Chapter 10 Reading PDF

Work serves a number of purposes, not all of them monetary. Many things go into making a job worth having, such as prestige, independence, and authority; socializing with fellow workers; and the opportunity for personal growth. But the mention of these benefits should not obscure an inescapable real...

Work serves a number of purposes, not all of them monetary. Many things go into making a job worth having, such as prestige, independence, and authority; socializing with fellow workers; and the opportunity for personal growth. But the mention of these benefits should not obscure an inescapable reality of work: were it not for the daily wage or monthly salary it provides, many people would choose to do something else with their time. This chapter will consider the connection between work and income, particularly why some people are well rewarded for the work they do while others earn barely enough to get by from day to day. The size of a wage or salary is also important when occupations are ranked in terms of prestige, but it is not the only determinant. A number of attributes determine the relative prestige of occupations, and these will be taken up toward the end of this chapter. The Determination of Wages and Salaries: Market Economics Once Again It might be thought that the size of workers’ paychecks is directly tied to their contributions to the firms that employ them. Yet, from the outset, it has to be recognized that variations in pay cannot be explained solely on the basis of the skills and abilities of individual workers. Formal education, race, gender, and age also are important determinants of wages and salaries. Then there is the puzzling fact that within the ranks of workers with similar or even identical characteristics, some workers may get substantially more or less than others for no apparent reason.1 In the awarding of pay, as with most other aspects of life, quite a lot of variability cannot easily be explained through the invocation of economic and sociological reasoning. Our inability to fully explain wage and salary differentials does not mean that the determination of worker compensation is a totally random process. The motivations of employers and their employees usually have a powerful overlay of economic self-interest, and as a starting point, we need to consider how the workings of the labor market affect wages and salaries. Chapter 7 noted how the rate of remuneration influences the number of hours an employee is willing to work at a given job and the number of hours an employer is willing to offer. The same supply-and-demand analysis can be used to explain a sizable amount of the variations in pay found among workers. That these differences exist is obvious; a movie star might make more in a week than a sanitation worker does in a year of difficult, odiferous work. At first glance, this seems to reflect a strange set of priorities. After all, what is more essential, entertainment or the safe disposal of waste? We could go for a long time without seeing a movie, but life would become pretty miserable if all the drains backed up for prolonged periods of time. We might, therefore, assume that the high level of demand for the safe disposal of sewage should result in high rates of remuneration for anyone willing to do the inherently unpleasant task of keeping the sewers clear. Such is not the case, of course, for a simple reason: this kind of work does not require uncommon talent and/or skills acquired through years of training. Anybody with sufficient physical strength and endurance can do the job, which means there is a large potential supply of sanitation workers. And when the supply of labor or any other commodity is easily expanded, the price paid for that commodity (in this case, unskilled labor) will be low unless the demand for it increases. While an oversupply of workers and potential workers will drive down their remuneration, the same will happen when there is only a limited demand for a particular kind of work. Certain occupations have only a small market for their services—think of madrigal singers, professional lacrosse players, and goat herders—and this is likely to be reflected in low levels of remuneration for the few who are employed in these lines of work. There are some kinds of work that are not in great demand, but this is offset by an even more restricted supply of capable workers. Not many steam locomotives are in service today, but few people have the skills necessary to operate them. Consequently, it may be possible to earn a decent living operating steam locomotives used for tourist trains and other special attractions. Following from this line of reasoning, the best-paid occupations are likely to be those where the work is much in demand but only a few people have the skills necessary to do it. This is a situation that may arise for many reasons. One of these is demographic change, as happened in the years following World War II. The postwar baby boom substantially increased demand for a variety of occupations, such as obstetric nurses, pediatricians, and primary school teachers. Because people with the necessary skills could not be produced overnight, workers in these fields had a lot of bargaining power, which was reflected in the salaries they received. Technological change can also affect the supply–demand balance, with favorable results for certain kinds of workers and unfavorable consequences for others. According to some observers, the wages of unskilled manufacturing workers have fallen or remained stagnant in recent years as automated processes have become an integral part of industrial production. In sharp contrast, the development and rapid spread of personal computers have created numerous high-paying jobs for people with the requisite skills, such as computer scientists, engineers, programmers, and systems analysts. Whether or not technological change has been a prime reason for widening pay gaps remains controversial, however, and the topic will be taken up later in this chapter. In any event, the monetary gains made by the latter group are likely to be temporary as growing numbers of people acquire the necessary skills and increase