How to create good, stable, high-paying jobs for less skilled workers? How to maintain a strong middle class? Where will a large number of good jobs come from in the wake of massive restructuring and globalization of industrial jobs which once served this function?
A big part of the answer lies in upgrading service class jobs – the largest class of jobs in virtually every advanced industrial nation. Look at the trendline below.
But, service class jobs currently pay low wages and are insecure work – they seem to be a poor substitute for the long-run, stable, high-wage jobs that are being lost in manufacturing. But many service jobs have the advantage of being strongly tied to location. It’s hard to outsource personal services, or restaurant work, or retail sales jobs.
The upgrading of service work is a key challenge for the advanced world. Just as we transformed industrial work from harsh, dangerous, and low-paying work during the New Deal and after, we can and must upgrade service work – transforming current service jobs into the same kind of stable, high-paying, secure work that can support middle class families.
A team of researchers at the Martin Prosperity Institute has been looking closely at this critical issue. Here are the first two discussion papers the group has produced as part of the project on Ontario in the Creative Age.
My Rotman school colleague, Anil Verma, provides a detailed profile of low-wage service workers and their jobs including four case studies of firms that are actively upgrading service work. Amy Cervenan examines the potential upgrading of service class work in light of the broader transformation of the economy. Download copies here.
March 27th, 2009 at 7:52 pm
Amy Cerravan’s paper is a great starting-point. Will a follow-up paper look at things from the perspective of the owner of a MacDonald’s franchise? What would motivate (as opposed to force) that owner to pay her staff more?
March 28th, 2009 at 3:37 pm
I am an MBA student at Rotman, and I am taking a course called Creative Regional Strategies, lead by Richard Florida and his research partner Kevin Stolarick. The focus of the class is to expose business students to ways of thinking about how policy can impact the long term economic prosperity of regions, in the context of Florida’s work on the creative class. The issue of upgrading service work is indeed a difficult and important one. Florida classifies the service class as those working in typically low-wage and low-autonomy service jobs. What I find interesting is the notion that as an economy becomes more ‘creative’ the inequality between creative class and service class workers does not lessen, and in some cases it gets worse. Florida calls the service class the “support infrastructure of the creative age,” yet this class’s work offers very little creative opportunity and long term stability. In the Ontario in the Creative Age report that Florida mentions there is little discussion on how to achieve the broad objective of upgrading the service class – which is not problematic in itself since I believe the report was not meant to be prescriptive but rather as a method for identifying broad objectives – yet it does pose problems for those who are not willing to live in the possibility of a future that looks different than today. A friend of mine recently attended the Ontario Good Roads Association conference where Howard Hampton was clear that he was unimpressed by the report, and was critical of the fact that it did not address the current challenges we face, with a struggling auto sector and recession. The problem is that the idea to upgrade the service class is an objective we have to be creative in meeting given all the constraints we face, and there are no short term, easy answers. I believe a creative resolution is possible, we just need more people thinking about how to upgrade our service class so our entire economy in Ontario can benefit from moving to a more creative class economy. I agree with Mike that Amy Cervenan’s paper is a great start to thinking about these challenges, and I hope that enough people read it and start to think about how to motivate employers and workers alike to upgrade service class jobs. It’s a long term vision that I am hopeful about, but it may mean some short term pain that many are not willing to suffer, and it’s this short-sightedness that to me is one of the greatest challenges to upgrading the service class.
March 29th, 2009 at 10:18 pm
I agree that improving conditions for service workers is an important issue that deserves the attention of policy makers.
Among other things, Amy Cervenan recommends in her report to support the skill development of those in ‘at risk’ groups, and to support and maintain workplace rights resources. While these actions may help, I do not feel they address a major issue, which, as Mike points out, is how to incentivize employers to increase wages, provide benefits and offer more security. While empowering workers at the Four Seasons made service class work more rewarding and enjoyable (this is a classic example), it was also in the best interest of the company. However, this model may not translate into lower-margin industries such as fast-food. Can we expect companies to suddenly find a reason to improve the working conditions of the service class? Without legislation, I don’t foresee many incentives for companies to incur extra cost.
March 30th, 2009 at 12:48 am
There were a couple of articles in the Sunday NY Times that got me thinking. One was about the phenomenal growth of Facebook, the other about how business models change in times of economic crisis. I think these may relate to one another.
Just as the assembly line made the CIO model of industrial unions possible, and therefore made manufacturing jobs well paying, I wonder if the Internet will provide a means for organizing the service class. Also if the present economic meltdown will cause some new business models that will also change service industries.
