Employer Legislate JPGYears ago I got into an argument with a friend.  We were discussing the The National Endowment for the Arts and I was adamant that the government should not be in the business of paying for the arts in any way, shape or form.  My argument was that government is, at it’s core, conscription of personal property by force.  I argued that this is desirable for necessities that can only be accomplished through a unified effort (i.e. national defense) but not for debatable pleasantries such as furthering artistic expression.  My friend, a huge proponent of the arts was incensed with me.  She ranted and raved and wound up calling me a communist over and over.  I was a clueless young male who was trying to have a dispassionate and logical debate with a passionate young artistic female.  I’m sure you find it shocking that I was unable to convince her of my finer points including the fact that she was using the wrong terminology.  A communist, as I understand the philosophy, would welcome state involvement in the arts, in fact they would demand it.   I’m assuming she used the term as an emotional crutch to identify me as a despot who, in her opinion, was trying to destroy her beloved right to freedom of expression.  

Something similar happened to me recently, I was told that if someone checks out my work with all the Peluso Presents efforts including my blog and podcast, they would think I’m a socialist.  I found that humorous because I’m pretty sure nothing can be further from the truth.  In my day job I’m heavily engaged with serving business.  At times i’ve been such a devout right winger that at one point I actually had a Ronald Reagan themed room in my house.  For the record, the room was much classier than It initially sounds.  The feel of the room was actually more Traditional Americana with Ronald Reagan highlights, but I digress.  Upon reflection it’s pretty easy for someone to come to that conclusion when you consider my expertise area which is the collision points between work and life.  By default half that equation includes ‘work’ which means employers.

I like to use examples to communicate my thoughts, so, let’s take a nice incendiary topic, say employer provided health care, and use that.  I figure why try and be descriptive with something boring.  If you look at the growth of things like  ‘try before you buy’ services provided by staffing agencies, The wall street excitement around the uberization of everything and the growth of jobs with work scheduling that comes in just under the legal wire of having to provide health care, then it’s blatantly obvious that employers would prefer to not have to pay for healthcare if they didn’t have to.  The numbers bear this out.  The population covered by employer provided health care has a very clear pattern of going down significantly in the last couple of decades.

Honestly I don’t have a problem with this, at least not with the employer desire to divest itself of this massive liability.  That little passionate conservative ghost of my youth is constantly whispering in my ear that employers should have the freedom to structure their business as they see fit.  I’ve always said that GM should make cars, Microsoft should make software, and neither one should have to worry about if their people are getting regular checkups or have to pay for things like heart bypass surgery.  The problem that we have through historical precedent, enculturation and political machinations, developed a system that facilitates the nation’s healthcare through employers during the working years, and through the government after you are retired from the workforce.  It actually wasn’t so bad when you worked for a single employer or just a few employers for the majority of your life.  That’s not the case anymore.  Economies have become more complex and that has demanded more complex and flexible workforces.  The concept of the just in time workforce is our current reality.  The numbers back this up too.   According to the U.S. Bureau of Labor Statistics, the median number of years that workers had been with their current employer was 4.2 years in January 2016, down from 4.6 years in January 2014.  According to Fortune magazine, 40% of America’s baby boomers, whose prime working age occurred in the 60s, 70s and 80s  stayed with their employer for more than 20 years.  My dad was one of them.  It is truly a different world.  If you are bringing people on just when you need them, laying them off the second you don’t, then it makes it really difficult to provide them a basic human need (health care) for the majority of their life.  

This brings me to the origin of this article, which was originally intended to explore the question of: Should we legislate employer loyalty?   By default, this question falls into the realm of socialism, because it meets the technical definition.  If you look it up, Socialism is defined as a range of economic and social systems characterised by social ownership and democratic control of the means of production.  It’s why I started the article with my story about being called a communist and a socialist when in fact I’m closer to a right leaning libertarian.  There is absolutely no question that the quality of life of an employee is secondary to profit.  This is how it should be at least from a competent managers position.  Companies are amoral.  They are not bad and they are not good.   They exist to make a profit. Done and done.  Investment into the lives of the employes vis a vis benefits is to attract and retain the best possible employees which in theory creates the most possible profit.   

As I said, Let’s step away from the ticking time bomb of health care because it’s such a complex topic.  For the purposes of this narrative, we can move on to something that should be a no-brainer: Attracting and retaining the best possible employees.  The problem is that the best possible employees are changing year to year.   This is because we are reaching an inflection point in technology.   Jobs are currently being destroyed faster than they are being created and this is mostly due to the tech adoption acceleration curve.  The first modern integrated circuit, which is the brains of almost every electronic product sold today was created about fifty years ago.  For fifty years we have been iterating on the design and are only now just slowing our ability to make them faster and smaller because we are hitting the walls of physics.  That means we are getting much better at using what we have in different ways. Instead of a single personal computer that does everything, we now have tablets, smartphones, and IOT devices all tasked with different specialties.  Instead of a circuit that manages the flow of coolant into a production machine, we now have many circuits all controlling different parts of different machines that will handle the entire run of production.  As tech adoption grows in the manufacturing sector then we enter into a trend where fifty production workers needed for a line becomes ten which eventually becomes one.  Robotics and automation are truly killing jobs and creating them.  These trends are well understood by the technorati if not John Q Public.  

I’ve oft used the example of how the automated phone systems have pretty much displaced the position of receptionist.  Old buildings which were originally designed with a receptionist station have sad little empty desks with a phone on it and a list of extensions.  Eventually the person that would be a receptionist became a customer service rep or some other type of representative and fulfilled different positions as the company grew and tech empowered him or her to do other duties in addition to welcoming customers and managing the flow of information.  It’s classic tech displacement that created job growth.  The integrated circuit is causing the same thing to happen across the entire economy.  The problem is that tech is displacing all jobs.  So using the example, imagine that shortly after the receptionist loses their job, they become a sales rep, and before they can even learn that  job online automation takes away the sales position.  Then they become a customer service rep but automation comes along shortly thereafter and bots start to answer 95% of customer needs.   That acceleration is the problem.  Because we are figuring out all sorts of ways to use our now mature automation technology the jobs are being destroyed faster than they are being created.  New jobs have come along and growth will happen but for now the general employe pool doesn’t have the needed technical skills and the workforce system as a whole isn’t set up for continual retraining.   

So what’s the solution?  We could turn the nation into a welfare state.  It’d be disability based but not  a physical ailment, it would technology.  Although that is happening to a certain extent already it’s existence is pretty much a disaster.  I’ve made the point before; giving everyone a check is just a bad idea.  

We know there is value in employee knowledge.  We know of the skills gap.  We have people who want to work, and we have employers who want to hire them, but only if they have the right skills. One immediate example that comes to mind is that we need lots more people who know how to program those customer service Bots. This, in a nutshell would accelerate the job creation ahead of the technological disruption if we could get people trained more quickly without them having to shoulder the burden of paying for life while getting retrained.  Goldman Sachs has reported on numerous occasions that there is an asset not just in capital but there’s also an asset in a knowledgeable workforce that is loyal to its employer.   I agree with that broad assessment but unlike the market wonks at Goldman, I can’t forget the fact that the quarterly earnings statement is in direct opposition to this loyalty. It’s the reason why we have adopted a just in time workforce.  It’s simply more profitable.  

The model of retaining and investing in staff works.   Nintendo, who has a tremendously difficult time finding and developing really good creatives has a policy for keeping people even when the business is soft.  They promote this job safety to keep people from feeling anxiety about possibly losing their jobs.  This allows the company’s talent pool to focus on what they do best, which is to iterate on concepts until they get a great game.  Nintendo is a good example, but they also have many decades of understanding that their business is cyclical and keeping their people around is better for everyone.   

Let’s bring it home.  We have an economy that needs more sophisticated employees who need to be retrained throughout their working careers.  We have economic think tanks saying it’s better to train and retrain employees to keep them around.  We have examples of companies that succeed by doing just that.  On the other hand we have an investment system and accepted management culture that strongly incentivizes dropping people when they are not immediately needed. These two systems work together for limiting access to expensive benefits when it can be pulled off. American corporations are clearly not doing what’s in their long-term best interest. Shocking!

