Posts Tagged ‘labor’

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Special mention

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The Federal Reserve Bank of Atlanta has confirmed what many of us have suspected for a long time: job tenure is declining not just for millenials, but for workers of all wages.

What we see in this chart—using the 20- to 30-year-olds, for example—is that the median job tenure was four years among those born in 1953 (baby boomers) when they were between 20 and 30 years old. For 20- to 30-year-olds born in 1993 (millennials), however, median job tenure is only one year. Similar—and some even more dramatic—declines occur across cohorts within each age group.

Declining job tenure is not just all about millennials having short attention spans. In fact, there is a greater (five-year) decline in median job tenure between 41- and 50-year-old “Depression babies” (born in 1933) and 41- to 50-year-old GenXers (born in 1973).

The authors of the report dispute the attention-span explanation for declining job tenure. But then they go on to paint a rosy picture of what this means—for workers (“a world of possibilities that our parents and grandparents never dreamt of”!) and for the economy as a whole (“the flexibility of workers seeking their highest rents and the flexibility of firms to seek better matches for their needed skills mean greater productivity—not to mention growth—all around”).

What the authors fail to mention is that declining job tenure across the board means much higher corporate profits (since employers can hire and shed workers more easily) and a lot more work for workers (since they have to spend more time and energy making themselves “attractive” to employers and figuring out how they’re going to survive between jobs).

Declining job tenure—what mainstream economists refer to as “flexible” labor markets—is the natural outcome of the commodification of labor power. The only solution to the problem, then, is to treat people’s ability to work as something other than a commodity. Then, we would have real flexibility in our work and in the rest of our lives.

AusteritySurvivalGuide

There is something fundamentally unstable—and ultimately dangerous—about the liberal critique of austerity.

Consider the recent essay on “The Economic Consequences of Austerity” by Amartya Sen. On one hand, he correctly criticizes the austerity effects associated with the deficit-cutting measures that have been imposed in Western Europe in the years following the crash of 2007-08 (and reminds readers of Keynes’s critique of the austerity measures the Allied Powers were threatening to impose on Germany in the Treaty of Versailles).

But then Sen accepts, without any further argument, the need for “real institutional reform” in Europe: “from the avoidance of tax evasion and the fixing of more reasonable retiring ages to sensible working hours and the elimination of institutional rigidities, including those in the labour markets.”

In other words, Sen is attempting to distinguish between the “antibiotic” of institutional reform and the “rat poison” of austerity.

The instability of Sen’s formulation stems from the fact that he wants to reject one part of the conservative austerity agenda (dismantling some state programs) while accepting the other (making markets, especially labor markets, more “flexible”). The danger arises because Sen takes as a common sense, without need for any kind of extended argument, that one group of workers should be protected (in the form of pensions of those who have retired) while further costs should be imposed on the other part of the working-class (by raising the age of retirement and creating more “flexible” labor markets for those still working).

Ultimately, it’s Sen’s nostalgia for a time that, in his view, was characterized by “good public services and a flourishing market economy” that leads him to such an unstable and, in my view, dangerous set of propositions. Better, it seems to me, to recognize that that period of public-private exceptionalism has come and gone, undone by the common sense that capitalist growth needs to be preserved at all costs—and to reject not only the rat poison of austerity, but also what Sen and other liberals consider to be the antibiotic of imposing further costs on European workers.

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Tyler Cowen has made a bit of a splash with his argument that, here in the United States, we’re probably in the midst of an economic “reset.”

What does Cowen mean? Essentially, his argument is that economic growth may continue at relatively low levels for the foreseeable future (in contrast to the higher rates of growth following on other postwar recessions), that low and stagnant wages will likely continue (his examples are lower salaries of adjunct faculty, two-tier wage systems in manufacturing, and lower wages for college graduates), and there’s probably not much government policy can do to avoid this “grimmer future.”

In this, Cowen is basically echoing the concerns expressed by others, in the form of the “new normal” (associated with, among others, PIMCO boss Mohamed El-Erian) and “secular stagnation” (which Larry Summers [pdf], among others, has been arguing).

My view, for what it’s worth, is Cowen is both right and wrong. He’s right in the sense that we have witnessed, and will likely continue to experience, a relatively slow recovery from the crash of 2007-08. That’s why I continue to refer to our current situation as a Second Great Depression. And, as we have seen, what recovery there has been during the past six years has mostly benefited those at the very top. The rest of the population has already been forced to “reset” their expectations in terms of stagnant wages and salaries.

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But Cowen is also wrong, in the sense that he’s only focused on the last few years. His view is that recent rates of economic growth have been relatively low (by postwar standards), and that trend may continue into the future (thereby requiring those at the bottom to revise their expectations downward). What he misses is the fact that a fundamental “reset” of the U.S. economy has been taking place for much longer, since at least the mid-1970s. Since then, we’ve seen the profit share growing and the labor share declining—a long-term trend that has only been exacerbated since the crash of 2008-08.

Or, if you want a different sort of evidence, consider taking a look at George Packer’s magnificent book, The Unwinding: An Inner History of the New America. Using fascinating profiles of several Americans (and a dos Passos-like sprinkling of alarming headlines, news bites, song lyrics, and slogans), Packer offers an epic retelling of American history from 1978 to 2012—of a shrinking middle-class and an economy that has lost its ability to offer any significant hope for recovery for the majority of the population.

It’s that unwinding—which we’ve been living through for almost four decades now but which Cowen and others miss—that is going to require a fundamental “reset” of our economic system.

matt wuerker

graduation-selfie Tremors

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The headline, “Labor vs. Capital,” is not mine; it’s the Wall Street Journal’s. And the argument is,

For decades, labor’s share of American national income has shrunk while the share that goes to profits has expanded.

There are now tantalizing signs that labor may finally be gaining ground on capital.

Workers in the first quarter of the year recorded their biggest annual gain in pay since 2008, evidence that a steady decline in unemployment is finally having an effect on paychecks.

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That’s because, according to latest numbers from the Bureau of Labor Statistics [pdf], the wage and salary portion of the employment cost index increased by 0.7 percent during the first quarter of 2015 and 2.6 percent for the 12-month period ending March 2015 (as one can see in the chart above), which was higher than the 1.6-percent increase in March 2014.

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But we have to remember that workers’ share of income has been declining for decades, which means that a big chunk of the growth that has occurred during that period has gone to profits, shareholders, and a tiny group at the top of the distribution of income.

It’s going to take much more than a 2.6-percentage annual rise in the wage and salary component of the employment cost index—even if sustained for many years—for workers to really gain ground on capital.

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