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September 4, 2019

Creating Pathways to Better Jobs

MIT Sloan Professor Paul Osterman explains the importance of developing industry-specific strategies to improve the jobs of low-wage workers.


MIT Sloan Professor Paul Osterman

These days, the U.S. economy generates an awful lot of bad jobs—jobs that pay low wages, lack good benefits, have unpredictable schedules, and often have few good prospects for advancement. MIT Sloan Professor Paul Osterman wants to change that—by finding ways to improve the jobs of low-wage workers.

Osterman, who is the Nanyang Technological University Professor of Human Resources and Management at MIT Sloan as well as co-director of the MIT Institute for Work and Employment Research, has been studying labor markets, training programs, and public policy governing both for years. He has looked at these issues from numerous vantage points, from conducting extensive academic research to writing books with titles such as “Good Jobs America: Making Work Better For Everyone,” to serving as a board member for nonprofits involved in training.  

Now, Osterman is tackling America’s job-quality problem from a new perspective: industry by industry.  Specifically, in addition to writing the 2017 book “Who Will Care for Us? Long-Term Care and the Long-Term Workforce,” Osterman is the editor of a forthcoming book from MIT Press, “Creating Good Jobs: An Industry-Based Strategy.” Osterman, who is a member of the faculty steering committee for the Good Companies, Good Jobs Initiative at MIT Sloan, recently spoke with Martha Mangelsdorf, the director of strategic communications for the Initiative, to discuss some of the key findings of the forthcoming book—as well as the latest new projects he’s working on. What follows is an edited and condensed version of their conversation.

Good Companies, Good Jobs Initiative: You’ve edited a book, “Creating Good Jobs: An Industry-Based Strategy,” that MIT Press will be publishing in January 2020. Tell us a bit about the book and some of its key findings.

Osterman: Our forthcoming MIT Press book was motivated by the fact that there's a very large low-wage labor market in the U.S. for adults. Depending on how you measure the low-wage labor market, you could say that almost a quarter of U.S. adults are in jobs that pay less than a family-supporting wage.

The question is what to do about that. A lot of public policy is focused on either job training—giving these workers skills to move to other jobs—or regulatory policy of one kind or another, such as higher minimum wages. Both approaches are, I think, quite valuable. But the book was motivated by another set of potential strategies, which is to find ways to work with firms to encourage them to improve the quality of the jobs they provide.

A related motivation for this book is the thought that strategies for working with firms are going to vary by industry. The book includes chapters on the characteristics of seven different industries that employ large numbers of Americans in low-wage jobs, and the authors of each chapter are experts on that industry.  All seven industries covered in the book vary in structure, and the book considers what strategies are appropriate for each industry. 

A core finding of the book is that the very different structures of these industries have real implications for how to improve job quality. To really make a dent in the job-quality problem, you have to understand the structure of each industry.

Can you compare the structure of two of the industries explored in the book and talk about how the industry structure affects strategies for improving job quality?

Osterman: Two of the industries we include in the book are healthcare and residential construction. In healthcare settings such as hospitals and clinics, there’s a set of job-improvement strategies that rely on training low-wage employees to advance up a job ladder to better-paying jobs. Those strategies make sense for two reasons: first, healthcare is a quasi-public industry, and the fact that it’s a publicly regulated system gives you some leverage to put pressure on hospitals and healthcare systems to provide training and create job ladders for incumbent workers.  And second, the nature of healthcare is that there are built-in job ladders, because healthcare organizations like hospitals are very hierarchical, structured organizations.

Contrast that with residential construction, which is an industry where there is a lot of subcontracting. You have large construction companies that then subcontract to carpentry and electrical companies and so on. Then those subcontractors subcontract to sub-subcontractors. So you have many small subcontracting businesses competing on price, and it’s very easy to start or close these businesses. You can easily start, say, a framing business, but if there's a problem with that company, you go out of business and then reincorporate as a different corporation.

That means it's very hard to enforce labor standards, because you have a lot of small contractors who can easily come in and out of business. There's a high temptation for those companies to engage in various illegal practices such as wage theft; there are also significant health and safety issues and high accident rates in residential construction. And in some parts of the country there's a very large, often undocumented immigrant workforce in the industry that's highly vulnerable to exploitation. So understanding how to improve job quality in the residential construction industry is very much a story about thinking creatively about enforcement and regulatory strategies. It’s also a question of trying to see if you can find some ways to identify what we often call “high-road employers”—in other words, employers that offer higher-quality jobs with better wages—and brand their product and work in a way that customers would care about.

