If it seems too good to be true…it probably is
By Steven Hill, Hans Böckler Stiftung, July 6, 2022
Why it’s important to separate worker reality from corporate media hype, which often tries to decree what is best for workers – despite being wrong again and again and again.
There is an old saying: “If it seems too good to be true, it probably is.” When we are flooded with media stories telling us it’s a new halcyon day for workers, even though no changes have been made in the objective conditions and regulations that we know help workers, we should be skeptical.
Last December, my article for Mitbestimmungsportal reported on a phenomenon known as the “Great Resignation” that was garnering major headlines in the US. US workers of all ages and occupations were voluntarily quitting their jobs in record numbers. Some experts, such as former US Labor Secretary Robert Reich, said that it was the result of increased worker and labor union power. “For the first time in decades,” crowed Reich, “American workers are standing up and demanding better wages and improved working conditions.” There were signs of this phenomenon possibly spreading to Germany and the EU as well.
But I was skeptical that this would turn out to be a long-lasting trend. That’s because the vast majority of middle class and service sector workers cannot afford to quit their jobs, even ones they hate. Yet the numbers showed they were quitting anyway. There were several contributing factors, including fear of infection or lack of child care, which kept some workers home. For many, government support during the pandemic, including higher unemployment compensation and stimulus checks as a form of basic income, lulled them into a false sense of welfare and opportunity. Breathless headlines have continued to report on workers who supposedly have been defying gravity by quitting their jobs without much of a parachute.
THE GREAT RESIGNATION FLOP
Not surprisingly, this trend turned out to be too good to be true. More recent data reveals that it has been more of a statistical fluke than anything else. For example, labor force participation of people in their prime working years of 25 to 54 years of age shows a recent surge in the participation rate. While it is still a bit lower than it was before the pandemic, it’s pretty much back to 2019 levels, with the expectation being that it will return to normal fairly soon.
The same goes for older workers, 55 to 64 years of age. Some of the experts had speculated that perhaps a big chunk of these resigning workers were older people who couldn’t find work and so they decided to take early retirement by dipping into their Social Security pension before reaching full benefit level. For a handful of lucky few, their stock portfolios and cryptocurrency gambles had zoomed in value during the recovery. But instead of seeing reduced labor force participation among these older workers, as the great resignation narrative would have us believe, this age demographic also has largely returned to work.
While the evidence does show that more than the typical number of workers have left their jobs, it also increasingly shows that they have found different jobs. They did not leave the labor force. One economist published a Tweet storm of data, calling it more of a Great Reshuffling from job to job, than a Great Resignation.
Some of this turned out to be the usual labor market churn of people exiting their jobs. The churn rate tends to be fairly steady from year to year, unless something extraordinary happens – like a pandemic, when people became more worried about holding onto their existing jobs. So the churn declined for a time. Once large numbers of people were vaccinated and the pandemic dwindled, the normal labor market churn resumed, only with a higher rate than normal due to a lot of pent up desire to leave an undesirable job. So the higher rate was just making up for lost time, but now that churn rate is falling back to earth.
An additional confusing factor that kind of messed up the statistics was the fact that the major measurements of employment do not count those who are self-employed. And that number has increased dramatically – more than 600,000 additional self-employed workers compared to 2019 levels, as pointed out by economist Dean Baker. A number of Americans thought they might be able to earn their income by starting their own business (a “business of one). The patchwork US healthcare system known as Obamacare may have encouraged this “business of one” trend, because suddenly people found that their health care was portable, which allowed them to retain healthcare even when they left their jobs. If the rise in self-employment is added in, private sector jobs are only 250,000 below their pre-pandemic levels.
But will these newly self-employed businesses-of-one earn enough to make a go of it? History suggests ‘no,’ for most of them. According to the Bureau of Labor Statistics, the rates of small business failure show that approximately 20% of new businesses fail during the first two years of being open, 45% during the first five years, and 65% during the first 10 years. Only 25% of new businesses make it to 15 years or more. So the number of self-employed persons is also expected to return to normal trendlines, as these businesses fail and those workers have little choice but to return to the regularly-employed labor market for employment (while also possibly earning additional income on the side via temporary gig work).
In Germany and the EU, any trend toward a great resignation quickly fizzled out. In some EU member states, the employment churn was a bit higher than usual, but many EU states made extensive use of short-time work programs. Those programs encouraged struggling companies to retain tens of millions of employees but reduce their working hours. The state then subsidized a portion of their pay. European Central Bank President Christine Lagarde has highlighted that EU countries are not “experiencing anything like The Great Resignation, and our employment participation numbers are getting very close to the pre-pandemic level.”
So this no longer looks like a “great resignation,” much less a step forward in worker empowerment. It’s more like the “Great Hype,” and we should have known it was hype because few of the favorable fundamentals had changed for workers. One of the crucial factors that for decades has been a sure vital sign of worker power, reflecting an ability for workers to flex their collective muscles and determine their own destiny, is the level of unionization of the overall workforce, as well as within certain key industries.
So it’s a big red flag that a recent report from the US Bureau of Labor Statistics showed that the 70-year decline of unions has continued as the share of unionized US workers dropped from 10.8 percent in 2020 to 10.3 percent in 2021 (tying the all-time low set in 2019). The rate among private-sector workers also hit a new rock bottom of 6.1 percent.
With more data available, we now are able to fill in blanks to this Great Resignation story: it turns out it was more of a short-term “data snapshot” that lacked a longer-term perspective, and led to a statistical misreading. That in turn was over-hyped by a media-verse always looking for an interesting counter-factual narrative. Savvier labor experts and economists should have known better than to buy into that storyline, because it never really made much sense.
