This post first appeared on Daily Kos. Leave it to somebody from the American Enterprise Institute to figure out what's really wrong with the economy. Kevin Hasset, AEI's director of economic-policy studies, was an adviser to John McCain in his bid for the presidency. He writes, Your Fat Paycheck Keeps Your Neighbor Unemployed:
So here comes the leap into ice-cold water: The biggest problem with the labor market right now is that wages are too high. As Washington again turns to government spending as a cure for unemployment, some against-the-grain thinking is in order. Economics teaches that full employment would be reached if wages adjust downward, to a level that better reflects current circumstances. At lower wages, employers would desire more workers. Labor markets generate persistent unemployment only if wages are sticky, failing to fall as demand declines.
So why aren't American workers eagerly joining this race to the bottom, according to Hasset? Because of the minimum wage. Because of the damned unions. Because of extended unemployment benefits. Because of an unwillingness to pull up stakes and move. And, besides not understanding Economics 101, all those silly people have psychological issues:
...the natural reluctance of workers to accept lower pay is amplified by how their wage helps define their identity. A $60,000-a-year office worker might have an extra-hard time coming to terms with becoming a $40,000-a-year worker.
Hasset fails to point out how many workers have already taken pay-cuts, often in the guise of furloughs. Nor is he volunteering to take a one-third cut in his pay. Nor, you'll notice, does he have anything to say about big-time CEOs or others among the top 10 percent taking a hit on their paychecks at a time when income inequality has given the United States a rich-poor ratio of a banana republic. No surprise. As a colonel in the class war, providing philosophical protection for the top tier is in his job description. No matter how disastrous actually carrying out his prescription would be. As Tom Petruno at the Los Angeles Times points out, the plan would lead to deflation with consumers buying less than before at the very time that small businesses note that their biggest problem is weak sales. Which is why they're not hiring. Does Hasset actually want to worsen the vicious circle? Who knows. At least he's not proposing another tax cut for the rich as a solution to the deficit. Gotta save that for next week's column.
This post originally appeared on the Daily Kos.
The recession may have magnified a trend that began nearly four decades ago - wage stagnation, or worse. Michael Luo at The New York Times writes,For Many, a New Job Means Lower Wages, Studies Find:
With the country focused on job growth and unemployment continuing to hover above 9 percent, there has been comparatively little attention paid to the quality of the jobs being created in this still-struggling economy and what that might say about the opportunities that will be available to workers when the tumult of the Great Recession finally settles. ... For years, long before the recession began, job growth had become increasingly polarized in this country, with high-paid occupations that demand significant amounts of education and training growing rapidly, alongside low-wage, entry-level, service-type jobs that do not require much schooling or special skills, according to David Autor, a labor economist at the Massachusetts Institute of Technology. The growth of these low-wage jobs began in the 1980s, accelerated in the 1990s and began to really take off in the 2000s. Losing out in the shuffle, according to Dr. Autor, are jobs that he describes as "middle-skill, middle-wage" — entry-level white-collar positions, like office and administrative support work, as well as certain blue-collar jobs, like assembly line workers and machine operators.
But now there's an additional element at work. A recent study by the National Employment Law Project points out that "net job growth in 2010 has not been distributed evenly across the economy. Growth has been concentrated in mid-wage and lower-wage industries. By contrast, higher-wage industries showed weak growth and even net losses." The study concluded that: • Net job losses in 2008-2009 were widely distributed. There were significant losses in higher-wage industries. But net job gains this year are disproportionately found in median industries below $15 an hour. • At the top of the list in 2010 were three occupations - retail sales persons, cashiers, and food preparation workers - with median wages below $10 an hour. Many people who had been in the higher-wage industries but were laid off, particularly if they were in their 50s or older, have been forced to find work in those lower-wage occupations. Not only does this make matters tougher for them, it squeezes out younger workers who typically start out in the lower-wage jobs, often while they are attending college or saving up money to do so. If this trend continues, it will exacerbate the destruction of the middle-class, both for those who managed to get there after years of work and those who seek to get there. As noted by the Financial Times in its look at the vanishing middle class:
The slow economic strangulation of the Freemans and millions of other middle-class Americans started long before the Great Recession, which merely exacerbated the "personal recession" that ordinary Americans had been suffering for years. Dubbed "median wage stagnation" by economists, the annual incomes of the bottom 90 per cent of US families have been essentially flat since 1973 – having risen by only 10 per cent in real terms over the past 37 years. That means most Americans have been treading water for more than a generation. Over the same period the incomes of the top 1 per cent have tripled. In 1973, chief executives were on average paid 26 times the median income. Now the ­multiple is above 300.
