Vt. economy creates a paradox for businesses and workers

Rep. Tristan Toleno describes the economic dynamic between employers desperate for workers and workers desperate for a better paycheck. What is going on here?

BRATTLEBORO — Before we dive into my conversation with Rep. Tristan Toleno from Brattleboro, I want to provide some context to a part of the conversation that follows.

If you've been following Vermont news, you know that in general, employers have been saying, “We can't get enough good workers” and employees are saying, “We can't get good enough wages.”

The state has been working on this disconnect, as have been a lot of really good, smart people.

In our conversation, I referenced an upcoming conversation with folks at the Public Assets Institute, a nonprofit that conducts research and fiscal analysis about state government policy, over Vermont's high number of multiple job holders - in other words, people who are filing more than one W-2.

Why do so many people in this state need to work multiple jobs?

Stephanie Yu, PAI's deputy director, and Julie Lowell, a policy analyst, has since had this conversation with me. They pointed out that since 1994, when on a national level these numbers of multiple job holders have been tracked, Vermont has, for 20 out of those 25 years, ranked in the top 10 for the number of multiple-job holders.

So, in general, yes - Vermonters are working multiple jobs. In 2018, according to the data, the state actually marked lowest point, with only 22,000 multiple-job holders, though it's still pretty high nationally.

Here's the thing that Yu and Lowell told me: They don't know why.

The data doesn't tell why someone in Vermont is working these multiple jobs. It could be anything from a lifestyle choice, to an economic need, to not getting benefits. It's one of the things they're hoping to dig into.

In the meantime, wages don't seem to be going up very fast in this state. In fact, last year our average wage ranked number five in all of New England, though our minimum wage tends to be better than some of our neighbors'.

Toleno, elected to represent Brattleboro in the state House of Representatives in 2012, is also a member of the state Workforce Development Board as well as the House Committee on Commerce and Economic Development.

In addition to the issues in this week's paper, he discussed the proposed changes at Marlboro College, where he has been running its graduate program. Many of his comments from the radio program already appeared in a news story in last week's Commons.

The longtime food-service entrepreneur is still doing some catering under the auspices of American Legion Post 5 in Brattleboro, which picked up Toleno's catering license. “I can selectively choose a number of small events or a couple of big ones and get a little bit more control over my life, while I juggle a couple of other jobs and roles,” said Toleno - perhaps inadvertently illustrating the theme of workforce in Vermont and Vermonters holding down multiple jobs.

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Olga Peters: I have been talking to a number of business leaders lately, and they are saying that everyone across the board - from restaurants, to engineering firms, to retail - is having trouble finding workers. Yet I'm also hearing from economic-development-type people - specifically, the Public Assets Institute - that individual Vermonters are working multiple jobs. What do you think is happening?

Tristan Toleno: So a lot of different things are happening. I'm going to push back on the Public Assets data points conclusion a little bit.

I think actually that I have one of the more diverse perspectives on workforce from the state, in terms of people who have any influence or impact on the system. In addition to my legislative role, my committee role, and my role on the workforce board, I've been elected by the Legislature to serve as a trustee at the University of Vermont, so I have the perspective of being a part of the governor's leadership of Vermont's flagship research university. I came out of the management program at Marlboro College and now work part time as the director of the graduate school.

So I have an MBA, I have a business degree, and I've been focused on helping to train nonprofit and for-profit business leaders in organizational leadership.

And this summer, for the fifth or sixth year - I've lost track now - I'm teaching the workforce training program for the Strolling of the Heifers. So I'm doing frontline delivery of services to people who come from a variety of different backgrounds, including a couple of recent high school graduates who are trying to sort through where they might go.

I'm working with at least one recently incarcerated individual and people who have been recently homeless - who have “multiple barriers to work,” as we say in the workforce world.

So I get to see it from that sort of entry level into the state policy arena into that specific training around that kind of decision-making that leads to hiring practices all the way up into the higher-ed system, then on the state policy.

So I feel as though very few if any other people in the state have as many angles on this issue as I do. It doesn't mean that I actually have better ideas, but I do have a different perspective.

Sometimes, I might be coming at the problem from angles that are slightly different from the ones that people expect. I want to go back to the data point that you offered from the Public Assets Institute report and just name two things you know that are equally at play. I think it goes right to what I would identify as some of more of the core problems in Vermont in terms of hiring.

I suspect it is true that Vermonters are filing multiple W-2s, and that could be a sign that something about work and the job market is broken.

