Work and Workers
Work and Workers
When we are all in the business working together, we all ought to have some share in the profits—by way of a good wage, or salary, or added compensation.
—Henry Ford, My Life and Work, 1922
The American workforce plays a major role in the U.S. economy. Workers produce goods and provide services, the consumption of which drives the nation's gross domestic product (GDP) growth. But there is an age-old struggle between employers and employees over compensation. Businesses must compensate workers with pay and benefits that are high enough to attract and keep motivated employees, but not so high as to damage the profitability and growth of the business itself. On a macroeconomic scale, gainful employment of large numbers of workers is important to the overall health of the U.S. economy.
THE EMPLOYMENT SITUATION
The U.S. Department of Labor's Bureau of Labor Statistics (BLS) conducts a monthly survey of approximately 160,000 nonfarm businesses and government agencies with around 400,000 worksites around the country. Detailed information on employment, work hours, and payroll are obtained as part of the Current Employment Statistics (CES) program. These data are published monthly by the BLS in a news release titled "The Employment Situation."
The BLS defines the civilian labor force as including all civilian noninstitutionalized people age sixteen years or over who have a job or are actively looking for a job. People are considered to be employed during a given week if they meet any of the following criteria:
- They performed any work that week for pay or profit.
- They worked without pay for at least fifteen hours that week in a family-operated enterprise.
- They had a job but could not work that week due to illness, vacation, personal obligations, leave of absence, bad weather, or labor disputes.
People considered not to be in the labor force are those who do not have a job and are not looking for a job. This category includes many students, retirees, stay-at-home moms and dads, the mentally and physically challenged, and people in prison and other institutions, as well as those who are not employed but have become discouraged from looking for work. The unemployed are counted as those who do not have a job but have actively looked for a job during the prior four weeks and are available for work. Also included are people who did not work during a given week due to temporary layoffs.
Table 5.1 lists major findings from the CES for the first quarter of 2006. The civilian labor force averaged just over 150 million people at that time. Another seventy-seven million people were considered to not be in the labor force. Just over seven million people were counted as unemployed, giving an overall unemployment rate of 4.7%. The unemployment rates were much higher than this for minorities and teenagers. Of the nearly 135 million people employed in nonfarm occupations, more than 112 million (or 83%) held service-providing jobs. The other 17% (approximately twenty-two million employees) worked at goods-producing jobs, primarily in manufacturing. Table 5.1 also notes that average earnings for private-sector production or nonsupervisory workers during the quarter were $16.46 per hour, or $556.35 per week.
Employment and Unemployment as of May 2006
In May 2006 the BLS reported that 144 million people were employed in the United States. Nonfarm payroll employment totaled just over 135 million people (based on preliminary estimates). As shown in Figure 5.1, this value has steadily increased from June 2003, when it
|Labor market activity, first quarter 2006|
|[Numbers in thousands, seasonally adjusted]|
|aIncludes other industries, not shown separately.|
|bQuarterly averages are calculated using unrounded data.|
|cData relate to private production or nonsupervisory workers.|
|Source: Adapted from "Table A. Major Indicators of Labor Market Activity, Seasonally Adjusted," in News—The Employment Situation: May 2006, U.S. Department of Labor, Bureau of Labor Statistics, June 2, 2006, http://www.bls.gov/news.release/pdf/empsit.pdf (accessed June 17, 2006)|
|Household data||Labor force status|
|Civilian labor force||150,405|
|Not in labor force||77,359|
|Black or African American||9.2|
|Hispanic or Latino ethnicity||5.6|
|Professional and business services||17,161|
|Education and health services||17,584|
|Leisure and hospitality||12,954|
|Hours of workc|
|Indexes of aggregate weekly hours (2002=100)c|
|Average hourly earnings, total private||$16.46|
|Average weekly earnings, total private||556.35|
stood at around 130 million people. Figure 5.2 indicates that the unemployment rate declined over this same time period from more than 6% in June 2003 to 4.6% in May 2006.
The unemployment rate varied widely according to certain demographic factors in May 2006, as illustrated in Figure 5.3. Teenagers were unemployed at a rate of 14%. Racial and ethnic differences were significant; African-American workers had an unemployment rate of 8.9%, while those of Hispanic or Latino ethnicity had a rate of 5%. These values are higher than the 4.1% unemployment rate reported for white workers. There was virtually no difference by sex among adults; for adult men the rate was 4.2% and for adult women it was 4.1%.
Table 5.2 provides a breakdown on duration of unemployment as of May 2006. Approximately 2.5 million people had been unemployed for less than five weeks at that time. This represents 36% of all the unemployed. Another 2.2 million people (32%) had been unemployed for five to fourteen weeks, and 968,000 (14%) had been unemployed for fifteen to twenty-six weeks. Lastly, more than 1.3 million people (19%) had been unemployed for at least twenty-seven weeks.
A poll conducted by the Gallup Organization in May 2006 found that 41% of those asked felt it was a "good time to find a quality job." (See Figure 5.4.) This compares with 54% who believed that it was a "bad time to
|Unemployed persons by duration of unemployment, May 2005–May 2006|
|[Numbers in thousands, seasonally adjusted]|
|Note: Data reflect revised population controls used in the household survey.|
|Source: Adapted from "Table A-9. Unemployed Persons by Duration of Unemployment," in News—The Employment Situation: May 2006, U.S. Department of Labor, Bureau of Labor Statistics, June 2, 2006, http://www.bls.gov/news.release/pdf/empsit.pdf (accessed June 17, 2006)|
|Number of unemployed|
|Less than 5 weeks||2,516|
|5 to 14 weeks||2,242|
|15 weeks and over||2,297|
|15 to 26 weeks||968|
|27 weeks and over||1,329|
|Average (mean) duration, in weeks||17.1|
|Median duration, in weeks||8.5|
|Less than 5 weeks||35.7|
|5 to 14 weeks||31.8|
|15 weeks and over||32.6|
|15 to 26 weeks||13.7|
|27 weeks and over||18.8|
find a quality job." The number of people who believe that the timing was right to find a good job has increased since the early 2000s.
