The cost of profit

The New York Times has a piece about part-time workers by Steven Greenhouse. The picture it paints isn't rosy for the workers. Perhaps the most straightforwardly harrowing anecdote comes from Desmond Anthony, who described his experience working for Express:

At first, he usually worked five days a week, often racking up 30 hours. But after several months, he said, he and many co-workers had their weekly hours cut to 12 or 15 and occasionally none at all.

“I’d go to the managers and say, ‘What is the issue? Am I not pulling my weight?’ ” he said. “And they’d say, ‘We just don’t have enough money.’ ”

“ ‘So how am I supposed to support myself? ’ I asked, and they said that was not their problem.”

Mr. Anthony said it was hard to survive. At $8.25 an hour, 15 hours a week equaled about $500 a month. His share of the monthly rent was $800, with several hundred more for utilities, phone and subway fares. Some days he went hungry, he acknowledged, and he repeatedly turned to his parents for help.

He and his co-workers held out hope that, come the holiday season, their hours would pick up. “But then they hired 15 more workers,” he said.

Perhaps the companies who provide such jobs would retort that their jobs are only intended to provide extra cash, not to provide a living wage.

What's clear is that the companies that have chosen to make so much of their workforce part-time have their eyes on the bottom line. Jamba Juice, for instance, has turned to specialized software to optimize its scheduling of staff at its stores.

Karen Luey, Jamba’s chief financial officer, said the scheduling software “helped us take 400, 500 basis points out of our labor costs,” or 4 to 5 percentage points, a savings of millions of dollars a year.

And:

Mr. Flickinger, the retail consultant, said companies benefited from using many part-timers. “It’s almost like sharecropping — if you have a lot of farmers with small plots of land, they work very hard to produce in that limited amount of land,” he said. “Many part-time workers feel a real competition to work hard during their limited hours because they want to impress managers to give them more hours.”

I can't believe he used "sharecropping" as if it were a praiseworthy idea.

There is a vast, unbridgeable gulf between what these employers want and what these employees want. The employers clearly don't think it's their problem to ensure their employees can earn a living wage. And frankly, in a free-market economy, that's a permissible attitude. It can even be considered a praiseworthy one.

At least some of the employees, though, are looking for a way to make a real living. They can't understand why their hard work doesn't impress their employers enough to make that happen.

The employees and employers have an irreconcilable conflict. Unfortunately for the employees, the employers very much have the upper hand in this economy.

Now, if you're a free-market advocate, that's okay. The fact that retailers are able to cut costs to the bone results in lower prices for consumers. That's a win as far as it goes.

If you look beyond the tip of your nose, though, a bigger question presents itself. Is the U.S. economy able to provide enough jobs that pay livable wages to support a robust consumer sector?

If enough people are working at jobs that don't pay them enough to cover their cost of living, that means these people can't be good consumers, right? What happens to the U.S. economy then? Hell, what happens to the United States as a whole?

All these jobs numbers that economists and politicians keep throwing around: how many of them represent good jobs, the kind needed to support the much-discussed (and, I increasingly fear, mythical) middle class?

Lower costs at restaurants and retailers are a boon to the customers of those establishments. To the extent that these businesses flourish, it's expected that the investors in these businesses will prosper, too. If those companies are publicly held, the investors are shareholders, and potentially could include any of us. Those points are the upside that free-market advocates love to discuss.

What free-market advocates never discuss is what the economy as a whole looks like in their glossy vision. It's an article of faith that if you simply let businesses follow free-market principles of lowering costs and competing furiously with minimal or no interference, something beautiful will result.

But will it?

What happens if the market fails to provide enough jobs for workers to earn a living? What if too many jobs are what an earlier generation called "pin money" jobs? Is there a free-market solution to such a situation?

One immediate consequence would be that some businesses, maybe a lot of them, would fold. But what then?

I can imagine that the businesses that remain open will try to cut their costs even further. That, however, will do nothing to boost the number of people who have any money to spend. In fact, if you follow this line of thinking to its absurd end, the population starves to death.

I'd like to believe that the reductio ad absurdum consequences won't come to pass, but to ensure it doesn't there has to be an alternative. So again I ask: how does the free market fix an economy that doesn't provide enough jobs to support a robust middle class? We may not be at that point yet, but the Times article suggests we're heading in that direction. So what the hell is the answer?

Might we have to rethink our national obsession with the totally free market? Might we have to acknowledge that a free market is all well and good, but that the free market might not be entirely compatible with our overall national well-being?