Where I mix career information and career decision making in a test tube and see what happens

Wednesday, June 22, 2011

The Hollywood Model of Employment

In 2011 Career Plan and many other books, I write mostly about careers that people pursue by going to work for someone else. To be sure, freelance or self-employed work is not uncommon in some occupations I describe. When I write about job-hunting, however, I generally write in terms of getting hired. However, some people who write about the future of work suggest that this kind of work arrangement is soon going to fade away. It’s an intriguing theory, but I don’t buy it.

The argument is that the “Hollywood model” will become the new norm. In the days of black-and-white movies, Hollywood studios kept writers, directors, cinematographers, editors, set designers, and other workers--even actors--under contract as full-time employees. But nowadays a movie producer brings together a team of workers with no commitments beyond the project at hand.

Some futurists argue that this will become the model for other industries--all the more likely as we see decreases in noncreative work, such as mass manufacturing, and increases in more creative work, such as research and development. Teams of creative workers will come together for a project and disband when it’s completed.

This new work arrangement is supposed to make the creative industries more competitive. It gives the project manager (in Hollywood, that would be the producer) the ability to put together the most appropriate team for the particular project and gives the talented workers the freedom to choose which projects to work in. This is supposed to increase the creativity of the output, because flexibility in the makeup of the team should avoid a cookie-cutter approach to the creative process. Moreover, this arrangement is supposed to save money, because the organization (in Hollywood, that would be the studio or production company) is not carrying the overhead of a large staff of salaried employees.

This alleged trend toward ad-hoc work arrangements should be encouraged by modern telecommunications technology. Nowadays you don’t even have to be on the same continent as your teammates to collaborate on many types of projects. In addition, traditional notions of loyalty to one’s employer have long since crumbled and no longer present a barrier to a more tentative employment relationship.

In the late 1990s, I had been reading several books that argued that this was the emerging model for work. At the time, I was convinced by this reasoning, and I even drafted an article arguing in favor of this prediction.

But I no longer believe that this change will happen anytime soon. One reason for my skepticism is the passage of time: Almost all of these factors have been present for the past 15 years, yet no paradigm shift has occurred so far.

You, too, may become a skeptic after visiting your local multiplex. Has the Hollywood model really contained movie production costs? And after the umpteenth movie in which an odd couple hits the road, an irresponsible schlubby guy woos a hot gal, or a superhero battles the forces of evil, do you really think Hollywood is more creative now than in the heyday of Louis B. Mayer and the Warner Brothers?

In the current model for the film industry, word of mouth quickly kills off every movie except a few blockbusters. Seeking a blockbuster, then, producers spend megabucks to inject larger-than-life stars or larger-than-life special effects into a predictable concept that has been pre-sold to the public, such as a formulaic plot, a sequel, or a 30-year-old television show. I wonder whether other creative industries can achieve any better results by following the Hollywood model. Software publishing may be the dominant industry of this kind, and almost all the applications on my desktop are only cosmetically improved over what I was running a decade ago. Most of the advances in software have resulted from breakthroughs in hardware platforms.

Here are some important factors that I believe will continue to discourage project-based work arrangements in the near future:
  • Health insurance costs continue to climb, and we’re seeing only slow movement at best away from a system that is employer-based and that can deny you coverage easily when you’re not a full-time worker.

  • Job security has become a much greater concern since the onset of the Great Recession. (This is why the book I’m working on right now is called 150 Best Jobs for a Secure Future.) People realize that we are a long way from recovery of the jobs lost and that few safeguards have been put in place to prevent a repeat of the financial collapse. Because job loss means loss of health insurance, couples increasingly want at least one partner to have steady employment.

  • The trend toward creative work means that an increasing number of companies are engaged constantly in creative projects and do not need to dismiss their workers after one project is finished. Creative workers are needed now more than ever, and so the companies that have identified and used their talents are reluctant to let them scatter to the four winds.

  • Companies that only occasionally need creative workers can sometimes fill these needs by finding full-time employees who work elsewhere but are willing to moonlight. Moonlight income is very welcome these days of stagnant salaries in most industries.