The federal government broadly characterizes jobs as being in the goods-providing or services-providing categories. Goods-providing industries include businesses engaged in manufacturing, construction, mining, and natural resources. The service industry includes businesses whose main function is to provide a professional or trade service, rather than a product. Service-providing industries are extremely diverse and include businesses involved in retail and wholesale trade, professional and business services, education and health services, leisure and hospitality, government, and numerous other services.
Since the mid-twentieth century the service-providing industries have grown to dominate the U.S. economy. (See Figure 5.5.) In 1960 goods-producing industries employed around nineteen million people. This value has increased slowly over time, reaching twenty-two million in 2005. By comparison, the number of people employed in service-providing industries has skyrocketed from around thirty-five million in 1960 to 111 million in 2005.
Jobs are categorized by the government using the North American Industry Classification System (NAICS; pronounced "Nakes"). Adopted in 1997, NAICS was devised by the U.S. Economic Classification Policy Committee in conjunction with Statistics Canada and the Instituto Nacional de Estadística, Geografia e Informática of Mexico, and is the standard classification system for businesses throughout North America. There are twelve major so-called "supersectors" tracked by the BLS that encompass all private and public jobs within the United States and businesses owned by U.S.-based companies operating in other countries.
The twelve supersectors are:
- Education and health services
- Financial activities
- Leisure and hospitality
- Natural resources and mining
- Other services
- Professional and business services
- Transportation and utilities
- Wholesale and retail trade
Virtually every job can be placed into one of these categories. It should be noted that industry tracking focuses on the core mission of the business rather than on the particular tasks performed by employees. For example, jobs in public schools and government-owned hospitals are considered part of the government sector rather than education and health services.
Industry and job data in the following sections were obtained from Industry at a Glance, an online profile of American business maintained by the BLS at http://stats.bls.gov/iag/iaghome.htm.
The construction supersector includes all businesses that contribute to the development of land, roads, utilities, buildings, and such structures as bridges and dams. Included are firms that build new projects and those that provide maintenance, repairs, and alterations to existing structures. For the most part, such enterprises are managed from a central location with work performed elsewhere.
In 2005 construction employment accounted for 5% of all employment and 30% of employment in the goods-producing sectors, according to the BLS. More than 60% of goods-producing establishments were engaged in construction. This supersector employed nearly 7.3 million people in 2005, up from 5.5 million in 1996. Employment in construction increased steadily over that time period and has been predicted by the BLS to increase by 11.4% between 2004 and 2014. But the 2005 unemployment rate among people most recently employed in construction was 7.4%, higher than the overall unemployment rate of 5.1% for that year. Construction employment often fluctuates throughout the year, especially in areas of the country that experience severe winter weather.
EDUCATION AND HEALTH SERVICES
The education and health services supersector includes all instructional and training facilities, including private schools and universities, that are not funded by the government. Non-governmental organizations that provide child day care, medical care, and social assistance are also included. Businesses of this type that are government owned (public schools and hospitals, for example) are considered part of the government sector.
In 2005 employment in education and health services accounted for 1.6% and 10.8%, respectively, of all employment. This supersector employed 17.3 million people in 2005, up from 13.7 million in 1996. Employment in these fields increased steadily over that time period and has been predicted by the BLS to increase by at least 30% between 2004 and 2014. This rate of increase is the highest projected for any industry. The 2005 unemployment rate among people most recently employed in education and health services was 3.4%.
The financial activities supersector includes the banking, insurance, and real estate industries, including businesses that, according to Industry at a Glance, facilitate "transactions involving the creation, liquidation, or change in ownership of financial assets." The real estate sector includes businesses that manage properties for others, appraise real estate, and facilitate property buying, selling, and leasing.
In 2005 employment in financial activities accounted for 4.5% of all employment. This supersector employed 8.1 million people in 2005, representing a steady increase from nearly seven million people in 1996. The BLS predicts that employment in this sector will increase by 10.5% between 2004 and 2014. The 2005 unemployment rate among people most recently employed in financial activities was 2.9%.
The government sector encompasses all local, state, and federal government agencies as well as public schools and public hospitals. This includes law enforcement agencies, courts, and legislative assemblies but, for the purposes of industry tracking, does not include military personnel.
In 2005 employment in government accounted for 16.1% of all employment broken down as follows: federal (2.1% of total), state (3.5% of total), and local (10.5% of total). This supersector employed 21.8 million people in 2005, having increased steadily from 19.5 million in 1996. According to the BLS, employment in the government supersector should increase by 14.8% between 2004 and 2014. Growth in state and local government employment accounts for 11.3% of the increase. Only a 1.6% increase is projected for federal government employment. The 2005 unemployment rate among people most recently employed in government was 2.6%.
The production and distribution of information falls under the information supersector of the American economy. This supersector includes book and software publishing, Internet service providers, and television broadcasting, as well as the motion picture and sound recording industries.
In 2005 employment in the information industry accounted for 2.4% of all employment. This supersector employed nearly 3.1 million people in 2005, up slightly from 2.9 million people in 1996. Employment in this field increased through the late 1990s before peaking in the early 2000s and then declining. The BLS expects employment in this sector to increase by 11.6% between 2004 and 2014. The 2005 unemployment rate among people most recently employed in the information industry was 5%.
