Posts Tagged ‘exploitation’

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Joan Robinson famously quipped, “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all.”

In the United States right now, workers with a college degree, with an unemployment rate of only 2.8 percent, are forced to endure the misery of being exploited by capitalists; while workers with a high-school diploma or less, with an unemployment rate between 5.4 and 8 percent, have it even worse: many of them confront the misery of not being exploited at all.

That’s because, as a new report from Georgetown University’s Center on Education and the Workforce [ht: ja] makes clear, of the 11.6 million jobs created in the United States after the Great Recession, 8.4 million (72 percent) went to those with at least a bachelor’s degree. Those with associate’s degrees or some college education got 3.1 million (27 percent) of the jobs. The remainder, 80,000 jobs (less than 1 percent), were left for workers with a high-school diploma or less.

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Now, it’s true, Americans with only high-school diplomas represent a shrinking share of the workforce. This year, for the first time, college grads made up a larger slice of the labor market than those without higher education, by 36 percent to 34 percent, respectively. Including workers with an Associate’s degree or some college, workers with postsecondary education now make up 65 percent of total employment.

But the divided nature of the current recovery for American workers among themselves is even more stark.

Workers with a graduate degree (Master’s degree or higher) experienced no decline in jobs in the recession and maintained a stable employment growth throughout the recovery. Workers with a Bachelor’s degree struggled until the second half of 2011, but have since seen fast job growth, and in fact have exceeded the gains of graduate degree holders. . .Workers with a graduate degree have gained 3.8 million jobs since January 2010. Over the same period, workers with a Bachelor’s degree have gained 4.6 million jobs.

Workers with some college or an Associate’s degree have experienced a lot of volatility since 2007. They rode the recession to its depths, losing 1.8 million jobs. Those workers have now ridden the recovery back up; the economy recovered all those jobs by mid-2012. Over the next three and a half years, this group of workers experienced decent job growth, with a net gain of 1.3 million jobs since the beginning of the recession. Overall, this group of workers has added 3.1 million jobs since January 2010.

The workers who have suffered the most are those with a high school diploma or less. They lost the most jobs in the recession and have seen almost no growth in the job market during the recovery. They remain 5.5 million jobs short of their pre-recession employment level. Further, the current economic trends fail to provide any sign that those lost jobs will be returning in the near future.

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The growing gap in the job situations of college haves and have-nots is certainly part of a long-term trend, based on structural changes in the U.S. economy beginning especially in the 1980s. But their diverging trajectories since the crash of 2007-08 have only exacerbated the previous trends. That’s due in part to the precipitous decline in the construction and manufacturing sectors of the economy (which have still not recovered) and the fact that workers with college degrees or at least some postsecondary education have taken most of the new jobs at all skill levels: high, middle, and low. For workers with a high school diploma or less, low-skill jobs have been just about the only jobs available—and, even in those occupations, they’ve been forced to compete with workers with higher levels of education.

Here’s the problem: while would-be workers may be able to exercise some choice in obtaining more education (and thus jump over the gap between college haves and have-nots), they still don’t have any say in determining either the quality or quantity of jobs. Those decisions are still in the hands of the small group of employers at the top.

That means all workers—with or without college degrees—are forced to endure a choice between the misery of being exploited by capitalists or the misery of not being exploited at all. And that’s no choice at all.

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Special mention

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We all know that economic inequality has reached grotesque, even obscene, levels around the world. And the gap between a tiny group at the top and everyone else continues to grow.

But is inequality a human rights concern?

As Ignacio Saiz and Gaby Oré Aguilar [ht: ms] explain, the ongoing debates about inequality

have rarely made reference to human rights. In turn, the human rights community has paid very little attention to economic inequality. While inequality on grounds such as gender, race and disability have long been core human rights concerns, gross inequalities in economic status remain largely unchallenged by human rights law and advocacy.

The question then is, is it possible or even desirable to make inequality a central concern of the global human-rights movement?