the supply of qualified workers, thereby undercutting their aggregate bargaining power. Useful though it may be, explaining wage and salary differences by invoking market-based economics takes us only so far. For one thing, “demand” has to be recognized as a social creation. Some kinds of jobs have been imbued with great value because their practitioners have convinced significant numbers of people that this is so. Atheists, agnostics, and other skeptics might put members of the clergy in this category. Academics have boosted their job prospects by successfully arguing that a college education is essential for future financial success. Medical care providers of all sorts have benefited from the “medicalization” of many human failings, everything from alcoholism to compulsive gambling.2 Whether or not this process has been good for individuals and society can be endlessly debated, but it certainly has boosted demand for a variety of medical practitioners. While trying to increase demand for their services, professionals and semi-professionals also have attempted to maintain their incomes at high levels by addressing the supply side of the equation. As noted in Chapter 9, holding down the number of practitioners is largely done by limiting access to credentialing institutions. To take two examples, the lawful practice of medicine is restricted to men and women who have attended an accredited medical school, while most full-time, tenured positions at colleges and universities are occupied by holders of PhD degrees. There is nothing inherently unreasonable about this; consumers of professional services expect that practitioners will be competent and adequately trained. At the same time, it is also true that the restriction of admissions to medical schools and graduate programs limits the supply of physicians and college professors, thereby reducing competition and protecting the incomes of established members of the profession. The Widening Income Gap The income differential that separates professional practitioners from most other workers is only one aspect of a larger phenomenon: the large and growing income gap that separates a relatively small number of income earners from the rest of the working population. This situation can be demonstrated by dividing households into quintiles (i.e., the bottom 20 percent, the next 20 percent, and so on) and noting the share of income that goes to each quintile. An analysis of this sort shows substantial inequality in the distribution of income in the United States. In 2009, only 3.4 percent of the nation’s income went to the bottom quintile of American households. Families in the second, third, and fourth quintiles received 8.6, 14.6, and 23.2 percent, respectively, while those in the top quintile took in 50.3 percent of the nation’s income.3 Translated into dollars, this means that in 2009, the mean household income for the bottom quintile was $11,552, while the equivalent figures for the second, third, and fourth quintiles were $29,257, $49,534, and $78,694, respectively. The mean household income for the top quintile came in at $170,844.4 The gap between the incomes of the top quintile and those of everyone else has grown with few interruptions over the past three decades. In 1975, the top 20 percent of American households accounted for 43.6 percent of the nation’s income. By 1985, the figure was 45.6 percent, and in 2009, as just noted, it had climbed to 50.3 percent.5 During this period, the share of household income going to all but the top quintile declined or stayed the same, while the portion accrued by the top 5 percent of families increased almost without interruption from 16.5 percent in 1975 to 21.7 percent in 2009.6 These figures give a general idea regarding the distribution of income and wealth over the past 3½ decades. The stated numbers do not provide a completely accurate picture because they may be affected by sampling errors and the difficulty of putting a monetary value on some things that are not counted as income on official statistics, such as food stamps for the poor and lavish “business” trips for those at the other end of the scale. Charting the distribution of income also is complicated by the changing size and composition of households. For example, the increased number of households headed by single mothers has contributed to the decreased share of total income received by the lowest quintiles. Nonetheless, the trend is clear: income inequality in the United States has increased in recent years and shows no signs of abating (see Figure 10.1). Along with a wage or salary, employee compensation often includes a package of benefits, primarily health insurance and a pension plan. The issue of health insurance is an important topic, one that deserves more space than can be devoted to it here. In virtually all economically developed nations except the United States, providing healthcare to everyone is a government responsibility, although employers usually are a prime source of funding. In the United States, the federal government covers men and women over the age of 65 through its Medicare program, and a joint federal–state program known as Medicaid provides healthcare insurance to the poorest segment of the population. For everybody else, the prime providers of health insurance are their employers—if they offer it. In reality, a significant portion of workers, including many with full-time jobs, lack this coverage, and they constitute a sizable share of the approximately 50 million Americans without health insurance. And even individuals with insurance have met with some unpleasant surprises as insurers have tried to limit coverage in the face of relentlessly rising healthcare costs. Employers also have been squeezed by rising healthcare costs. The large-scale adoption of HMOs (health maintenance organizations) and PPOs (preferred provider organizations) brought some temporary financial relief in the 1990s, but the United States still devotes a larger portion of its gross national income to healthcare (more than 17) than any other country does. Paradoxically, however, these costs are not matched by higher levels of health. Quite the opposite: the United States ranks 24th in life expectancy and 36th in rates of infant mortality.7 Some of the shortcomings of the American healthcare system were addressed when President Obama signed into law the Patient Protection and Affordable Care Act in 2010. The legislation contains a lengthy set of provisions and runs to about 1,000 pages, so only the briefest summary can be presented here.8 The first phase allows men and women under the age of 26 to remain on their parents’ policies and does away with the lifetime expenditure limits found on some policies. It also establishes a high-risk insurance pool for individuals who have had difficulty obtaining insurance and provides payments for a number of preventative procedures. Bigger changes come in 2014, with more individuals covered by Medicaid along with the establishment of regulated insurance exchanges expected to increase competition among insurers. The most controversial element prevents insurance companies from denying coverage while, at the same time, requiring individuals to buy a policy if they are not already covered. Mandatory purchase of health insurance is an essential part of the package; otherwise, many individuals would not buy insurance until they got sick. The legislation also funds a number of state-based programs to allow experimentation and innovation aimed at improving services and reducing costs. This latter point is significant. Although the legislation encompasses potentially cost-saving features, such as picking up the bill for some preventative procedures, it does not directly engage the seemingly inexorable rise in medical costs, which are likely to get only worse as the population ages. The current pension system also should be a cause for concern. The provision of employee pensions increased substantially after 1974 when the Employment Retirement Income Security Act set minimum standards for employer-based pension plans and established the Pension Benefit Guaranty Corporation as a backstop in the event that an employer cannot meet its pension obligations. With the establishment of employer-sponsored pension plans, large numbers of employees have been freed from a future of subsisting on Social Security payments and whatever money they had been able to put aside during their working years. For some commentators, this has represented substantial change in the distribution of wealth and income, a kind of backdoor entry into socialism.9 As things have turned out, the revolution has been incomplete at best. In the first place, it is a strange kind of socialism that does little to close the aforementioned earnings gap. Unionized workers, who tend to have higher wages and salaries than nonunionized workers do, also are more likely to have pension plans—so this benefit has actually increased the income differential between them and nonunionized employees. Only when government-administered Social Security benefits are taken into account do pensions serve to reduce income inequality.10 Of greater importance to individuals, however, is whether their pensions will deliver what they promise. Until fairly recently, pensions were, for the most part, “defined benefit” plans. That is, they promised a certain sum would be paid out to retirees on a regular basis. Today, about 20 percent of private-sector employees have defined benefit plans. All other pensions are of the “defined contribution” variety, which directly tie future benefits to the money contributed by individual employees. These funds are often, but not always, supplemented by employer contributions. In either case, these plans usually are inferior to defined benefit plans in what they pay to retirees. But even defined benefit plans may be sharply reduced when a firm declares bankruptcy and leaves pensioners with far less money than they had expected. Some retirees with defined contribution plans have encountered a dramatic reduction of their pensions or even lost them altogether because the funds were invested in the stock of crooked employers, such as Enron and WorldCom. In both of these prominent cases, $1 billion in pension funds permanently disappeared.11 Even the pension funds of financially healthy firms can be underfunded by hundreds of millions of dollars because management appropriated a portion of these funds when they were deemed excessive. As with provisions for healthcare, future retirees may find they will get a lot less than what they thought they had coming to them. Why Has Income Inequality Increased? There is no way to put a positive spin on the possible loss or precipitous reduction of pension and healthcare benefits for substantial numbers of workers. Many observers also find the widening income gap to be problematic, but some have seen it in a favorable light. It can be argued, after all, that unequal incomes reflect the greater contributions of high-income earners and that reduced income differentials might diminish the motivation to move up in the world.12 There is certainly an element of truth to these assertions, but in regard to the first point, the ability to earn a high income reflects more than individual effort and talent. As we have seen in Chapter 7, membership in a social network considerably enhances the prospect of getting a good job, and such membership usually is based on the family one was born into or the neighborhood in which one lives. Having a college education also greatly enhances earning power, but as we also have seen, educational opportunities have a lot to do with the economic status of one’s family. In regard to the second point, that unequal rewards are effective sources of individual motivation, only the most idealistic would claim that personal ambition and the willingness to undergo long periods of training are not affected by the opportunity to earn more money in the future. But how wide an income gap is necessary to ensure adequate levels of motivation? There is no easy answer to this question, but it is worth noting that the income gap was much narrower from 1945 to 1975, yet worker productivity and the economy as a whole grew more rapidly than it did in the years that followed. It also can be noted that in all branches of the U.S. military, the income differences