  • The project-based work arrangement requires creative workers to spend part of their work time lining up the next project. Many creative workers find this a drag on their ability to focus on the project at hand.

I am living proof of what I’m describing. After I was downsized in the late 1990s by a company that had only intermittent need of creative workers (at least in my area of expertise), I worked as a consultant for some years, doing project-based assignments. One such assignment, from JIST Publishing, turned into a series of assignments, then a half-time job, and finally a full-time job when JIST discovered that my skills were a good fit for the company’s needs and would be in constant demand. The same modern communications media that allowed me to work for JIST from home on a project-by-project basis enable me to work for JIST from home now as a regular employee.

The Great Recession has made me even more convinced than before that the traditional work arrangement remains preferable to a project-based scheme. I believe that my view is not idiosyncratic but is shared by most workers who theoretically should be able to work in a project-based arrangement.

Wednesday, June 15, 2011

Licensure Affects Health-Care Costs and Earnings

Three years ago I blogged about a study of occupational licensure. (The blog appeared on a site where it has since been taken down, but I have reposted it on this site for your perusal.) The study found that in 2006, 29 percent of the national workforce was licensed by some level of government, a percentage much higher than I expected. The economists also found that licensure provides a pay boost roughly equivalent of that of union membership: about 15 percent. One reason it does this is by limiting occupational entry, thus reducing competition.

Last week I came upon a more recent study (PDF) by two labor economists--Morris M. Kleiner of the University of Minnesota and Kyoung Won Park of Case Western Reserve University--that focuses on just two licensed occupations: dentists and dental hygienists. The research caught my eye partly because of my continuing interest in the effects of licensure and partly because dental hygienists is an occupation that I frequently include in books about highly rewarding occupations, such as Best Jobs for the 21st Century. In the sixth edition, which I just finished writing, it ranks sixth among the best 400 occupations, with average annual income of $68,250, projected growth of 36.1% from 2008-2018, and 9,840 annual job openings projected. To these rewards, add the attractions that one can enter this career with only an associate degree, and it offers many opportunities for part-time work.

But another unusual fact about dental hygienists is that the occupation’s licensing standards in almost all states are set not by its own practitioners, but rather by practitioners of another occupation, dentists. Dental hygienists were created as an occupation that would help dentists by taking over certain routine tasks of patient care, especially cleaning teeth and teaching patients techniques of good preventive dental care.

As the occupation has evolved, some dental hygienists have attempted to increase their autonomy and get out from under the supervision of dentists. So far, this effort has been only partly successful. In 1988, Colorado became the first state that allowed dental hygienists to practice without the direct supervision of a dentist. As of 2007, only seven states allowed dental hygienists to be self-employed other than as independent contractors, and only three of these states allowed them to own a dental hygiene practice. These independent practitioners can do various tasks besides cleaning, such as application of sealants, fluoride treatments, or X-rays, but the particular mix of tasks varies between states. As a result of the legal restrictions in most states, only 0.1 percent of dental hygienists are self-employed, compared to 28.0 percent of dentists.

The economists who researched these two occupations found a good reason for dentists to restrict the autonomy of dental hygienists, entirely apart from the best interests of patients: It turns out that in states where dental hygienists can practice independently, their hourly earnings are approximately 10 percent higher, and those of dentists approximately 16 percent lower, than in other states. In addition, employment growth for dental hygienists is about 6 percent higher where they can practice independently, whereas for dentists it is about 26 percent lower.

One finding with implications for public policy is that allowing dental hygienists to practice independently reduces a state’s dental-care costs by 1 percent. It also broadens employment options for women, because dental hygienists are about 98 percent female, whereas dentists are about 78 percent male. Furthermore (and here I’m just speculating), it may provide additional opportunities for social mobility, because a career as a dental hygienist may appear attainable to young people who come from families that have no history of college completion and who (rightly or wrongly) rule out the goal of becoming a dentist. In other words, the independent practice of dental hygiene may provide an on-ramp to the middle class for some people.