It shows how far we've come that, given today's economy, treading water sounds like an improvement.
This post originally appeared on Daily Kos. Since the Great Recession began in December 2007, significant percentages of Americans have been been added to the already ample roster assisted by anti-poverty programs. Currently, 17 percent of the population gets help from one or more of these. Most such programs wouldn't even exist had it not been for Democratic majorities pushing them through Congress and Democratic Presidents signing them into law. None of them would exist if today's Republicans had been around to put up obstacles when the programs were first proposed. If they had their way now, they'd be cutting the remaining guy-wires to the safety net tomorrow. Just how bad things could have been in the Great Recession if these programs didn't exist was punctuated by Richard Wolf in USAToday Monday. • More than 50 million Americans on Medicaid, up 17 percent since the recession began, with costs up 36 percent to $273 billion • More than 40 million on food stamps, up 50 percent, with costs up 80 percent to $70 billion • More than 10 million on unemployment benefits, down from the peak of 12 million in January, the highest number of record, with costs up from the beginning of the recession from $43 billion to $160 billion • 4.4 million on welfare, up 18 percent, with costs up 24 percent to $22 billion Not mentioned by Wolf is the expansion since December 2007 of the National School Lunch Program, which served 30 million children from low-income families with free or reduced priced meals and snacks at a cost of $9.1 billion the year the recession started and is currently serving 31.5 million at a cost of $9.8 billion. Also not mentioned is the oldest and biggest anti-poverty program of all: Social Security. How many people have chosen to take their retirement benefits early as a consequence of the being forced off the job before they planned to do so is unknown. What we do know is if it weren't for Social Security, 19.8 million more Americans, including 1.1 million children, would be poor, according to the latest Census data. And that calculation is based on a federal poverty threshold which many critics finding too low.
Conservatives fear expanded safety-net programs won't contract after the economy recovers. "They're much harder to unwind in the long term," says Michael Tanner of the Cato Institute, a libertarian think tank.
What all these right-wingers, including right-wing libertarians, fear even more is the possible contraction of tax cuts for the rich. Priorities, y'know. Even our very modest safety net for the poor is much too "European" in their eyes. If they get enough of their collaborators into high office, soup kitchens are going to make a bigger comeback than they already have.
This post first appeared on Daily Kos. For well over a year, both professional and amateur analysts of the economy have avidly watched how many new claims for unemployment benefits are filed each week. At 674,000, the peak for new claims was reached March 7, 2009. And the numbers went down from there, with some hiccups, until December. Although those numbers weren't great, they steadily improved, indicating that hiring would soon exceed firing and some job growth would begin, which it did, although tentatively. After December, however, the drop in initial claims - as well as the volatility-smoothing four-week running average of initial claims - got stuck. Week after week, for months, the figure went up and down around a narrow range. Over the past few weeks, however, in an ominous sign, we've moved off the frustrating plateau as claims have begun rising again, far higher than the experts expected. Today, the Department of Labor announced that 500,000 initial claims were filed for the preceding week, and the four-week average rose to 482,500. That slippage puts us at the same place we were nine months ago. And while continuing claims continue to drop, at least some of that can be attributed to Americans whose jobless benefits are now exhausted. Tie this into the lackluster Bureau of Labor Statistics job reports for the past three months, during which a paltry number of private-sector jobs have been created. Add in the weak second-quarter GDP report in July (which almost certainly will prove to be even weaker when the first revision is announced later this month). Plus, every few days, there's another release like that from today's gloomy manufacturing report of the Philadelphia Fed: not just the stalled growth of the past two months, but a move into negative territory. The stock market took a three-digit tumble on the news. To understate, none of this is very encouraging. That applies both to those without jobs and those fearing they may lose their jobs, including Democratic incumbents in the House and Senate. It-could-have-been-worse will not make for a very persuasive get-out-the-vote message if those statistical improvements we started seeing in the economy more than a year ago still seem on the precipice of reversal come election day. Not that voters shouldn't be constantly reminded of who the major obstacle in improving the situation is. President Obama once again on Thursday urged obstructionist Republicans to stop blocking the modest jobs bill. We know how that will likely end. The only faint glimmer of hope is that these awful jobless claims numbers and associated calculations, distorted by Census layoffs and other statistical "noise," will turn out to be temporary, just part of a choppiness that accompanies many recoveries. There is a silver lining of sorts. Not as many people are dying on the job, according to Businessweek, because not as many people are on the job.