Sunday, February 26, 2017

Fawning for Favors: Tipping, Harassment, and the Need for One Minimum Wage

Controversies around tipping are seemingly everywhere these days. Tip jars seem to be proliferating at the same time as some restaurants are experimenting with banning tips. It’s always hard knowing who to tip and how much, and even more so when traveling abroad. Even the New York Times ran a story on “To Tip or Not to Tip Your Uber Driver” last year, and class action lawsuits prompted Uber to allow drivers to put up signs indicating that tips are appreciated.

But have you ever stopped to think about the origins of tipping and the continued implications for workers who primarily rely on tips for most of their income? As someone who studies work, I’m embarrassed to admit that I had not. Until last week. It was then that the University of Minnesota’s Center for Human Resources and Labor Studies sponsored a provocative presentation by Saru Jayaraman (co-founder and co-director of the Restaurant Opportunities Centers United, Director of the Food Labor Research Center at the University of California, Berkeley, and as the author of Behind the Kitchen Door, a fellow Cornell University Press author), a visit that was facilitated by the Minneapolis worker center CTUL.

The precise origins of tipping are unknown but a key early step seems to be the expectation dating back to at least the 17th century that visitors to private English homes give money to the host’s servants because of the extra work they’ve had to do. These aristocratic origins made tipping seem un-American and un-democratic in the 1800s and early 1900s as those who received tips were seen as servile rather than equals. Indeed, starting in 1909 several states outlawed tipping, though these laws didn’t survive for more than a decade.

What did survive were the racist and sexist foundations of beliefs on who was lowly enough to be exploited by tipping, such as African-American porters and immigrant maids. As nicely summarized by Kerry Segrave in Tipping: An American Social History of Gratuities,

Tipping seems to have started with the traveling aristocracy and spread downward class by class. With the rise of wage labor in industrial capitalism, the number and position of servants declined. That same rise in industrial capitalism brought with it an increase in commercial eating and drinking establishments, hotels, and mass transportation wherein those who received tips—maids, valets, waiters, and so forth were found in large numbers. As a greater proportion of people dined out, stayed in hotels, traveled on trains, and so on, they found themselves in tipping situations. All of those who received tips in the past were regarded as social inferiors at a time when such distinctions were felt to be normal and natural—God’s will. All the services for which tips were given—serving meals, carrying luggage, making beds, drawing drinks, and so forth—were regarded as menial labor. Those legacies of who was tipped for what services remain with us today. (p. 5)

In addition to views on servility, another important legacy of the history of tipping is an enduring debate over whether tips should be included in the calculation of earnings when determining if workers reach at least some level of minimum earnings, . For several decades, the side favoring the inclusion of tips has been winning. Since 1966, U.S. federal law allows a lower sub-minimum wage for tipped workers. Currently, the federal minimum wage for workers who earn at least $30 per month in tips is a measly $2.13. And this has not increased since 1991! If workers do not earn sufficient tips, the employer needs to pay at least the standard (non-tipped) minimum wage, but this entails significant record-keeping and there are high rates of non-compliance.

Many states have their own minimum wage laws that exceed federal standards, but only seven states, including Minnesota, require that tipped workers earn the same minimum wage as others.  An eighth state (Maine) recently enacted minimum wage changes that will lead to tipped workers earning the full minimum wage, though there is already a movement to undo this change. And Minneapolis is considering excluding tipped workers from a possible increase in a city minimum wage.

Which brings me back to Jayaraman’s provocative talk passionately arguing that this change being considered by Minneapolis would be a significant step backwards. You might be thinking, why is this a problem? Don’t tipped workers bring home more than the minimum wage? Well…not as much as you might think. Even including tips, tipped occupations are routinely among the lowest-paying jobs in the economy. And according to the Bureau of Labor Statistics, the median hourly earnings for waiters and waitresses in 2015 was $9.25 including tips; the 75th percentile was only $11.65.

But the more fundamental and eye-opening issue revealed by Jayaraman is the pervasive power differential created by a subminimum wage that leads to endemic sexual harassment. Most restaurant servers are women. And when their living depends on earning tips, they are exceptionally vulnerable to unwanted sexualization and sexual behavior because they are beholden to the customer. Indeed, the report "The Glass Floor: Sexual Harassment in the Restaurant Industry" by the Restaurant Opportunities Centers United revealed that 60 percent of women restaurant workers experience sexual harassment, and over 50 percent report that they experience harassment on at least a weekly basis. These rates of harassment are highest in states with the $2.13 minimum wage for tipped employees. As Jayaraman noted, this is a pretty disgusting way to introduce millions of young women to the working world. Consequently, the One Fair Wage campaign is pushing for an end to the subminimum wage for tipped workers—not an end to tipping, but an end to the subminimum wage. I recommend their video "The Time Is Now."

