Creating an upscale service economy



Robert Kuttner

Published — Saturday 1 December 2012

Last update 30 November 2012 10:01 pm

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NEW YORK: The American economy is irrevocably shifting from manufacturing to services. Our workforce has gone from 28 percent factory workers and 72 percent service workers in 1978 to 14 percent factory workers and 86 percent service workers today.
But the service sector encompasses tens of millions of “bad” jobs that are unstable and offer low pay with few benefits — routine clerical work, for example, or retail sales, fast food or low-end human services such as nurse’s aides — alongside a relatively small number of well-compensated professional positions, including doctors, lawyers and scientists, as well as astronomically rich investors and plutocrats in the financial sector.
As we move into this service economy, there are political choices to be made — or evaded. We can allow our increasingly laissez-faire economy to take a low road of underpaid and under-professionalized service jobs. Or we can use social investment, taxation and public borrowing to create more high-level careers in the human services, which will, in turn, help stimulate an economic recovery and stem the tide of inequality.
Millions of jobs serving the very young, the very old and the very sick are now low-wage positions. This is a social decision, however, not the product of private supply-and-demand. For the qualifications and earnings for these occupations are determined by prevailing mores as much as by labor markets.
A person caring for 3-year-olds, for example, can be a glorified baby sitter with minimum certification as a day-care worker -— or a well-trained professional in child development. So the job can pay minimum wage, or it can be a middle-class occupation and career.
This social choice governs not just the quality of the job but also the quality of the early education — crucial for those children who lack the advantages of more affluent families. High-quality early childhood education and day care can also help mothers and fathers be better parents.
A nursing home worker, similarly, can be a nurse’s aide making $ 8 an hour or a licensed practical nurse or trained recreation aide earning almost twice that — closer to $ 30,000 a year. Well-qualified and trained nursing home personnel produce not just better career opportunities and economic stimulus but also better quality of life for the elderly. Having competent staff proves more efficient in the long run because there is less turnover, less need for outlays on recruitment, better morale and fewer incidents of neglect that require far more expensive medical treatment.
I’ve done a rough calculation and found that for an annual expenditure of about $ 100 billion to $150 billion — less than 1 percent of gross domestic product — we could set a national policy goal of guaranteeing that all human service jobs are professional jobs that pay at least $ 25,000 a year. This requires professionalyzing some occupations, as well as making some woefully underfunded services, such as early education, universally available.
As long as the current deflationary economy persists, this funding could come from additional government borrowing, since interest rates are extraordinarily low. As the economy recovers, the normal increase in revenue could pay for part of the cost, supplemented by increased progressive taxation. The increase in the supply of good service jobs would accelerate the recovery.
Historically, production jobs have paid better wages than service jobs. But globalization has increasingly allowed factory jobs to be done offshore by lower-paid workers. Most human service jobs, by contrast, must be performed at home. If we have a national policy of guaranteeing that they are well-paid jobs, there is no risk that they will move overseas.
Two of the fastest-growing job categories, according to the Bureau of Labor Statistics, are home care workers and nurse’s aides. These occupations suffer from shortages because the pay is low and the working conditions often frustrating. Nurse’s aides typically make slightly above minimum wage, whereas licensed practical nurses (usually a one-year certificate program) earn about $ 20 an hour, or $ 42,000 a year. Registered nurses, graduates of a two- or four-year college degree program are more highly trained still, with median earnings in excess of $60,000.
Extensive evidence shows that having home care or nursing-home care performed by workers with the lowest minimally acceptable skill levels is a false economy. The money saved on lower wages is lost in medical incidents, like increased bedsores on the part of nursing home residents or failure to diagnose medical conditions early. Both can result in the need for far more expensive hospital stays. At the same time these service workers are condemned to jobs that do not pay well.
More than 60 percent of all human service work is underwritten, directly or indirectly, by some level of government. Most care in nursing homes as well as home care is paid by Medicaid or by other state programs, while child care for the poor and pre-kindergarten programs are provided or subsidized by government. Thus, public policy determines whether these jobs are professional occupations or casual labor and whether they are adequate to the social need.
A national strategy of filling the holes in America’s social safety net could prove to be a countercyclical engine of recovery. It could also offer a permanent strategy for replacing our dwindling highly paid manufacturing jobs with domestic, well-compensated non-exportable service jobs. We would get the quadruple benefit of macroeconomic stimulus, better jobs, better quality services and (in the case of the young) improved lifetime opportunity and productivity.

— Robert Kuttner is a Reuters columnist but his opinions are his own.

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