It is also true that that it could be a sign of adaptive behavior from businesses that are struggling to find workers. Say you're a restaurant and are trying to hire a couple of full-time cooks and there's nobody out there that you can find. But there are people who used to work for you who have better jobs now who you convinced to come in on a Saturday shift to give you peak coverage. It shows up as that person has multiple W-2s. But in fact what they're doing is they're they're propping up an employer who is struggling to find any available labor in a very tight labor market.

The flip side of that scenario is somebody who is cobbling together multiple minimum-wage jobs to meet a household budget. The cost of living in Vermont is relatively high compared to our income levels.

I would argue that both those trends are happening simultaneously. One of the reasons many economies are complex and the policy choices in this space are so difficult: multiple things are happening, certainly for employers in a tight labor market. The only viable strategy really to solve this labor-shortage problem is just try to steal from somebody else. Otherwise, you have to talk your employees into working extra hours.

That is a completely logical outcome of 2.4-percent unemployment.

And frankly, other factors are at play with the people who remain unemployed (and remember, “unemployed” is a self- diagnosed state). The federal government has criteria: you have to look for work in a certain period of time, and you actually have to be looking.

That particular number has a lot to do with who's looking for work and how they self-identify. Other unemployment numbers would show a higher rate of unemployment because of different criteria. But the federal numbers are typically used as the benchmark. And frankly, federal unemployment is at near-record lows and it's as close as the USA economy typically gets to full employment.

And so, I generally am sympathetic ideologically to Public Assets' position, or positions. They certainly advocate for more-progressive policy measures like increasing the minimum wage. And they're certainly looking for a way to leverage state government to improve the lives of working Vermonters through public policy.

But in this particular case I would say it's a little bit of a stretch.

O.P.: One reason I brought that question up is not just the data that I had seen but also from my own personal working experience over the past couple of years. I'm also meeting more people like this who say, “My job was technically full-time, as far as the amount of work I needed to put out, and if you want me to do the work that you say you want me to do, I should be full-time.” And they say, “No, we do not want to give you benefits.” That's part of the equation as well.

T.T.: I appreciate that. So just as there's multiple ways to interpret that data point, there's also not enough conversation happening statewide. Maybe actually more is happening in southern Vermont than in Montpelier.

But employers are not particularly good at hiring, at taking risk, at identifying when their behavior is not really competitive in the market. So that's one subset of problems.

A couple of years ago, I was in a workforce-related summer study group, and I remember the commissioner of labor was talking about a phone call they'd received from a trucking company in the Rutland County area.

The guy said, “Look, I can't find anybody to come in with CDLs (commercial driver's licenses) and drive for me, and I pay great wages - I pay above-average wages.”

They asked, “Well, what are you offering?”

And he said, “$19 an hour.”

And they said that average starting wage for CDL drivers with no experience is $22.

So whatever you think you are offering them, and however generous you think that is, you know contextually you're actually out of whack with the market.

So I think a lot of employers just simply don't have access to the right information. Maybe business networks are not sufficient to allow for that kind of exchange of information. Or maybe it's something more willful - you know, if you're trying to compete for labor in a tight labor market and you're way underperforming the market, you will not be an employee's first choice.

Here's the most successful strategy for recruitment in Vermont: in whatever sector you're working, you want to be the one that everybody wants to work for. And if you aren't, you're probably going to struggle to get the best people.

You can interpret this either way, depending on your political perspective. The fact is, a full-time employee with full benefits is a much more expensive employee - 25 to 30 percent more expensive than somebody who falls below the threshold of those benefits, maybe even more than that.

So you're looking at total compensation - that's what the business pays for. The shift can be so significant that if you're able to keep somebody successfully at 30 hours and your threshold for benefits is 32 hours, you're giving up only a couple of hours a week of labor participation in the organization, yet you're saving yourself 30 percent on total compensation for that worker.

It's a hard calculus for a business to make in a tight labor market. But there seems to be a persistence in many sectors in the Vermont economy and in keeping people below that threshold. And the worker, of course, wants access to the extra security and supports that because of the nature of the U.S. system we give through workforce participation and not through citizenship.

I think it goes back to what you might call democratic socialism - or what the critics will call the “welfare state.” I believe that many European countries have a superior model around social supports because it takes many of these pieces away from workforce participation and puts it into citizenship.

I think that it's a superior model because it allows for people to move jobs more safely and it allows them to actually have more leverage in conversations with employers about compensation. It's now no longer dependent on work.

Basically, the U.S. system has evolved and designed to give more power to employers and to the owners of capital in our economy than to the workers. And much of the political battle at the state level or at the federal level is about who moves the needle one micro-step at a time toward which direction.