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The problem is that human rights have mostly been articulated in terms of individual rights—such as in the “right to life, liberty, and security of person” (as in the 1948 Universal Declaration of Human Rights). And inequality raises a very different set of questions, not about individual rights but about economic and social relations, about the relationshop between smaller and larger groups of people within society. Ultimately, growing inequality challenges the idea of “just deserts” and raises the prospect that one small group on top is “ripping off” everyone else, who are forced to have the freedom to continue to work for their benefit.

That’s what Samuel Moyn is getting at when he argues that “even perfectly realized human rights are compatible with radical inequality.”

The assertion of human rights in the 1940s began as one version of the update to the entitlements of citizenship on whose desirability and necessity almost everyone agreed after depression and war. Franklin Roosevelt issued his famous call for a “second bill of rights” that included socioeconomic protections in his State of the Union address the year before his death. But in promising “freedom from want” and envisioning it “everywhere in the world,” Roosevelt in fact understated the actually egalitarian aspirations that every version of welfarism proclaimed. These went far beyond a low bar against indigence so as to guarantee a more equal society than before (or since). His highest promise, in his speech, was not a floor of protection for the masses but the end of “special privilege for the few”—a ceiling on inequality.

But the harmony of ideals between the campaign against abjection and the demand for equality succeeded only nationally, and in mostly North Atlantic states, and then only partially. Whatever success occurred on both fronts thus came with sharp limitations—and especially the geographical modesty that the human rights idiom has since successfully transcended. It is, indeed, as if globalization of the norms of basic protection were a kind of reward for the relinquishment of the imperative of local equality.

Even the decolonization of the world, though unforeseen at the time of the Universal Declaration that accommodated itself to the empires of the day, hardly changed this relationship, since the new states themselves adopted the national welfarist resolve. The burning question was what would happen after, especially in the face of the inability of the global south to transplant national welfarism and the wealth gap that endures to this day between two sorts of countries: rich and poor.

The fact is, while the gap between countries has decreased somewhat (at least in terms of national income per capita), the gap within countries (especially within the North) has been growing—and the human-rights movement has mostly been “a helpless bystander of market fundamentalism.”

Philip Alston offers a very different view:

the human rights community needs to address directly the extent to which extreme inequality undermines human rights. One starting point is to clearly recognize that there are limits to the degree of inequality that can be reconciled with notions of equality, dignity and commitments to human rights for everyone. Governments should formally commit to policies explicitly designed to eliminate extreme inequality. Economic and social rights must become an integral part of human rights programs. A concerted campaign to ensure that every state has a social protection floor in place would signal a transformation in this regard. That concept—initially elaborated by the International Labour Organization, subsequently endorsed by the UN and now even by the World Bank—draws upon the experience of a range of countries around the world that have successfully tackled poverty in terms of programs with universal coverage, formulated in terms of human rights and of domestic legal entitlements.

But, in all honesty, the challenge facing the human-rights movement is to pick up where Alston stops. He leaves us with the idea of a “social protection floor,” which is pretty much where we were at when Franklin Delano Roosevelt presented his “second bill of rights” in 1944.

The real obstacle is to make sense of the conditions and consequences of the social “ripping-off” that serves as the basis of the extreme and growing levels of inequality we are witnessing today. The human-rights community has succeeded in making it obvious that we need to eradicate traditional forms of slavery as a violation of fundamental human rights.

As I see it, the human-rights movement now needs to take a step forward and confront the modern problem of class exploitation based on the continued existence of wage-slavery.

Millenials

We all know that the Millennials, notwithstanding their constant battering in the media, are generation screwed.

The members of Generation Y know it, too, which is why they see themselves not as middle-class, but as working-class [ht: ja].

The number of millennials – who are also known as Generation Y and number about 80 million in the US – describing themselves as middle class has fallen in almost every survey conducted every other year, dropping from 45.6% in 2002 to a record low of 34.8% in 2014. In that year, 8% of millennials considered themselves to be lower class and less than 1% considered themselves to be upper class.

The large downshift in class identity among young adults may have helped explain the surprisingly strong performance in Democratic primaries of the insurgent presidential candidate Bernie Sanders, who has promised to scrap college tuition fees and raise minimum wages.