The TechCrunch article references the need for tremendous educational investment on the part of all employers. Will the little employer’s ever possibly do that? My experience is no way. In the case of the little guys it’s really more about limited resources or personality.  Small and mid-sized companies, especially the ones that are owned by the type of business owner who sees every dollar spent as a dollar out of their pocket  will get rid of people in a heartbeat. I see this everyday with small-time manufacturers who never become General Electric but still impact hundreds if not thousands of their employees lives.  Other owners, the nice guys, the civically oriented entrepreneurs of small organizations, understand what their needs are.  They really do wish to train people and many see their role, in part, as helping people in their community develop great lives for themselves. They can handle training somebody for a few weeks or a few months, but supporting somebody for several years while they get retrained is just not in the cards for most small to mid-size employers.  

The real goal is to retrain them, and retrain them again, and retrain them again as many times as it takes until the speed of tech disruptions level off, which in my opinion won’t happen for at least a complete generation, maybe two.  That means the cost of retraining, including down time during training,  has to become a standard cost of doing business for everyone, large and small employers.  It’s the only way to play on a level playing field and there’s only one way to make that universal: Legislation.

Is it even possible? Can you possibly legislate employer morality via loyalty legislation? If you do does that take the form of displacement in that it keeps the employers coming to that conclusion on their own with corporate culture to change organically? What I mean by displacement is we have 30 year mortgages and big houses as the cultural standard, not because that’s the natural equilibrium for the market, but because that’s the maximum number of years the government will easily facilitate under current legislation.  If that legislation didn’t exist I bet dollars to doughnuts we’d have more renters and mortgage holders would have shorter mortgages.  

Even if you wanted to dictate employer loyalty the question becomes how? Legislative edict can take many forms. You could require employers to fund and support comprehensive retraining programs that employees have access to throughout their tenure. You could require employers to provide significant unemployment gap coverage in the form of continued benefits and wages after a separation.  You could make it so hard to eliminate an employee that business would have their own version of an in-house welfare state.   You could add comprehensive tax incentives for any and all monies spent on training and retraining.  You could bundle any combination of these tactics.  

The problem with any law is that if it’s not facilitating the transition to a new cultural norm then the business community would try and figure a work around and would do it.  Anti-smoking legislation worked great because it was accepted almost universally that smoking was bad, even by the smokers. Uber wouldn’t exist if there were no labor laws or expectations of employee benefits. Uber and the entire gig economy exists because of a perceived need by investors to circumvent modern workplace regulation.  Uber really is a more natural form of employment that harkens back to the pre-industrial age, so legislating loyalty within the gig economy means that type of employment goes away.  Employers will work to find another way to get just what they need when they need it.  

And there it is. The real questions that underpin this article. The question isn’t should you legislate employer loyalty, the questions become: is it worth it?  And Will it work?  If employers want knowledgeable staff that sticks around long term, yes it will work and it’s worth using legislation to help facilitate that end goal universally.  If employers continue to want a just in time workforce, then all the legislation in the world is like trying to patch a windshield with a bunch of cracks in it.  No matter what one you try to fix another crack will get bigger until there are so many you can’t see out the window.

Notice that all this conversation is about employers.  It’s not about social safety nets or facilitating career transitions on an individual level.  I do think that additional security is what is wanted by the average worker and it’s why we continue to see more and more steps towards things like socialized healthcare and conversations about guaranteed incomes.   The collision point is that employers don’t want something that employees want, and arguably need.  I do think there is a solution that’s not a welfare state, and not draconian legislation, but that’s an article for another day.  I just hope nobody tells me i’m a communist when I share my opinions on that topic!

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Posted by Mike Peluso

Mike Peluso writes about the collision between between the business / professional world and life. He also writes about the journey involved with the Peluso Presents efforts including the Blog, Books, and Podcast so that others may benefit from his efforts. From Mike: I spend hundreds of hours working on these articles every year with no compensation other than support I get through donations. You can support with a tip and by Subscribing to the Podcast (and writing a review on iTunes would be really appreciated as well!) One time tips: www.paypal.me/pelusopresents https://venmo.com/pelusopresents

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