In hospitals and in clinics, what does a common job ladder look like? Is it someone moving from a job like custodial work to be some kind of medical technicianor from medical technician to nurse?

Osterman: Inside of hospitals there are jobs called certified nursing assistants, which are kind of at the bottom of the hierarchy of the people who interact with patients. But there's a whole set of technician jobs—for example, phlebotomists or medical assistants—which are accessible to those workers with more training. That would be a typical kind of ladder.

Got it. So those technician jobs are jobs that, in the U.S., you'd often get some kind of community college credential for.

Osterman: Exactly.

You mentioned the significant percentage of American adult workers who are in low-wage jobs that don't pay family-supporting wages. Has that problem gotten worse over time?

Osterman: It hasn't gotten worse over time, but it hasn't improved very much over time either. That implies that you need some kind of structural change. Full employment—a tight labor market like we have now—absolutely does help. You see examples of retail firms, for example, raising their wage to attract workers, but it's not going to lead to a fundamental shift in the structure of that labor market without something deeper going on.

What effect do you hope this book will have?

Osterman: I hope it will focus attention on the issue of improving job quality in the low-wage labor market and then deepen the quality of the policy debate. There’s a lot of interest in other job-related issues, such as whether robots will kill many jobs, but public and policy attention to job quality at the low end of the labor market has not been as significant as one would like—even though the issue affects huge numbers of people.

You wrote a chapter in the book about home healthcare. That’s an industry you've also written extensively on in the past, in your 2017 book “Who Will Care for Us?” It’s an industry where you think there is a good opportunity, with the right kind of policy, to create better jobs. Tell us a little bit about that.

Osterman:  The home healthcare industry is an industry that's heavily reliant on public funding, through Medicaid and Medicare. The constraint on that industry is that the home care aides, who are paid terribly—on the order of somewhere between $11 and $13 an hour nationally—are not permitted to do very much because of what are called scope of practice regulations, which are state-level regulations of healthcare professions.  For example, home health aides are not trained or permitted to work with diabetic patients on managing their diet or with injured people on their physical therapy exercises. In many states, aides are not even permitted to administer pre-packaged medicines.

That limits the aides’ productivity and how much they can contribute to reducing healthcare costs. If you could find ways to expand their permitted scope of practice and then train them to take on additional tasks, they could save the system money. Then, a portion of those savings could rebound to the home health aides in higher compensation. That's the core argument of both my earlier book and the chapter in this book.

I see: If a home health aide could get trained in, say, helping people manage their diabetes, that could presumably save the system a lot of money, because it would help avert the need for more expensive medical interventions down the road. And if the home health aide in turn got two more dollars an hour after acquiring the new skill set, it could change her or his life a lot, right?

Osterman:  Exactly. That's precisely the argument.

Let's talk a little bit about your work with the MIT Task Force on the Work of the Future, which is a task force across the Institute that is looking at the issue of how advances in digital technology, AI, and automation are going to change work in the future.

Osterman:  I'm co-chair of the Task Force’s subcommittee on training and skills. Within that area of responsibility, I've been focusing on the skill training system in the U.S, and I'm doing several projects related to that.

One is a joint project with the Community College Research Center at Teacher’s College, Columbia University. Community colleges are America's largest training institution for adults, by a huge factor, so we're going to look at best-practice community colleges and try to understand how they work with their employer communities.  Secondly, I'm in the process of designing a survey funded by the Good Companies, Good Jobs Initiative at MIT Sloan. We’re going to ask a nationally representative sample of about 3000 people about skill training—where they’ve learned their skills, with a particular focus on what kind of training they get from their employers, because there's no good national data on that.  And I'm also working on studying the regional ecosystem for skill training in southeastern Michigan, the region around Detroit, and what some of the issues are. We chose that region because it’s one that the MIT Work of the Future Task Force is focusing on.

All three projects are still in the planning stage, so there won't be real outcomes from them for quite some time. A fourth thing I'm doing is that I've got a grant from the Russell Sage Foundation to write a book on retraining for the work of the future.  

Interesting. What do you think are the big issues for the country in terms of retraining typical workers?

Osterman:  I think low-wage workers in particular receive short shrift in terms of the amount of training resources that go in their direction. More generally, given the volatility in the job market and changing skill demands, we need a more systematic way of providing people with skills. That's what the focus of my next book will be.

 


This article is part of our new monthly “Work in Progress” interview series, which highlights recent and in-progress work by researchers affiliated with the Good Companies, Good Jobs Initiative.​ Read the "Work in Progress" series.


 

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