LEISURE AND HOSPITALITY
The leisure and hospitality supersector contains businesses in the arts, entertainment, recreation, spectator sports, accommodation, and food service industries. This includes performance venues, gambling outlets, golf courses, amusement parks, arcades, hotels and other lodging sites, food service establishments, and privately funded exhibit spaces and historic sites.
In 2005 employment in leisure and hospitality accounted for 9.6% of all employment, broken down as follows: accommodation and food services (8.2%) and arts, entertainment, and recreation (1.4%). This supersector employed 12.8 million people in 2005, up steadily from nearly 10.8 million people in 1996. Employment in this field has been predicted by the BLS to increase by 17.7% between 2004 and 2014. The 2005 unemployment rate among those most recently employed in leisure and hospitality was 7.8%.
An organization is considered part of the manufacturing supersector if its primary business is to transform raw materials into new products through mechanical, physical, or chemical processes. Manufacturing covers many separate industries, including aerospace, apparel, computers, automobiles, pharmaceuticals, printing, steel, and textiles, among others, and provides products that contribute and support all other economic sectors.
In 2005 employment in manufacturing accounted for 11% of all employment and 62% of goods-producing employment. This supersector employed 10.1 million people in 2005, down from more than seventeen million people in 1996. Employment in this field remained relatively steady through the late 1990s and then declined sharply in the early 2000s before leveling off between 2003 and 2005. The BLS predicts that manufacturing employment will continue to decrease by 5.4% through 2014. The 2005 unemployment rate among people most recently employed in manufacturing was 4.9%.
NATURAL RESOURCES AND MINING
The natural resources and mining supersector includes all agriculture, forestry, fishing, hunting, and mining enterprises. Farms engaged in growing crops and raising animals are included in this sector, as are lumber and fishing operations, coal mining, petroleum and natural gas extraction, and other mining and quarrying activities.
In 2005 employment in natural resources and mining made up 1.3% of all employment and approximately 7.3% of goods-producing employment. This supersector employed 625,000 people in 2005. Employment in this field has remained relatively flat since 1996 and has been predicted by the BLS to decrease by 10.7% through 2014. This is the largest projected decrease of any industry. The 2005 unemployment rate among those most recently employed in agriculture, forestry, fishing, and hunting was 8.3%, while the rate among people most recently employed in the mining industries was 3.1%.
This supersector includes such jobs as repairing equipment and machinery, promoting or administering religious activities, operating dry cleaning and laundry services, conducting personal care, death care, and pet care services, and supplying photo processing services, temporary parking, and dating services. People who work in grant making and advocacy are also included in this category.
In 2005 employment in the other services category accounted for 3.3% of all employment. This supersector employed nearly 5.4 million people in 2005, up from around 4.5 million people in 1996. Employment in this field increased steadily over that time period and has been predicted by the BLS to increase by 11.8% between 2004 and 2014. The 2005 unemployment rate among people most recently employed in other services was 4.8%.
PROFESSIONAL AND BUSINESS SERVICES
Professional and business services include legal, accounting, architectural, engineering, advertising, marketing, translation, and veterinary services. This sector also includes those who manage companies and all of the administrative support needed for a business to operate. In addition, security, surveillance, cleaning, and waste disposal services are tracked in this sector.
In 2005 employment in professional and business services accounted for 12.6% of all employment broken down as follows: professional, scientific, and technical services (5.2%); management of companies and enterprises (1.3%); and administrative and support and waste management and remediation services (6.1%). This supersector employed nearly 16.9 million people in 2005, up from fewer than fourteen million people in 1996. Employment in this field increased dramatically during the late 1990s before undergoing a mild decline in the early 2000s. Following a leveling off period in 2002 and 2003, employment began to rise again. Employment has been predicted by the BLS to increase by 27.8% through 2014. The 2005 unemployment rate among people most recently employed in professional and business services was 6.2%.
TRANSPORTATION, WAREHOUSING, AND UTILITIES
The transportation, warehousing, and utilities supersector includes businesses that transport passengers or cargo by air, rail, water, road, or pipeline. The sector also includes businesses that provide storage of goods and that support transportation activities. Also tracked in this sector are private enterprises that generate, transmit, or distribute such utilities as electric power, natural gas, and water.
In 2005 employment in transportation, warehousing, and utilities made up 3.5% of all employment, broken down as follows: transportation and warehousing (3.1%; 4.3 million employees) and utilities (0.4%; 557,600 employees). Employment in transportation and warehousing has increased slightly since 1996, when approximately four million people were employed. The utilities sector has lost employees since 1996, when 639,600 people were employed. Employment has been predicted by the BLS to increase by 11.9% in the transportation and warehousing sector and decrease by 1.3% in the utilities sector through 2014. The 2005 unemployment rate among people most recently employed in transportation, warehousing, and utilities was 4.1%.
WHOLESALE AND RETAIL TRADE
The wholesale and retail supersector encompasses private businesses that trade in products that they do not produce. Wholesalers buy large quantities of finished goods from manufacturers and sell the goods in smaller lots to businesses engaged in retail trade. Retailers then offer the goods for sale to consumers at an increased price, usually figured as a percentage of the wholesale cost. Goods in this sector are classified as durable (expected to last longer than three years) or nondurable (expected to need replacement within three years). Consumer goods in the durable sector include motor vehicles, furniture, household appliances, sporting goods, and toys. Durable goods are also sold to other businesses—for example, to the manufacturing or construction sector, including such items as machinery, equipment, metals, and construction materials. Examples of nondurable goods include paper products, drugs, apparel, groceries, books, flowers, and tobacco products. While the traditional notion of a retail establishment includes at least one store location, many retailers in the early twenty-first century operate via Internet and/or catalog sales without stores.
