Ask the Headhunter: Which industries are being too greedy to pay you fairly?
In this special Making Sen$e edition of Ask The Headhunter, Nick shares insider advice and contrarian methods about winning and keeping the right job, on one condition: that you, dear Making Sense reader, send Nick your questions about your personal challenges with job hunting, interviewing, networking, resumes, job boards or salary negotiations. No guarantees — just a promise to do his best to offer useful advice.
You see it in many aspects of your life:
- While the price of fuel has dropped and airlines and their shareholders run to the bank with higher returns, you pay more to sit in smaller airline seats and to arrive at your destination later.
- Your stock broker gets rich off the higher fees you pay on your investments, while the value of your portfolio stagnates or declines.
Yes, you're getting screwed.
The trend is hardly worth debating — you pay more to get less. And now we know for sure that it's hitting your paycheck, too: As corporate profits soar, you get paid less for your work.
I believe in capitalism, but this isn't capitalism — it's greed, and it's putting our economy and our society at risk because it's devaluing the work you do and killing your motivation to be more productive.
A banker's story
The irony is that a guy at JP Morgan Chase — a big bank, making big bucks — has spilled the beans. Bloomberg reports that Michael Feroli, JP Morgan Chase's chief economist, recently published a research note that reveals — ta-da! — "workers' slice of the economic pie is getting smaller."
It's doubly ironic because JP Morgan's first-quarter profits beat estimates — while the firm slashed bankers' pay. Even the bankers who are screwing us are getting screwed!
Feroli sharpens the point and explains the connection: Which industries are too greedy to pay you fairly?
Which is the long way of saying that you're getting the shaft, while the Man gets richer. The owners of those industries make out, while your paycheck gets smaller.
Sheesh — I never thought I'd find myself talking like a workers' rights nut.
It's worse than unfair pay.
So I'll make myself clear: While I worry about workers, I worry far more about the gross disconnect between the value of work and what people get paid to do it. Even more than I worry about tired employees' families going hungry due to stagnant wages and salaries, I worry that American productivity and ingenuity are at risk — because who's going to be productive and inventive if that behavior is not going to pay off?
It's worse than you getting paid less. Our entire economic system is at risk because the concentration of ownership and wealth is violating a basic tenet of capitalism — at least according to my definition: Profits motivate people to do more profitable work when those who create profit enjoy the rewards.
What happens when workers — at any level and in any kind of job — see where the profits are really going? I think it spells trouble. A prescient, responsible capitalist, Nick Hanauer, spills more of the beans in a TED presentation, "Beware, fellow plutocrats, the pitchforks are coming."
Is Feroli right?
Rather than the regular Ask The Headhunter Q&A column this week, I'd like to ask you to please read a short article about Feroli's work in Bloomberg Businessweek: "Rising Profits Don't Lift Workers' Boats."
And then, if you dare, skim a report written by Jason Furman, chairman of the president's Council of Economic Advisers: "Benefits of Competition and Indicators of Market Power." It's dense, and one of Furman's conclusions will seem obvious:
"When firms take action to impede competition, through anticompetitive mergers, exclusionary conduct, collusive agreements with rivals, or rent-seeking regulation to restrict entry, their profitability may increase, but at the cost of even greater reductions in consumer welfare and societal benefits."
Read the Bloomberg article and draw your own conclusions. Then let's talk about whether you're getting paid less — and whether it's because a concentration of ownership and wealth doesn't reward the people who come up with the ideas, do the work and create the wealth.
This week's takeaway
Since this is Ask The Headhunter and my purpose is to help you be more successful — here it is, based on the sources I've discussed above: It seems you'll earn better pay working in an industry where there's more competition and less concentration of ownership. So pick your job targets wisely.
Feroli's and Furman's work suggests, for example, that the health care industry pays more of its income to employees, while the transportation and warehousing industries (which include airlines and railroads) pocket more of the profits and leave workers in the lurch.
For example, between 1997 and 2012, in transportation and warehousing, the "share of business accounted for by the top 50 companies rose by 11.4 percentage points," while health care and social assistance fell 1.5 percentage points. And in looking at the share of sectors' income paid to employees from 1998-1999 to 2013-2014, transportation and warehousing fell 7.6 percentage points, while health care and social assistance rose 1. 8 percentage points.
It should be no surprise that last week's jobs report reveals the dirty little secret of our economy: 458,000 people left the workforce. See "Why hiring is at five-year low and the economy is stalling." It doesn't take an economist to tell us that when employers stop paying out part of their profits to the people that produce them, those people get fed up and stop doing the work.
Choose your employers carefully.
Here's how various industries stack up in terms of the revenue share controlled by their 50 biggest players. According to Bloomberg, Feroli's analysis suggests "the share workers got tended to decline in industries where there's more consolidation." That is, when more revenues are controlled by a smaller number of firms, the less that industry is likely to pay to its workers.
Note that transportation and warehousing tops the list of industries where ownership has become more highly concentrated. It's also the industry that showed the biggest drop in the share of income paid out to workers.
Of course, being the smart readers you are, you already know which industries are the problem — and you should assess any industry you're considering working in. Even then, you need to look carefully at individual companies. I have two suggestions for assessing specific employers.
Ask: Does the company pass the profit test?
Does the company you're looking at offer an opportunity to produce and enjoy profit through your hard work? In other words, if you work hard and if you work smart, how will the job pay off for you? This is not a simple question to answer, and the answer is rarely obvious. But it is key to your success.
In Fearless Job Hunting, Book 8, Play Hardball With Employers, "Avoid Disaster: Check out the employer" (pp. 11-12), I suggest conducting your own investigations when judging employers:
You should also talk with some of the company's customers and vendors. If there are problems, these people may be suffering from them. Sure, it takes effort to identify customers and vendors — but if you don't do it, you'll never know what the company's reputation is out in the business community. You will have no references.
Picking good employers who pay you for your contributions to profitability has become a much more challenging task than just applying for jobs that appear online.
Dear Readers: How can you tip the balance back towards making your work more profitable for you — not just for your employer? Or has our economy shifted so far that it's going to tip over? In your experience, which industries share the wealth — and which of them pocket the profits you help produce?
Nick Corcodilos invites Making Sense readers to subscribe to his free weekly Ask The Headhunter© Newsletter. His in-depth "how to" PDF books are available on his website: "How to Work With Headhunters…and how to make headhunters work for you," "Keep Your Salary Under Wraps," "How Can I Change Careers?" and "Fearless Job Hunting."
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