As for dental hygienists, so for nurse practitioners: you will also find great variation in state laws regulating their ability to work independently. In some states, especially Western states with a lot of rural territory where doctors are scarce, nurse practitioners can act as primary-care providers. It would be interesting to see a similar study of how these state-to-state differences correlate with the earnings of nurse practitioners and physicians--and also the impact on health-care costs, which are currently the focus of much political discussion.

Wednesday, June 1, 2011

Prosaic Licenses

Note: This blog originally appeared on another site in 2008, where it has since been taken down.

In a book that I’m presently working on (Your $100,000 Career Plan: Match Your Personality to a Six-Figure Job), I classify a group of occupations under the heading “professional,” and one common characteristic I note among them (they include architects, lawyers, physicians, dentists, and veterinarians, among others) is that they are all licensed. However, it seems that licensure is not as exclusive an occupational characteristic as it once was. One recent study, “The Prevalence and Effects of Occupationhttp://www.blogger.com/img/blank.gifal Licensing,” estimates that 29 percent of the national workforce is licensed by some level of government.

That figure surprised me. Evidently the percentage is so much higher than I expected partly because past estimates have been based solely on state licensure requirements and partly because the number of licensed occupations has grown in recent years. The researchers who conducted this study in 2006, Morris M. Kleiner of the University of Minnesota and the prolific Alan B. Krueger of Princeton, based their finding on a specially designed Gallup survey asking respondents “Does your job require a license by a federal, state, or local government agency?”

It’s important to remember what a license is and is not. Some occupations, such as pet groomer, are open to anyone who wants to offer his or her services. (The results of this free market are evident in the unpredictable appearance of my neighbor’s West Highland White Terrier.) Registration is a requirement that some jurisdictions impose on workers in some other occupations. For example, to keep bees in Rhode Island, you must register with the state. This requirement probably is in place so that the state’s Department of Environmental Management knows where the beehives are and thus is able to conduct inspections for communicable diseases. Certification is usually awarded by a professional organization as recognition that the practitioner has met certain standards, such as a specified level or kind of education, a specified amount of work experience, or a passing score on a test of occupational skills, knowledge, and perhaps professional ethics. By definition, certification usually is not a legal requirement, but in many occupations it is a sign of professionalism. Licensure usually imposes entry requirements similar to those of certification, but it differs in that it is required by law.

In many foreign countries, registration means the same thing as licensure; this meaning survives in our term “registered nurses,” who actually are licensed. In some foreign countries where all professional workers are educated at state-run universities, there is no distinction between licensure and certification in these occupations because professional status is awarded by the universities.

So what is the benefit of licensure that has caused it to become so widespread? Occupational licensure began as a way to ensure the competence of workers who make life-and-death decisions—for example, doctors. For many years, it has been extended to other occupations that might have great impact on people’s lives and well-being, such as structural engineers and lawyers. But the function of licensure has slowly changed, largely because of the nature of the people who control it. Licensure is enforced by government, but inevitably the people who set the standards of professionalism, who specify the contents of the licensing exam, and who determine the wording of the code of ethics are the practitioners. And, for the most part, these are the same people who have encouraged licensure in fields where previously it did not exist. In most fields, practitioners have a vested interest in minimizing competition, so licensure benefits them—but not necessarily the public—by creating a barrier to occupational entry. Kleiner and Krueger found that licensure provides a pay boost roughly equivalent of that of union membership: about 15 percent.

In Maine, for example, you need a license to dig for marine worms. The state imposed this license not because careless worm-digging could endanger anyone’s life, but rather to protect Maine’s worm-diggers from having to share their beaches with out-of-state diggers.

I’m not a market fundamentalist, and recent events in the financial sector have underscored the important role government needs to play in the economy. I wouldn’t want to be operated on by a doctor who lacked a physician’s license. However, I’m not sure that the expansion of licensure is always a good thing.