In 2005 employment in wholesale and retail trade accounted for 16% of all employment, broken down as follows: wholesale trade (4.4%, or 5.7 million employees) and retail trade (11.6%, or 15.2 million employees). Employment in this field has increased slightly since 1996 and has been predicted by the BLS to increase by 8.4% for wholesale trade and by 11% for retail trade between 2004 and 2014. The 2005 unemployment rate among those most recently employed in wholesale and retail trade was 5.4%.
JOB SUPERSECTOR EMPLOYMENT AS OF MAY 2006
Table 5.3 provides a breakdown of the number of employees working in each nonfarm job sector as of May 2006. At that time more than 135 million people were listed on nonfarm payrolls. Government employed nearly twenty-two million people, making it the largest job sector. Other major sectors include professional and business services (17.2 million employees), retail trade (15.2 million employees), health services (14.8 million employees), and manufacturing (14.2 million employees).
Table 5.3 also shows the changes in employment in each sector between May 2005 and May 2006. Natural resources and mining had the largest increase in employment, at 8.7%. Modest gains were achieved in construction (up 3.5%), financial activities and professional and business services (both up 2.7%), and health services (up 2.4%). Several job sectors lost employees over the year:
|Employees on nonfarm payrolls, May 2006|
|Job sector||Thousands of employees, May 2006||Change from May 2005|
|Note: Individual sectors do not sum to total due to rounding.|
|Source: Adapted from "Table B-1. Employees on Nonfarm Payrolls by Industry Sector and Selected Industry Detail," in News—The Employment Situation: May 2006, U.S. Department of Labor, Bureau of Labor Statistics, June 2, 2006, http://www.bls.gov/news.release/pdf/empsit.pdf (accessed June 19, 2006)|
|Professional & business services||17,243||2.7%|
|Leisure & hospitality||12,995||1.7%|
|Transportation & warehousing||4,399||1.2%|
|Natural resources & mining||674||8.7%|
information (down 0.3%); manufacturing (down 0.1%); and retail trade (down 0.1%).
Although many historians trace the origins of labor unions to medieval guilds (organized groups of trades-people and artisans in the Middle Ages), the modern labor movement is more directly linked to the trade unions of the early Industrial Revolution, when working conditions in factories and mines were barely tolerable and employees began to join together to demand reasonable work hours, safe conditions, and decent wages. Unions have often had tense relationships with both employers and government; at times they have been banned altogether, and the struggle between labor and employers has sometimes resulted in violence.
Labor unions have had a significant impact on the American workforce and labor policy. Unions are often able to secure higher wages and increased benefits for their members. The BLS reported in "Union Members in 2005" that 15.7 million wage and salary workers were union members in 2005. This represents 12.5% of all wage and salary workers. The percentage is unchanged from 2004, but it is significantly lower that the peak of 20.1% reached in 1983. According to the report, more than a third (36.5%) of government workers were unionized in 2005, compared with only 7.8% of private industry workers. Local governments have the most highly unionized employees, particularly teachers, police officers, and firefighters. The highest rates of union membership in the private industries are found in the transportation and utilities, information, construction, and manufacturing sectors (Union Members Summary, January 20, 2006, http://www.bls.gov/news.release/union2.nr0.htm).
Despite their successes on behalf of American workers, contemporary labor unions continue to face opposition from employers, and often from employees, who question whether the benefits of being associated with a union are worth the costs. Union members are required to go on strike when the union has an unresolved grievance against an employer, and striking union members receive only a fraction of their income in strike pay. Workers who are part of a union may also find themselves facing fines for not abiding by the union bylaws.
For employers, unions can pose other problems. Business operations can be greatly interrupted by unresolved negotiations, whether or not they lead to a strike. Further, due to the increased expenses associated with employing union members, a company's products or services might become less competitively priced in the marketplace. If sales are lost to foreign or nonunion competitors, companies may be forced to lay off employees or even go out of business.
COMPENSATION OF AMERICAN WORKERS
Compensation has two components: pay and benefits. Pay includes wages (which is the term used primarily for pay made on an hourly, weekly, or monthly basis) and salaries (which is pay calculated on an annual basis). Benefits provided by employers include paid time off from work, various insurance and retirement plans, and other programs designed to attract and keep employees.
Table 5.4 shows the wage and salary disbursements and supplements paid by employers in 2004, 2005, and calculated for 2006 based on first-quarter 2006 values. It is estimated that more than $7.3 trillion was to be paid out in compensation in 2006, up from $6.7 trillion in 2004 and $7.1 trillion in 2005. In addition, nearly $1.5 trillion in supplements was estimated to be contributed by employers in 2006, primarily for employee pensions and insurance funds. In 2004 and 2005 these supplements totaled about $1.3 trillion and $1.4 trillion, respectively.
The U.S. Census Bureau reported in Income, Poverty, and Health Insurance Coverage in the United States: 2004 (August 2005, http://www.census.gov/prod/2005pubs/p60-229.pdf) that the median U.S. household income in 2004 was $44,389. Although this value is higher than the median of $43,318 reported in 2003, there is actually no difference when inflation is considered.
Incomes differed by householder characteristics, such as age, education, work experience, and race or ethnic
|Personal income, 2004–first quarter 2006|
|[Billions of dollars, seasonally adjusted at annual rates]|
|*Revised. Revisions include changes to series affected by the introduction of revised wage and salary estimates for the fourth quarter of 2005.|
|Source: Adapted from "Table 2. Personal Income and Its Disposition (Years and Quarters)," in Personal Income and Outlays: 2006 (BEA 06-21), U.S. Department of Commerce, Bureau of Economic Analysis, May 26, 2006, http://www.bea.gov/bea/newsrelarchive/2006/pi0406.pdf (accessed June 19, 2006)|
|Compensation of employees, received||6,687.6||7,113.1||7,329.5|
|Wage and salary disbursements||5,389.4||5,712.3||5,867.4|
|Trade, transportation, and utilities||899.7||953.9||975.4|
|Other services-producing industries||2,500.4||2,669.5||2,758.7|
|Supplements to wages and salaries||1,298.1||1,400.8||1,462.1|
|Employer contributions for employee pension and insurance funds||895.5||975.0||1,022.9|
|Employer contributions for government social insurance||402.7||425.8||439.1|
origin. For example, the median annual income of house-holders ages fifteen to twenty-four years was $27,586, compared with $61,111 for those ages forty-five to fifty-four years. White non-Hispanic householders had a median annual income of $48,977 in 2004. This was less than the median income of Asian-American householders ($57,518) but greater than that of African-American householders ($30,134).