that separate the lowest-level enlisted man or woman from top commanding officers are far less than in civilian industries, where CEOs and other high-level managers enjoy incomes several hundred times greater than the earnings of ordinary workers. It may be, of course, that what really matters to workers at all levels is the absolute size of their paychecks, not how they compare with their bosses or with other workers. But even here, the record of the past three decades has not given much reason for cheer, especially for employees with only high school diplomas or less. For the past three decades, these workers have experienced essentially flat or even declining real earnings (i.e., earnings that reflect increases in the cost of living). The incomes of workers with at least some college have moved generally upward, but most of the gains have gone to the most highly educated group, those with college and postgraduate degrees. And even if all workers had experienced some degree of wage growth, it is not certain that absolute increases in one’s material standard of living compensate for the sense of falling behind other people whose incomes are advancing much more rapidly. The existence of a large income gap that shows no signs of abating is indisputable. More difficult is explaining what has caused it. A major economic and social shift is likely to have multiple causes, and such has been the case with changes in the distribution of wages and salaries. A consensus on the exact contribution of each of these remains elusive, but there is general agreement regarding the sources of income inequality, delineated in the following sections. Unemployment and Income One of the strongest influences on wages, especially for workers at the bottom end of the scale, is the overall rate of employment. When the unemployment rate is low, the relative shortage of workers causes employers to increase wages for open positions. And even if workers are reluctant to move to a new job, the possibility of doing so gives them more bargaining power with their employers. Conversely, a high rate of unemployment limits workers’ options and sharply reduces their ability to demand higher wages. This situation is particularly pronounced for low-income workers. According to one study, each percentage point increase in the unemployment rate lowers the income of families in the bottom quintile by 1.8 percent, in the middle quintile by 1.4 percent, and in the top quintile by 1.0 percent.13 Conversely, when unemployment is low, the incomes of low-wage workers increase by a higher percentage than they do for other workers, but these increases are applied to a lower base, so the actual monetary gains will be modest. Periods of large-scale unemployment have been recurring episodes in American economic history. The most severe was the Great Depression of the 1930s. Shorter and less intense periods of unemployment accompanied several economic recessions in the postwar era. Nothing in recent decades, however, has done as much damage as the Great Recession that began at the end of 2007 and the beginning of 2008. On Labor Day 2010, the ranks of the unemployed stood at 14.9 million people, or 9.6 percent of the labor force.14 An additional 8.9 million were employed part time because they could not find a full-time job. To make matters even worse, three-quarters of the jobs created in that year were in low-paying areas such as food preparation and retail sales.15 Not only were millions of workers rendered jobless during the Great Recession, but large numbers of them remained unemployed for a long time; 42 percent were without a job for more than 6 months.16 Extended periods of unemployment, especially at the beginning of a working life, have consequences that will be felt for many years. One study of workers who found a job after having been laid off during the 1981–1982 recession noted that, on average, they suffered an earnings loss of 30 percent when compared with workers who had remained employed and that even after the passage of 15 to 20 years, they still had not closed the gap.17 For new entrants to the labor market, the effects of a recession may be even worse. According to one widely quoted study, white men who graduated during that same recession earned 6 to 8 percent less for each percentage point increase in the unemployment rate when compared with employees who had graduated in more prosperous times. Their situation improved by about a quarter of a percentage point in each following year, but 15 years after their graduation, their earnings were still 2.5 percent less when compared with workers who had graduated amidst better economic circumstances.18 Income Distribution in a Changing Economy Another source of persistent income disparities has been structural change in the U.S. economy. In Chapter 3, we saw how the service sector has overwhelmed the primary and secondary sectors as a source of employment and now provides jobs for nearly 80 percent of the workforce. This has been a positive development for some service industry workers; physicians, bond traders, and attorneys earn handsome incomes for the work they do. But the service sector also includes vast numbers of janitors, fast-food workers, and retail clerks whose wages often are not much above the poverty level, if even that.19 In contrast, the manufacturing sector does not exhibit as great an income spread, and on average, workers in this sector have enjoyed higher wages and salaries than have workers in the service sector. For these reasons, many economists and sociologists have pointed to the rise of the service sector and the parallel decline of manufacturing as important sources of increasing economic inequality.20 Computerization and Income Inequality Technological advance has proceeded in parallel with some fundamental changes to today’s economy and the kinds of work it supports. As we have seen in Chapter 5, technology has been assailed, not always fairly, as a source of unemployment. Technological change also has been implicated as a cause of widening income inequalities. Its effects can be seen in the widespread adoption of the most significant work-related artifact of recent decades, the