A Graphic Look at Secure and Insecure Industries

Right now I’m working on a book called 150 Best Jobs for a Secure Future, which is intended to take the place of 150 Best Recession-Proof Jobs. I received a lot of media coverage, including face time on several TV networks, when Recession-Proof came out, thanks to the efforts of JIST’s crackerjack publicist, Selena Dehne, and also because the book came out just as the recession was taking its heaviest toll and the subject of the book thus had newsworthiness.

Now that I’m working on a similar concept, I’m trying to benefit from hindsight. Did all 150 occupations included in the book weather the recession with no layoffs? Of course not. In fact, almost every occupation you can think of has a certain number of layoffs and dismissals, even in good times. Think of layoffs as like body temperature: There’s a certain rate, like our normal 98.6 degrees, that can be considered healthy. A better question to ask is whether some of the occupations in the earlier book experienced a considerable uptick in layoffs, a feverish recessionary level. Sadly, some did, but that’s not surprising. The Great Recession was ever so much worse than any we have experienced since the 1930s, and some occupations that are barely affected by normal recessions did experience a higher level of job loss.

One lesson that I learned from the previous book is that in considerations of job security, it is helpful to think not only in terms of occupations but also in terms of industries. Some industries are much less sensitive to the ups and downs of the economy than others. That’s something I stated in the earlier book, but this time I’m constructing the lists of best jobs based on industry-specific data for occupations. So, for example, a given occupation may appear as tenth on the list of best jobs in educational services but as twenty-second (or maybe not at all) on the list of best jobs in government.

I’ve used several lines of research for selecting the most secure industries, but perhaps the most dramatic is the graphic that appears below. (This ties in nicely with my blog of two weeks ago, in which I discussed the importance of graphicacy--skill with using and understanding visual representations.)

Layoff and Discharge Rates (Percent) in Selected Industries

Source: JOLTS database, BLS
I created this graph from data I downloaded from the Department of Labor’s Job Openings and Labor Turnover Survey (JOLTS). It shows the average annual percentage rate of layoffs and discharges in several major industries over the previous decade. The first thing you should notice is the bold black line, which represents all private-sector industries. You’ll note that over the course of the last decade, it starts out flat (at around 1.7%), coasts down along a very slight mid-decade dip, trends upward beginning in 2007, hits a peak in 2009, and then slopes downward, reaching about the lowest point of the previous decade. The impact of the Great Recession is obvious, and this is the line against which you should compare the other lines in the chart.

Now let’s focus on the lowest and flattest lines on the chart. The star performer here is the bold robin’s-egg blue line that represents education and health care, which maintains a steady rate of between 8.0% and 9.0% over the course of the decade. You can barely see the recessionary uptick that appears along almost all the other lines. You can be sure I’m going to include this industry (actually, the two smaller industries it subsumes) in the book I’m working on now.

Government, the pink line, is another interesting industry to observe. It begins the decade with the lowest rate of all, 0.5%, and maintains the lowest rate until the very end of the decade. Note that it actually slopes downwards slightly from 2007 to 2008, when almost every other industry is beginning to see increased layoffs. It parallels the other industries in sloping upward after 2008, but it is unique in that it continues this upward slope even after the private-sector industries start seeing diminished layoffs. It’s not hard to understand why you’re seeing increasing government layoffs here: reduced tax revenues and politicians who have experienced an overnight conversion to deficit hawkishness. Nevertheless, I’m going to include government as one of the industries in the new book, because there are several kinds of government workers (such as in law enforcement) that are essential and will not be dismissed unless we are prepared to model our country after Somalia.

Note also the green line that partially overlaps with the robins’-egg blue education and health care line. This is finance and insurance. You’ll observe that it’s a little more volatile than education and health care, but it still shows fewer perturbations than most of the other industries and overall maintains one of the lowest rates of layoffs and discharges.

The most sensitive industry on this chart, with the widest swings and a very high layoff rate to begin with, is construction, the red line. But the one that particularly fascinates me is the yellow line for arts, entertainment, and recreation, which keeps changing places with construction as the industry with the highest layoff rate. This industry is the most countercyclical of all those shown here, actually doing better as the recession sets in. I’m not going to include either of these two industries in the book.