Labor Day is About Work

Today is Labor Day, a holiday that was born in the tumult, social upheaval, and violence of the industrial revolution in the late 1800s. It was a time of boom-bust business cycles that left employees largely on the outside of the economic pie looking in. The words of the day were “robber baron”, “monopolist”, “child labor”, and “company town” with the minimum wage, defined work-weeks, and labor unions still in their infancy or just ideas of fancy. Income inequality increased, strikes were common, battles were fought, and people died. Indeed, it was a struggle over fairness, humane treatment, and money. And although the context and circumstances have changed, that fight within our capitalist structure continues today.

So let’s start with a basic and sometimes inconvenient truth. The money does matter.

Today, the Labor Day fight is about creating a minimum wage that is actually a “living wage.” It is about defining overtime rules that appropriately compensate those that put in the hours but don’t have an equity stake in the outcome. And it encapsulates the anger and disenfranchisement that have fed everything from “Occupy Wall Street” strikes, to “Black Lives Matter” protests, to the “Feel the Bern” socialist agenda. These movements lay out fundamental issues of economic opportunity that must be addressed. Beyond marking the end of summer, this should be the core meaning of “Labor Day.”

Now for the twist in the plot – perhaps I should call it a turn to the right or left – I’m not sure which. I’m on the record arguing that as symbolic and useful as things like the $15 minimum wage efforts are, the issue that should galvanize us the most is creating jobs. You can argue about $9/hour versus $15/hour all you want, but when significant portions of our citizens are unemployed or underemployed – with minorities and young people bearing the brunt of that burden – you have an economic and social equation that does not compute.

The official unemployment rate peaked at about 10% in late 2009 and has dropped slowly but steadily to about 5% today. As statistics go, that is a meaningful drop and a sign that the economy has improved. But it dramatically masks the underlying problem. Unemployment amongst teenagers is almost 16% and amongst African Americans over 8%. Of the 8 million people who are unemployed, roughly 2 million of them have been looking for work for more than 6 months. More importantly, an additional 6 million people are involuntarily working part time and another 1.7 million people have stopped looking for a job (and therefore are not even counted as unemployed).

If you we use the 2009 labor force participation rate, 10% of America’s employable workforce today are not earning a living wage – and most of those are not earning any wage at all.

So amidst the accusations and acrimony of a presidential campaign that is about to become a festival of negativity, where do the candidates really stand on creating jobs? Naturally, they are both in favor of job creation – but the question is “how”?

Hillary’s “One for All” Plan:

If you go to the Clinton website you can easily find a reasonably cogent point of view on job creation and the economy. It is a relatively traditional, centrist approach that tries to cover the waterfront of constituents:

  1. Investment in infrastructure – I call this the “government funded jobs that should be productive” plan.
  2. Investment in technology R&D and clean energy – noble causes that probably don’t warrant much government support since they are going to happen anyway. But it sounds very pro-business.
  3. Incentives for small business investment – whether this will work or not, it at least admits the fact that most jobs are actually in small to medium sized businesses.
  4. A decidedly vague “Make it in America” plan that includes saying “no” to the TPP trade agreement. This is classic pandering and in response to Sanders and Trump.
  5. Support for a variety of activities that would make it easier for unions to organize workers and negotiate on their behalf. Unions are a difficult, double edged sword and the specifics of the legislation matter a lot.
  6. Additional related measures including debt free education, tax reform for individuals and businesses, and strengthening and expanding social security – all of which sound nice but must be financed somehow – and Hillary provides little data on that.

Donald’s “Wave of the Hand” Plan:

Going to the Trump website is mostly an exercise in “trust me, I will make it better”. There is an outline for an economic plan that includes:

  1. Simplifying and cutting taxes – seemingly everywhere. Loopholes will be closed too.
  2. Reducing the federal deficit/debt – without any details on how, which is especially challenging given his viewpoint on taxes.
  3. Cutting regulation that reduces growth, with a strong emphasis on oil, coal, and other environmental regulations. This is how you win in Kentucky, Ohio, West Virginia, and Texas.
  4. A pledge to renegotiate all trade agreements with an emphasis on making them “fair” for American companies.
  5. Additional related proposals to eliminate Obamacare, invest in infrastructure, support child care costs, and reduce crime – the latter having nothing really to do with jobs.