computer. As with technological change in general, the use of computers has benefited some groups of workers and put others at a disadvantage, but its effects have been more indirect and subtle than is often appreciated. More productive workers generally earn more than less productive ones, so it may be expected that employees whose work entails the use of computers will earn higher wages and salaries. One statistical analysis of wage trends did find a positive association between wages and the extent of computer usage, both within industries and across them.21 Another study found that the frequency of computer use at work was highly correlated with workers’ educational attainments, which in turn are important determinants of income.22 But the real impact of computers on the distribution of wages and salaries may not be as much a consequence of what workers can do with computers as it is a consequence of what computers cannot do by themselves. As Frank Levy and Richard J. Murnane have emphasized, computers can take over routine tasks that employ set procedures, but human workers are still needed for dealing with problems that cannot be solved through the application of these procedures. Equally important, computers are poor substitutes for skilled employees when it comes to engaging in what Levy and Murnane call “complex communication,” the ability to organize, interpret, and convey information in ways that are most useful and relevant to the recipients of that information.23 Looking at the other side of the coin, the widespread diffusion of computers in the workplace has diminished the need for employees who are capable of performing only routine manual or simple cognitive tasks. As a result, occupations and individual jobs that require little more than these capabilities have grown at a slower rate than the ones that require higher-order cognitive and communication skills.24 Consequently, workers in the first category have had little leverage as far as wages, salaries, and benefits are concerned, while employees in the second category are in a much more advantageous bargaining position. In sum, it is not the possession of computer skills that has boosted the incomes of better-educated workers; their ability to do what computers are incapable of doing has been of greater significance. Globalization, Employment, and Income For many observers of the economic scene, the most important cause of current income disparities has been globalization, the collection of cultural, economic, and demographic changes described in Chapter 6. More specifically, it is often noted that jobs have been lost and wages driven down by “offshoring,” the relocation of productive activities to low-wage countries overseas. Although offshoring has been most evident in the manufacturing sector, a growing number of service industry jobs have moved abroad in recent years. Radiologists in India interpret CT scans, accountants in the Philippines audit the accounts of American firms, engineers in China design circuits for the next generation of microchips, and engineers in Poland produce plans and blueprints for the construction of massive industrial complexes.25 According to critics of economic globalization, sending work abroad has had overwhelmingly negative effects on domestic labor. Since many poor countries have large reservoirs of skilled and unskilled labor, they can manufacture goods and provide services more cheaply than can be done in the United States and other advanced industrial nations, bringing a substantial loss of jobs in their wake. Even if jobs are not lost, it is argued, competition with foreign workers will inevitably drive down domestic wages and salaries.26 Are these fears justified? Although economic globalization is often blamed for job losses and falling incomes, its effects may not be as severe as its critics claim. In the first place, the number of unskilled but well-paying jobs lost to foreign competition has not been large up to now. Job losses caused by offshore competition have been well publicized, but at least until the onset of the Great Recession, the number of jobs relocated abroad had been smaller than the number of new jobs being added to the economy as a whole.27 Widespread unemployment caused by globalization is unlikely because tens of millions of jobs, both old and newly created, can be found in industries such as retail trade, healthcare, education, and law enforcement—jobs that are difficult or impossible to relocate abroad. Other types of work are more easily transferred to low-wage foreign countries, but the extent of relocation likely will be limited by communication difficulties, deficiencies of foreign workers, the loss of tacit knowledge acquired by home-grown employees, and the negative publicity that attends sending jobs abroad. At the most general level, the effects of globalization are similar to those of technological change. As with technological change, globalization has directly created well-paying jobs in a number of industries and sectors, everything from action movies to soybean cultivation. It also has indirectly stimulated employment by increasing the spending power of consumers. For example, the globalization of the textile industry, which has been going on for decades, has brought significant reductions in the cost of fabrics and apparel. These reduced costs, in turn, have allowed consumers to spend more money on other goods and services, thereby creating new employment opportunities in the firms that supply them. Globalization, however, also parallels technological change in that not everyone benefits from the process, and some suffer major losses. To return to the example of textiles, the economy as a whole has benefited from globalization, but this fact provides no comfort to American textile workers who have lost their jobs because their home-grown industry cannot compete with Asian or Latin American producers. Unions and Workers’ Incomes Beginning in the 19th century and continuing through the 21st, labor unions have battled, with varying degrees of success, to improve the pay and working conditions of their members. Efforts to aggregate and mobilize groups of workers in the United