Information Asymmetry and the Salaried Workforce

It was my first real job opportunity after college and, as a result, my fourth interview for an entry level role was extremely stressful solely by virtue of having secured a job offer. Like anyone else in this position, I was moving into the negotiating stage of role and I was stuck in a quandary. 

On one hand, I had severe economic constraints limiting my bargaining power and, since this was 2011 and I had no "real" experience, any job was better than coming back to North Dakota in shame. I had paid the bulk of my $220,000+ college education with what I later learned were substandard loans at about 7% a year featuring no payment protection (despite the financial aid originating from a state-owned bank). Compounding this stress, since I was an intern in Washington prior to the interview and earning sub-subsistence wages, any opportunity that could possibly help me pay rent and loans was a godsend

On the other hand, I knew how to interview employers for position flaws or concerns and this one was setting off a plethora of red flags. Unlike most of my classmates in college, I had worked for the entirety of my teenage years and adult life. After a high school career of dishing Little Caesar's Pizza and slinging The Country's Best Yogurt, I cleaned and painted the dumpsters from the innumerable fraternities, sororities, and dining halls at the University of North Dakota following my first year in college. I was no stranger to hard, dirty work and these experiences also helped me become highly familiar with different types of managers and what to notice at job interviews. My role in the interviews had gone well, but I was growing uncomfortable with evasions concerning work expectations. The apex of this tension manifested at a key moment when we discussed working time. 

Me: In order to assess my interest in this job, I would like to know a bit more about what the standard day looks like. Can you expand on that?

Her: Well, you'll start your day early, probably around 7:00, but you get to work in your pajamas! After sending out the morning brief, you'll come into the office and some days you'll leave at a normal time and other days you might work late.

Me: Ok... so can you define what "normal" looks like?

Her: When the work gets done. Some days will be longer and other days will be just like any other job.*

The conversation continued with the employer continually evading questions about time expectations. As might be expected of a broke twenty-two year old, I took the job. Unsurprisingly, the job actually entailed a before 6:00 AM start time and a 10:00 PM to 2:00 AM finish time for $36,000 a year without benefits. Six months later and twenty-five pounds heavier, I quit without having another source of income. 

The real crux of my job post-hire stress, though, was the effective variability of my earnings.

For a long time, many aspects of labor have been measured as a function of an hourly unit. This is partially a hangover from a unionized manufacturing economy in which collective bargaining safeguarded working time within certain boundaries. The hellish wage slave hours that Marx had witnessed in mid-19th century England, where a reasonable labor policy was a cap on child labor at sixty-nine hours a week and workers regularly worked well over fourteen hours a day in dangerous conditions, were effectively abolished in the early-mid 20th century. These goals were realized through the efforts of unions to safeguard worker time that culminated in the U.S. Congress passing the 1938 Fair Labor Standards Act. The growth of hourly assessments also came as a reasonable adaptation to the post-industrial professional services sector in which lawyers or management consultants must have a unit of measurement for billing clients, since their products are less tangible and therefore the time itself is the product.

Because of this confluence in labor rights and intangible production, most employers viewed labor as a variable cost, which is a cost that increases, either proportionally or, in the case of overtime, exponentially with utilization on an hourly level. 

During the same period, though, there were a number of "exempt" employees, which, in short, means these individuals are exempt from overtime pay. According to a Bureau of Labor Statistics report in 1997, "Professionals and managers were among those most likely to work very long workweeks. This may reflect the considerable responsibilities associated with many of these types of jobs, but also that employers often are not required by law to pay overtime premiums to workers in these occupations, as they must do for most hourly paid workers."

Despite this growth in hourly inputs from the professional, managerial, and sales classes, overall average hours per week had only increased by 1.1 hours between 1976 and 1995 from 38.1 to 39.2. Using the same metric, though, net hours for employees have actually fallen to 34.4. This fact, however, obfuscates the complexity of the U.S. economy. The falling of overall hours reflects the dual nature of America's labor force.

It is important to note that data about hours per week in the United States obfuscate the complexity of the labor market, which, in the United States, is effectively a bifurcated labor market. On one hand, there are over six million jobs that do not pay a living wage, offer health benefits, or job security and the workers in these roles are often desperately seeking a way out, which bolsters the political narrative of the continuation of the recession in the United States. On the other hand, salaried employees, like the rest of the United States, have seen little in the way of effective real wage growth. Despite this trend, these salaried jobs' weekly hour load has risen to forty-nine hours per week, with about 40% of workers toiling for more than fifty. While the former individuals are worth an entire tome's worth of research, the latter are equally worthy of study.

Setting aside the well-researched and proven inefficacy of overworking employees to improve productivity, it remains a common practice. In many cases, the fact of the matter is that salaried employees' relationship to work has fundamentally changed and you can find evidence of this socially.

I posit that, somewhere along the line, the United States' business culture succumbed to an impulse that is present in any inherently asymmetrical power relationship: the ability to exploit. Instead of workers' time being considered as a loan from the worker, businesses began thinking of how to best maximize the amount of time their labor pool can be utilized. After all, if the person is salaried, then he or she functionally has no work-related constraints. Instead of a borrowed hourly employee, companies now have a pool of infinitely-exploitable owned resources. Workers have become a factor endowment no different than a machine that can operate for X hours per day or capital that is utilizable until it is expended or broken. 

Evidence of this can be readily found in a simple labor policy that has carried over from hourly employees into the salaried workforce. Specifically, whenever an employee needs an hour or two for X or Y reason, including dire issues like  sick parents and children, he or she is required to file a request for leave for that time, burning through their fixed pool of time. At the same time, employers have developed explicit and implicit policies to work their employees beyond a normal workday scope with, perhaps most nefariously, ill-defined start and ending times.

As we have learned from the experiments in "unlimited" vacation, ill-defined policies always benefit the employer. The social coercive mechanisms of the anxiety-filled workforce in the post-recession era are more than enough for workers to indenture each other with the employer having no need to lift a finger.

Information asymmetries occur in everyday life, but nowhere is this more pervasive than in the American workplace. Traditional economic models have discussed things called "indifference curves" along which workers will swap leisure time for work time, given a certain wage-to-hour conversion rate.

image credit: economicsdiscussions.net

This model is still utilized today to describe worker behavior, but, like most sanitary economic models, it presupposes that the worker has access and knowledge to the exchange ratio. Without knowledge of his or her earnings per hour, an employee has no data on which to base a decision. Instead, on an individual level, the leisure-work exchange is not a curve so much as two fixed points between a high number of work hours with a nonzero income or a zero income, zero work hours point (point E or T, respectively above).

To effectively bring back a reasonable workforce in the United States, it is essential to give employees the ability to value their time and understand their pay to time exchange rate. There is no better way to do this than by outlawing salaried work and bringing back hourly income metrics and increasing transparency between employers and their workers. 


The Decorous and the Déclassé

Manufacturing Employment and the Neo-Dixiecrat Donald Trump