In 1896, Gunton’s Magazine wrote that rather than working for wages, tipped workers are “fawning for favors” and thus, tipping undermines the personal freedom and dignity of tipped workers (July, p. 16). More than 100 years later, this continues to be particularly true for tipped workers who lack the protections of the full minimum wage. 

Sunday, January 15, 2017

Labor Unions Have More Younger Members Than They Think, And Why This is Important

With Donald Trump joining a Republican-majority Congress in office this week, the U.S. labor movement is braced for adversity. Who knows what lies ahead. At a minimum, labor will face a less sympathetic legal system when the composition of the National Labor Relations Board (NLRB) and judiciary reflect Trump appointees. Bigger changes at the federal level could include a de-funded NLRB and a national right-to-work law, while in the public sector a new Friedrichs case could result in a national public sector right-to-work mandate to go along with continued state-level legislative efforts to weaken public sector unions.

Undoubtedly, labor union strategies to survive and even revitalize in this era will need to be multi-pronged. Any strategy, however, is likely to have limited success if it fails to consider how to represent workers throughout the job switches and other major changes that occur over the full life cycle of workers in the new world of work, organizations, and employment. In many countries, from Asia to Europe to North and South America, workers are most likely to be unionized in their forties. In the United States, there are more than twice as many union members in their forties than in their twenties. Union leaders that want to be responsive to the majority of their rank and file members consequently negotiate seniority rights, seniority-based wage schedules, and health and retirement benefits that benefit middle-aged and older workers more than younger workers. Those interested in the future of collective voice and union representation should be asking whether this middle-aged and older worker bias has
contributed to the decline of unions by ignoring how workers experience unionism over their life cycles.

Taking seriously the role of younger workers in union revitalization efforts requires recognizing when workers are first unionized and how these early experiences affect later attitudes toward labor unions. In contrast to conventional wisdom that associates unionization with middle-age, my research using the National Longitudinal Survey of Youth 1979 has shown that the average age when workers begin their very first unionized job is 23 years old. Among those who had been represented by a union by the time they were around 40 years old, more than 85 percent were first represented before they were 30 years old. By age 25, nearly 50 percent of the entire sample had held at least one unionized job, and by age 40, nearly 65 percent was unionized in at least one of their jobs, and ex-unionized workers outnumbered currently-represented workers by three to one.

I think this bears repeating. By age 25, nearly 50 percent of a nationally-representative of workers that I analyzed had held at least one unionized job, and among the nearly 65 percent (yes, 65 percent) who had been represented by a union by the time they were around 40 years old, over half were first represented before age 23, and more than 85 percent were first represented before they were 30 years old. Any direct experiences that workers have with unions presumably shape their lasting attitudes towards unions, positively or negatively. So if younger workers are being neglected by their unions, unions run the risk of alienating a larger number of workers than previously expected. Labor unions should therefore adopt a life-cycle rather than job-centric representation strategy. Tom Kochan  has explained how this can work:

Once recruited, the relationship with members could be maintained for life by providing the labor market and educational services and benefits individuals and families need as they move through different stages of their careers and family lives. Consistent with the history of the way many unions began, these types of organizations might serve as mutual benefit societies by providing workers with health insurance, savings programs that build retirement security, life-long education, work-family supports, and the social networks and information needed to find jobs when required. They would also provide quick and effective advice and representation to solve problems and if necessary represent workers in trouble, individually and collectively. (Restoring the American Dream: A Working Families’ Agenda for America, MIT Press, p. 151).

My research on first union experiences reveals that U.S. labor unions have an important, and probably overlooked, opportunity to develop a supportive, firsthand relationship with quite a large fraction of the U.S. workforce. Admittedly, the labor movement faces significant complexities in fully embracing young workers with the goal of developing lifetime support. Workers who first encounter unionization as teenagers do so disproportionately in wholesale and retail trade which means that specific unions might bear the burden of devoting resources specifically to younger workers. Even when these unions realize the importance of workers’ first unionized experiences, high turnover of younger workers can make it difficult to build strong connections. U.S. labor law also favors a job-centric membership model.

Nevertheless, the labor movement and other interested parties should understand when and how workers first experience unionization, and construct representation strategies that fit with the life cycle realities of today’s workers. Given what’s likely to be a hostile legislative and judicial environment for U.S. labor unions in the coming months and years, this is probably more important than ever for the future of the U.S. labor movement.


Additional reading: John W. Budd (2010) "When Do U.S. Workers First Experience Unionization? Implications for Revitalizing the Labor Movement," Industrial Relations, vol. 49, no. 2 (April), pp. 209-225

Monday, December 19, 2016

Financialization, Not Globalization, Driving Carrier's Movement of Jobs

President-elect Donald Trump’s apparent success in getting Carrier to partially reverse its decision to shift jobs from Indiana to Mexico has rightfully received a lot of attention. This certainly isn’t the first time a politician has used a bully pulpit to pressure private corporations on labor issues. But to do so using Twitter, and more substantially, to get a major corporation to keep (at least some) jobs in the US is perhaps unprecedented, at least in recent decades. And at least some who decidedly do not share Trump’s perspective on many issues are applauding this move because too many politicians have sat silent while American corporations have moved thousands (millions) of jobs out of the country, even while benefiting from subsidies, tax breaks, government contracts, and other supports. Others have criticized this deal as interfering with free markets, or as furthering corporate subsidies (Carrier received $7 million in tax breaks).

