The missing ingredient for middle-class jobs
Christopher “Topher” Polack began his Apple career as a “creative genius.” He thrived in his job fixing customers’ technology problems and quickly rose through the ranks, getting more on-the-job training along the way. But like most other members of his genius class, he eventually quit. He now works as a freelance consultant specializing in helping older people use technology.
“I wasn’t meant to be a cog,” says Polack, who increased his salary post-Apple.
Polack’s experience provides a blueprint for how to thrive in the modern labor market and points to the future of middle-class jobs. Unlike the industrial revolution, the latest technology revolution diminishes the value of long-term employment relationships and places a premium on individual skills. Workers like Polack are more mobile and take the skills they acquire from one job to the next. Yet America’s institutions haven’t fully adapted, and may be holding the economy back.
Technology — be it Apple software or the steam engine — has always led to changes in how people work. The agricultural revolution fundamentally altered the social and economic relationships that existed for centuries by decreasing demand for farm labor. Before the industrial revolution, small-scale artisans did manufacturing work at home, but then mechanization displaced them. They were replaced by urban factories, which offered steady employment and often terrible working conditions. Eventually employee unions helped introduce better labor conditions, more job stability and generous benefits, which encouraged job tenure.
But retaining employees for many years also made economic sense for employers. As the industrial age evolved, firms increasingly valued employees who understood the routines, machinery and politics of their employer.
As technology has evolved further, so has the relationship between companies and their employees. Instead of firm-specific knowledge, today’s market values individuals’ skills. Being a master of your trade requires working in many different jobs in your career, and depending on your occupation, perhaps in different industries. The modern worker must possess a constantly evolving skill set, a large professional network, and the ability to anticipate future trends and technology. A person can only gain these skills by working at different firms.
The rise of the individual-skill premium has already changed the labor market. Since 1983 the percent of men with more than 10 years of tenure has declined for every age group under 60. Economist Steven Davis observed that before the 2008 recession, when unemployment was low, job loss (though firing or layoffs) had declined and more job changes were voluntary. This suggests people no longer craved long, stable employment relationships. The poor labor market that followed the recession slowed this process. But deeper into the recovery we might expect this trend to continue. Individual-skill premium, in part, explains the rise of the “gig-economy,” where people like Polack apply their skills as independent contractors.
But while the labor market has evolved to reflect the individual-skill premium, institutions have not. Healthcare remains out of sync with the changing nature of the American workforce, since most Americans get health insurance through their employer.
While healthcare reform aims to create a more robust individual market where insurance is more affordable, the new law still relies on employers to provide most insurance, and discourages job changing. If the employer mandate is implemented, employers must offer their full-time employees healthcare. This means every time a person changes jobs, he has to change health plans and potentially doctors. A better solution is to eliminate the tax-exempt status of employer-provided health insurance, and have everyone buy insurance in the individual market.
The government also hurts job mobility by encouraging home ownership. A variety of tax incentives, like mortgage interest tax deduction and waiving capital gains taxes on home sales, encourages Americans to put all their wealth into housing instead of other more liquid assets.
To be sure, home ownership has some economic advantages, but many Americans end up buying houses that are too expensive for them. That makes them less mobile because their portfolios are dominated by an illiquid, levered asset. They have a harder time taking job market risk and lack the liquid funds necessary to relocate. Job changes have the most value early in a person’s career, when it makes more sense to rent than own. Policy could be helpful here by eliminating the tax breaks associated with a person’s first home purchase.
Workers are also often held back by their partner’s job. It’s harder to take a new job and potentially relocate if your spouse works, too. Co-habitation has many economic benefits that outweigh this limitation. But marriage job-lock could be minimized if employers offered more flexible work arrangements and telecommuting.
The odds are in our favor that the latest round of technology innovation, like all others before it, will ultimately improve our jobs and our lives in ways we can’t imagine. The transition period may be painful if outdated economic institutions slow it down. Some institutions that discourage job mobility, like union membership and defined benefit pensions, are already less common, but others remain.
Rather than living in the past, policymakers should embrace the future and amend institutions to encourage the fluid and dynamic labor market America needs.
PHOTOS: Employees help customers buying new Apple iPad Air tablets inside the Apple Store on New York’s fifth avenue, after the new iPad went on sale, November 1, 2013. REUTERS/Mike Segar
Online trader Raymond Firetag works from his home in Sacramento, California in this undated handout photo. REUTERS/Handout