Posts Tagged ‘jobs’

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Chris Dillow is right about one thing: citing globalization as the reason for the success of Donald Trump’s campaign, especially among working-class voters, “suits some people very well for foreigners to get the blame rather than for inequality and the health of capitalism to come under scrutiny.”

But that doesn’t mean that, alongside many other factors (from the decline in labor unions to increasing automation), globalization—to be precise, capitalist globalization—doesn’t deserve some good share of the blame.

There are two main ways the U.S. working-class is affected by globalization: in terms of jobs and in terms of consumption.

As far as jobs are concerned, the combination of cheap imports (e.g., toys and garments) and outsourcing (e.g., to produce motor vehicles and electronics) has led to the reallocation of workers away from high-wage manufacturing jobs into other sectors and occupations, with large declines in wages among workers who have been forced to have the freedom to switch. Those effects are pretty straightforward, at least in terms of the research of Avraham Ebenstein, Ann Harrison, and Margaret McMillan.*

What about the cheaper goods workers can buy? The argument that is usually invoked to counter the negative effects on jobs and wages is that workers can now purchase less expensive goods (e.g., at big-box and dollar stores), thereby increasing their consumption.

Here’s Dillow:

For one thing, cheap imports should help workers. If you’re spending $5 on a Chinese T-shirt rather than $10 on a US-made one, you’ve got $5 more to spend on other things. That should increase demand and jobs.

That may be true in the short run, since with the same nominal incomes workers can add other items to their consumption bundle.

But what Dillow and others miss is the fact that, as the prices of items in the wage bundle decline (and without an ability to defend the value of their customary standard of living), the value of workers’ labor power also has a tendency to decline. As a result, employers have to pay less to get access to laborers’ ability to work—and their profits rise.

Considering both jobs and consumption, members of the U.S. working-class—many of them voters in Pennsylvania, Ohio, Michigan, and Wisconsin—correctly understood they were under assault by the forces of globalization.

The fact that U.S. workers have, in recent decades, been negatively affected by globalization doesn’t mean either adopting a nationalist stance or ignoring all the other factors. Nationalism (e.g., in terms of erecting protectionist barriers to trade) just pits workers in one country against those in other countries and doesn’t, within any country including the United States, solve the problem of workers getting the short end of the economic stick. And, certainly, we need to look at all the causes of workers’ current plight, from deteriorating real minimum wages to skill- and power-biased technological change.

However, globalization as it is currently configured has been one of the strategies employers have been able to use to discipline and punish workers, increasing both inequality and insecurity.

Globalization is therefore at least in part to blame for Trump’s victory.

 

*Even those who, like Gary Clyde Hufbauer and Tyler Moran, want to argue that, through the “prosperity effect,” globalization has made a positive contribution to average wages, are forced to admit that “Richer households did enjoy a disproportionate share of benefits from globalization, because of their dominant claim on corporate profits and proprietors’ incomes and the very small impact of foreign competition on the wages of highly skilled workers.”

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Both Hillary Clinton and Donald Trump argue on the campaign trail that manufacturing is a source of good-paying jobs and the United States needs to do all it can to strengthen that sector.*

What both candidates ignored is the fact that the manufacturing now pays (and has since 2006 paid) lower wages than the average for the private sector as a whole (as readers can see in the chart above). In September, the average hourly wage for a nonsupervisory worker in manufacturing was $20.59, more than a dollar an hour less than for other workers in the private sector.

Employers may complain about a “talent shortage,” about not being able to find enough skilled workers to fill jobs, but they’re not willing to pay higher wages to attract those workers. The problem is, most factory jobs have been redefined as lower-level work.

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According to a recent report from the University of California-Berkeley Center for Labor Research and Education (pdf), a large number (34 percent) of the families of frontline manufacturing production workers are enrolled in one or more public safety net programs.

The high utilization of public safety net programs by frontline manufacturing production workers is primarily a result of low wages, rather than inadequate work hours. e families of 32 percent of all manufacturing production workers and 46 percent of those employed through staffing agencies who worked at least 35 hours a week and 45 weeks during the year were enrolled in one or more public safety net program.

