Robert Whitcomb: The gig economy

I’m old and lucky enough that most of my working life took place when large U.S. enterprises usually made long-term commitments, albeit often rather vague, to their competent workers. If a recession hit, senior executives would grit their teeth and try to hang on to their employees.  Back when I was a business editor at The Wall Street Journal, the International Herald Tribune and elsewhere, Fortune 500 senior executives’ commitment to their fellow employees often impressed me. Not much anymore!

There was something like two-way loyalty, and the top people often showed a certain sensitivity about public perceptions of their compensation.

Now the idea is to maximize short-term profit and stock price and thus senior execs’  and board members’ compensation above all else.  I have seen that in some sectors where managements that used to be satisfied with 15 percent profit margins raised them to over 30 percent. And CEOs now make  on average over 300 times the average pay of their employees, compared to 20 times in 1965!

Thus many companies  refuse to spend money on long-term investments, such as employee  training: While such outlays strengthen companies in the long haul, they cut into short-term net income. So train yourself – you may well be laid off next month anyway.

Then there’s the rise of the “gig economy,’’ in which “on-call’’ workers, “permatemp workers,’’ “independent contractors’’ and people employed  by such  contract firms as Manpower comprise an ever larger share of the workforce.

The Wall Street Journal reports that these days 17 percent of women and 15 percent of men have such “alternative employment.’’ Such jobs are up by more than half from 2005. (See ‘’’Gig’ Economy Spreads Broadly,’’ WSJ March 26-27).

These positions, with  their very unpredictable hours, pay lower wages than regular jobs and offer few if any fringe benefits.  They are spreading rapidly across more sectors, such as law and healthcare, pulled by computerization and globalization. They have long been particularly common in higher education,  which depends on low-paid adjunct teachers to offset the cost of almost-impossible-to-fire tenured professors, with  their high salaries and big benefits.

Employers obviously need flexibility to adjust their staffing levels. But when they reduce the ranks of their full-time employees beyond a certain point to keep short-term profit margins and senior executive pay sky high, they risk undermining the viability of their enterprises by destroying the institutional memory and employee morale and loyalty needed formost enterprises’ long-term success.

Short-termism usually triumphs. CEOs don’t expect to have their jobs very long; thus they want to accelerate their compensation.

Meanwhile, the economy as a whole tends to stay in a low-growth pattern as the purchasing power of most people shrinks and national wealth is increasingly concentrated in a tiny group whose members can perpetuate their (and their children’s)  power with the aid of cash (and later, lobbying and other jobs) for politicians in return for favorable policies.

We’ll see a revival of private-sector unionization as more workers see that as the only way to obtain a modicum of economic security. We’ll also see an increasing number of economically insecure Americans following the siren song of such con men as Donald Trump and such presumably sincere but wrong-headed reformers as Bernie Sanders who don’t understand the need  to encourage the “animal spirits’’ of entrepreneurism; Mr. Sanders has never had a job in business. There are reasonably centrist policies that can make things better, such as adjustments in the tax code and labor regulations.

None of this is to say that “contingent’’ and/or freelance employment can’t work well for some people. I myself have enjoyed some of its flexibility as a partner in a couple of small businesses. But you can’t build a strong economy on it.

xxx

Post-Brussels, President Obama and some other sensitive souls continue to avoid saying “Islamic’’ before  “terrorism’’. They’re being intellectually dishonest. Islam (mostly its Sunni side) has big problems, the worst being that too many of its emotionally needyfollowers adhere to the 7th Century barbarism  and supremacism in some of its scripture. Islam needs a reformation.

Robert Whitcomb (rwhitcomb51@gmail.com) is a Providence-based editor and writer and overseer of this site.