Little to show from the Obama economic recovery There are millions of Americans who have never really recovered. The jobs market, as the White House is quick to say, has come back. But wages haven’t. It’s worth remembering that median household income peaked in this country back in 1999 at $57,843. Based on Census data analyzed by Sentier Research, it was, as of April of this year, $57,367. 7/16
Most of the world’s workers have insecure jobs, ILO report reveals [Guardian] “A global shift to more insecure jobs since the financial crisis is fueling growing inequality and higher rates of poverty, according to a new report that estimates only a quarter of the world’s workers are on permanent contracts”.
Is your job safe in the second machine age? Computers and other digital advances are doing for mental power what the steam engine and its descendants did for physical power http://blogs.ft.com/off-
How Low Can We Go? State Unemployment Insurance Programs Exclude Record Numbers of Jobless Workers Kimball & McHugh, EPI 3/15
J.Wolfers, NY Times Upshot 3/13/15 , “The Wall Street bonus pool for last year is roughly double the total earnings of all Americans who work full time at the federal minimum wage.”
McGill, “Losing Mobility and Gaining a Work Life,” NY Times, 2/1/15 “My belief is that the people who are against affirmative action must lack an empathy gene. Oh, if they could only roll a mile in my wheelchair. The unemployment rates for people with disabilities worldwide are mind-numbingly high. I know because I’ve traveled to over two dozen countries and met these people, as a tour guide leader for those with disabilities. The main reason the jobless rate is so high for people with disabilities is that they are not given an equal chance in the mainstream work world.
Employers bring their own baggage and ill-conceived preconceptions about my tribe. The Americans With Disabilities Act and similar laws notwithstanding, some employers are unwilling to make certain changes to an office space that would make a worker’s life more comfortable and productive. I had several jobs where the floor on the building I worked in didn’t have a wheelchair-accessible bathroom; at one job I even had to go across the street to a different office building to use a bathroom that didn’t belong to my company. This little trip was a bonus in the summer, but was dreadful in the winter.” http://www.nytimes.com/2015/
Financial Times, 1/30/15 “Syriza’s victory stood not for a repudiation of Europe, but for a redefinition of it. The moral reasoning that lay behind the Greek result began from a simple insight: economic trauma of the severity that Greece has suffered is destroying society. With youth unemployment above 50 per cent, an entire generation is being consigned to the scrap heap. At the same time, the notion of the common good is being sacrificed through forced sell-offs of state-owned lands as well as businesses, with the prospect of ecological destruction as a result……If the Greek vote was for solidarity, it displayed a virtue that too much of the continent has lost sight of. German or Finnish voters may feel they have shown enough solidarity with the Greeks. But strictly speaking they have mostly shown solidarity with their own financial institutions, which would have been among the biggest losers if Greece had not been bailed out. and that is another thing entirely.http://www.ft.com/intl/cms/s/
“A Big Safety Net and Strong Job Market Can Coexist. Just Ask Scandinavia” “Some of the highest employment rates in the advanced world are in places with the highest taxes and most generous welfare systems, namely Scandinavian countries. The United States and many other nations with relatively low taxes and a smaller social safety net actually have substantially lower rates of employment.” Irwin, NYTimes, 12/18/14
Wessel, Brookings “Among men ages 25 to 54, the prime working ages, one in six (16.1%) wasn’t working in October; some were looking for work, but some were retired or disabled…..people are now focusing on the chronic disease: the stagnation of wages and incomes in the middle, the widening gap between winners and losers, and prospects for the next generations. Exit polls this week found that half the voters expect life for the next generation of Americans to be worse than for the current generation; that’s more doubt than at any time since the question was first posed in exit polls in 1996. Broader public opinion polls (ones that survey people who don’t vote, too) find even more pessimism. An August WSJ/NBC News poll found that 76% of adults doubt their children’s generation will have a better life than they do. [Wall St. Journal]
Garrett-Peltier: “… the $2.9 trillion in federal funds spent and obligated on the wars over the last 14 years has resulted in the loss of between 1 and 3 million jobs for Americans..” 11/14
NELP: Voters Approve Minimum Wage Increases Across the Nation[The 2014 election] proved, once again, that raising the minimum wage is a winning issue. In binding measures that will directly benefit more than 600,000 low-wage workers, voters in four states–Alaska, Arkansas, Nebraska, and South Dakota–and two cities–San Francisco and Oakland–passed ballot initiatives to raise minimum wage rates to between $8.50 and $15 an hour.
Voters in two more states–Illinois and Wisconsin–approved non-binding referenda, instructing their legislators to raise wages for more than 1.1 million workers. The margins of victory weren’t even close, even in deeply conservative “red” states such as Arkansas, where 65 percent of voters approved the wage increase. Clearly, higher wages for working families isn’t a partisan issue. ….And the federal minimum wage has been stuck at $7.25 since 2009.”Read more.
Durdin, Zero Hedge, 10/3/14 That Diminishing Labor Force Participation “While by now everyone should know the answer, for those curious why the US unemployment rate just slid once more to a meager 5.9%, the lowest print since the summer of 2008, the answer is the same one we have shown every month since 2010: the collapse in the labor force participation rate, which in September slid from an already three decade low 62.8% to 62.7% – the lowest in over 36 years, matching the February 1978 lows.” “Hiring Grandparents Only”: 230K September Jobs Added In 55-69 Age Group; 10K Lost In Prime, 25-54 Group”
Gould EPI 10/3/14 “In September, the labor force participation rate dropped to 62.7 percent. The last time the labor force participation rate was this low was February 1978. And, the biggest drop in labor force participation was among prime-age workers, 25-54 years old.
Over the last year, the labor force participation rate fell 0.5 percentage points. Therefore, it’s not surprising that missing workers–potential workers who are neither working nor actively seeking work due to the weak labor market–are at an all-time-high of 6.3 million. The vast majority of them (3.4 million) are 25 to 54 years old.”
Another way to squeeze the poor: “Last year, Ferguson, Mo., the site of recent protests over the shooting of Michael Brown, used escalating municipal court fines to pay 20.2 percent of the city’s $12.75 million budget. Just two years earlier, municipal court fines had accounted for only 12.3 percent of the city’s revenues…..” Thomas Edsall, “Poverty Capitalism,” NYTimes, 8/26/14
“There is very little evidence consistent with the complaints about skills and a wide range of evidence suggesting that they are not true. Indeed, a reasonable conclusion is that over-education remains the persistent and even growing situation of the US labor force with respect to skills.”Peter Cappelli, “Skill Gaps, Skill Shortages and Skill Mismatches: Evidence for the US “ NBER 8/14
E. Kleinbard: “The recent surge in interest in inversion transactions is explained primarily by U.S. based multinational firms’ increasingly desperate efforts to find a use for their stockpiles of offshore cash (now totaling around $1 trillion), and by a desire to “strip” income from the U.S. domestic tax base through intragroup interest payments to a new parent company located in a lower-taxed foreign jurisdiction.” 8/14
A data problem with the Norris report below– the decline is driven by workers dropping out of the labor force. “The government uses a relatively narrow definition of unemployment that includes only people who are actively looking for work. That means unemployment can fall for good reasons (because people are finding jobs) or bad ones (because they’re giving up looking)….Only about 11 percent of the long-term jobless find jobs each month, little better than in the depths of the recession. Moreover, even those who do find jobs are often able to find only part-time or short-term work.
If they aren’t finding jobs, what’s happening to the long-term unemployed? They’re dropping out of the labor force altogether. As the chart below shows, the share of the long-term jobless who are giving up their job searches has been rising steadily, even as the job-finding rate has remained largely flat.” Ben Casselman, 538
F. Norris, “A Drop in the Long-Term Unemployed,” NYT 7/25/14 “THE long-term unemployment rate, which soared in 2009 to heights not seen since the Great Depression, is finally declining rapidly. The proportion of the work force that has been unemployed for at least 27 weeks has fallen to 1.98 percent, less than half the record high of 4.4 percent reached in 2010.”
Dean Baker:: Do Coal Mining Jobs Matter So Much More Than Jobs Lost to Trade? 6/14 When President Obama announced plans to curtail the use of coal over the next fifteen years major news outlets like National Public Radio and The New York Times rushed to do pieces on the prospective loss of jobs in coal mining areas. There are a bit less than 80,000 workers directly employed in the coal industry. A large percentage of these jobs will be lost in the next fifteen years due to these regulations.
While it is good to see the media paying attention to this job loss and its implications for families and communities, this concern is a striking departure from normal practice. This was demonstrated clearly last week when the Commerce Department reported a large jump in the trade deficit for April. The report, and the implied job loss, received almost no attention from the media. ….a trade deficit means that demand generated in the United States is going overseas. Money spent by businesses or consumers is going for goods and services produced in Europe, Mexico, and China rather than in United States.