What Does It All Mean:

Despite all of the acrimony and dissent, there are some things the plans have in common:

  • Neither spends any time explaining how they will pay for any of this. While not surprising, it should be a giant red flag indicating that much of this will not happen.
  • Both are clearly pandering to certain voters and special interest groups, in particular labor (Clinton) and energy (Trump). Whether those promises get fulfilled is a different question.
  • Tax reform, regulation reduction, education, and some “anti-trade” elements play a role for both candidates. The specifics are actually different in important ways, but they are both promising changes in these areas.

With that said, there are important differences that should inform voters:

  • The Clinton plan has more detail and more ideas generally, while the Trump approach is longer on grandiose statements but short on internal consistency or specificity.
  • Clinton focuses on organized labor and workers’ rights while Trump’s promises to workers are about “general prosperity”.
  • Trump doesn’t care about global warming or the environment, Clinton clearly does.
  • In the world of a divided legislature, it is unclear how much of either plan can be implemented – but Clinton’s ideas would have clear Democratic support, something Trump cannot say about his Republican colleagues.

A Better Way Forward:

As I’ve argued in my first book Xbox Revisited: A Game Plan for Corporate and Civic Renewal, jobs and economic growth should be the defining issue of this campaign, and the level of vagueness, pandering, and sloppiness in both camps is clearly problematic. I’ve written about these issues a number of times, but the message bears repeating. Any reasonable plan in this space should include the following:

  • Tax and Regulatory Reform (see A Taxing Point of View): Enacting a consistent, simplified, and more transparent set of tax policies, in particular on corporate taxes, would lead to more domestic investment and more jobs. We also need to make it dramatically easier to start and run a business and reduce the amount of regulation that affects that process, in particular for smaller, private businesses. Both candidates have elements of this in their plans – the specifics remain to be clarified.
  • A New Type of Education: It is all well and good to talk about reducing college debt and enabling more to attend college. But the reality is that many of those who are under-employed or unemployed need more than a high school degree – and yet, not everyone needs a four-year degree in computer science or English literature. What they do need is extensive, certificate-based training in areas such as customer service, network administration, device repair and service, and software management tools. Even in more traditional trades such as construction, we are not training enough workers to replace the large group that is entering their retirement years. All of these roles revolve around a whole new trade craft providing long-term, middle class employment opportunities.

  • Infrastructure Done Right: As both candidates recognize, our national infrastructure is more fragile than at any time since World War II with energy transmission, roads and bridges, air traffic control, water management, food quality, and many other areas in need of systematic upgrades and replacement. Done correctly, this kind of spending has the dual purpose of generating jobs AND improving the environment in which both consumers and businesses operate. Unfortunately, it is very easy to waste billions (perhaps trillions) of dollars in this area, so the challenge for voters is deciding whether Clinton or Trump should be entrusted with this task.
  • The Trade and Labor Distractions: The economic evidence overwhelmingly indicates that free trade helps the American economy as a whole – which after all is the president’s job – so it is hard to accept either of their positions on trade. I would suggest that Trump is more consistently protectionist than Clinton, but both should be focused on re-aligning our workforce for the future, not restricting trade to protect the jobs of the past. Likewise, if you care about creating new, living wage jobs, supporting big labor creates many potential conflicts and roadblocks. I believe that unions can and should play an important role supporting workers’ rights – but they generally focus exclusively on their industries, independent of what is right for the country.

The most difficult aspect of this entire discussion is that very little of what I describe above generates political points on the scoreboard – in part because it is long-term in nature and requires specific trade-offs. Much of it also costs real money, funds that must be generated through savings elsewhere or new taxes. I don’t love either candidates’ approach, but have significantly more faith that Hillary Clinton could navigate these waters better – in large part because she is a practical, and largely consensus-based, thinker.

Either way, as voters we should demand that our elected leaders tackle the real problems and take responsibility for improving the underpinnings of our country. We can only build a stronger economy, and in the process employ more people productively, if we build on a rock solid foundation.

With that, we could really celebrate Labor Day.