Because of price inflation, the cost of paying for goods and services increases each year for consumers. If workers do not receive a comparable increase in pay, it becomes more difficult for them to maintain their standard of living. In July 2005 the Gallup Organization conducted a poll in which workers were asked about whether they had received a pay raise from their employers in the previous twelve months and, if so, how that pay raise affected their financial situation. As shown in Figure 5.6, a majority of respondents (63%) had received a pay raise during the previous year. This value compares with 72% recorded when the same question was asked by Gallup in August of 1999. Nearly half of the people who reported receiving a pay raise in the 2005 survey believed they had "lost ground" financially over the previous year in the face of rising prices. (See Figure 5.7.) A like amount reported they had "gained ground" financially. Five percent of those receiving raises reported no change in their financial situation. Among all employed adults contacted for the 2005 poll (those who received raises and those who did not), two-thirds believed they had "lost ground," while 30% felt they had "gained ground" over the previous year.
In order to attract and keep the best employees and earn a level of loyalty from them, many U.S. employers offer benefits and incentives. The BLS tracks the avail-ability of employee benefits using national surveys. In August 2005 the agency published National Compensation Survey: Employee Benefits in Private Industry in the United States, March 2005. The results are illustrated in Figure 5.8.
As of March 2005, a large majority of employees (77%) in private industry had access to paid holidays and vacations. These were the most commonly offered benefits. Other benefits available to more than two-thirds of the workforce were medical care plans (70%), paid jury duty leave (69%), and paid funeral leave (68%). More than half of employees also had access to prescription drug plans, retirement benefits, paid sick leave, and life insurance. Less commonly offered benefits include paid military leave, dental care plans, paid personal leave, and vision care plans.
In general, employees working for larger companies—those with more than one hundred employees—and union members had the highest access to company benefits.
Typically, the total cost of monthly health insurance coverage is split between employers and employees, with employers paying the largest portion. As shown in Figure 3.8 in Chapter 3, the price of medical care grew at a faster rate between 1996 and 2005 than the price of all other consumer expenses. Due to rising health care costs, medical insurance has become a costly benefit for both employers and employees.
The BLS estimates that rising expenses for health insurance premiums are depressing wages. In other words, employers are paying lower wages than they otherwise would, because they are devoting so much money to providing health care coverage. As shown in Figure 5.9, paid hourly wages have remained relatively flat since 2002, while the price of insurance benefits has increased. As a result, a disparity has developed between actual wages and the wages that could have been paid if health insurance premiums had grown at the same rate as inflation over this time period.
NONTRADITIONAL WORK ARRANGEMENTS
Working from Home
In September 2005 a BLS report indicated that 20.7 million people worked from home at least once per week as of May 2004 ("Work at Home Summary," September 22, 2005, http://www.bls.gov/news.release/homey.nr0.htm). This represents approximately 15% of the total nonagricultural workforce, a value virtually unchanged from May 2001. The data were collected as part of a special supplement to the monthly Current Population Survey. Nearly two-thirds of the at-home workers in 2004 were wage and salary earners. The remainder was self-employed.
With technological advances such as Internet access, e-mail, and teleconferencing, working at home has become a viable option for many types of jobs. As employees conduct much of their daily work from home offices, employers are able to save on operating costs. Many employers will pay for computers, additional telephone lines, and even utilities to allow their employees to work from home offices. This allows them to reduce office space, one of the higher costs for an employer, especially in large metropolitan markets.
Self-employed workers are not on the payroll of a company. They may own or operate small businesses or work under contract arrangements with companies. According to the BLS, the number of self-employed U.S. workers has increased over the past few decades. In 1970 just over five million people working in non-agricultural jobs were self-employed. By the mid-1990s the number had reached around nine million. Approximately 9.5 million people were self-employed in 2005.
For the purposes of its statistical findings, the BLS counts anyone whose own business is their primary source of income as self-employed, whether or not they are incorporated. The occupations with the most self-employed individuals are managerial operations and sales- and marketing-related activities. But self-employment is common in other businesses as well. The BLS estimated in Career Guide to Industries: 2006–07 Edition that approximately 1.9 million construction industry workers were self-employed in 2004, including more than 40% of painters, paperhangers, and flooring installers.
FOREIGN WORKERS IN THE UNITED STATES
Relatively high wages and favorable working conditions have attracted workers from around the world to the United States. There are two broad categories of foreign workers: those who have entered the country legally with the proper paperwork to pursue work and those who have entered illegally. Legal workers are tracked by the U.S. Citizenship and Immigration Service (USCIS), formerly the Immigration and Naturalization Service.
Legal Foreign Workers
The U.S. Department of Labor issues a limited number of certifications to foreign workers to work in the United States on a temporary or permanent basis under the following programs:
- Permanent Labor Certification—Allows a foreign worker to work permanently in the United States
- H-1B Specialty (Professional) Workers—Temporary certification for workers in occupations requiring highly specialized knowledge with at least a bachelor's degree or equivalent
- H-2A Temporary Labor Certification (Seasonal Agricultural)—For workers engaged in agricultural labor or services of a temporary or seasonal nature working for employers anticipating a shortage of U.S. workers
- H-2B Temporary Labor Certification (Nonagricultural)—For nonagricultural laborers working for employers anticipating a shortage of U.S. workers; the need can be a one-time occurrence, seasonal, peak load, or intermittent
- D-1 Crewmembers Certification—For longshoremen hired to work at U.S. ports; there are numerous restrictions, one of which is that there cannot be a strike or lockout ongoing that keeps U.S. longshoremen from working
According to the DOL, "certification may be obtained in cases where it can be demonstrated that there are insufficient qualified U.S. workers available and willing to perform the work at wages that meet or exceed the prevailing wage paid for that occupation in the area of intended employment."
The U.S. Department of Homeland Security's Office of Immigration Statistics (OIS) tracks the number of foreign workers entering the United States and publishes related data in annual reports. The latest report available on nonimmigrant (temporary) foreign workers is "Estimates of the Nonimmigrant Population in the United States: 2004," published in June 2006 (http://www.uscis.gov/graphics/shared/statistics/publications/NIM_2004.pdf). The report notes that there were approximately 700,000 temporary workers in the United States in 2004. Legal permanent residents are foreigners who have obtained "green cards" and have been granted permanent residency in the United States. According to the OIS report "U.S. Legal Permanent Residents: 2005," published in April 2006, approximately 247,000 foreigners were granted employment-based legal permanent residency during 2005 (http://www.uscis.gov/graphics/shared/statistics/publications/USLegalPermEst_5.pdf).
Temporary foreign workers maintain the citizenship of their native countries, and after fulfilling their contracts with U.S. employers they typically return to their own countries. Immigrant workers are people who have come to the United States through legal channels and intend to become citizens, obtaining jobs while they are waiting for their naturalization (the process of becoming a U.S. citizen) to be finalized.
Illegal Foreign Workers
The issue of illegal immigration has become a heated topic, particularly in 2006. Much of the debate centers on the economic effect of undocumented workers—foreign workers who have entered the United States illegally. Some people claim that undocumented workers take jobs away from Americans and place a large burden on government-provided social programs. Others believe that undocumented workers are willing to take jobs that Americans do not want—low paying, labor-intensive jobs with no benefits and little to no chance for advancement.
Employers are required by law to verify that new hires are U.S. citizens or foreigners with legal working status who are eligible to work in the United States. Job applicants have to show identification and documentation, including a Social Security card. But the authenticity of these documents cannot be verified immediately. Thus, well-meaning businesses may unknowingly hire and train illegal workers who have used fake documentation to obtain jobs. According to the Christian Science Monitor, as of December 2003 the Social Security Administration had $374 billion in funds that could not be matched to valid Social Security numbers. It is believed that much of the money was paid into the system by illegal workers using fake Social Security numbers ("Jobs and Illegal Immigrants," December 4, 2003, http://www.csmonitor.com/2003/1204/p08s03-comv.htm).
In 2005 the New York Times estimated that illegal immigrants pay up to $7 billion per year into the Social Security system (Eduardo Porter, "Illegal Immigrants Are Bolstering Social Security with Billions," April 5, 2005). This represents approximately 1% of the total $700 billion paid into the system during 2005 by all workers.
There is little doubt that some businesses purposely hire illegal workers or at least ignore questionable paperwork in order to get inexpensive labor. In April 2006 the Associated Press reported on what it calls "an underground employment network" in the United States that encourages and facilitates the employment of illegal immigrants from Mexico and Central and South America ("Many Illegal Immigrants Have Jobs in U.S. before Crossing Border," April 16, 2006, http://www.foxnews.com/story/0,2933,191889,00.html). The article notes that lax enforcement of laws prohibiting the hiring of illegal workers has allowed the network to flourish. Many critics maintain that the federal government's focus on terrorism and national security has diminished attention on issues related to undocumented workers. Others believe that businesses willing to hire the workers are to blame. Like many factors in the U.S. economy, the issue of undocumented workers is driven by supply and demand factors. As one analyst notes in the article: "It continues to be clear who controls immigration; it's not governments, but rather the market."
POLITICAL DEBATE AND PUBLIC PROTEST
An August 2006 report from the Department of Homeland Security estimated that there were around eleven million illegal immigrants in the United States at the beginning of 2006 ("Estimates of the Unauthorized Immigrant Population Residing in the United States, January 2005"). Illegal immigration has become a politically charged and divisive issue. In late 2005 the U.S. Congress and Senate began drafting immigration reform bills designed to deal with the problem. Both bodies called for tighter border security. The Senate bill would allow many illegal immigrants already in the country the opportunity to obtain U.S. citizenship under certain conditions. This so-called amnesty provision has received harsh criticism from some politicians, but it has been advocated by the administration of President George W. Bush. A much tougher bill drafted in the House contained provisions that would make illegal immigrants felons. (It is a felony to enter the U.S. illegally, but illegal immigrants that are already in the United States face only civil penalties when caught.)
In December 2005 passage of the House bill caused a firestorm of controversy, particularly among the nation's Hispanic and Latino populations. In March 2006 demonstrations were held in major cities around the country to protest the proposed legislation. According to a New York Times report, "hundreds of thousands" of demonstrators participated in marches across the country (Linda Chavez, "American Dreams, Foreign Flags," March 30, 2006.) Another massive demonstration was held on May 1, 2006, in honor of "May Day," or International Worker's Day—a day historically used by activists to push for workers' rights. Organizers called for immigrants to skip work and forego shopping as part of a one-day economic boycott designed to illustrate their presence and financial clout. Media reports estimated that hundreds of thousands of immigrants and supporters participated in the event.
As of August 2006, the House and Senate bills were "in conference," meaning that a commission was working to combine the bills into one piece of legislation acceptable to both bodies. Due to the large differences in the bills, analysts have predicted that an acceptable compromise will probably not be possible in the near future.