….This implied job loss from this rise in the trade deficit over the prior three months is roughly ten times the number of jobs at risk in the coal industry over the next fifteen years. Yet there was not a story in any major media outlet that highlighted the jobs put in jeopardy by a growing trade deficit.
It is worth noting who benefits from the trade deficit. Major retailers like Walmart have worked for decades to develop low cost supply chains in the developing world. …. They would not be pleased by measures to reduce the trade deficit.
Krugmas’s blog: “Supply, Demand, and Unemployment Benefits” 4/14 Ben Casselman points out that we’ve had a sort of natural experiment in the alleged effects of unemployment benefits in reducing employment. Extended benefits were cancelled at the beginning of this year; have the long-term unemployed shown any tendency to find jobs faster? And the answer is no.
Fed Chair Janet Yellen, speech 3/14: ” It might seem obvious, but the second thing that is needed to help people find jobs…is jobs. No amount of training will be enough if there are not enough jobs to fill…..
A final piece of evidence of slack in the labor market has been the behavior of the participation rate–the proportion of working-age adults that hold or are seeking jobs. Participation falls in a slack job market when people who want a job give up trying to find one. When the recession began, 66 percent of the working-age population was part of the labor force. Participation dropped, as it normally does in a recession, but then kept dropping in the recovery. It now stands at 63 percent, the same level as in 1978, when a much smaller share of women were in the workforce. Lower participation could mean that the 6.7 percent unemployment rate is overstating the progress in the labor market.
One factor lowering participation is the aging of the population, which means that an increasing share of the population is retired. If demographics were the only or overwhelming reason for falling participation, then declining participation would not be a sign of labor market slack. But some “retirements” are not voluntary, and some of these workers may rejoin the labor force in a stronger economy. Participation rates have been falling broadly for workers of different ages, including many in the prime of their working lives. Based on the evidence, my own view is that a significant amount of the decline in participation during the recovery is due to slack, another sign that help from the Fed can still be effective.”….emphasis mine–jz
Paul Krugman’s blog, Nov. 16, 2013: â€œWe now know that the economic expansion of 2003-2007 was driven by a bubble. You can say the same about the later part of the 90s expansion, and you can in fact say the same about the later years of the Reagan expansion, which was driven at that point by runaway thrift institutions and a large bubble in commercial real estate.…..So how can you reconcile repeated bubbles with an economy showing no sign of inflationary pressures? [Larry] Summers’s answer is that we may be an economy that needs bubbles just to achieve something near full employment — that in the absence of bubbles the economy has a negative natural rate of interest. And this hasn’t just been true since the 2008 financial crisis; it has arguably been true, although perhaps with increasing severity, since the 1980s.”
“There are complaints from Washington about a bloated federal government…..In September, before the government shutdown, the government had 2,723,000 employees, according to the latest job report, on a seasonally adjusted basis. That is the lowest figure since 1966. Until now, the lowest figure for the current century had been 2,724,000 federal employees in October 2004, when George W. Bush was seeking a second term in the White House. Now, the federal government employs exactly 2 percent of the people with jobs in this country. In 1966, the figure was more than twice that, 4.3 percent. All these figures, by the way, are for civilian jobs” Floyd Norris, Economix, NYTimes, 10/23/13 http://economix.blogs.nytimes.
“The median income for a person over age 65 is less than $20,000 a year.Relatively few seniors are enjoying anything that could be considered a comfortable retirement. It is completely wrongheaded to look to make their situation worse by the reducing the Social Security cost-of-living adjustment by adopting the chained CPI as the measure of inflation.
This switch would reduce benefits by roughly 0.3 percentage points annually, implying a cut of 3 percent after 10 years and a cut of 6 percent after a person has been retired for 20 years. This is a larger hit to the income of the typical senior than the tax increases faced by the typical wealthy person as a result of the ending of the Bush tax cut last fall. Seniors will be hit even harder if Medicare is cut in ways that lead to increased out-of-pocket costs for beneficiaries.” Dean Baker
The Rich Get Richer Through the Recovery Lowrey, NY Times, 9/11/13 The top 10 percent of earners took more than half of the country’s total income in 2012, the highest level recorded since the government began collecting the relevant data a century ago, according to an updated study by the prominent economists Emmanuel Saez and Thomas Piketty. ….The economy remains depressed for most wage-earning families. With sustained, relatively high rates of unemployment, businesses are under no pressure to raise their employees’ incomes because both workers and employers know that many people without jobs would be willing to work for less. The share of Americans working or looking for work is at its lowest in 35 years.http://economix.blogs.nytimes.
Wonder why wages lag? “Caterpillar’s chief executive, Douglas Oberhelman (whose compensation has increased more than 80 percent over the last two years), says the [pay] freeze was vital to keep wages competitive with rival companies. “I always try to communicate to our people that we can never make enough money…We can never make enough profit.” NY Times, Greenhouse, “Fighting Back Against Wretched Wages”, 7/28/13
TPP and the Dismantling of Japanese Agriculture “The traditional Japanese diet–rice combined with locally produced vegetables and fish–constituted one of the biggest barriers to post-war US imports. To open up a market for US food products, Japanese diets had to change to include bread, meat and dairy products.Through the US-funded “Nutrition Improvement Action’ program,” people were told, ‘Eating rice makes you stupid! Eat Bread!’ School lunch menus were westernized and ‘American Trains and ‘Kitchen Cars’ crisscrossed the country to promote a western diet. Today, Japanese people consume 9.5 percent more wheat, 152 percent more animal products and 131 percent more fat than in the 1950s. According to the Japanese Ministry of Agriculture and Fisheries (MAFF), TPP would drop food self-sufficiency from 39 to 14 percent. Food First http://foodfirst.org/wp-
Immigration and NAFTA Few borders in the world are so heavily guarded by sophisticated technology, and so subject to impassioned rhetoric, as the one that separates Mexico from the United States, two countries with amicable diplomatic relations.
“Job Loss Raises Threat of Heart Attack”Unemployment increases the risk of heart attack, a new study reports, and repeated job loss raises the odds still more. In a prospective analysis from 1992 to 2010 with interviews every other year, researchers tracked job history and heart attacks among more than 13,000 people ages 51 to 75. The study, published online Nov. 19 in The Archives of Internal Medicine, recorded 1,061 heart attacks over the period.
Skills Don’t Pay the Bills By Adam Davidson “The secret behind this skills gap is that it’s not a skills gap at all. I spoke to several other factory managers who also confessed that they had a hard time recruiting in-demand workers for $10-an-hour jobs. “It’s hard not to break out laughing”, says Mark Price, a labor economist at the Keystone Research Center, referring to manufacturers complaining about the shortage of skilled workers. “If there’s a skill shortage, there has to be rises in wages,” he says. “It’s basic economics.” After all, according to supply and demand, a shortage of workers with valuable skills should push wages up. Yet according to the Bureau of Labor Statistics, the number of skilled jobs has fallen and so have their wages.
