Welcome to the Service Economy

“We are moving into a service economy.”  How often have we heard this in the past twenty-plus years?  Most of us here in the Twin Cities have thought little about it until we received the jolt this year that, after eighty years in operation, the Highland Park Ford plant is going to be closed.  We can no longer deny that it is the end of one era and the beginning of another.  We have entered the service economy.

What does this mean?  What kinds of jobs do we find in this service economy?  The picture, frankly, is grim.  According to recent research, in a Minnesota family of four with both parents working, each worker must earn $12.00 an hour just to meet their basic needs.  Of the five occupations in Minnesota with the most job openings, only one pays a median wage of more than $8.00 per hour.  The two occupational groups with the most job openings are retail sales and food preparation/serving, accounting for more than one-fourth of all job openings.  Workers in these industries earn an average of $7.29 an hour.  In other words, most of these service-sector jobs are not family-supporting jobs.

Back in the first thirty to forty years of the 20th century, men who worked in meatpacking, steel, auto, and coal mining could not support their families on their wages, even with the assistance of working wives and children.  Through a mass movement towards industrial unionism in the late 1930s and 1940s, they radically changed their situations.  Some twelve million workers had joined unions by the end of WWII, and their contracts brought them not only improved wages and better working conditions but also benefits including individual, family, and retiree healthcare coverage, paid vacations, and pensions.  These workers and many of their children and grandchildren enjoyed an economic security and stability that their own parents and grandparents had never known.  They became home-owners, their children attended college, and many of them lived longer, healthier lives.

Today’s generation of service workers could create such economic security and stability for themselves and their families.  The industries in which they work — food processing and serving, healthcare, and retail — generate substantial financial surpluses (even those which call themselves “non-profit”).  These profits (as dividends, salaries, bonuses, stock options, and the like) have not only enriched the owners, managers, and stockholders of these companies, but, like their predecessors the Fords, Rockefellers, Mellons, Carnegies, Hormels, Weyerhauesers, and their ilk, the owners and CEOs of these service-sector companies have become the lauded philanthropists of their generation, as foundations, buildings, and parks begin to bear their names.  There is plenty of wealth generated in the service sector.

While service workers could follow in the path mapped out by meatpackers, autoworkers, steelworkers, and coal miners, they face substantial obstacles.  Labor law, corporate structures, the media and our dominant culture together undermine the very concept of unionism in the service sector.  Workers are pressed to put their patients and customers first, to sacrifice their own interests, to see themselves as “unskilled,” and to expect little reward for their labor.  Jobs are often part-time with little opportunity for advancement.

Even when workers in these industries manage to organize, their employers are bitterly resistant to paying decent wages and benefits.  Take the more than 3,300 certified nursing assistants, dietary workers, transporters, environmental service workers, and other health care support workers employed by five Twin Cities hospital networks and represented by Service Employees International Union Local 113.  These workers threatened a strike this summer in order to resist pressures to bear a growing burden of their families’ health care costs.  The irony, of course, is that their very jobs are to provide health care to others.  Their self-insured employers are themselves the providers of the health care these workers and their families often need.

Members of Local 113 have faced employer demands for higher deductibles and co-pays, decreased co-insurance (that is, the share of total costs paid by the employer-insurer), and increased out-of-pocket maximums.  As health care costs have risen and the wealth generated by the industry has grown, employers, including most Twin Cities hospitals, have sought to put more of the burden on workers’ backs and have sought to restrict workers’ choices in seeking care by making it more expensive to go outside their  hospital network.

We need to look at this situation through multiple lenses.  First, there are the health care workers themselves.  An ever-increasing number of us work in this particular service industry.  Then, there are the ways in which their experiences reflect ours, if we work elsewhere in the service sector.  We might also be affected as patients, if we are being cared for by women and men who are working while sick because they cannot afford care, or have become sicker than they need be because they have delayed seeking attention, or are physically healthy but have become bitter and disgruntled because of how they are being treated as workers.  And then, we are affected as purchasers of insurance and as tax-payers, because their employers have managed to slide out from under their share of the economic burden and shifted it not only to their own employees but also to the employers of their employees’ spouses (only one-third of hospital workers purchase family coverage through their employers because of the expense) and to the government (through Minnesota Care and other systems used by people who do not receive adequate health care coverage from their employers).  All of these practices might be characterized in a nutshell as “privatize gain and socialize cost.”

If the service economy is actually going to “serve” us — workers, consumers, patients, and tax-payers — we must overturn these practices.  Service-sector employers must not be allowed to spread their costs of doing business and amassing wealth onto their workers and our communities.  Anything less suggests that we will be going backwards rather than forwards as we move from a manufacturing to a service economy.

Peter Rachleff

Labor Day 2006

Peter Rachleff

Peter Rachleff is a Professor of History at Macalester College in St. Paul, Minnesota.  He is the President of the Working Class Studies Association and a board member of the Labor and Working Class History Association.

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