Everyone is looking at the return of New Deal type regulation and social models, but forget the New Deal was entirely new at the time. Whatever happens won’t be a return to the past. People also forget that the New Deal was made up as they went along, Roosevelt didn’t have a grand plan in 1932.
March 31st, 2009 at 10:24 am
I think there is a fundamental truth here in North America that we ignore at our peril when we get into these discussions of precarious/low wage service sector work, or indeed of income inequality. The collective decision we’ve made is to ensure lower cost goods and services at the expense of those who provide them to us.
I was in Norway a few months ago and the cost of living – even in their currency – was shocking. But the reason one pays ten dollars for a coffee (and perhaps endures slower service) is because the person serving it was receiving a wage double what a comparable barista in Toronto would be making. Guaranteed living wages and strong social supports are simply a part of their social contract in a way that they aren’t in ours.
This might sound blasphemous on this blog, but I don’t think there is a great deal that can done to increase the creativity of many of these service sector jobs (at least to the point where there’ll be market incentives to increase wages significantly). I think the fundamental truth is this: if there is indeed a desire to improve the standard of living for many in low-wage service industries – whether because we feel this is a moral imperative or because it can improve economic and social outcomes – it must be legislated, and it must come to some degree through an increase in middle class cost of living.
The corollary though is that a better standard of living can then increase spending power and scope of opportunity for those in service sector jobs – potentially both fostering economic growth and providing incentives to pursue further education and the opportunity to enter more creative lines of work.
How to get there? Ontario is pushing the minimum wage to $10.50 from around $7 just a few short years ago. But imagine if it was at $14 or $15? Now i realize that economists have squabbled for years over whether raising the minimum wage actually puts more people out of work (largely unproven in the literature), and often prefer tax credits or other measures to boost incomes (hidden in the tax system). But, in my mind, pursuing labour market reforms directly by boosting the minimum wage would be a politically difficult but symbolically important shift – suggesting to those in low-pay jobs that we’ve been undervaluing their contribution, and to those in the middle class that this shifting labour market requires a renewed social solidarity.
April 3rd, 2009 at 12:50 pm
It’s going to take a major shift in the way board rooms think about the service sector to increase the wages and the value of jobs for this group. I read through the case studies in the paper written by Anil Verma and it got me thinking. Without more companies like Four Seasons (and many other great service companies) we are in big trouble with this growing class of jobs in Canada. The key to increasing the value of the worker is to increase the value of the customer experience and if we do that often enough they will come back next time and we can then pay those employees more for the great work they are doing.
Three things that are crucial to facilitate better service jobs in my view are, 1) front line input into direction, 2) freedom for workers to make decisions, and 3) creative involvement in service improvement activities.
First, management needs to create real ways for employees to have input into the direction of their organization (avenues to strategic planning etc.). Real communication channels like Employee opinion surveys, focus groups, and open doors to management can help foster an environment that will increase the value of the service employees thoughts. Many companies pay lip service to these ideas but few use them to the full potential.
Second, management needs to allow workers the freedom to delight customers. Rules, red tape and rigorous procedures can hinder this process. Delta Hotels (a three time Canada Awards for Excellence winner and a place I visit often) has a program called “Straight from the Heart” that promotes fearless decision making for front line staff. An employee can do pretty much anything to delight a customer without the fear that a manager or supervisor will reprimand the decision. This type of thinking injects creativity into service work and it helps foster employee engagement that leads to a better customer experience.
Third, management needs to open the door to service improvement activities. This is especially true in routine-based service jobs with typically lower pay. A good way to engage the minds of routine based service workers is to involve them in documenting their work and making it better, faster, easier etc. This will once again engage the employees in using creativity and improve the customer experience and in time increase the value of their work.
These three things are by no means exhaustive but they are a step in the right direction for improving the value of our service jobs.
I work at the National Quality Institute and we have collected lots of best practices from the winners of the prestigious Canada Awards for Excellence over the last 25 years who like Four Seasons really “get” the importance of treating service employees like gold.
April 8th, 2009 at 11:20 pm
At Second Cup the other day (an Ontario coffee chain) I got a caramel latte, and they typically give you the coffee without a lid since the caramel is coated on top of the foam. I watched as the barista doodled an impromptu design with the caramel. That little bit of creativity that went into an otherwise typical coffee drink made an impression on me, not only because my drink was now ‘hand-crafted’, but i felt that it allowed an otherwise mundane service-sector job to be a little more bearable.