States began with the formation of the Knights of Labor in the years following the Civil War. At the turn of the 20th century, many skilled workers were organized into craft unions, which in turn were affiliated with the American Federation of Labor (AFL), founded in 1886. In the 1930s, a new form of unionization emerged, one that took in all the workers in a particular industry, skilled and unskilled alike. Under the banner of the Committee for Industrial Organization (CIO), several of its member unions won significant victories—most notably when the United Auto Workers Union (UAW) staged a sit-down strike at General Motors that forced GM’s recognition of the union as the workers’ bargaining agent in early 1937. The UAW then went on to successfully organize workers at Chrysler and Ford. Despite these successes, differences in organizing tactics led the AFL to expel the constituent unions of the CIO. The breach was healed in 1955 when the CIO (which now stood for Congress of Industrial Organizations) and the AFL reunited as the AFL-CIO. In the year of the AFL-CIO merger, 37 percent of American workers belonged to unions,28 but in the decades that followed, union membership declined substantially. By 2009, a mere 12.3 percent of all workers belonged to unions. Only 7.2 percent of workers in private industry were union members; in contrast, 37.4 percent of workers in all levels of government belonged to unions. Although the private sector employs five times as many workers as the public sector, there are now more unionized workers (7.9 million) in the latter than in the former (7.4 million).29 The extent of union membership also differs considerably from industry to industry. Utilities and transportation have relatively high rates of union membership at 22.2 percent, followed by telecommunications (16 percent) and construction (14.5 percent). In manufacturing, a former bastion of union membership, only 10.9 percent of the workforce is unionized.30 Bringing up the rear is financial services (1.8 percent), followed by agriculture and related industries (1.1 percent).31 Economists have long debated how much influence unions have exerted on the setting of wage rates. It seems evident that the power of a union, underscored by its ability to call for a strike, should make a union a more effective bargaining unit than a collection of unaffiliated workers. At the most general level, this is true; when background factors such as industry, occupation, region, education, and experience are comparable for union and nonunion workers, workers who belong to unions earn wages that are 14.1 percent higher than those of unaffiliated workers.32 Unionized workers also receive 15 to 25 percent more in benefits such as health insurance.33 Unionization also appears to have a positive effect on workplace training and development.34 Although the benefits of union membership extend to all members, some workers benefit more than others. The union wage premium for African Americans and Hispanics is 18.3 and 21.9 percent, respectively, whereas it is only 12.4 percent for whites. Women workers get the least relative benefit, a premium of 10.7 percent.35 Union–nonunion wage differentials are especially pronounced for low-skilled workers,36 and unions are particularly good at protecting the wages of the most vulnerable workers.37 In some cases, unions also benefit nonunion workers through the “threat effect,” which causes employers to set wages, salaries, and benefits at levels comparable to those found in unionized enterprises in an effort to forestall unionization.38 This tactic has been particularly notable in the automobile industry, where Japanese, German, and Korean firms have set up most of their operations in the American South, a region where unions historically have been weak. Despite organizing efforts by the UAW, it has remained that way, in large measure because wages and benefits have remained closely tied to those received by union members in other parts of the country. The ability of unions to deliver higher wages to their members and some nonunion workers is good news for them, but the gains that accrue for union workers have to come from somewhere. In the best of all worlds, the union premium would result from the higher productivity of unionized firms; instead of commanding a larger slice of a small pie, productivity gains would allow workers and management to share bigger slices of a larger pie. Unfortunately, such usually is not the case. As with all aspects of unionization, the relationship between unionization and productivity varies from firm to firm and industry to industry,39 but on average, the effects of unionization on productivity are close to negligible.40 It may be that firms with cooperative labor relations and effective approaches to human resource management boost productivity in unionized firms, but such combinations are rare.41 During the high tide of unionization in the 1950s and 1960s, many unions were able to obtain high wages, salaries, and benefits because their members were employed in large, oligopolistic industries. Under these circumstances, the cost of generous remuneration packages could be passed on to customers in the form of higher prices. But in today’s globalized economy, competition from foreign firms has undermined the oligopolistic position once enjoyed by many domestic firms and has forced them to hold the line on prices by reducing their labor costs. In contrast, many of the services provided by federal, state, and local governments—such as education, infrastructure construction and maintenance, policing, firefighting, and public health—cannot be outsourced to a significant degree. Accordingly, the lack of competition in the public service sector helps explain why governments support significantly higher levels of unionization than firms in the private sector do. In the absence of productivity improvements or oligopolistic markets, union premiums most likely will result in lower profits or lower employment as capital is substituted for labor. In regard to profitability, most studies point to lower profits for unionized firms.42 Whether or not this is viewed as good or bad depends on one’s beliefs regarding what constitutes a fair and proper apportionment of a firm’s earnings between the owners of an enterprise and its employees. The tendency of unionization to slow the growth of employment in particular firms and industries43 also raises issues regarding the fairness of one group making gains at the expense of another group. Some firms have been willing, if only grudgingly, to accept unionization and the lower profits that sometimes come with it. On the other hand, many private-sector firms have engaged in aggressive efforts to undermine unions and diminish their influence. To do so, employers can legally prevent union organizers from contacting employees at the workplace, require workers to attend anti-union presentations, and make “forecasts” (threats are illegal) of plant closures and job losses.44 Moreover, although it is illegal to fire employees for trying to organize a union, employers often are able to find other reasons to terminate would-be organizers and other union activists. Unionization began in the 19th century as an effort to improve the wages and working conditions of rank-and-file workers. This effort achieved many successes during the first half of the 20th century, but today, unionization is at a low point, especially in the private sector. There have been a few victories, most notably the ability of the Service Workers’ International Union to organize workers in the healthcare, private security, and public services industries. Yet, judged on the basis of how much their members earn, the most successful unions have worked on behalf of some of the best-paid members of the workforce: airline pilots, professional athletes, and upper-echelon public officials.45 When the first leader of the AFL, Samuel Gompers (1850–1924), was asked what he wanted for the members of his union, he famously answered, “More.” One can only wonder if these are the workers on whose behalf he would be speaking were he alive today. Immigration and Income As we saw in Chapter 6, large-scale immigration is not a recent phenomenon. The same can be said of the concerns that immigrant labor undermines the earning power of native-born workers. The presumed connection between immigration and low wages was an article of faith for early 20th-century union organizers, who were among the chief opponents of unchecked immigration. So great was their fear of cheap labor coming from abroad that the aforementioned Samuel Gompers, himself an immigrant, refused to support efforts to unionize Jewish immigrant garment workers in New York and Filipino farmworkers in California.46 Gompers and other early union leaders were wrong about the long-term effects of immigrant labor, but what about today? Although it is reasonable to expect that an increase in the supply of workers will drive down wages and salaries, at least in the short run, one recent study on the effects of immigration on remuneration came to the opposite conclusion.47 Based on data spanning the years 1990 to 2004, the study found that in California, immigration increased the wages of native-born workers by an average of 1.8 percent each year. As with recent wage trends in general, the benefits were not distributed equally; as a result of immigration, the wages and salaries of high school graduates increased, on average, by 2.4 percent annually, and workers with some college experienced annual increases of 3.4 percent. High school dropouts, in contrast, lost 1.1 percent of their annual wages on average. What seemed to have happened was that while many immigrants took low-skilled jobs, significant numbers of native-born workers moved upward into jobs that required a better command of the English language and more familiarity with American culture. It is also likely that wages and salaries were boosted by increases in capital investments as employers slowly accommodated the influx of new workers. In assessing the impact of immigration on wages and salaries, it is important to keep in mind that immigrants are a diverse population. In the crucial matter of educational preparation, although many immigrants are not well educated, others have university and postgraduate degrees that qualify them for high-level jobs in medicine, education, management, science, and engineering. At the other end of the scale, however, can be found large numbers of immigrant workers who have not finished high school. In 2007, 29.1 percent of adult immigrants had not completed high school, significantly more than the 6.1 percent of native-born men and women who lacked a high school diploma.48 Workers with poor educational credentials face bleak job prospects, no matter what their immigration status may be. But for many immigrant workers, even a poorly paying job in the United States or other developed country is a significant improvement over what could be found at home. These workers form the bulk of the labor force in certain sectors of the American economy. Some industries, such as vegetable and fruit cultivation in California and the Southwest, are heavily dependent on immigrant workers, many of them undocumented. The willingness of large numbers of immigrant workers to accept low rates of remuneration is, of course, what makes them appealing to employers, and for workers lacking legal immigration status, the threat of deportation produces a docility that can be easily exploited. Employers are more likely to offer market-level wages and salaries to well-educated immigrant workers, many of whom intend to stay in the United States, where their skills are in greater demand than in their native countries. Although well-educated immigrants may have put some downward pressure on the salaries of engineers, nurses, and computer programmers, the chief victims of immigration have been low-skilled, U.S.