Not debated is that Carrier workers in Indiana make $22 per hour; in Mexico Carrier can pay $3 per hour ($6 including benefits). So Carrier can save $65 million per year by shifting production to Mexico, or a host of other countries with similar labor costs and lax labor protections. So this is universally seen as illustrative of the pressures of globalization. What else could it be? That’s not a rhetorical question. Because this isn’t just a story of globalization, it’s a story of financialization. Financialization is when financial markets, motives, results, and institutions become more important than the production and delivery of goods and services.

Carrier is profitable in Indiana, and its parent United Technologies made billions—yes, billions—in profits last year. So this isn’t a struggling company moving in order to eke out a modest profit to stay in business. Rather, it’s a very profitable company seeking to make even greater profits. Why? Because of pressure from Wall Street. Investors have become insatiable in their demands for higher and higher financial returns all in the name of maximizing shareholder value. Workers thus face demands for wage and benefit concessions, layoffs, and stressful restructurings, all while being asked to invest more of themselves (but denied a role in corporate governance) in order to cut costs, increase short-term profitability, and drive up stock prices.

These issues are magnified by stock repurchases. Rather than retaining and reinvesting cost savings and earnings back into the business as was the norm before the shareholder-value movement, cost savings and earnings are increasingly being used to repurchase shares of the company’s stock. This “downsize and distribute” strategy drives up the stock price which not only benefits investors, but also top executives because of their sizable stock options. This is not globalization; this is financialization.

The shareholder-value movement is one element of financialization. A second dimension of financialization is an increased emphasis on pursuing profits through financial transactions rather than the production and delivery of goods and services. This has two facets.  One facet is the increasing importance of the financial sector. Deregulation of the financial sector allowed commercial banks to becomes more like investment banks and led to industry consolidation so that the small number of key financial firms are “too big to fail.” Moreover, information technology has allowed sophisticated financial investments to be priced and traded.  This has created a concentration of wealth in the financial sector, widens inequalities between Wall Street and Main Street, and further reinforces the primacy of financial investment over productive investment. The other facet of this dimension of financialization is the increased importance of financial activities of nonfinancial firms, such as the Ford Credit arm of Ford, which is forecast to earn pre-tax profits of $1.5 billion in 2017.

Perhaps the most visible and aggressive examples of wringing profits out of companies is the third dimension of financialization—private equity funds that use leveraged buyouts to take over companies that are seen as financially underperforming, install their own cost-cutting leadership teams, strip off assets, and then sell the pieces at a significant profit. This pushes the shareholder value ethos to the extreme by seeing companies solely as assets to be traded for maximum profit, and the private equity structure allows private equity firms to do this using financial engineering strategies that are much riskier and involve a lot more debt than public corporations are able to do, or find it prudent to do. Some private equity interventions create jobs, some destroy them. On net, the evidence seems to suggest that more jobs are lost than created. 

Financialization affects public sector workers, too. For example, efforts to restrain or remove bargaining rights for public sector workers in Wisconsin, Ohio, and elsewhere have consistently been justified by citing the need for budget austerity, including Wisconsin’s “Budget Repair Bill.” This can be seen as an extension of financialization because fiscal concerns are prioritized over service delivery, and because budget deficits and public sector pension shortfalls were at least partly a result of the financial crisis. Internationally, countries with high levels of public debt (e.g., Greece) have had to lower public sector wages in order to meet the bailout provisions of financial institutions like the International Monetary Fund (IMF) and the European Central Bank.

In sum, money is no longer simply a medium of exchange, and financial institutions are no longer simply neutral sources of financing. Rather, the rise of financialization means that financial motives and institutions have become active players that strongly influence corporate decision-making and challenge governmental sovereignty, and thereby affect workers and their communities. Yes, financialization is like globalization in that they both consist of a bundle of  interrelated structural changes in the economy, and they both affect economic and political power. But it’s important to recognize the importance of financialization in today’s economy rather than seeing everything through a globalization lens.

Why does this matter? Partly to have a deeper understanding of key trends that affect the economy, workers, and their communities. But to recognize the importance of financialization also brings the issues back home. Rather than blaming low-cost foreign competition, recognizing the importance of financialization draws attention to Wall Street, investors (which includes people who have retirement investments), the incentives that executives face for buying back stock rather than investing in the production and delivery of valuable goods and services, and the rhetoric around public sector austerity. Financialization isn’t a problem any easier to solve than globalization, but it will never be addressed if we don’t recognize these forces.