AMERICAN JOBS GOING TO FOREIGN COUNTRIES
One consequence of the globalization of American business has been "offshoring"—the transfer of jobs from the United States to other countries. This can occur when an entire business establishment, such as a factory or service center, is relocated to another nation or when certain jobs within a business are transferred to a foreign company. The latter is also an example of outsourcing—a business practice in which certain tasks within a company are contracted out to another firm. (Outsourcing may or may not involve sending work to another country.) During the 1990s outsourcing became a popular means of reducing costs for some companies. Noncore functions, such as payroll management or housekeeping, are common examples in which outsourcing can be cost effective. Offshoring is controversial, because jobs move outside of the United States, primarily to developing countries where labor costs are much cheaper.
Critics say that offshoring harms the U.S. economy by putting Americans out of work. Others claim that relocation of some operations to foreign countries has a very limited effect on domestic employment. They argue that offshoring leads to lower prices for consumer and investment goods, with the ultimate effect of raising real wages (wages that are adjusted for changes in the price of consumer goods) and living standards in the United States.
In 2004 the BLS published data on the relationship between extended mass layoffs and overseas job relocations. An extended mass layoff is defined as an event in which at least fifty initial claims for unemployment benefits are filed against an establishment during a five-week period. According to a BLS press release issued June 10, 2004, the layoffs of 4,633 workers during the first quarter of 2004 were associated with job relocations to other countries (http://www.bls.gov/news.release/reloc.nr0.htm). This number represents just 1.9% of the total of 239,361 private-sector nonfarm workers who were separated from their jobs for at least thirty-one days during the quarter. Overseas relocations within the same company accounted for 2,976 lost jobs, while 1,657 jobs were lost to overseas workers employed by different companies.
In December 2004 a study published by Duke University's Fuqua School of Business in conjunction with Archstone Consulting found that offshoring had been very cost effective for large U.S. companies. Researchers studied the offshoring experiences of ninety large companies with average annual revenues of $21 billion. A large majority (72%) of offshore implementations had met or bettered expected costs savings. As a result, companies indicated great willingness to pursue additional offshoring opportunities. The report notes that the functions most often offshored were information technology (66%), finance and accounting (60%), engineering services (44%), and research (32%). Eighty percent of offshored operations had been transferred to India ("Fortune 500 Reap Early Cost Benefits from Offshoring Initiatives," December 10, 2004, http://www.fuqua.duke.edu/admin/extaff/news/fortune_offshore_dec_2004.htm). A combination of relatively low costs and a large number of well-educated workers who speak English has made India a popular location to offshore work.
A 2005 report published in The McKinsey Quarterly estimates that approximately 274,000 software and business-process jobs were moved from the United States to India between 2000 and 2003 ("Don't Blame Trade for U.S. Job Losses," http://www.mckinseyquarterly.com/article_page.aspx?ar=1559&L2=19&L3=67). The article notes that "although the costs were substantial for the displaced employees, a job shift of this size is small compared with the 2.1 million service jobs created every year during the 1990s and minor compared even with the net annual job increase of about 327,000 from 2000 to 2003."
PROTECTING AMERICAN WORKERS
The United States has enacted comprehensive labor laws to ensure that workplaces are operated safely and workers are treated fairly. These include relatively strict laws to protect American workers from discrimination on the basis of gender, age, race, ethnicity, religion, sexual orientation, and other factors.
The Fair Labor Standards Act (FLSA) offers protection for full- and part-time workers in private and government jobs, covering minimum wages, overtime pay, employer record keeping, and child labor. The FLSA also established the standard forty-hour workweek. Local fire and police employees typically are not covered by the FLSA. It was passed in 1938 and has been amended many times over the years.
THE MINIMUM WAGE
The FLSA established a federal hourly minimum wage that U.S. employers must honor for many nonsupervisory, nonfarm, private sector, and government employees. Most states have their own minimum wage as well. In states with minimum wages that differ from the federal, the employer must pay the higher of the two. As of May 2006, the federal minimum wage was $5.15 per hour.
There are numerous exceptions to the minimum wage law. Employers may apply for subminimum wage certificates for disabled workers, full-time students, workers under age twenty who are in their first ninety days of employment, workers who receive tips, and student-learners (usually high school students). Lawmakers reasoned that exempting employers from paying the minimum wage to certain workers—the disabled and students, for example—encourages them to hire more of those workers who may otherwise be at a disadvantage. Employers may not, however, displace other workers in order to hire those subject to the subminimum wage. Other workers exempt from the minimum wage include certain professional and administrative employees, certain workers in the fishing industry, certain seasonal employees, babysitters, and certain farm workers.
The BLS tracks the number of hourly wage earners in the United States based on the results of the Current Population Survey. According to Characteristics of Minimum Wage Workers: 2005 (May 2006, http://www.bls.gov/cps/minwage2005.htm), there were 479,000 workers paid the federal minimum wage of $5.15 per hour during 2005. Another 1.4 million workers earned less than the minimum wage. The total number of workers earning minimum wage or less accounted for 2.5% of the nearly seventy-six million people earning hourly wages that year.
Women, people under age twenty-five, part-time workers, and those without a college degree were the groups most likely to earn the minimum wage or less. Jobs in the service sector—particularly those related to food service—had the highest rate (about 8% of the total) of workers making $5.15 or less per hour. In some cases, however, those who work in food and beverage service jobs also earn tips, which supplement their hourly wages.
