Fired Up!

This NYTimes posting discusses how the recession has impacted both employment and wages, saying "oddly, though, the weakness in employment hasn’t translated into anywhere near as much weakness for wages."  In fact, while jobs have gone down, wages have actually gone up; if you look at these graphs, you'll see that the two were pretty closely synchronized.  The NYTimes treats this as some sort of paradox or coincidence.

 

Job losses were at their highest rates in months nine through sixteen.

Wage growth was at its highest rate from months eight through thirteen.

This is no coincidence:  job loss was actually the cause of wage growth.  This paradox is easy to reconcile; as a response to the recession, lower-paid temp workers were the first to get axed, leaving behind a core of more well-paid permanent employees.

This idea makes a lot of sense in theory:  "Temp employment in the U.S. fluctuates wildly, by design. The whole purpose of bringing on workers who are employed by temporary staffing firms such as Manpower (MAN), Adecco (ADO), and Kelly Services is that they're easy to shuck off when unneeded. While the number of temps fell sharply during the recent recession..."  - Business Week, Jan 03, 2010.

It can also be supported empirically:  "During the 9-month course of the officially designated recession of 2001, temp agency workers - which as a group represented just 2.5% of the workforce - accounted for fully 23% of net job losses in the labor market" - "Temporary downturn? Temporary staffing in the recession and the jobless recovery", Jamie Peck and Nik Theodore.

Temps are easy to get rid of - they're 3/5ths of a person, meaning they expect to be mistreated; they go quietly, and no one bats an eye.  Firms don't even have to fire them, firms just can passively neglect to renew their employment, and if there's anything office-types excel at, it's passive-aggression.  Meanwhile, if a firm lays-off a full-fledged employee, its much more like an act of betrayal, and things get messy.  The firm has to worry about a wrongful-termination suit, workplace morale takes a hit among the survivors, and the betrayed has more ammunition if they choose to retaliate extra-legally - because they know where the bodies are buried.

After the temps are gone, the next to go are often the more junior long-term employees; by honoring seniority, firms maintain the illusion of fairness and therefore morale.  Then firms are left with the highly-paid senior staff members, typically these are more productive workers, which is part of the reason productivity has risen during this recession (up by 6.9% in Q4 of '09).  For firms, this lessens some of the pain of paying higher average wages, but you know for a fact that if firms could cut these workers' wages, they would. 

Unfortunately for the firms, it's hard to cut someone's pay, because then they'll become disgruntled.  Of course, they'll be even more disgruntled if you fire them, but that's why after they fire a guy, they make sure to escort the him out of the building, rather than letting him find his way out on his own.  The guy's worked there long enough, surely he knows how to find the exit, but he also knows how to throw a spanner in the works:

"6. Do not let the employee linger. Unless there's an urgent reason to keep the employee around for a few days, tell them that they're to leave the business premises immediately, after a short stop at their desk to pick up any personal items. Escort the employee to the door, so the employee doesn’t have the chance to steal any company files, trash any computer data or change any computer passwords without your knowledge. Better yet, have another employee change these while the other employee is in your office, so they can’t go back to their desk and wreak havoc with your computer system. Collect any office keys and company credit cards this employee might have." - "The Right Way To Fire Someone", entrepeneur.com.  

If you cut someone's pay and keep them on staff, you might be creating a saboteur - one who has the run of the place.  Of course, for firms, the long term solution to all of this is to replace all permanent workers with lower-wage temps; from that point on, you can "let them go" at your leisure, then hire replacements at even lower wages than the previous dupes.

This picture is from iStockphoto, under the keyword category of "Human Resources".  You don't have to read an HR manual to know what goes through the minds of these assholes - it's all pretty plain to see.