-born workers whose already low wages have been further diminished by competition with unskilled immigrants.49 The debate over immigration and its effects is not likely to end soon. Although immigration may have increased wages and salaries overall, the complex effects of immigration make generalization hazardous. As with technological change and economic globalization, immigration has mixed economic and social consequences. While it is likely to be beneficial in the aggregate, large-scale immigration also has damaged particular groups of workers. Taking advantage of the benefits of immigration while mitigating the dislocations it engenders will be a major challenge in the years to come. Occupational Prestige Although the opportunity to earn a wage or salary is the primary reward for putting in time at work, some occupations offer an additional bonus: the prestige they confer on the men and women who hold them. Sociologically speaking, prestige should be distinguished from status, the latter meaning simply the position of a person or group in society without necessarily connoting a place in a hierarchical order. In this sense, widower, Rotarian, and sister-in-law all are examples of a particular status. Prestige, by contrast, implies a hierarchical arrangement. A high degree of prestige implies respect, admiration, and the ability to elicit some measure of deference. The prestige, or lack of it, of a particular occupation is an important component of individual identity because modern societies lack well-defined social divisions, such as religiously sanctioned castes or distinct lines separating nobles and commoners. Significantly, when two people meet for the first time, the first question likely to be asked is, “What do you do?” which is understood to mean “What kind of work do you do?” Over the years, numerous surveys have been taken in order to assess the relative prestige of different occupations. Most of these assessments have shown a remarkable rate of stability over years, as well as little country-by-country variation in the ranking of occupations.50 Moreover, the race, class, ethnicity, and gender of respondents have little effect on their assessment of occupational prestige.51 However, a recent study using a more refined methodology found some changes over time, as prestige ratings moved upward for many occupations while a smaller number moved in the other direction. Perhaps most remarkably, the prestige of many low-end occupations has increased in recent years even though the wages they offer have stagnated or declined in real terms.52 The relative prestige of particular occupations is governed by a number of factors. The prestige of an occupation usually reflects the wages or salaries attached to it, but making a lot of money through drug trafficking obviously doesn’t translate into much prestige, at least outside the circle of other drug bosses. Conversely, most ministers, priests, and rabbis earn modest incomes but enjoy high occupational prestige. This seemingly anomalous situation provides us with a key to understanding occupational rankings. In the first place, these rankings generally reflect how much educational preparation is required for a particular occupation. As we have seen in Chapter 9, the ratcheting up of educational requirements may have as much to do with elevating the prestige of an occupation as with improving the performance of its practitioners. Occupational prestige also has a lot to do with the perceived importance of a job and the kinds of responsibilities discharged by the people who do the work. A surgeon can save someone’s life, and an attorney can save a client from a long prison term. To return to the case of members of the clergy, the special relation they have with God and the spiritual world gives them unique powers and responsibilities, at least in the eyes of believers. In addition to being shaped by the qualities and qualifications of its practitioners, occupations also gain or lose prestige through the clients they serve. Selling insurance and working as a stockbroker—note the use of the term broker instead of salesman—have many similarities, yet the latter line of work enjoys higher prestige than the former, in large measure because stockbrokers serve a significantly more affluent clientele. Note, too, the different perceptions of elementary school teachers and graduate school professors; a higher intellectual level may be expected of the professors, but no less important is the fact they are teaching adults rather than children. Finally, the prestige of an occupation is often closely tied to its work environment. A great deal of white-collar work does not differ fundamentally from blue-collar work in terms of skill, responsibilities, and pay, but most white-collar workers go about their tasks in air-conditioned offices rather than in factories where the work environment can be noisy, smelly, and dirty. A “clean hands” occupation is almost always more prestigious than an equivalent line of work that leaves its practitioners in need of a long shower at the end of the working day. To take one notable example, to be a good automobile mechanic requires intelligence, knowledge of a variety of complicated systems, strength, physical dexterity, and the ability to relate well to customers. Yet mechanics (many of whom have taken on the more prestigious-sounding title of “technician”) have always suffered from a “grease monkey” image because working on cars is an inherently dirty business.53 It is not surprising that physicians and attorneys occupy the upper rungs of the prestige ladder while garbage collectors and parking lot attendants are found toward the bottom. In general, occupations with a successful claim to being professions cluster at the top, followed by administrative positions such as managers and elected officials. Clerical workers and skilled workers tend to occupy middling positions, while operatives such as assembly line workers and stock clerks are in a lower cluster. Service workers are the most heterogeneous in terms of occupational prestige. Physicians are near the top of the prestige scale, while police officers have rankings similar to those of lower-level administrative occupations, and maids and janitors rank close to the bottom.54 The income an occupation provides and whatever prestige it confers are the most obvious rewards for the work we do. But work can be a source of satisfaction for several other reasons. In the next chapter, we will take a closer look at life on the job, taking into consideration the circumstances that can make work a generally pleasurable experience.