The Great Resignation – Turnover and Immigration

When the COVID-19 Pandemic ground the gears of the world to a screeching halt in March of 2020, I do not think I was alone in dreaming of the day when we could get back to normal.  Yet “normal” is an ever-evolving concept, and many of us may not recognize our post-pandemic selves.

Major crises have a way of refocusing our attention. One day you might be mildly irritated that your favorite brand of toilet paper is not available in the 36-roll quantity and the next day you find yourself locking your arms around a six-roll package and running to the checkout before a horde of crazed shoppers pries it from your grip.

Nearly everyone I know has had a family member come down with one of the five major variants of COVID-19 and many have lost a family member to the disease. Normal may be normal, but it is not going to turn back the hands of time. We can only go forward, and so we need to understand what is happening. Discovering why things happen can help us chart our course for the future. This series will attempt to explain the Great Resignation, which is a contributor to inflation, but not its only cause.

What does that term encompass? Despite what pundits might have you believe, it is not one simple thing causing people to change jobs or retire. Just as a mighty river is a confluence of many babbling brooks and crooked creeks, the sources of the Great Resignation are at once demographic, generational, and cultural. Understanding those sources may give us clues on how to better manage it. 

Some Industries generate ridiculous turnover, warping the numbers

Some industries’ practices have contributed to their exceptional turnover rate. For example, you may have heard that the nation needs more truck drivers, but it is not a lack of truck drivers as much as a failure to retain the truck drivers we have. Up until the 1970s driving a truck for living would provide a solid middle-class income. The logistics companies owned and maintained the rigs and the drivers were paid and received benefits as employees.

All of that changed when the government de-regulated the transportation of freight in an attempt to reduce prices for consumers. Some freight haulers were bound by teamster contracts, but as these workers retired, they were replaced by so-called independent contractors. 

This is an important concept for many industries, so let’s review what it takes to be an independent contractor (IC). 

  1. ICs are business owners themselves. They own the means of production. In the case of truckers that would be the rig.
  2. ICs cannot be compelled to work any specific hours or comply with company rules if these are not matters of law. For example, a trucker would be required to hold a license to drive the vehicle as a matter of law, but the company could not tell the trucker when to drive or which route to take.  
  3. ICs are free to choose with whom they wish to contract and to negotiate the terms of the contract. In other words, they may work for different shippers and negotiate the terms of each job based on the difficulty, route, wait times for loading and unloading, etc.

At first, independent trucking firms were bidding on contracts and the truckers were employees of the bidding companies. But then the large logistics companies started buying up the independent firms. They minted their own “independent contractors.” Or, at least, they appeared independent. 

The drivers paid all their business operating expenses such as fuel, oil changes, tires, and maintenance of the vehicle. They received no employee benefits—no health insurance, no vacation or sick time. They had to pay their own Social Security and Medicare taxes as well as the employer portion—that’s 7.65% for the employee portion plus 7.65% for the employer portion for a total of 15.3% of the payroll the driver was supposed to pay himself. One needs 40 quarters (10 years) of contributions to be eligible for a Social Security benefit on one’s own record. So, failing to make this payment could disqualify them for benefits unless they were married to someone who contributed to Social Security.

Drivers would be paid a flat rate for a load based on the miles to be driven. It can take up to a day to load and unload a truck, but drivers were not paid for this time, because they were only paid for the miles driven.

A dispatcher would radio the driver with instructions for picking up a load at a specific time. The dispatcher also determined the driver’s sleep period, driving period and bathroom breaks, if any. If the driver was too tired to drive or became unwell, they might be fined and/or dismissed. Although the rigs were allegedly owned by the drivers, the logistics company might not only specify where the rig could be parked, but they might charge the driver for the parking space.

Drivers who did not own their own rig could lease-to-own one from the logistics company. Each week a portion of their pay was deducted from their paycheck to cover the lease payment. Sometimes this left a driver with nothing but a slip listing lease payment deductions and parking fees. 

If this doesn’t sound like what arrangement would look like between an independent business owner and a contracting logistics company, it would explain why the turnover rate for drivers is 300% for some companies.

The nation does not need more drivers, it needs to retain and value the drivers it already has. The Wall Street Journal reported on April 8, 2022 that Walmart would increase pay and bonuses to their in-house drivers, so perhaps corporate America is catching on.

Disruption in Immigration Processing

Growing up in Cleveland, Ohio, nearly everyone with whom I attended school was either a first or second generation American on at least one parent’s side. American industry has demanded a steady stream of workers and our birth rate alone has not been sufficient to supply all the workers we need. Back then, the immigration system relied on sponsorship. If someone in the U.S. was willing to be responsible for shepherding your transition to citizenship, you could be granted resident alien status after an investigation of your personal history.

The last time Congress addressed a comprehensive reform to immigration rules was with the Immigration Reform and Control Act of 1986. Immigrants generally fill one of two niches–either they fill jobs that no American could do—for example, Albert Einstein and Robert Oppenheimer, or immigrants filled jobs Americans would not do—from steel mill and construction workers to farm workers and fruit and vegetable pickers. Generally, if a job involved back-breaking labor, danger, and hardship, it was likely filled by someone who was not born here.

Immigrants have been working in slaughterhouses and poultry processing plants since Upton Sinclair published The Jungle (1905). Before that, immigrants built the railways on which we still carry freight from coast to coast. Sadly, they also fill the role of “the other,” a political punching bag used by the most vile and reprehensible of politicians. While the Immigration and Control Act of 1986 provided amnesty to nearly a million immigrants who had been living illegally in the U.S., it also made it next to impossible to find a legal path to citizenship for many who would arrive after 1986.

Even before the Pandemic, the Trump Administration was implementing anti-immigration policies against so-called “s—hole countries.” By the time the Trump Administration shut down the southern border in reaction to the COVID-19 threat, the disease was already spreading in the U.S., but not from the southern border. It most likely came home with businesspeople travelling through major U.S. airports.

The use of Title 42, a 1944 public health emergency measure to prevent the spread of communicable diseases, has required that refugees and immigrants wait in Mexico or their country of origin for immigration processing. Before Title 42 was implemented, there were legal consequences to failing to present oneself at the border for processing. But since Title 42 rejects everyone automatically, there are no consequences for attempting to cross illegally.  Consequently, repeated crossing attempts are up by 30% over pre-Title 42 times. (Voice of America, April 7, 2022)

The Biden Administration plans to lift Title 42 in May. The President has also promised to provide refuge for one hundred thousand Ukrainians displaced by the war with Russia. Perhaps the crisis in Ukraine will finally stimulate Congress to fulfill the promise made on the base of the of the Statue of Liberty. “. . . Send these, the homeless tempest tossed to me. I lift my lamp beside the golden door.”

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