In a recent study, the Boston Consulting Group noted that, outside a few small cities that rely on the oil industry, there weren’t many places where manufacturing wages were going up and employers still couldn’t find enough workers. “Trying to hire high-skilled workers at rock-bottom rates,” the Boston Group study asserted, “is not a skills gap.” The study’s conclusion, however, was scarier. Many skilled workers have simply chosen to apply their skills elsewhere rather than work for less, and few young people choose to invest in training for jobs that pay fast-food wages. As a result, the United States may soon have a hard time competing in the global economy. The average age of a highly skilled factory worker in the U.S. is now 56.” …. NY Times 11/ 20/12http://www.nytimes.com/2012/
Is the Drought a New Dust Bowl? No, Thanks to the New Deal “It is thanks to the New Deal’s establishment of the Soil Conservation Service and the planting of the Great Plains Shelter Belt that we have not experienced another Dust Bowl, even in the face of such severe conditions as this summer’s dry spell or the even more extensive drought the nation experienced in 1956. As was typical of most New Deal infrastructure projects, the programs the government designed to combat this unprecedented environmental disaster were not developed merely as a means to provide jobs and short-term work relief to those who were suffering unemployment. Rather, they were part of a large-scale effort to bring about a long-term solution to a very difficult environmental problem. This emphasis on long-term environmental planning, which recognizes the need create a balance between stewardship and managed exploitation and which sees the federal government as playing a crucial role in establishing the parameters of that balance, is now referred to as sustainable development.” David Woolner, 7/12
Older, Suburban and Struggling, “Near Poor” Startle the Census“When the Census Bureau this month released a new measure of poverty, meant to better count disposable income, it began altering the portrait of national need. Perhaps the most startling differences between the old measure and the new involves data the government has not yet published, showing 51 million people with incomes less than 50 percent above the poverty line. That number of Americans is 76 percent higher than the official account, published in September. All told, that places 100 million people â€” one in three Americans â€” either in poverty or in the fretful zone just above it…..Of the 51 million who appear near poor under the fuller measure, nearly 20 percent were lifted up from poverty by benefits the official count overlooks. But more than half were pushed down from higher income levels: more than eight million by taxes, six million by medical expenses, and four million by work expenses like transportation and child care…..Perhaps the most surprising finding is that 28 percent work full-time, year round.”NY Times 11/11
Politics Matter: Changes in Unionization Rates in Rich Countries, 1960-2010 “The national political environment, not globalization or technology, is the most important factor driving long-run changes in unionization rates in the United States.” CEPR 11/11
There’s a Huge Amount of Anger”…the “official” unemployment rate is 9.1 percent — but the one that includes discouraged workers who have left the labor force or partially unemployment has gone from 16.2 percent to 16.5 percent. And if you add to it the millions of people that you have in jail in the U.S. — which is four times the amount of any civilized country as a share of population — than unemployment is probably closer to 20 percent. And that’s just among the average population. For minorities, the youth, or unskilled people that don’t have a high school degree, the number is closer to 30 percent. It’s a stressful situation.” Nouriel Roubini, Foreign Policy, 10/10/11
The costs of rising economic inequality By 2007, the top 1 percent of households took home 23 percent of the national income after a 15-year run in which they captured more than half – yes, you read that right, more than half – of the country’s economic growth. As Tim Noah noted recently in a wonderful series of articles in Slate, that’s the kind of income distribution you’d associate with a banana republic or a sub-Saharan kleptocracy, not the world’s oldest democracy and wealthiest market economy. Wash. Post , 10/6/10
Unemployment Insurance: “…even in normal times, the benefits outweigh the work disincentive costs. Now the long-term unemployed, who have depleted their savings, who have a hard time finding a job period in the current economy, would gain the most from unemployment insurance. And thatâ€™s even before the macroeconomic effects. And itâ€™s even before the interesting problem of subsidizing people to look for a job (which unemployment insurance requires) rather than join the long-term unemployed, where some current research shows that human capital depreciates at an alarming rate…”
How America Can Create Jobs“The former Intel chief [Andy Grove] says “job-centric” leadership and incentives are needed to expand U.S. domestic employment again
‘….the great Silicon Valley innovation machine hasn’t been creating many jobs of lateâ€”unless you’re counting Asia, where American tech companies have been adding jobs like mad for years.
The underlying problem isn’t simply lower Asian costs. It’s our own misplaced faith in the power of startups to create U.S. jobs. Americans love the idea of the guys in the garage inventing something that changes the world. New York Times columnist Thomas L. Friedman recently encapsulated this view in a piece called “Start-Ups, Not Bailouts.” His argument: Let tired old companies that do commodity manufacturing die if they have to. If Washington really wants to create jobs, he wrote, it should back startups.
Friedman is wrong. Startups are a wonderful thing, but they cannot by themselves increase tech employment. Equally important is what comes after that mythical moment of creation in the garage, as technology goes from prototype to mass production. This is the phase where companies scale up. They work out design details, figure out how to make things affordably, build factories, and hire people by the thousands. Scaling is hard work but necessary to make innovation matter.
The scaling process is no longer happening in the U.S. And as long as that’s the case, plowing capital into young companies that build their factories elsewhere will continue to yield a bad return in terms of American jobs.
New War on Social Security:”Everyone who looks at the projections agrees; the scary budget stories being hyped in the media and by the Wall Street crew are driven almost entirely by projections of exploding health care costs. But instead of proposing ways to fix the health care system, these deficit hawks want to attack Social Security. They tell us that fixing health care is hard. By contrast they think that cutting money from Social Security will be relatively easy…..Federal Reserve Board Chairman Ben Bernanke recently suggested cutting Social Security because: ‘that’s where the money is.’ That’s not true, the real money is on Wall Street. Let’s go get it.” D. Baker, 4/10
“…there were bank panics” “systemic crises” in 1873, 1884, 1890, 1893, 1896, 1907, and 1914. On the other hand, there were no systemic crises from 1934 to 2007. The problem, as Gorton makes clear, is that the Quiet Period reflected a combination of deposit insurance and strong regulation, undermined by the rise of shadow banking. So we have a choice: restore effective regulation or go back to the bad old days.” Paul Krugman’s blog, 3/23/10 http://krugman.blogs.nytimes.
How a New Jobless Era Will Transform America The Great Recession may be over, but this era of high joblessness is probably just beginning. Before it ends, it will likely change the life course and character of a generation of young adults. It will leave an indelible imprint mately, it is likely to warp our politics, our culture, and the character of our society for years to come. 3/10
The Safety Net Living on Nothing but Food Stamps About six million Americans receiving food stamps report they have no other income… they described themselves as unemployed and receiving no cash aid â€” no welfare, no unemployment insurance, and no pensions, child support or disability pay. Their numbers were rising before the recession as tougher welfare laws made it harder for poor people to get cash aid, but they have soared by about 50 percent over the past two years. About one in 50 Americans now lives in a household with a reported income that consists of nothing but a food-stamp card. NYT, DeParle & Gebeloff, 1/10
America’s economic pain brings hunger pangs The nation’s economic crisis has catapulted the number of Americans who lack enough food to the highest level since the government has been keeping track, according to a new federal report, which shows that nearly 50 million people — including almost one child in four — struggled last year to get enough to eat. Goldstein, Wash. P, 11/09
Broken Laws, Unprotected Workers…America’s workplace laws are failing to protect our country’s workers. In industries ranging from construction and food manufacturing to restaurants, janitorial services and home health care, workers are enduring minimum wage and overtime violations, hazardous working conditions, discrimination, and retaliation for speaking up or trying to organize. They have little recourse because of their need for work, especially during the recession. Until now, however, advocates and policy makers lacked representative and reliable data on the magnitude of the problem, the workers who are most affected, and the industries that are the biggest culprits. Bernhardt et al, 9/09
Job Growth Lacking in the Private Sector For the first time since the Depression, the American economy has added virtually no jobs in the private sector over a 10-year period. The total number of jobs has grown a bit, but that is only because of government hiring. Norris, NYT 8/09 http://www.nytimes.com/2009/
Increase in Minimum Wage Helps Economic Recovery “The recently enacted American Recovery and Reinvestment Act included policies to help struggling families and create jobs. But an extremely effective and simple policy that achieves both of these goals is often overlooked: increases in the minimum wage. Each increase provides financial relief directly to minimum wage workers and their families and helps stimulate the economy. By increasing families’ take-home pay, workers gain both financial security and an increased ability to purchase goods and services, thus creating jobs for other Americans.” 5/09
“The sudden emergence of the H1N1 virus and the possibility of an epidemic outbreak on a scale not seen in decades has led to the closings of schools and workplaces around the world. President Obama recently urged workers with flu symptoms to ‘stay home’. But a new report from the Center for Economic and Policy Research (CEPR) shows that the United States is the only one of 22 rich countries that fails to guarantee sick workers some form of paid sick leave. ” 5/09 no longer at http://www.policy.rutgers.edu/News/A&RR-FINAL_9.30.pdf
“…a 2004 study by the National Institute of Justice reported that women whose male partners experienced two or more periods of unemployment over five years were three times more likely to be abused. ” Tough Times, Domestic Violence, and Economic Abuse
Losing Job May Be Hazardous to Health “Workers who lost a job though no fault of their own…were twice as likely to report developing a new ailment like high blood pressure, diabetes or heart disease over the next year and a half, compared with people who were continuously employed. Interestingly, the risk was just as high for those who found new jobs quickly as it was for those who remained unemployed.”NYT 5/9/09
From the Century Foundation: …one number that merits special attention is the estimate by Emmanuel Saez and Thomas Piketty of the distribution of new income generated between 2002 and 2006. Saez and Piketty show that almost three quarters of the additional income (73%) went to the top one percent of households. That is, families making more than $376,000 in 2006 enjoyed three out of every four dollars in raises during the growth of 2002-2006. During the Clinton boom years (1993-2000), the top one percent enjoyed nearly half (45%) of the total increase in income.
Building a Better Capitalism, Myerson The Reagan-Thatcher model, which favored finance over domestic manufacturing, has collapsed. The decline of American manufacturing has saddled us not only with a seemingly permanent negative balance of trade but with a business community less and less concerned with America’s productive capacities.
Federal Deficits can raise private investment The idea that tight fiscal policy when the economy is depressed actually reduces private investment isn’t just a hypothetical argument: it’s exactly what happened in two important episodes in history.
The first took place in 1937, when Franklin Roosevelt mistakenly heeded the advice of his own era’s deficit worriers. He sharply reduced government spending, among other things cutting the Works Progress Administration in half, and also raised taxes. The result was a severe recession, and a steep fall in private investment.
The second episode took place 60 years later, in Japan. In 1996-97 the Japanese government tried to balance its budget, cutting spending and raising taxes. And again the recession that followed led to a steep fall in private investment…..
What made fiscal austerity such a bad idea both in Roosevelt’s America and in 1990s Japan were special circumstances: in both cases the government pulled back in the face of a liquidity trap, a situation in which the monetary authority had cut interest rates as far as it could, yet the economy was still operating far below capacity…..Krugman, NYT, 12/1/08
To Build Confidence, Aim for Full Employment, R.Shiller, NYTimes,12/14/08. In the
current crisis, discussions of economic policy have often centered on uninspiring, short-term goals. To restore confidence in our economic future, we need appropriate, firm targets that will clearly put us where we want to be. ….If the new president had a target of full employment, and if Americans believed that he could reach it, the confidence problem could be quickly solved.
Mr. Obama’s announced goal of 2.5 million new jobs by 2011 is too modest. In the next two years, almost four million workers will enter the labor force–or would if there were jobs. Combined with the loss of employment this year, that means we should be striving to create more than five million jobs. Joseph Stiglitz, NYT, 11/30/08
The immunity wore off “…a speculative outbreak has a greater or less immunizing effect. The ensuing collapse automatically destroys the very mood speculation requires. It follows that the outbreak of speculation provides a reasonable assurance that another outbreak will not immediately occur. With time and dimming of memory, the immunity wears off. A recurrence becomes possible. Nothing would have induced Americans to launch a speculative adventure in the stock market in 1935.” JK Galbraith, The Great Crash, 1954, 176
The Problem Is House Prices, NOT Interest Rates Economists used to believe in prices being determined by supply and demand. The bubble pushed house prices up by more than 70 percent above their trend level. There was no change in the fundamentals that justified this rise….The bubble was extended by the predatory mortgages in the subprime market and new exotic mortgage instruments developed in these years, but the underlying problem was house prices, not the mortgages. Dean Baker, Beat the Press, 10/3/08
In fact, some of the most basic details [of the bailout plan], including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy. “It’s not based on any particular data point,” a Treasury spokeswoman told Forbes.com Tuesday. “We just wanted to choose a really large number.” Forbes, “The Paulson Plan: Bad News For The Bailout”
“Despite strong gains in earnings last year, men who worked full-time made essentially no gains from 2000-2007 because of large losses from 2003 to 2006. The 2007 median earnings of these workers ‘closely connected to the job market’ were only 0.6% higher–$260 dollars– than their level in 2000.” Income Picture, EPI, Bernstein, 8/08
The Irrelevance of Workers In Economic Theory An August 8, 2008 search of 73 economics journals collected electronically in the JSTOR database revealed how marginal work, workers, and working conditions has become in economic literature. Of the articles published since January 2004, the term “working conditions” appeared in only 12, not counting four more substantial articles in the Review of African Political Economy, a journal rarely cited by mainstream economists. Of the remaining articles, three concerned the problem of retention of teachers. Another had a footnote that observed that people can learn about working conditions from websites. One article noted that faculty members in colleges and universities join unions to improve working conditions. A book review considered whether globalization could improve working conditions. Two articles mentioned legislation that took working conditions into account. One article disputed that child labor abroad experienced hideous working conditions. Another cited a mid-nineteenth century British economist who said that factory working conditions were good.
US slips down development index Americans live shorter lives than citizens of almost every other developed nation, according to a report from several US charities. The report found that the US ranked 42nd in the world for life expectancy despite spending more on health care per person than any other country. Overall, the American Human Development Report ranked the world’s richest country 12th for human development.The study looked at US government data on health, education and income. BBC News, 7/08
Fed Fears Wage Spiral That Is Little in Evidence “… the typical American worker…has not had a raise to speak of in this decade. Workers’ leverage is gone. Companies are not creating jobs. Unions that negotiated big wage increases in the 1970s are shadows of their former selves. Cost-of-living adjustments, once commonplace, have disappeared. And the movement of jobs offshore, or the threat of it, has conditioned workers to not even ask for a raise, fearing they will join the millions already laid off. Still, the Federal Reserve’s policy makers, its governors and the presidents of its regional banks are convinced that wage pressures could emerge unexpectedly. That concern, and the idea that wage pressures could lead to yet higher prices and a rising inflation rate, showed up in half-a-dozen interviews with policy makers over the last week. ” Uchitelle, NYT 8/1/08 [Inflation and Wages Out of Sync]
Women Are Now Equal as Victims of Poor Economy Labor market woes have chipped away for years at the presence of men at work, and now that is happening to women. For the first time, the percentage of women employed in their prime working years has fallen, not risen, during a period of economic recovery. Uchitelle, NYTimes, 7/22/08 Growing disparities in life expectancy “Rising economic inequality is often discussed as a significant social problem. Too often, that claim remains unsubstantiated. Why is rising inequality so problematic? What negative impacts does it have on our living standards? One compelling example comes from research on growing socio-economic disparities in life expectancy.While life expectancy has grown across the United States between 1980 and 2000, the degree to which people live longer has become increasingly connected to their socio-economic status. …. In 1980, those with the highest socio-economic status had a life expectancy 2.8 years higher than those with the lowest status (75.8 versus 73.0 years, respectively). By 2000, that gap had grown: those in the top decile had attained a life expectancy of 79.2 years: 4.5 years more than those in the bottom decile. Disparities in life expectancy also increased between the top and the middle decile and between the middle and the bottom.” E. Gould, EPI, 7/08
“…from 1947 to about 1973…real hourly pay for nongovernment workers rose by about 40%….Since then, real wages both hourly and weekly for all nongovernment workers, on average, have fallen by about 5%, very roughly.””Why Oil and Wages Don’t Mix,” B. Stein, NYTimes, 6/29/08
“Laid-off Danes who have worked 52 weeks over the previous three years are eligible to receive 90% of their average earnings for up to four years.” “World’s Best Places For Unemployment Pay,” Woolsey, Forbes, 6/08
Chronic joblessness and the decline of two-parent families: “Andrew Sum, director of the Center for Labor Market Studies, put it this way in a research paper: ‘The marriage rates of all native-born young males and young black males (22-32 years old) in the U.S. are strongly correlated with the annual earnings of these young men. The higher their annual earnings, the more likely they are to be married. Among native-born black males, those men with earnings over $60,000 were four times more likely to be married than their peers with annual earnings under $20,000.
‘”Unfortunately, the mean annual earnings of young men without four-year college degrees have plummeted substantially over the past 30 years, and declined again over the 2000-2007 period. Declining economic fortunes of young men without college degrees underlie the rise in out-of-wedlock child-bearing, and they are creating a new demographic nightmare for the nation.” Bob Herbert, “A Dubious Milestone,” NYTimes, June 21, 2008
Tough Times for the American Worker “One of the least examined but most important trends taking place in the United States today is the broad decline in the status and treatment of American workers — white-collar and blue-collar workers, middle-class and low-end workers — that began nearly three decades ago, gradually gathered momentum, and hit with full force soon after the turn of this century. A profound shift has left a broad swath of the American workforce on a lower plain than in decades past, with health coverage, pension benefits, job security, workloads, stress levels, and often wages growing worse for millions of workers.” Steven Greenhouse, The Big Squeeze, quoted by von Hoffman
Inequality and Health Outcomes “The health situation in Japan after World War II was extremely poor. However, in less than 35 years the country’s life expectancy was the highest in the world. Japan’s continuing health gains are linked to policies established at the end of World War II by the Allied occupation force that established a democratic government. The Confucian principles that existed in Japan long before the occupation but were preempted during the war years were reestablished after the war, facilitating subsequent health improvements. Japan’s good health status today is not primarily the result of individual health behaviors or the country’s health care system; rather, it is the result of the continuing economic equality that is the legacy of dismantling the prewar hierarchy.” Bezruchka, Namekata, & Sistrom, “Interplay of Politics and Law to Promote Health,” American Journal of Public Health: April 2008, Vol. 98, No. 4, pp. 589-594. http://ajph.aphapublications.
Unionization Substantially Improves the Pay and Benefits of African Americans “The report, “Unions and Upward Mobility for African-American Workers,” found that unionized black workers earned, on average, 12 percent more than their non-union peers. In addition, black workers in unions were much more likely to have health-insurance benefits and a pension plan.” Schmitt, CEPR 3/08
“What are the consequences of a world in which regulators rescue even the financial institutions whose recklessness and greed helped create the titanic credit mess we are in? Will the consequences be an even weaker currency, rampant inflation, a continuation of the slow bleed that we have witnessed at banks and brokerage firms for the past year?” “Wall Street’s Economic Chaos Has Big Political Consequences,” von Hoffman, TheNation, 3/08
Spending on Iraq is also a job killer “…the economic consequences of Iraq run even deeper than the squandered opportunities for vital public investments. Spending on Iraq is also a job killer. Every $1 billion spent on a combination of education, healthcare, energy conservation and infrastructure investments creates between 50 and 100 percent more jobs than the same money going to Iraq. Taking the 2007 Iraq budget of $138 billion, this means that upward of 1 million jobs were lost because the Bush Administration chose the Iraq sinkhole over public investment.” “The Wages of Peace,” Pollin & Garrett-Peltier, 3/08, the Nation
“…one in five Americans in working families have income below a minimum middle-class budget standard for the area in which they live. The authors argue this is the result of a frayed social contract that must be updated so that more workers can move into the middle class.” Movin’ On Up: Reforming America’s Social Contract to Provide a Bridge to the Middle Class, CEPR, Fremstad, Ray, Chimienti, & Schmitt, 2/08
“The major causes of hunger in survey cities are poverty, unemployment and high housing costs. The hunger crisis is exacerbated by the recent spike in foreclosures, the increased cost of living in general, and increased cost of food.”Hunger & Homelessness Survey, US Conference of Mayors, 12/07
“Think about the jobs you’ve had. Where were you the most productive? Was it when you worked for a boss and an organization that treated you with respect, that valued your contributions, where you actually felt that you were part of something useful? Or were you more productive when you worked for a boss and an organization that governed by fear, that treated you with suspicion and contempt? Most adults have worked for the latter kind, while only some have had the good fortune to work for the former. And many if not most of them do just enough work to stay out of trouble and avoid the wrath of their superiors. That’s the spirit fostered in a workplace where employees are treated like criminals.”“Woe Is the American Worker, Waldman, The American Prospect, 12/07
“…this EPI analysis finds that between 18% and 22% of today’s jobs– about 25 to 30 million–could potentially be offshored. Interestingly, the workers most vulnerable to offshoring are those with at least a four-year college degree.”The Characteristics of Offshorable Jobs, Bernstein, Lin, & Mishel, EPI, 11/07
“The number of good jobs –jobs that pay at least $17 an hour, and provide health insurance and a pension — declined by 3.5 million between 2000 and 2006….
The report, “The Good, The Bad, and the Ugly: Job Quality in the United States over the Three Most Recent Business Cycles,” found that the economy has created fewer good jobs in the 2000s than was the case over comparable periods in the 1980s and 1990s.
The research defined a good job as one that pays $17 an hour, or $34,000 annually, has employer-provided health care and offers a pension. The $17 per hour figure is equal to the inflation-adjusted earnings of the typical male worker in 1979, the first year of data analyzed in the report.” Schmitt, CEPR, 11/07
“…by addressing social needs in the areas of health care, education, education, mass transit, home weatherization and infrastructure repairs, we would also create more jobs and, depending on the specifics of how such a reallocation is pursued, both an overall higher level of compensation for working people in the U.S. and a better average quality of jobs.” U.S. Employment Effects of Military & Domestic Spending Priorities, Pollin & Garrett-Peltier, IPS, 10/07″Government should not devise elaborate job training schemes, especially those disconnected from real jobs. The research shows that most such programs bring few benefits. Access to college should be eased to improved people’s general skills and sense of well-being; job-specific training programs should normally involve on-the-job training for real jobs.
In part because economic authorities will never allow macroeconomic policy to run fast and long enough to create all the jobs we need, the federal government should expand its own labor force. For decades government jobs have been an important avenue of success for the poor and near poor, especially among minorities, but that effect has waned recently, in part due to the conservative assault on government. Governments should do more to create permanent jobs that provide useful services and pay decently (protecting our national parks, running after-school programs at neighborhood parks, delivering the mail, building schools, insulating buildings, manufacturing solar cells, caring for our children, acting as teaching aids). The private sector is subverting the American dream; there is less job mobility today than in the 70s. Few Bush supporters admit it, but all net job growth was in government employment from 2000 to mid-2005. Honesty requires that we acknowledge the failure of the private sector, and create civilian-sector government jobs.” Frank Stricker, Why American Lost the War on Poverty and How to Win It, 2007
“According to a 2005 report of the International Centre for Prison Studies in London, the United States–with five percent of the world’s population–houses 25 percent of the world’s inmates. Our incarceration rate (714 per 100,000 residents) is almost 40 percent greater than those of our nearest competitors (the Bahamas, Belarus, and Russia). Other industrial democracies, even those with significant crime problems of their own, are much less punitive: our incarceration rate is 6.2 times that of Canada, 7.8 times that of France, and 12.3 times that of Japan. We have a corrections sector that employs more Americans than the combined work forces of General Motors, Ford, and Wal-Mart, the three largest corporate employers in the country, and we are spending some $200 billion annually on law enforcement and corrections at all levels of government, a fourfold increase (in constant dollars) over the past quarter century.” Why Are So Many Americans in Prison? Race and the transformation of criminal justice,” Glenn C. Loury
“The substantial declines in job stability for prime-age men…, in conjunction with the high rates of permanent job loss (relative to the unemployment rate) and large associated earnings losses…, lend credence to the view that worker anxiety about job stability and security is real rather than illusory. At the same time, the burden of job loss and its consequences, most notably earnings losses, has shifted towards groups like the highly educated….,” FRBSF, 6/07
Where Your Income Tax Money Really Goes: Total Outlays (Federal Funds): $2,387 billion– MILITARY: 51% and $1,228 billion NON-MILITARY: 49% and $1,159 billion
“If economic theory is unkind to trickle-down proponents, the lessons of experience are downright brutal. If lower real wages induce people to work shorter hours, then the opposite should be true when real wages increase. According to trickle-down theory, then, the cumulative effect of the last century’s sharp rise in real wages should have been a significant increase in hours worked. In fact, however, the workweek is much shorter now than in 1900.
Trickle-down theory also predicts shorter workweeks in countries with lower real after-tax pay rates. Yet here, too, the numbers tell a different story. For example, even though chief executives in Japan earn less than one-fifth what their American counterparts do and face substantially higher marginal tax rates, Japanese executives do not log shorter hours.
Trickle-down theory also predicts a positive correlation between inequality and economic growth, the idea being that income disparities strengthen motivation to get ahead. Yet when researchers track the data within individual countries over time, they find a negative correlation. In the decades immediately after World War II, for example, income inequality was low by historical standards, yet growth rates in most industrial countries were extremely high. In contrast, growth rates have been only about half as large in the years since 1973, a period in which inequality has been steadily rising.” R. Frank, “In the Real World of Work and Wages, Trickle-Down Theories Don’t Hold Up,” NY Times, 4/07
“A new report from The Mobility Agenda finds that over 40 million jobs in the United States– about 1 in 3–pay low wages ($11.11 per hour or less) and often do not offer employment benefits like health insurance, retirement savings accounts, paid sick days, or family leave. Moreover, these jobs tend to have inflexible or unpredictable scheduling requirements and provide little opportunity for career advancement.”
“We did not realize it until we lost unions how crucial they are to our well-being.” Paul Krugman, Congressional testimony, cited in Daily Kos
Record Numbers in Severe Poverty “The percentage of poor Americans who are living in severe poverty has reached a 32-year high, millions of working Americans are falling closer to the poverty line and the gulf between the nation’s “haves” and “have-nots” continues to widen. A McClatchy Newspapers analysis of 2005 census figures, the latest available, found that nearly 16 million Americans are living in deep or severe poverty. A family of four with two children and an annual income of less than $9,903 – half the federal poverty line – was considered severely poor in 2005. So were individuals who made less than $5,080 a year. The McClatchy analysis found that the number of severely poor Americans grew by 26 percent from 2000 to 2005. That’s 56 percent faster than the overall poverty population grew in the same period….” U.S. economy leaving record numbers in severe poverty …” 2/22/07
Populism’s Revival By James Lardner, from San Francisco Chronicle November 22, 2006
In the late 1970s and early ’80s, when the inequality trend first surfaced, the most conspicuous victims were workers in industries shaken by competition from Asia. From then on, highly regarded authorities have continued to present the problem as a matter of technology and trade creating a “rising skill premium,” as Federal Reserve Board Chairman Ben Bernanke put it at a congressional hearing earlier this year. Americans have clearly taken that analysis to heart. By and large, according to a recent Wall Street Journal/NBC News poll (in which the widening pay gap was rated the country’s No. 1 economic problem by 24 percent of those surveyed), people don’t hold Republicans responsible. They’re more inclined to blame corporate greed or the global economy; and either way, they don’t think there’s much that mere humans, regardless of party, can do about it. But that fatalistic outlook is not supported by the facts.
If cheap imports (or, for that matter, low-wage immigrants) could explain a long, sharp increase in inequality, France, the Netherlands and much of Europe would be going through the same experience; they’re not. If skill was the crucial factor, the long-term winners would be the top 20 or 30 percent of Americans. Instead, they’ve been the top 5, 2, or 1 percent — the 1 percent who now pocket almost a fifth of all personal income, roughly twice what their share was during the 1960s and ’70s.
The data suggests a story of power rather than skill–rule-making power. The trail of evidence leads into the arcane world of economic policy; and if you look back over the past few decades, ignoring the catchy labels (“deregulation,” “personal responsibility” and the rest), you’ll find a pattern of government action–on taxes, trade and the minimum wage, among other things–favoring corporate insiders and financial manipulators over the rest of us.
You’ll also find inaction — a wholesale abandonment of the tradition of public investment that, in earlier periods of our history, from the Louisiana Purchase to the G.I. Bill and the Higher Education Act of 1965, earned the United States the right to honestly call itself a land of opportunity…..
Culture of poverty? For decades, scholars and opinion makers have been seduced by cultural explanations for economic problems. Recently, comedian Bill Cosby has caught the bug, leading him to inveigh against aspects of black culture he views as intimately linked to problems among African-Americans, from poverty to crime and incarceration. Mr. Cosby is merely the latest and most visible in a long chain of cultural critics….. This work is misguided at best and destructive at worst. One key to the success of the cultural argument is the omission of inconvenient facts…. For example, people arguing that African-Americans are suffering from a culture of poverty stress that blacks are much more likely to be poor than whites. True, but this fact misses the most important development about black poverty in recent years: its steep decline during the 1990s.
Black poverty fell 10.6 percentage points from 1993 to 2000 (from 33.1 to 22.5 percent) to reach its lowest level on record. Black child poverty fell an unprecedented 10.7 percentage points in five years (from 41.9 percent in 1995 to 31.2 percent in 2000).
The “culture of poverty” argument cannot explain these trends. Poor black people did not develop a “culture of success” in 1993 and then abandon it for a “culture of failure” in 2001.
What really happened was that in the 1990s, the job market finally tightened up to the point where less-advantaged workers had a bit of bargaining clout. The full-employment economy offered all comers opportunities conspicuously absent before or since. Since 2000, black employment rates have fallen much faster, and poverty rates have risen faster, than the average.
What this episode reveals is how we squander our human resources when slack in the economy yields too few decent employment opportunities for those who want to work….. “Don’t Blame Black Culture for Economic Decline,” A. Austin & J. Bernstein
Good News! “..minimum wage initiatives passed in all six states where they were on the ballot on November 7. This means over 1.5 million workers in Arizona, Colorado, Missouri, Montana, Nevada and Ohio, will see their wages increase, thanks in part to your support. Not only did each of these states raise their minimum wages, they also adopted automatic annual cost-of-living adjustments, bringing to 10 the number of states with inflation indexing.”Monique Morrissey, EPI
The Gender Pay Gap is the Smallest on Record–Not Necessarily Good News, Sylvia Allegretto New data released by the U.S. Census Bureau show that the gender pay gap for full-time, full-year workers is the smallest on record. The shrinking gap was a feature in the Department of Labor’s report, Highlights of America’s Workforce: Labor Day 2006. Women now earn 77 cents on the dollar compared to men. After an increase in the gap from 2002 to 2003, the gap shrunk over the last two years. However, as the Figure shows, these declines were solely due to the fact that earnings have fallen for both men and women, but have fallen more so for men–not a desirable scenario. Amazingly, the Department of Labor brags that the gender gap in pay is now the smallest ever, while completely ignoring how we got there…..
“Even households at the 95th percentile–that is, households richer than 19 out of 20 Americans–have seen their real income rise less than 1 percent a year since the late 1970’s. But the income of the richest 1 percent has roughly doubled, and the income of the top 0.01 percent–people with incomes of more than $5 million in 2004–has risen by a factor of 5.” “Whining Over Discontent,”Paul Krugman, NYT, 9/6/06
“The stagnation of real wages–wages adjusted for inflation–actually goes back more than 30 years. The real wage of nonsupervisory workers reached a peak in the early 1970â€™s, at the end of the postwar boom. Since then workers have sometimes gained ground, sometimes lost it, but they have never earned as much per hour as they did in 1973.
Meanwhile, the decline of employer benefits began in the Reagan years, although there was a temporary improvement during the Clinton-era boom. The most crucial benefit, employment-based health insurance, has been in rapid decline since 2000.” “The Big Disconnect,” Krugman, NYT 9/1/06
CEO pay-to-minimum wage ratio soars Today’s average CEO earns more before lunch in one day than the average minimum wage worker earns all year, with a compensation ratio of 821-to-1. CEO pay continues to climb, while the federal minimum wage has remained unchanged since 1997 [and is at a 50-year low]. forthcoming The State of Working America, 2006/07.–EPI
“Income Inequality, and Its Cost” “Unchecked inequality may also tend to create still more inequality. Edward L. Glaeser, a professor of economics at Harvard, argues that as the rich become richer and acquire greater political influence, they may support policies that make themselves even wealthier at the expense of others. In a paper published last July, he said, ‘If the rich can influence political outcomes through lobbying activities or membership in special interest groups, then more inequality could lead to less redistribution rather than more.’In the United States, there is plenty of evidence that this has been occurring. Bush administration policies that have already reduced the estate tax and cut the top income and capital gains tax rates benefit the well-to-do. It seems hardly an accident that the gap between rich and poor has widened.” A. Bernasek, NYT, 6/06
“Dean Baker debunks the myth that conservatives favor the market over government intervention. The book examines a variety of “nanny state” policies that make the rich richer while leaving most Americans worse off.” The Conservative Nanny State 5/06
Basics, Not Luxuries, Blamed for High Debt, Washington Post, 5/12/06 Why are Americans so deeply in debt? It’s not because they are using credit cards to buy plasma TVs and premium coffee drinks at Starbucks. The real culprits, according to a new analysis, are the rising costs of housing, health care and education.
The debt of the typical American family earning about $45,000 a year rose 33.1 percent from 2001 to 2004, after adjusting for inflation, according to a study based on data compiled from the Federal Reserve Board’s most recent Survey of Consumer Finances. …Real wages, after adjusting for inflation, have been flat since 2001, according to the study, while the cost of big-ticket items for which families pay the most rose. In the past five years, the costs of medical care, housing, food, cars and household operations rose 11.2 percent, the study said. Many families are trying to make up the difference by borrowing….
Stagnating minimum wages and housing bubble: “Last year was the first year of record, according to an annual study conducted by the National Low Income Housing Coalition,
that a full-time worker at minimum wage could not afford a one-bedroom apartment anywhere in the country at average market rates. In 2001, officials in …a suburb of Seattle passed an ordinance imposing penalties of 90 days in jail or fines of up to $1000 against people caught living in their cars.” “Keeping It Secret as the Family Car Becomes a Home,” NY Times, 4/2/06
The minimum wage buys less today than it did when Wal-Mart founder Sam Walton opened his first Walton’s 5 & 10 in Bentonville, Arkansas in 1951. It would take more than $9 in 2006 to match the federal minimum wage peak reached in 1968, adjusting for inflation… The minimum wage sets the wage floor. When the minimum wage is stuck in quicksand, it drags down wages for workers up the pay scale as well. Hourly wages for average workers are 11 percent lower than they were in 1973, despite rising worker productivity. It wasn’t always like this. Between 1947 and 1973, worker productivity rose 104 percent while the minimum wage rose 101 percent, adjusting for inflation……..The downward shift in wages is moving higher up the career ladder. The inflation-adjusted earnings of college-educated workers have fallen since 2000… The share [of national income] going to after-tax corporate profits… is at the highest level since 1929. “Wanted: A High-Road Economy,” Holly Sklar, 3/06
More bad news on inequality “Between 1979 and 2003, according to…the IRS, the share of overall income received by the bottom 80 percent of taxpayers fell from 50 percent to barely over 40 percent. The main winners from this upward redistribution of income were a tiny, wealthy elite: more than half the income share lost by the bottom 80 percent was gained by just one-fourth of 1 percent of the population, people with incomes of at least $750,000 in 2003.” Krugman, NYTimes, 3/6/06
The Culture of the New Capitalism “… the pervasive insecurity that is inextricably part of today’s capitalism has become the dominant fact of modern life. ‘The fragmenting of big institutions has left many people’s lives in a fragmented state: the places they work more resembling train stations than villages,’ writes sociologist Richard Sennett in The Culture of the New Capitalism…. Throughout most of the 20th century, the insecurity endemic to capitalism was mitigated by business institutions organized…, along military lines. The corporation gave the employee a place and a ladder, and in such a lifelong institution, Sennett notes, ‘it became possible to define what the stages of a career ought to be like, to correlate longtime service in a firm to specific steps of increased wealth.’ Sennett is no apologist for the old corporate order, but it did impart a structure to people’s work lives and a place to hone their crafts.
The new workplace, by contrast, is a brave new world of short-term employment and relationships, where experience is not necessarily a virtue and institutional memory is sketchy at best. It may be a fine place for young workers, but ‘as middle age looms and children, mortgages and school fees appear, the need for structure and predictability in work grows greater.’ The frequent migration of executives from one firm to another, Sennett adds, imposes further costs on employees: ‘This managerial revolving door has meant that the steady, self-disciplined worker has lost his audience.'” “A Gentler Capitalism,” Harold Meyerson, Wash. Post, Jan 4, 2006
Median family income held up only by two workers “The irony of the story is that the two-income family is the most successful economic model in America. Mom and Dad both have good educations and good jobsÂ—that’s the twenty-first-century version of the American success story and the middle class….the cost of being middle class is out of reach for many of these families.” Elizabeth Warren http://harvardmagazine.com/2004/01/the-middle-class-trapdoo-html See also http://privatizationofrisk.
Tax Cuts Don’t Pay for Themselves: “…The recent analysis by [Ben] Page at the Congressional Budget Office dismisses the idea that tax cuts may actually improve the government’s fiscal situation. Even in his most generous scenario, only 28 percent of lost tax revenue is recouped over a 10-year period. The United States, it seems, is firmly planted on the left side of the Laffer Curve.
Recent experience corroborates this prediction. In the second quarter of 2001, just before the first of President Bush’s tax cuts took effect, federal receipts from personal taxes accounted for 10.3 percent of the economy. By the end of the post-recession slump, receipts had dropped to 6.4 percent. But in the third quarter of 2005, with the economy booming, they were still under 7.5 percent – an enormous difference. In dollar terms, federal receipts from personal income taxes, at $802 billion in 2004, are still lower than they were in 1998 ($826 billion) and much lower than in 2001 ($994 billion)….Even in Mr. Page’s most generous picture, the federal government would probably have to pay an extra $200 billion in interest over the decade covered by his analysis. “A Bit of Doodling About a Tax-Cut Danger,” Daniel Altman, NY Times Business, Jan. 1, 2006
Further horizons in outsourcing–our own computer-game playing. “…from Seoul to San Francisco, affluent online gamers who lack the time and patience to work their way up to the higher levels of gamedom are willing to pay the young Chinese here to play the early rounds for them.”“Ogre to Slay? Outsource It to Chinese,” New York Times, Dec. 9, 2005
Anti-Unionism is the Date Rape of Corporate Crime “…despite starting almost every union drive with majority support, by the time the corporate wave of crime is over, only 31% of union elections end with a vote in support of the union.” Nathan Newman
The New Rich-Rich Gap, by Robert Reich, Common Dreams: The wealthy class is splitting into two elites, one national and threatened by outsourcing, the other international and profiting wildly from globalization.
“..a new group is emerging at the very top. They’re CEOs and CFOs of global corporations, and partners and executives in global investment banks, law firms and consultancies…..It used to be that about a third of the work forces in advanced economies were in person-to-person jobs; now, close to half are. Today, more Americans work in laundries and dry cleaners than in steel mills; more in hospitals and nursing homes than in banks and insurance companies. More work for Wal-Mart than for the entire U.S. automobile industry…………
Routine office jobs are disappearing almost as fast as routine factory jobs. Almost any office task–claims adjusting, mortgage processing—can be done more cheaply and accurately these days by specialized software. Jobs that can’t be turned into software are heading to low-wage countries as fast as telecom systems can reach them. Not only are call centers, tech support and routine computer coding going abroad, but so are jobs involved in patent applications, divorce papers and certain domains of research.”
Wal-Mart Seeks Unbiased Research — and Gets It, LA Times November 3, 2005
Some of their findings, which a few of the researchers released before the conference, tend to confirm what Wal-Mart critics have been saying for years.
At least two concluded that Wal-Mart stores’ pay practices depressed wages beyond the retail sector. Another found that states on average spent $898 for each Wal-Mart worker in Medicaid expenses.
One study concluded that Wal-Mart’s giant grocery and general merchandise Supercenters brought little net gain for local communities in property taxes, sales taxes and employment; instead, the stores merely siphoned sales from existing businesses in the area.
Not all the news was bad for Wal-Mart. Several of the studies noted that its stores led to lower prices throughout a region. Two suggested that Wal-Mart increased a county’s total employment, with one pegging that long-term gain at 1% to 2%.
David Neumark, a senior fellow at the Public Policy Institute of California, found that “residents of a local labor market do indeed earn less following the opening of Wal-Mart stores.”
Worse yet, he wrote, is Wal-Mart’s influence in the South, where it has its greatest concentration of stores. There, Neumark and his coauthors found, Wal-Mart has decreased retail employment and total employment………..
“…inequality, in fact, increased at the insistence of southern representatives in Congress, while their other congressional colleagues were complicit. As a result of the legislation they passed, blacks became even more significantly disadvantaged when a modern American middle-class was fashioned during and after the Second World War.” When Affirmative Action Was White, Ira Katznelson, x.
At the Very Top, a Surge in Income in ’03, Johnston, NY Times. 10/5/05 “The income of [the top tenth of 1 percent] grew by 9.5 percent in 2003 over the previous year… ////for the bottom 99 percent of taxpayers, income rose by less than 2 percent, which was below the inflation rate… …among major world economies, the United States in recent years has had the third-greatest disparity in incomes between the very top and everyone else. Only Mexico and Russia, among major economies, have greater disparity.”
“More People Are Working Now Than Ever Before” (But Less Often) Max Sawicky, 8/ 11/05 http://www.maxspeak.org/mt/ “I remember first hearing the boast in the top line above from the 1976 Gerald Ford campaign. He had Bob Hope helping him out. Even before I had done any formal study of economics, I though, “Gee, what an idiot. Or does he think we are idiots.”
Now the vacationing Mr. Bush is handing out the same drivel. Well, one helping of drivel deserves another. It is true that according to the latest monthly report from the BLS Establishment Survey of jobs, more people are working now than ever before. But, you might ask with some prompting, how often could this be said of presidents since, let’s say Jimmy Carter.
Below are percentages of months in office where the statement was true (we use January of inauguration to December before the next joker’s inauguration as time periods).
“All” is an average of all months after January of 1939. To save myself the trouble of disentangling JFK from LBJ and Nixon from Ford, I started with Jimmy Carter.
Bush I 38%
Bush II 15%
By this reckoning, it is true that more people are working now than ever before, but this is true less often — much less, in fact — for Bush the Younger than for his predecessors.
Response to NY Times article on problems for SS of increasing longevity: [non-working link] “Incredibly, in an article which is entirely devoted to the impact of life expectancy increases on social security’s finances, the authors do not, one single time, mention the fact that the Social Security Trustees (and the Congressional Budget Office) factor life expectancy increases into their assessment of the program’s long-term well-being. Now, there is a debate about whether the trustees have over- or under-estimated the increase in life expectancy going forward. Robert Pear, for example, in an article written last December, marshalled evidence suggesting that the trustees have under-estimated the likely increase.
However, he provided room for experts who disagree with that assertion. Furthermore, this March, the New England Journal of Medicine published a study (one that has generated controversy) arguing that, due to increasing obesity, life expectancy in the United States will fall, not rise, over the next seventy five years. But, there is not a single mention of that debate in the Toner/Rosenbaum piece….”
“A Galbraith Revival,” Remarks at Take Back America Conference, James K. Galbraith June 01, 2005: “…Full employment prosperity is not a birthright, it must be earned. It doesn’t come by magic, by cutting deficits or through prayer to the Great God Greenspan. Full employment prosperity must be created in the solution of our own national problems. Let’s therefore rebuild our cities, conserve our energy resources, save education, extend health care, restore the environment and preserve Social Security. When we have taken back America, we will surely have to rebuild it, finally ending the long age of “public squalor” of which my father [ John Kenneth Galbraith] wrote in The Affluent Society 50 years ago.” http://epsusa.org/publications/newsnotes/2005/galbraith.htm
President Eisenhower letter on Social Security to his brother Edgar on November 8, 1954: “Should any political party attempt to abolish social security, unemployment insurance, and eliminate labor laws and farm programs, you would not hear of that party again…. There is a tiny splinter group, of course, that believes you can do these things. Among them are H.L. Hunt…a few other Texas oil millionaires, and an occasional politician or businessman from other areas. Their number is negligible and they are stupid.” https://www.goodreads.com/quotes/153796-should-any-political-party-attempt-to-abolish-social-security-unemployment
“Will a Social Security Bill Become a Vehicle For Budget-Busting Tax Cuts? The potential is growing that efforts to address the Social Security shortfall could become a vehicle for budget-busting tax cuts. At a press conference on April 29, House Ways and Means Committee Chairman Bill Thomas (R-CA) and Social Security Subcommittee Chairman Jim McCrery (R-LA) suggested combining the broad type of Social Security benefit reductions that President Bush has proposed with additional tax cuts on savings and investments by higher-income people, such as making permanent the capital gains and dividend tax cuts enacted in 2003. The Washington Post reported May 5 that Chairman Thomas also is considering including large increases in contribution limits for IRAs and 401(k)s in his Social Security legislation.” http://www.cbpp.org/5-6-
Social Security’s fixable financing issues (EPI): The deterioration in the 75-year actuarial balance of Social Security that has occurred since 1983 has been caused overwhelmingly by economic developments, trends in disability incidence, and programmatic changes to Social Security. Sixty percent of the current shortfall would be eliminated by a reversal of two adverse economic trends that have emerged since 1983: sluggish growth in average (real) wages and erosion of the tac base due to rapid growth in the inequality of earnings. Reversing the demographic change most commonly identified with placing strain on the Social Security system–declining mortality rates–would eliminate less than 5% of the current shortfall.
