An MIT economist on how to turn bad jobs into good ones – Paul Osterman

MIT Sloan Prof. Paul Osterman

Paul Osterman, Professor of Human Resources and Management, MIT Sloan School of Management

From the Boston Globe

Despite the historically strong job market in our state and nationally, almost a quarter of Massachusetts residents are stuck in low-wage jobs. None of us should find it acceptable that 23 percent of the state’s working adults (who were not self-employed) earned $15 an hour or less in 2018 — an amount well below the wage needed to support an adult with one child in many parts of Massachusetts. People who hold low-wage jobs suffer worse health than the rest of us — as do their children. What’s more, many low-wage jobs, especially in retail and food service, are characterized by unpredictable schedules that make it difficult for employees to manage their lives and fulfill their family responsibilities. The political anger that we read about every day in our nation is in part because too many people cannot earn enough to support their families.

 

Although it may seem like blaming the victim, part of the problem lies in low skill levels. In Massachusetts, 53 percent of workers who earn $15 an hour or less have no more than a high school degree. But we also know that most people can improve their skills. Effective job training programs, such as those offered by the workforce development organization JVS Boston, can make a real difference. As an example, in the past year, its 12-week pharmacy technician training program placed 45 people in better-paying jobs; graduates went from earning an average of $13 an hour before gaining new skills to $17 an hour after.

We have good evidence that well-run job training programs, ones that include significant investments in training, support services (for example, help with small unexpected expenses), and coaching for participants, are effective in moving people into better jobs and raising their earnings. High-performing programs are also characterized by strong relationships with employers.

We know how to make these work, but we face two big challenges: spreading the model to reach more workers, and providing the resources needed to pay for it. Federal funding for training has been in decline for several decades, and even in our current strong economy, states, cities, and philanthropies have to fill in the gap. Some employers, too, can take actions that help them and their workforce. Hierarchical organizations like hospitals can use training programs to create job ladders, where low-wage workers can ascend to better jobs without changing employers.

Job ladders do not work as well in less-hierarchical low-wage industries such as restaurants and retail. And many jobs that pay low wages — such as cleaning, food and beverage service, and residential construction — are not going away. We also need to think about how to make these jobs better.

Traditionally, unionization has been the most effective strategy to improve job quality — wages, benefits, and workplace fairness — at scale. Consider the family-supporting wage and strong benefits package that Unite Here Local 26 in Boston last year achieved for Marriott hotel workers. But unions have limited scope and face significant employer resistance. It is also a challenge to organize many low-wage industries, which often have workforces that are vulnerable and difficult to reach.

An important part of the answer lies in establishing and enforcing good labor market standards. A strong body of economic research shows that raising minimum wages to a reasonable range creates societal benefits that far exceed any costs of related job losses. This means Governor Charlie Baker and the Massachusetts Legislature made a good choice in 2018 when they enacted a law that will gradually raise the state’s minimum wage to $15 an hour by 2023.

Read the full post at the Boston Globe.

Paul Osterman is the Nanyang Technological University (NTU) Professor of Human Resources and Management at the MIT Sloan School of Management as well as a member of the Department of Urban Planning at MIT. He is the editor of Creating Good Jobs: An Industry-Based Strategy (The MIT Press) available on January 28, 2020.

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