The latest Bureau of Labor Statistics (BLS) data indicated that the February unemployment rate was 5.5% while labor force participation was 62.8%. At 5.5%, the unemployment rate appears to be a positive, although it doesn’t adequately reflect underemployment. The labor force participation rate of 62.8% is near record lows and would seem to reflect an unusually high level of potential worker disenchantment with opportunities for attractive employment.
The above data does not reflect the increasing problem of involuntary part-time work. Historically, low-wage hourly workers struggled with long shifts and low hourly pay. The Fair Labor Standards Act (FLSA) was intended to remedy this situation by setting a minimum hourly wage and mandated premium pay for hours worked over 40 in a week.
More recently, employer focus on labor cost control, including work hours, pay, and benefits, has resulted in many employees dealing with convoluted and inadequate hours, and a “just-in-time” approach to scheduling during slack periods. This employer focus on flexibility may be beneficial to the bottom line, but places a substantial burden on workers who are already at the bottom of the pay scale ladder.
We have not been able to find any comprehensive data detailing the extent of this problem, but BLS data relating to retail workers may be instructive. According to the BLS, in 2007, approximately 685,000 workers out of a total of 19.2 million retail workers faced involuntary part-time work. By 2014 there were 1.4 million workers out of 18.9 million retail workers facing involuntary part-time schedules.
Investors should consider the implications of profit margin gains driven by a potentially short-sighted approach to labor cost controls. Obviously, there are significant social implications associated with inadequate weekly pay. Moreover, treating your employees in a manner that many would consider as callous at best is not likely to build loyalty or good customer experiences.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA®