24.6.18

REDISCOVERING THE EFFICIENCY WAGE?

In Wisconsin, there are personnel managers learning what excess demand looks like.
CertainTeed, a ceiling tile manufacturer in Plymouth, is looking to broaden its production staff with part-time help as the supply of available temporary workers — and their quality — has become a bit less reliable.

We just see the increase in orders and the need to increase our production levels,” said Christine Brees, regional human resources manager. “It’s been a challenge.”

At Ability Group LLC, a home health care firm on Milwaukee’s south side, declining unemployment has made the already-difficult task of finding good employees even tougher.

“The minute a better job comes up, they’re gone, they’re somewhere else,” co-owner James Valona said. “It’s a huge problem.”

Dutchland Plastics LLC, which makes such things as kayaks, playground equipment and Yeti coolers, also has dropped its high-school-diploma requirement and last year increased wages and the number of paid holidays. Still, the growing, 280-employee Oostburg company finds its expansion constrained because it has 50 job openings.

“That’s a very large number,” CEO Randy Herman said. “That’s much higher than we’ve experienced before.”

And in Pewaukee, the crew of a Subway restaurant has been working more hours because operator Deepa Garcha has had trouble hiring additional help despite offering a higher-than-typical wage.

For a few months now, Garcha has run an ad on Indeed.com offering $10.50 an hour – more than almost any other Wisconsin Subway posting openings on the job site. As of mid-June, the position was still open.

“There have been a couple people who worked a couple days and left,” Garcha said.
The logic of the efficiency wage is that workers will not quit, because they cannot find as good a job or comparable pay elsewhere. But perhaps that's not yet what's in play, even at the plastics plant.
Despite a national unemployment rate that has been this low exactly one month in the last 48 years (April 2000), increases nationwide in total compensation in the private sector have hardly been robust. Since 2015, they’ve trended upward but still fall short of the increases of the early 2000s, a period of higher unemployment, data from the U.S. Bureau of Labor Statistics show. Total compensation includes pay and benefits.

The bureau doesn't publish total compensation figures by state. But its comprehensive census of wages in Wisconsin shows that pay increases of the last three years, in percentage terms, also lag behind the gains of the early 2000s.

It may just be that earnings haven’t yet caught up to the changing labor market and that stronger increases are yet to come, John Heywood, an economics professor at the University of Wisconsin-Milwaukee, said by email.

But Heywood said some economists believe things have fundamentally changed and that we won’t return to the compensation gains of the past.

One reason for that view: Labor force participation is unusually low and so, Heywood said, there may be more slack in the labor market than the unemployment rate suggests.

Rising automation also could play a role.

“Workers may be increasingly competing with machines,” Heywood said. “This competition restrains wage increases.”

Finally, he said, it could be that while companies may want trained workers, fewer firms are engaging in training.
The risk of providing training is that human capital is mobile. The roundhouse foreman for The Milwaukee Road complained about that, years ago (there no longer being a roundhouse or a Milwaukee Road.) He'd take on apprentices, then would come a downturn in rail traffic, and the people he had to lay off could become blue-collar aristocrats at the machine tool works.

We're seeing a phenomenon I recall from years ago, when the Reagan recovery took hold in the suburbs of Detroit, but many of the help wanted signs were well off the bus routes.
For many residents of the most poverty-stricken areas of Milwaukee, though, jobs in Sheboygan or Kenosha might as well be on the moon.

More than 9,000 employed residents of seven high-poverty ZIP codes in Milwaukee lack vehicles to get to work, sharply limiting their job options.

“You don’t have a car, you’re screwed,” south side resident Jeffery Ziarniak said as he walked along West Mitchell Street after finishing a Friday shift for a temporary agency. “You can’t find a good job. The good jobs are out of town now.”

Ziarniak, 49, said he has spent the past two years working factory jobs for a temp service. He currently makes “9 something an hour,” he said, and pays $9 a day to the agency for transportation.

“What are you going to do?” Ziarniak asked. “You don’t have a car, you’re just going to have to deal with it. I don’t mind.”

Among efforts to connect Milwaukeeans without cars to jobs beyond the bus lines is the Joseph Project, started by Pastor Jerome Smith of Greater Praise Church of God in Christ, 5422 W. Center St. The program has placed people at several companies, including Nemak, in Sheboygan, Dodge and Waukesha counties.

But while it has grown since its launch in 2015, the Joseph Project remains small — the 140 city residents currently working at jobs they landed through the program represent a tiny slice of the working population without access to a car.
That is the same Joseph Project that former Wisconsin senator Russ Feingold characterized as crumbs.  The question I asked at the time, "Are the politicians in the Milwaukees of the country providing the environment in which [entrepreneurship and good schools] can flourish?," is still germane.

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