Last week, Sen. Elizabeth Warren unveiled a comprehensive set of proposals to provide basic employment policy protections and income security benefits to those working in the so-called “gig” economy and others in subcontracted or franchised arrangements. Whether one agrees with her specific ideas or not, the nation owes her a debt of gratitude for putting these issues front and square on the table for a discussion that is long overdue.
The gig economy, best embodied by Uber, Lyft and Task Rabbit, may account for less than 1 percent of the workforce, but it has sparked a debate over what to do about all those who make their living outside of standard employment relationships.
Standard employment relationships are ones in which there is a clearly defined and identifiable employer that is responsible for complying withthe range of employment laws put on the books since the New Deal: unemployment insurance, Social Security, minimum wage and overtime rules, and the right to unionize and gain access to collective bargaining. To be clear, the vast majority of American workers, about 85 percent to be exact, still work in this type of employment relationship.
Late last month, President Barack Obama took a step around the longstanding congressional gridlock over labor and employment policies by announcing a plan to boost the salary threshold governing overtime from US$23,600 to $50,440 and to index it to inflation.
Essentially, that means white collar workers in that salary range, currently exempt from being paid overtime, would get 1.5 times their hourly wages for anything over 40 hours.
The administration estimates this action will extend coverage to an additional five million workers who will either receive overtime pay or work fewer hours at the same salary, with some of their extra work shifted to part- or full-time hourly workers. Either way, the workforce and the economy will record a small win in efforts to raise wages and reduce income inequality.
I’ve been immersed in this issue for decades, including as a member of the Clinton administration’s Commission on the Future of Worker Management Relations in the early ‘90s and as codirector of the MIT Sloan Institute for Work and Employment Research.
While many graduating MBA students are still heading to traditional sectors like finance, consulting and technology, one of the biggest trends among top business schools is an increase in the diversity of students’ career interests. Perhaps it’s related to fallout from the financial crisis or even a generational trend, but more and more students are pursuing positions in a broader array of areas.
At MIT Sloan, about 60% of our MBA graduates in the past few years have gone to those traditional areas. Among our other MBA students, we are indeed seeing this trend toward diverse interests. Strong areas of focus for that group include: entrepreneurship; sustainability; energy; social enterprise; health care; operations and supply chain management; and entertainment, media and sports.
Andy McAfee and I have just released a short e-book, Race Against the Machine. In it, we try to reconcile two important facts. 1) Technology continues to progress rapidly. In fact, the past decade has seen the fastest productivity growth since the 1960s, but 2) median wages and employment have both stagnated, leaving millions of people worse off than before. This presents a paradox: if technology and productivity are improving so much why are millions being left behind?
In the book, we document remarkable advances in digital technologies in particular. Innovations like IBM’s Watson, Google’s self-driving car, Apple’s Siri are turning science fiction into reality. Machines are doing more and more tasks that once only humans could do.
In the book (and now film) Moneyball, general manager Billy Beane transforms the Oakland Athletics by recognizing that overlooked players contribute value to a team. He overturns conventional wisdom, indeed upends baseball’s domination by wealthier teams,by using data to measure performance. What he learns can also apply to the economic challenges we face today.
When people think and write about what leads to economic success, they too often focus only on the most visible, highly paid players. In the case of the economy, it is the CEOs. The business press is full of praise for celebrity leaders such as Jack Welch and Steve Jobs. But even when the CEO is not movie-star famous, stories about whether a firm will succeed or fail usually focus on the personality and actions of the person at the top.