And, as members of the working-class, they’re beginning to challenge their employers over exploitation [ht: ja]. That’s especially true when Millennials are forced to have the freedom to take unpaid internships.

The usual excuse is that, whether on political campaigns or in media outlets, interns are gaining experience, contacts, and references. However,

not everyone believes “experience” or connections are enough of a payout for weeks and months of labour. Over the past five years, former interns at Condé Nast, Harper’s Bazaar, Gawker Media, NBC Universal and Fox Searchlight have filed lawsuits against their employers, accusing them of exploitation.

Clearly, within contemporary capitalism, Millennials are getting screwed—and, as workers, they’re beginning to fight back.

Chart of the day

Posted: 17 November 2015 in Uncategorized
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The headline of this Gallup report points to the fact that the financial well-being of involuntary part-time U.S. workers (workers who are working part-time but seeking full-time work) is similar to the financial well-being of the unemployed: 46.3 as compared to 44.6. Large portions of both groups of workers are struggling or suffering in terms of their financial well-being.*

What I find perhaps even more interesting is that workers who are employed full-time by an employer only achieve a score of 60 on financial well-being (with workers who are employed part-time and do not want a full-time job just above them), which is very close to the financial well-being score for the United States as a whole in 2014: 59.7.

Together, these figures indicate that most U.S. workers—part-time and full-time, employed and unemployed—are falling far short of real financial well-being.

We can think of it as the gap between what they produce and what they receive. In another theoretical tradition, that’s measured in terms of another index: s/v. It’s called the rate of exploitation.

 

*To assess financial well-being, Gallup (with Healthways) asks U.S. adults about their ability to afford food and healthcare, whether they have enough money to do everything they want to do, whether they worried about money in the past week, and their perceptions of their standard of living compared with those they spend time with. Financial well-being is calculated on a scale of zero to 100, where zero represents the worst possible financial well-being and 100 represents the best possible financial well-being.

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Those of us in economics are confronted on a regular basis with the fantasy of perfect markets. It’s the idea, produced and presumed by neoclassical economists, that markets capture all the relevant costs and benefits of producing and exchanging commodities. Therefore, the conclusion is, if a market for something exists, it should be allowed to operate freely, and, if it doesn’t exist, it should be created. Then, when markets are allowed to flourish, the economy as a whole will reach a global optimum, what is often referred to as Pareto efficiency.

OK. Clearly, in the real world, that’s a silly proposition. And the idea of “market imperfections” is certainly catching on.

I’m thinking, for example, of Robert Shiller (who, along with George Akerlof, recently published Phishing for Phools: The Economics of Manipulation and Deception):

Don’t get us wrong: George and I are certainly free-market advocates. In fact, I have argued for years that we need more such markets, like futures markets for single-family home prices or occupational incomes, or markets that would enable us to trade claims on gross domestic product. I’ve written about these things in this column.

But, at the same time, we both believe that standard economic theory is typically overenthusiastic about unregulated free markets. It usually ignores the fact that, given normal human weaknesses, an unregulated competitive economy will inevitably spawn an immense amount of manipulation and deception.

And then there’s Robert Reich, who focuses on the upward redistributions going on every day, from the rest of us to the rich, that are hidden inside markets.

For example, Americans pay more for pharmaceuticals than do the citizens of any other developed nation.

That’s partly because it’s perfectly legal in the U.S. (but not in most other nations) for the makers of branded drugs to pay the makers of generic drugs to delay introducing cheaper unbranded equivalents, after patents on the brands have expired.

This costs you and me an estimated $3.5 billion a year – a hidden upward redistribution of our incomes to Pfizer, Merck, and other big proprietary drug companies, their executives, and major shareholders.

We also pay more for Internet service than do the inhabitants of any other developed nation.

The average cable bill in the United States rose 5 percent in 2012 (the latest year available), nearly triple the rate of inflation.

Why? Because 80 percent of us have no choice of Internet service provider, which allows them to charge us more.

