Posts Tagged ‘labor force’

employment-incomes

U.S. capitalism has a real problem: there don’t seem to be enough workers to keep the economy growing.

And it has another problem: capitalists themselves are to blame for the missing workers.

As is clear from the chart above, the employment-population ratio (the blue line) has collapsed from a high of 64.4 in 2000 to 59 in 2014 (and had risen to only 60.1 by the end of 2017).* During the same period, the average real incomes of the bottom 90 percent of Americans have stagnated—barely increasing from $37,541 to $37,886.

That should be indicator that the problem is on the demand side, that employers’ demand for workers’ labor power has decreased, and not the supply side, that workers are choosing to drop out of the labor force.

But, as I explained back in 2015, that hasn’t stopped mainstream economists from blaming workers themselves—especially women and young people, for being unwilling to work and turning instead to public assistance programs and raising children and being distracted by social media and digital technologies, as well as Baby-Boomers, who are choosing to retire instead of continuing to work.

So, which is it?

Katharine G. Abraham and Melissa S. Kearney have just completed a study in which they review the available evidence and their conclusion could not be clearer:

labor demand factors, in particular trade and the penetration of robots into the labor market, are the most important drivers of observed within-group declines in employment.

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Over the course of the past two decades, U.S. capitalists have decided both to increase trade with China (through outsourcing jobs and importing commodities) and to replace workers with robots and other forms of automation (it is estimated that each robot installed displaces something on the order of 5-6 workers).

That’s the main reason the employment-population ratio has declined so precipitously and that workers’ wages have stagnated in recent years.

Clearly, U.S. capitalists have been remarkably successful at increasing their profits. But they have just as spectacularly failed the vast majority of people who continue to be forced to have the freedom to work for them.

 

*The Bureau of Labor Statistics defines the employment-population ratio as the ratio of total civilian employment to the 16-and-over civilian noninstitutional population. Simply put, it is the portion of the population that is employed. Thus, for example, in 2000, the total number of civilian employees in the United States was 136.9 million and the figure for the civilian noninstitutional population was 212.6 million. By 2014, the civilian noninstitutional population had grown to 247.9 million but the total number of workers had risen to only 146.3 million. The employment-population ratio differs from both the unemployment rate (the number of unemployed divided by the civilian labor force) and the labor force participation rate (the share of the 16-and-over civilian noninstitutional population either working or looking for work).

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The new jobs report is out and, pretty much as expected, a bunch of new jobs (242,000, to be exact) were created in February and the official unemployment rate remained the same (at 4.9 percent). But workers’ wages actually declined.

What’s going on?

What’s going on is a key feature of capitalism: the reserve army of labor.

As Ben Casselman explains,

There is one downside to a growing labor force: If more people start looking for work there will be more competition for available jobs, holding down wages. Average hourly earnings fell by three cents in February, and the year-over-year rate of growth dropped to 2.2 percent, the slowest pace since last summer.

The fact is, the Second Great Depression created a large pool of potential workers who haven’t formally been part of the labor force but who would be willing to work—to take a job or search for a job—under the right circumstances. In the meantime, while they’re not part of the official labor force, these people do lots of things: they work at home, they work with and for their friends and neighbors, and they engage in a variety of other activities (both legal and illegal). They form part of capitalism’s relative surplus population.

Their existence—as potential members of the official labor force, first-time members of the labor force, or as reentrants to the labor force—puts downward pressure on all workers’ wages.

That’s how the reserve army of labor works: even as the labor force participation rate rises, workers’ wages continue to stagnate and their employers’ profits continue to grow.

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