An investment pro on privatization: May 1, 2005 Social Security: [Berkshire Hathaway Inc. Chairman Warren] Buffett and [Vice Chairman Charles] Munger also told shareholders they oppose U.S. President George W. Bush’s plan to allow privatization of Social Security because the government has a duty to take care of the country’s elderly.“The Republicans are out of their cotton-picking minds on this issue,” said Munger, a self-described right-wing Republican. Social Security is “one of the most successful things that the government has ever done.” http://www.dailykos.com/story/2005/05/01/110849/-Buffett-Thumbs-Down-on-Bush-s-SS-Piratization
Productivity: 2006 Budget vs Trustees’ 2005 Report April 16, 2005 “They let the cat out of the bag. I did some poking around the 2006 Budget and found the following on p. 191. I have posed the question here and there: How do the Presidents’ men predict productivity when they are talking tax cuts? The answer is here. ‘conservatively, to be 2.6% per year’. How then do they get away with 2.1% as their optimistic number when talking [Social Security] Trust Funds? http://www.whitehouse.
Analytical Perspectives Potential growth is approximately equal to the sum of the trend rates of growth of the labor force and of productivity. Potential GDP growth is projected to be 3.2 percent through 2008, and then edge down to 3.1 percent during 2009â€“2010, primarily because of an assumed slowing in labor force growth. The labor force is projected to grow about 1.2 percent per year through 2008 on average, slowing to about 0.8 percent yearly on average during 2009â€“2010 as increasing numbers of baby boomers enter retirement. Trend productivity growth is assumed, conservatively, to be 2.6 percent per year. That pace is noticeably below the average since the business cycle peak in the first quarter of 2001 (4.2 percent per year). It is, however, close to the pace during 1996â€“2000 (2.5 percent) and not far from the average since the official productivity series began in 1947 (2.3 percent). “
Further Horizons in Offshoring
Outsourcing off Los Angeles? By Linda L. Briggs ADTmag.com 4/18/2005
What if you could outsource to a company that offered the cost savings of an
India-based outsourcing firm, but whose facilities were just a few hours away?
That’s the premise of three entrepreneurs in San Diego, who are in the final throes of launching a company that will offer software development off the coast of California–three miles outside Los Angeles, to be specific.
The three plan to buy a used cruise ship and station it close enough for a half-hour water taxi ride to shore, but far enough to avoid H1B jurisdiction. ……
President “cares the most” about the working poor; poor may not agree “I’m 1,000-percent convinced of this: The president cares the most about this $10-an-hour person,” said Allan B. Hubbard, director of the White House National Economic Council. “And what he gets most irritated by is when it is suggested, ‘Oh the $10-an-hour person isn’t sophisticated enough to deal with a personal retirement account.’ ” ….”When you know you’re entitled to Social Security, you know it’s going to continue to come until you breathe your last breath,” said Sondra Gilbert, a former D.C. government worker who had been jobless since 1999. “But if I start putting the few dollars he’s going to let me put into an account, I could run out of that in a year or two, or whatever. Then I’m back on what? A homeless shelter?” “Bush Social Security Plan Proves Tough Sell Among Working Poor”, J. Weisman, Wash. Post, April 18, 2005
While a smaller fraction of workers have pensions and Social Security is in danger–“Everyone knows that chief executives are paid huge amounts of money while they are working. Less known is just how much they make in retirement. At many of America’s biggest corporations, it is not uncommon for retired executives who were paid tens or even hundreds of millions of dollars during their tenures to receive $1 million or more in pension benefits every year– for as long as they live. Some will take home much more. ….At a time when millions of American workers have seen their pension plans pared back or shut down, and millions more are being asked to bear the risk of managing their own retirement savings, departing chief executives are making out better than ever. A total of 113 chief executives can anticipate retirement benefits worth more than $1 million a year; at least 31 may get twice that amount, or more.” “The New Executive Bonanza: Retirement” by Eric Dash 3 April 2005 NY Times
Wage Gap Figures in Social Security’s Ills, Wall Street Journal, 4/11/05
“In the past 25 years, a growing share of income has been paid to people who earn more than the cap. This increasing concentration of income at the upper strata of society is an important reason why, from 1980 through 2000, taxable payroll fell to 83% of wages of contributing workers from 90%. Both these trends partially were reversed in 2001, but there are signs inequality is growing again: The Federal Reserve estimates that the pay of managers and supervisors is rising much faster than that of production workers. Meanwhile, Social Security actuaries expect taxable payroll, which rebounded to 86% of total wages in 2002, to return to 83% by 2013.”
The 2005 Social Security Trustees Report, Brad DeLong, March 23, 2005
The 2005 Social Security Trustees Report lowers the estimate of Social Security’s deficit through 2079 to 0.6% of GDP. Last year’s Trustees Report pegged the deficit through 2078 at 0.7% of GDP.
Social Security’s financial status improved even though the new forecast window adds a big deficit year–2079–to the calculation. And its financial status improved even though the Bush administration assumed:
1. Reduced earnings on the part of the young.
2. Reduced death rates on the part of the old.
3. Lower labor force participation on the part of the young and old.
4. More short term inflation.
5. No change in long-run productivity growth (in spite of very good productivity news).
6. No change in immigration (in spite of immigration running ahead of assumptions).
That’s six thumbs on the scales, and still the long-run deficit shrinks. So why is the headline that the financial status of Social Security has gotten worse? Can you say “an easily snowed press corps”? I knew you could.
“Waging Inequality” Lawrence Mishel, Economic Policy Institute “The policy argument for raising the cap is that the payroll tax used to be levied on 90 percent of all wages (in the early 1980s, when the last major change in Social Security was legislated), but that now only about 85 percent of wages are taxed. The cap in taxes is tied to a cap in benefits. But, with this growth in inequality, those who are getting the maximum benefit are now paying taxes at a lower rate. The taxable wage base eroded because the wages of top earners grew far faster than the wages of the typical worker, putting more wages out of reach of the payroll tax and undermining the system. If the cap were raised to a level where 90 percent of all wages were taxed, as was the case in the early ’80s, the cap would need to be at about $140,000.”
Fed Chairman Greenspan on Social Security:”In response to a question [at hearings of the House Financial Services Committee]…Mr. Greenspan said he could not say whether he would have voted to create Social Security if he had been a member of Congress in 1935 when the retirement system was established.” [Alan Greenspan, as well as being the current Chair of the Federal Reserve, was also Chair of the National Commission on Social Security Reform that in 1983 increased SS taxes, generating the current large surpluses in the Trust Fund that he later used to justify tax cuts for higher-income taxpayers.] NYT 2/18/05
“‘The Wall Street Journal spotted yet another depressing trend in the pension field. Many companies have started suing their own retired employees in order to cut their pension benefits.’Many companies have already cut back company-paid health-care coverage for retirees from their salaried staff,’ the Journal notes. ‘But until recently, employers generally were barred from touching unionized retirees’ benefits because they are spelled out in labor contracts. Now some are taking aggressive steps to pare those benefits as well, including going to court.’ Here’s the part I love: The companies’ legal argument is that the ‘lifetime’ coverage specified in the contracts does not mean the lifetime of the workers, but the ‘lifetime’ of the labor contract. Cute, eh?” http://www.freepress.org/
Another risk is that your income will decline, perhaps because economic changes make your skills less valuable. (Today, for example, steelworkers could be made redundant by productivity increases. Perhaps in 30 years it will be accountants or software engineers whose work was outsourced overseas.) That’s why Social Security gives low-earning retirees a greater return on their taxes than high-income retirees. Still another risk is that you’ll live a very long time and exhaust your savings, which is why old-age benefits are indexed to inflation and last for a lifetime.
A system of individual accounts would concentrate all these risks on the shoulders of the individual. The inherent risks of investing have captured the most attention. Obviously, if you invest poorly–or even retire at the end of a market slump–you may get a nasty surprise at retirement. (Gary Burtless of the Brookings Institution studied what would have happened historically if workers had invested two percentage points of their Social Security taxes in stocks. Those retiring at the end of a slump would have less than half the income of their more fortunate counterparts who cashed in a few years earlier.) But the risks of replacing social insurance pose an even harsher dilemma. If you suffer a career-ending disability before you’ve put aside enough in your account, if you find yourself at the low end of the income scale, or if you live longer than you had made contingencies for, you would be out of luck. Social Security doesn’t make anybody a millionaire, but it offers everyone the assurance against suffering too much from outrageous fortune. A privatized system would invert that premise.