to make workers into independent contractors, who work until the job's done, without being entitled to any benefits.
The result is a world in which the 40-hour work week is a rarity — both because some people work way more than that just to keep jobs that don't entitle them to greater pay for longer days, and because companies rely on a part-time workforce they can keep on call for when they're needed.
Now, liberals don't want the part-time issue to distract from their broad campaign theme of raising wages. They argue that the problem is workers just aren't earning enough, for a host of reasons that have nothing to do with growth: The minimum wage hasn't kept pace with inflation, corporations are making record profits and paying back shareholders instead of sharing them with employees, the decline of unions has left workers without the bargaining power to demand more.
But the question of productivity — how much each worker can achieve per hour, given the set of tools at their disposal — is a little trickier to answer. Getting more out of employees might help corporations, but does that matter if they're not paid accordingly? And what if it means there aren't enough jobs to go around?
Although rising productivity hasn't done much for workers over the past few decades, economists are actually quite worried about the fact that labor productivity has been slowing in recent years. The Organization for Economic Cooperation and Development just put out a massive report on the subject, laying out what's gone wrong and how to fix it. In an event discussing it at the Peterson Institute, moderator Adam Posen addressed the perceived conflict between productivity and the bargaining power of workers head on.
"There is a substantial set of voices that views productivity as the enemy of labor, that you’re going to replace low-skilled people, you put pressure on wages, productivity is generally a negative," Posen said, before asking report author Catherine Mann and Council of Economic Advisors chairman Jason Furman for their thoughts.
Mann agreed, but said that one of the report's main prescriptions — helping skilled workers find the employers that need them, which has been a problem — will both increase business productivity and help boost wages.
“When the worker is poorly matched to their job, that is negative for productivity growth," Mann said. "It’s also negative for workers, because they’re not getting paid for their marginal product. No chance of it, because what firm is going to pay a skilled worker when they’re not doing a skilled job?"
There have been a lot of ideas for how to address that problem, including leveraging "online talent platforms" to make the labor market more transparent. Often, employers need to be persuaded to hire people who don't have college degrees for positions where the credential isn't actually necessary.
Next, Furman talked about the "job churn" problem. Employment mobility has declined in recent years, for a bunch of reasons including the difficulty of finding good housing. Helping people switch jobs more often, often explained as a way to let businesses hire and fire as they please (or "labor market flexibility") can also strengthen worker bargaining power even as unions have declined. "If you’re never going to leave your business even if you are productive, what threat and ability do you have to get wage increases?" Furman says.
As far as low labor force participation, which Jeb Bush also identified as the fault of slow economic growth, Furman pointed out that policies friendly to women in the workplace — like paid family leave and flexible scheduling — are a better way to help. Finally, to answer Bush's point about new business formation, the OECD report emphasizes the need to make sure big corporations can't operate as functional monopolies that make it hard to enter a market.
The point is, while Bush isn't wrong that it would helpful for productivity growth to pick up, there are a lot more important ways to foster it than cutting taxes and red tape. Meanwhile, measures to increase worker bargaining power are necessary to make sure people get paid more for the product they deliver. And finally, while some workers need more hours, that's partly because many other workers should work fewer hours.
Identifying the problems is the easy part. Causes and solutions are more complicated.