Thus, between 2009 and 2013, the federal government and the states spent more than $10.2 billion per year on public safety-net programs for workers (and their families) who hold frontline manufacturing production jobs. (This includes workers directly hired by manufacturers and those hired through staffing agencies.)

As I have explained before, I hold no particular nostalgia for industry in the hinterlands of the U.S. economy.

Nor do American workers. They may be angry about their current plight but neither the current presidential candidates nor employers are willing to do what is necessary to create decent, well-paying jobs for the millions of people who have been laid off or who are currently forced to sell their ability to work to obtain precarious jobs at substandard wages.

Calls to restore the manufacturing sector to its former glory may do something for employers but they offer little in the way of real solutions to American workers.

 

*And Trump (but not Clinton) is criticized for ignoring the fact that the “nation’s manufacturing sector is actually booming.”

Loose Cannon

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In a recently leaked audio file (from a private fundraiser in February), Hillary Clinton referred to them as “children of the Great Recession. . .living in their parents’ basement,” who “feel they got their education and the jobs that are available to them are not at all what they envisioned for themselves. And they don’t see much of a future.”*

Well, as it turns out, the children of the Great Recession, especially those who completed college in recent years, were right: the jobs that have been available to them have not been at all what they envisioned for themselves.

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According to new research by Jaison R. Abel and Richard Deitz, unemployment among all workers, including college graduates, rose sharply during the Great Recession and continued to climb in the early stages of the recovery to levels not seen in decades.** It also increased dramatically for recent college graduates (whom the authors define as those with at least a bachelor’s degree who are 22 to 27 years old), doubling from about 3.5 percent before the recession to a peak of more than 7 percent in 2011. And even while unemployment among recent college graduates began to fall in late 2011, and to decline thereafter, it fell less steeply than for both college graduates as a whole and for all workers.

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But high rates of unemployment only reveal part of the plight of recent college graduates during the second Great Depression. Many of them also found themselves underemployed, that is, working in jobs that did not require a college degree. Not all of them were working as baristas, of course, but their underemployment rate has consistently held well above the rate for all college graduates (which, historically, has hovered at around one-third)—climbing well into 2014, rising to more than 46 percent, a level not seen since the early 1990s. As Abel and Deitz explain,

This divergence between falling unemployment and rising underemployment among recent college graduates between mid-2011 and mid-2014 suggests that more graduates were finding jobs during this time, just not necessarily good ones.

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The fact is, no matter how hard they tried, recent college graduates have had a difficult time finding jobs that met their degrees. That’s because, beginning in 2011, the demand for college jobs has fallen further and further behind postings for non-college jobs. According to the authors,

The steady growth of non-college jobs, coupled with the relatively soft demand for college graduates during this three-year period, appears to have forced many recent college graduates to take jobs not commensurate with their education. With the demand for college graduates rising again beginning in mid-2014, underemployment also started to come down. However, even with this modest improvement, 44.6 percent of college graduates—nearly one in two—found themselves underemployed in the early stages of their careers following the Great Recession.

What’s interesting is that recent college graduates, who were disappointed by the fewer and worse jobs they offered, for which they and their families had accumulated large amounts of student debt, did not choose the safe, mainstream option. They opted for a much-derided “idealism” and supported Sanders in much higher numbers than his self-identified “center-left/center-right” opponent.

For the last few decades, the value of a college degree has been economic and social dogma in the United States. Recent college graduates, who were forced to confront that dogma, were perhaps more prepared then to challenge other dogmas, including the political options presented by the American establishment.

 

*From Clinton’s perspective, underemployed Millennials’ support for Bernie Sanders betrayed “a deep desire to believe that we can have free college, free healthcare, that what we’ve done hasn’t gone far enough, and that we just need to, you know, go as far as, you know, Scandinavia, whatever that means, and half the people don’t know what that means, but it’s something that they deeply feel.”

**The charts from the Abel and Deitz research paper are updated on the Federal Reserve Bank of New York web site.