Service Jobs Should Be — and Can Be — Middle-Class Jobs
America is losing its one-time healthy middle class and desperately wants it back. But how? Some say reviving manufacturing jobs. Some say redistributing existing wealth. Some say a universal basic income. Academics are fond of upskilling and lifelong education. Even U.S. CEOs are now saying that they need to create more higher-paying jobs. But what almost no one talks about is how we can improve the low-wage jobs — mostly in the service sector — that already exist. We can’t build a large enough middle class without improving these jobs. Several very successful retail chains, with different business models, have already figured out how to do it.
America is losing its one-time healthy middle class and desperately wants it back. But how? Some say reviving manufacturing jobs. Some say redistributing existing wealth. Some say a universal basic income. Academics are fond of upskilling and lifelong education. Even U.S. CEOs are now saying that they need to create more higher-paying jobs.
But what almost no one talks about is how we can improve the low-wage jobs — mostly in the service sector — that already exist. Even enlightened business and thought leaders often view these jobs only as a stepping stone to better jobs or assume that they are not “real” jobs that could ever qualify as middle-class work. But we can’t build a large enough middle class without improving these jobs.
Last year, nearly 42 million Americans, almost 30% of the workforce, had jobs in retail, food service, personal care, health care support, and cleaning and maintenance — all with a median hourly wage below $15. That’s a lot more people than the 9.1 million in production and the estimated 4.7 million holding technology jobs. For the last 10 years, the largest occupation in the United States has been retail sales, with a median hourly wage in 2018 of only $11.33. It is expected that between now and 2026, two of the fastest-growing job titles will be home health aide and personal care aide — with median hourly wages of only $11.63 and $11.55.
These workers struggle to pay for basic necessities like rent and health care and are rarely able to save for retirement or emergencies — even a new car battery. Many have unstable schedules, affecting not only their income but also their children’s education and their family’s healthcare. Many are assumed by their employers to be, as one retail worker told me, “a dime a dozen, just human robots.”
This isn’t the middle class or any road to the middle class. But it needs to be. And many of these dead-end bad jobs could be good jobs, offering living wages, better benefits, sane schedules, and better opportunities. How do I know? Because several very successful retail chains, with different business models, have already figured out how to do it.
At QuikTrip, a convenience store chain, a full-time associate in Tulsa, Oklahoma, starts at over $42,000. The average hourly wage in Costco’s U.S. warehouses is slightly over $23. As one of its employees told me, “Costco will give you a salary where you can … raise a family … a medical plan where your medical expenses will be taken care of if you have a sick child. What that does is to keep [employees] focused, happy, and their mind on the job.” Rather than treating employees like robots, QuikTrip and Costco design their operations to respect and leverage employees’ time, knowledge, and capabilities and to give them more meaning and satisfaction in their work. Yes, it’s a big investment of money and effort in the frontline labor force, but with an even bigger return in productivity, customer loyalty, and adaptability.
That makes it a viable route to a larger, more secure American middle class. If the Business Roundtable, composed of the nation’s leading CEOs, is serious about companies serving their employees and communities and not just their shareholders, members operating in low-wage sectors need to prioritize raising wages and treating their workers and the work they do with dignity. Their boards and investors need to give these CEOs the time and support to make these changes.
No change is easy; getting to good jobs is no exception. The companies where a change like this could make the most difference — for the company and for its lowest-paid workers — are already struggling with thin profit margins and intense competition. But as companies such as Mercadona, Spain’s largest supermarket chain, and Mud Bay, a pet retail chain in the northwestern United States, have shown, it can be made if the CEOs prioritize it over other initiatives. From 2014 to 2017, Mud Bay raised wages by about 30%, implemented an ESOP, increased the percentage of employees working over 30 hours a week (and hence receiving benefits) from 65% to 82%, and made many changes to work design. The results were impressive: a 35% reduction in employee turnover; increased space, labor, and inventory productivity; and a nearly 50% increase in same-store sales growth.
Over the last 100 years, many manufacturing jobs — once low-paid, tedious, and dangerous — were transformed into well-paying, desirable jobs. It once seemed impossible to imagine, but it was quite possible and quite profitable. A similar transformation is now possible and badly needed in the service sector. If the opportunities are seized, we will see not only a stronger middle class but also stronger companies with a workforce that is prepared for the challenges that new technologies and new competitors are sure to bring.
Zeynep Ton is a professor of the practice at MIT’s Sloan School of Management and co-founder and president of the nonprofit Good Jobs Institute. She is the author of The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits. Follow her on Twitter at @zeynepton.
Service Jobs Should Be — and Can Be — Middle-Class Jobs
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