It’s Time to Make More Jobs Good Jobs

Over the past 30 years two insights have shaped my thinking about jobs in America and convinced me that we urgently need to restructure many of them. Each insight came from a colleague. The first was from Michael Porter, with whom I worked in the late 1980s and the 1990s. The second was from Richard Florida, a colleague at the Rotman School since 2007. Both insights are valuable on their own, but when they are viewed through a single lens, as Florida and I decided to do in 2015, it becomes clear that bad jobs in America is a burning platform on which we need to take action. The Michael Porter Insight This insight arose from the vast body of work captured in the 1990 book The Competitive Advantage of Nations. Porter shows that it really matters whether you work in an industry that’s clustered in one or a few small geographic areas (as in pharmaceuticals and software) or in one that’s dispersed fairly evenly across the country (as in retail and health care services). Industries with clustered employment sell their products and services far beyond their immediate areas — pharmaceutical companies in New Jersey don’t sell only in the Garden State, of course. As a result they can scale up, invest in R&D and branding, and help their employees achieve high productivity, which is reflected in high wages. Industries with dispersed employment sell only within their local areas, so they realize fewer economies of scale and tend to invest much less in R&D and branding (the market demand for, say, a local landscaping company doesn’t warrant considerable capital investment). As a result productivity is lower than in clustered industries and wages are significantly lower. The Richard Florida Insight This insight, captured in the best-selling 2002 book The Rise of the Creative Class, focuses not on the industry in which you work but rather on the content of your job. Florida draws a distinction between the amount of independent judgment and decision making a job involves and sees two basic kinds of jobs. The first are creativity-intensive; they involve a high level of independent judgment and decision making. Consider marketing executives and doctors: They are given the space and freedom to create value for their employers, which means they earn high wages. The second kind of jobs are routine-intensive; they involve little, if any, independent judgment and decision making. Think of payables clerks in marketing departments and orderlies in hospitals: They are unable — often, they’re not allowed — to create as much value as creativity-intensive workers. So they earn significantly lower wages. Porter + Florida Florida and I decided to combine the two insights to see how industry type and job content intersect. We started by creating a two-by-two matrix for all U.S. jobs. This gave us four types of jobs to examine, as shown below. Next we needed to know what share of the U.S. economy is represented by each job type (we drew on the most recent data available, from 2012). Perhaps not surprisingly, routine-in-dispersed jobs — ones that lack creativity and are in lower-productivity industries with limited ability to scale up — dominate. What is surprising is what happened when we plotted the average wage for each type of job against the average wage for all U.S. workers. As the graphic above shows, those holding a creativity-intensive job in a clustered industry are in the proverbial catbird’s seat. On average, they earn almost 80% more than the national average, and far more than workers in any other category. Yet they make up the smallest share of the workforce. Do the good fortunes of these employees result from having creativity-intensive jobs, or from working in a clustered industry? It appears to be the former; creativity-intensive workers in dispersed industries also earn more than the national average, although their premium is less than half that afforded to their creative counterparts in clustered industries. On average, workers in both routine categories earn far less than the national average. Those in clustered industries, who are fewer in number (they represent the second-smallest category), earn significantly more than those in dispersed industries. The latter earn very low wages indeed — and they account for almost half the workforce. Movement Across Groups We wondered whether the picture painted by the 2012 data was stable, so we looked at the earliest consistent data set, from 2000. We expected to find little difference over just 12 years, but we were wrong. The changes are dramatic and worrisome. The most disadvantaged category of workers, routine-in-dispersed, grew significantly, and wages for that group deteriorated sharply, whereas the earnings advantage of creativity-intensive workers rose steeply. The only ray of hope is that the share of creativity-intensive jobs grew by more than two percentage points. But by and large, that growth didn’t lift people out of the lowest-earning, routine-in-dispersed group. It drew mainly from the less-disadvantaged routine-in-clustered cohort, which decreased in size by almost four percentage points. The Implications for America Soon the breadwinners of more than half the families in America will hold the lowest-value, routine-in-dispersed jobs. They will surely start to wonder why they should support democratic capitalism when it doesn’t work for them, and won’t anytime soon. And although it’s good news that the share of creativity-intensive jobs has grown, that growth isn’t helping workers escape the very worst type of jobs. The best — and, I believe, the only — chance to save America’s form of democratic capitalism is to forget about moving people from one job category to another and instead to change what it means to be in the bottom categories. We can transform the nature of routine jobs. They involve little independent judgment and decision making not because that’s inherently better for corporations but because executives imagine it is better. In “The Case for Good Jobs” and “How to Build a Business on Good Jobs,” the two-part article anchoring this package, Zeynep Ton argues that by increasing the independent judgment and decision making called for in formerly routine-intensive jobs, companies will do better — because workers will become vastly more productive. That means that employers in turn can comfortably increase wages. The Good Jobs Institute, a nonprofit Ton and I founded, is helping companies undertake the transformation. The upside will be large for businesses and employees alike. The Big Idea

It’s Time to Make More Jobs Good Jobs

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