The minimum wage policy is not without controversy. Advocates for low-income workers believe the minimum wage should be increased on a regular basis to keep up with the effects of inflation. The current minimum wage of $5.15 per hour has been in effect since 1997. But, according to the BLS, inflation has increased at a rate of around 2.5% per year over this time period. (See Figure 2.3 in Chapter 2.) Opponents of the minimum wage assert that wage levels should be determined by market conditions and supply and demand factors. They argue that forcing businesses to pay a higher minimum wage discourages new hiring of low-income workers.
In October 2005 the Senate rejected a proposal to raise the minimum wage to $6.25 per hour. In August 2006 another bill, which would have raised the minimum wage to $7.25 per hour gradually over three years, was rejected by Senate Democrats because Republicans had tied a permanent reduction in the estate tax, as well as a total of $38 billion in other tax breaks, to the wage increase.
Meanwhile, state and local governments began taking action in response to public disappointment about low wages. In July 2006 the Chicago city council approved an ordinance requiring "big-box" retailers—stores that are larger than ninety thousand square feet run by companies doing more than $1 billion in business annually—to increase their minimum wage to $10 per hour by 2010 and spend no less than $3 per hour on employee benefits. In August 2006 the State of California announced an agreement struck between state legislators and California governor Arnold Schwarzenegger to raise the state's minimum wage from $6.75 to $8 per hour over two years.
CHILD LABOR LAWS
In an agricultural economy children typically begin working on the family farm or are apprenticed out to other farms at early ages. In the American colonial period children as young as three whose parents couldn't afford to support them were apprenticed out to work. This was the case in the United States until the early nineteenth century, when the Industrial Revolution permanently changed the American economy and way of life. Because they were considered easier to manage, less likely to unionize, and could be paid far less than adults, children became desirable as workers in the industrial economy, particularly in factories, mines, cotton fields, and the textile industry.
With no laws to regulate children's work, and no mandatory school attendance, the use of children as a cheap labor source became a widely accepted practice. Children as young as six worked thirteen-hour days, six days per week. They frequently suffered from hunger and malnutrition, work-related injuries, and diseases. Although social reformers began to campaign for child labor laws in the mid-nineteenth century, and the National Child Labor Committee was formed in 1904, it was not until the passage of the FLSA in 1938 that child labor in the United States was finally regulated by the federal government.
The FLSA prohibits employers from hiring children under the age of sixteen, although fourteen- and fifteen-year-olds are allowed to work at nonmining, nonmanufacturing jobs as long as the hours worked do not interfere with time spent in school and are not hazardous to the young person's health and well-being. The FLSA also prohibits anyone under age eighteen from working at jobs considered dangerous. Babysitting, delivering newspapers, and working in the entertainment industry are all specifically exempted from the provisions of the FLSA, and children of migrant farm workers often are not protected by the legislation because of the transient nature of their families' lives.
The Occupational Safety and Health Administration (OSHA) was formed in 1971 to institute and monitor safety regulations in the workplace. Focusing mainly on industries with high rates of work-related injuries and illnesses, OSHA works directly with employers and employees to ensure that health and safety standards are followed.
According to the BLS, there were 5,703 fatal work injuries during 2004, an increase of 2% from 2003. The most frequent events blamed for the deaths were highway incidents, falls, being struck by objects, and workplace homicides. The industries with the highest number of fatal work injuries were construction; transportation and warehousing; agriculture, forestry, fishing, and hunting; government; and manufacturing ("National Census of Fatal Occupational Injuries: 2004," August 25, 2005, http://stats.bls.gov/news.release/pdf/cfoi.pdf).
The BLS reported 4.3 million nonfatal work injuries and illnesses in the private sector in 2004, down slightly from 4.4 million in 2003. Illnesses accounted for 249,000 of the cases in 2004. The industry sectors with the largest number of nonfatal work injuries were manufacturing, health care and social assistance, retail trade, construction, and leisure and hospitality ("Workplace Injuries and Illnesses in 2004," November 17, 2005, http://stats.bls.gov/iif/oshwc/osh/os/osnr0023.pdf).
Whistleblower Protection Laws
A whistleblower is a person who reports unlawful activity in the workplace to the authorities. At one time whistleblowers were subject to demotion, threats, harassment, and firing if their reports were discovered by their employers, who wanted to prevent public scandals and avoid facing criminal and civil charges. But in 1989 the federal government passed the Whistleblower Protection Act to protect employees who report evidence of criminal wrongdoing in the workplace. In May 2002 President Bush signed the Notification and Federal Employee Anti-discrimination and Retaliation (NoFEAR) Act, which strengthened protections for whistleblowers by requiring federal agencies to be accountable for violations of whistleblower laws. Some states have their own additional whistleblower protection laws.
The Equal Employment Opportunity Commission (EEOC) enforces federal workplace discrimination laws. It is composed of five commissioners and a general counsel who are appointed by the U.S. president and approved by the Senate. In addition to its enforcement role, the EEOC has a training institute to educate employers on workplace discrimination and help them comply with the laws. The federal antidiscrimination laws that fall under the EEOC's watch are:
- The Equal Pay Act of 1963 (EPA), which protects men and women who perform approximately equal work in the same workplace from gender-based wage discrimination
- Title VII of the Civil Rights Act of 1964, which prohibits employment discrimination based on race, color, religion, sex, or national origin, including sexual harassment and discrimination against pregnant women
- The Age Discrimination in Employment Act of 1967 (ADEA), which protects individuals who are forty years of age or older. The ADEA applies to both employees and job applicants
- Titles I and V of the Americans with Disabilities Act of 1990 (ADA), which prohibit employment discrimination against qualified individuals with disabilities in the private sector, as well as in state and local governments (the ADA applies to people with both physical and mental impairments)
- Sections 501 and 505 of the Rehabilitation Act of 1973, which prohibit discrimination against qualified individuals with disabilities who work in the federal government
- The Civil Rights Act of 1991, which, among other things, provides monetary damages in cases of intentional employment discrimination