MORE “TOO GOOD TO BE TRUE” – THE “SHARING” ECONOMY
But that’s not the only example of “too good to be true” being foisted on unsuspecting workers by a fire hose of media hype. Remember the headlines and hoopla over the “sharing economy”? According to the masterminds of Silicon Valley, workers would have all the autonomy they wanted, indeed “the work will come to you” over your smart phone. We were told that we were entering some new kind of post-capitalist phase, and that our mind frames needed to adjust to enjoy the uncertainty – euphemistically called “flexibility” – of this kind of work. Techno-booster culture promoted the idea that young college grads were shrugging off bad employment prospects with a do-it-yourself attitude, becoming self-starters and entrepreneurial innovators, a million Mark Zuckerbergs in waiting.
But instead of a workers’ paradise, the “sharing” economy morphed into the bad dream now called the “gig economy”, led by rapacious companies like Uber and Upwork that are intent on creating a “freelance society” where they can hire and fire vast armies of precarious workers as easily as turning a light bulb on and off. Part-time and so-called “independent” jobs (what Germany calls “solo self-employed”) have become one of the major building blocks of the digital age, forcing Germany, the US and other developed economies to scramble to figure out how to turn these crummy jobs into something better.
STARTUP FEVER – MORE “TOO GOOD TO BE TRUE”
Beyond the gig economy, Germany also fell like a lovesick puppy for the Silicon Valley allure of startup companies as the harbinger of innovation and future progress. I remember when I came to Germany for a fellowship at the American Academy in Berlin in 2016, there was hype everywhere about “the startup economy.” Visitors arriving outside the Berlin-Tegel airport were greeted by a monstrously-large billboard featuring the names and corporate logos of over 250 German companies and large, splashy red letters shouting: “THERE’S NO BETTER PLACE TO START UP.”
As I travelled from the giant trade fairs of Hannover and Frankfurt to the digital incubators of Berlin, I heard a near-constant refrain from numerous officials, whether in government, business or tech — “Germany needs to be more like Silicon Valley…where are the German Facebooks, Googles and Apples?” In a familiar echo of Germany as the “sick man of Europe,” which was the prevailing talk in the late 1990s and early 2000s, many were now wondering, “Why are German companies, especially mittelstand businesses, so stodgy and boring? Why aren’t Germans able to start companies that are more innovative and ‘disruptive’?” Where are the German startups that grab the public’s imagination with some sexy new “gotta have it” product that scales quickly into a monster company and becomes an industry leader?
Now six years later, we have seen recurring headlines about the many abuses of Meta-Facebook, Google, Uber, Airbnb, Amazon, Tesla and other companies. Many of these digital companies have no allegiance to the social relationship between employers and employees, or concern about their impacts on society. These companies are redesigning the corporation and its business practices in a way that ultimately undermines the very society that they purport to be leading into the 21st century.
But this “too good to be true” disappointment is an old old story. Germany experienced it in the late 90s during the first Dotcom bubble. Workers in startup companies thought: “Why do I need a works council? The office door of my boss is always open, we have free organic juices in the fridge, table soccer and a workout room, and I can wear sneakers and jeans to work. We are too cool for a labor union!” Then the Dotcom bubble burst, many companies went into crisis mode and this new work culture very quickly disappeared. These companies went from being hip to giving workers pink slips for layoffs. It turned out a works council might have been a good idea after all.
And now, in the continuing roller coaster of “too good to be true,” tech companies whose stock market valuations soared like Icarus toward the sun during the pandemic recovery, have once again taken a nosedive. The Nasdaq technology stock index has declined by 23% since the start of the year, with the stock of Meta-Facebook plummeting by 42%, Uber by 46%, Zoom by 40% and Amazon 32%. More than 15,000 tech workers were laid off in May 2022 alone, as companies adjusted to flattening revenues following the peaks during their pandemic recovery.
LESSONS TO LEARN IN A CAPITALIST ECONOMY
What is the lesson here? Say it loudly and clear: “If it seems too good to be true, it probably is.” The Great Resignation, like the sharing economy, like the startup economy, like the first Dotcom bubble and the digital economy in general, thrives, survives and revives on the vapors of media and Silicon Valley hype and over-ventilation. These diversionary stories blind us to what will really help workers. Too often, those Silicon Valley propagandists that craft these false narratives know that to get buy-in from the government, media, labor unions and the workers themselves they have to frame it as a win-win for all stakeholders.
Yet when all the Great Hype about increased worker power is not grounded in the basics of what we know, from the past 50-100 years of labor market development, will actually result in worker power – high unionization rates, strong workplace representation, strong labor laws, low unemployment rates (including ‘discouraged workers’), rising income levels, narrowing wages-expenses gap (can people/families afford to buy what they need and want?), codetermination, and more – then we should be immediately suspicious of what the corporate propaganda machines are cranking out. We shouldn’t believe in their nice, velvety words, but instead must think for ourselves and constantly monitor these robust indicators of true worker power.
Looking ahead: we have only begun to assess the post-Covid transformation that is occurring as remote work deepens and broadens among the labor force. This kind of a “distributed workforce” (see my previous column) increasingly composed of freelancers and contractors is harder to organize, and will further weaken worker solidarity and organized labor’s influence. As a trade union or works council, how can you organize a workforce consisting of increasing numbers of precarious workers working most of the time from home, and who can be “fired by algorithm” by simply being shut off the digital platform?
Yet we are already being told, “It’s going to be great, you are going to love the flexibility. This is the future!” Hey, why should we worry? The Great Hype-sters have never been wrong before, right?