Internet service here costs 3 and-a-half times more than it does in France, for example, where the typical customer can choose between 7 providers.

And U.S. cable companies are intent on keeping their monopoly.

And the list of such market imperfections could, of course, go on.

The problem, as I see it, is that these critics tend to focus on the sphere of markets and to forget about what is happening outside of markets, in the realm of production, where labor is performed and value is produced. The critics’ idea is that, if only we recognize the existence of widespread market imperfections, we can make the market system work better (and nudge people to achieve better outcomes). My concern is that, even if all markets work perfectly, a tiny group at the top who perform no labor still get to appropriate the surplus labor of those who do.

Accepting that our task is to make imperfect markets work better makes us all look like fools. In the end, it does nothing to eliminate that fundamental redistribution going on every day, “from the rest of us to the rich,” which is hidden outside the market.

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The distribution of income in the United States is increasingly unequal. We all know that. The problem is, the more we focus on the unequal distribution of income, the more we’re forced to discuss the issue of class.

And that’s a real problem for mainstream economists, who either deny the existence of inequality or deny its connection to class.

That’s the only way of explaining why Jason Furman repeats, in two recent papers (“Global Lessons for Inclusive Growth” [pdf] and, with Peter Orszag, “A Firm-Level Perspective on the Role of Rents in the Rise in Inequality [pdf]), the same argument:

Overall, the 9 percentage-point increase in the share of income of the top 1 percent in the World Top Income Database data from 1970 to 2010 is accounted for by: increased inequality within labor income (68 percent), increased inequality within capital income (32 percent), and a shift in income from labor to capital (0 percent).

In other words, for mainstream economists like Furman who actually do pay attention to rising inequality (e.g., as measured by the share of income going to the top 1 percent), it can’t have anything to do with class (e.g., as measured by changing labor and capital shares).

As it turns out, I’m presenting Marx’s critique of the so-called Trinity Formula in one of my courses this week.* Basically, Marx argued that, if the value of commodities is equal to constant capital plus variable capital plus surplus-value, then both the “profit share” (the “profits of enterprise” plus “interest”) and the “rental share” (“ground rent”) represent distributions of surplus-value. In other words, productive labor—not independent factor services—creates, via exploitation, the incomes of both capitalists and landlords.

Marx’s critique of the Trinity Formula is still relevant today because, even if we assume (as many mainstream economists still do, against all evidence) that wage and profit shares are relatively constant, it’s still possible to show that the rate of exploitation has risen.

Consider the following hypothetical chart:

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The blue and red boxes represent profits and wages in 1997 and 2007. However, as we can see, the share of income going to CEOs has risen (Furman’s “increased inequality within labor income”). If we combine profits and CEO salaries as different forms of surplus-value, then indeed it is possible for the rate of exploitation to have risen—even if the conventional measure of profit and wage shares remains the same.

In terms of actual national income data, what we’d want to do is add to corporate profits the distributions of the surplus that go to those at the top (including CEO salaries) in order to to get “capital’s share” and subtract those same distributions from wages to get “labor’s share.”

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As it turns out, Olivier Giovannoni [pdf] has made something like the latter calculation, by subtracting top 1 percent incomes from the total U.S. labor share. As we can see in the chart above, the real labor share in the United States has fallen dramatically since 1970—from about 77 percent to less than 60 percent—just as it has in Europe and Japan.

The only appropriate conclusion is that the increasingly unequal distribution of income in the United States has a lot to do with the diverging movements of the labor and capital shares, and therefore with class changes in the U.S. economy. And the only way to deal with that problem—that class problem—is not by increasing tax rates at the top or by raising minimum wages, but by eliminating the problem itself: the exploitation of labor by capital.

*For the uninitiated, the Trinity Formula is the classical idea that the “natural price” of commodities is equal to the summation of the natural rates of wages, profit, and rent, that is, the idea that the incomes of workers, capitalists, and landlords are independent of one another. The same idea was later articulated by neoclassical economists, who argue that each “factor of production” receives its marginal contribution to production.