Clearly, right now the needle is going the wrong direction with the Trump administration, but in Vermont we're making incremental progress in moving in the opposite direction. There's a lot of complexity. It's actually macroeconomics, labor theory, and principles of organizational leadership.

All these factors combine to create very challenging dynamics, where employers feel like they're struggling and many workers in many sectors in the economy don't feel safe - and aren't safe. They're not getting compensated well enough or protected enough. Nor do they get good benefits.

The more power that the ownership class - those at the top of the food chain, if you will - has over the system, the more that they extract from it. And I think that Bernie Sanders has obviously spoken to this, as has Elizabeth Warren and others at the national level.

In the last 30 years, the economy has seen the global elite actually be able to take a larger piece of the total economic pie through control of the political landscape. That continues to be a generational battle in the political arena - how do we turn that tide? Vermont is a political outlier, but many many important states in the presidential process and control of Congress consistently steer in the wrong direction.

The bogeyman of the day is Mitch McConnell. He's appallingly bad for his own people, but he's been untouchable for a generation. We have to uproot the power base of people like him who are consistently steering the system to be rewarding large corporate interests and the small subset of people who benefit from that.

O.P.: Thank you for that, Tristan. Yeah, it's good to remember the big picture. In Vermont, sometimes we have such a Napoleon complex that we keep looking inward and not outward.

But I am going to bring it back to Vermont, having said that, because I feel sometimes economically as a state we're at this chicken-and-egg stage: People need higher wages to keep up with the cost of living, yet not every business can offer those higher wages. Are there any big levers you think we should be pulling first, as we look at either workforce or economic policy?

T.T.: Yeah. Obviously, at the policy level, the minimum wage is a really important tool. Because if we can resize that, if you will, relative to the base level of cost of living, then we have a little bit of firmer foundation for entry-level work.

Assuming that we can get legislation through our governor, it will take a little time for the economy to adjust to the shock. So it's one of those things where there will be some winners and some losers, and one might individually be a loser but in the aggregate, low-wage workers will benefit. That makes it a little bit difficult.

I actually think that housing is the most important lever - not just public or subsidized housing, but housing in general.

Brattleboro is honestly the major part of the economy of the southeastern part of Windham County. The labor shortage is acute, and the long-term demographics suggest that our population is well short of being able to replace incumbent workers who are poised to retire.

Which means that we either will have thousands fewer people working, and businesses will close or relocate because they can't find workers. Or, we will have to grow our population. And how do you do that when the housing/rental vacancy rate in the biggest part of the economy in the market is like 1 percent?

O.P.: If that.

T.T.: Right, if that. That 1 percent includes a fair number of properties that probably aren't worth living in.

Before the session in December, HCRS's housing survey showed that they had 250 housing units in Windham County that people were living in that didn't even have running water. And so the indignant mind says, “That's appalling. And nobody should be allowed to live there.”

Well, then you have 250 more people and/or families whom you have to place in housing that doesn't exist. This is not to say that we should let people live in substandard housing just because it's convenient. It's that we could actually make the problem in the short term worse by closing that kind of housing down.

But that story shows how desperate we are. And so, the central challenge is that we have to lower the barrier to entry to moving here.

If nothing else, we must work to substantially increase the quality and availability of housing - not necessarily subsidized, but entry level.

And we have to as a state get serious about becoming a more inviting and inclusive place for new Americans, whether that's meeting new immigrants or children or grandchildren of new immigrants. We have to participate in the demographics that are reshaping the rest of the country. The older, whiter demographic base in the country is not really growing at all.

The only reason that the United States population has been growing is because of immigration. And Vermont is not really participating in that, outside of the Burlington area, where the refugee center has actually helped a lot.

I think Brattleboro may be the second-most-diverse community outside of the Burlington area. Even so, it's not especially diverse. We're hopelessly white.

O.P.: Right.

T.T.: It's not specifically the whiteness that's an issue; it's just that the new Americans are the ones who are a little bit more risk-tolerant with experimenting with new jobs or moving into places where there's opportunity.

We have the jobs - but we don't have housing for them and we don't have the culture that is yet as inviting and open publicly and transparently as it needs to be to attract those families to move here.

Those twin challenges - housing and becoming a more diverse and inclusive culture - are probably the most important things that we can be focused on. And frankly, they're very difficult complex problems to address. In the Legislature, we're just barely scratching the surface and I don't think the governor is even talking about these issues. And I think that's a tremendous failure of leadership on his part.

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