Posts Tagged ‘unemployment’

wsj Reuters

We really need to go beyond the headlines to make sense of today’s jobs report.

The headlines are replete with “full health” and “strong” gains (in the Wall Street Journal and Reuters, respectively), based on total nonfarm payroll employment rising by 257,000 in January. But the report itself reveals not much has changed: not the official unemployment rate (5.7 percent), the number of unemployed workers (9 million), the jobless rates for different demographic groups (adult men, adult women, whites, blacks, Asians, and Hispanics), the number of long-term unemployed workers (2.8 million), and so on.

In fact, some numbers have gotten even worse—for example, the unemployment rate for teenagers (up to 18.8 percent) and the U6 unemployment rate (up to 11.3 percent).

About the only positive news is the rise in hourly earnings:

In January, average hourly earnings for all employees on private nonfarm payrolls increased by 12 cents to $24.75, following a decrease of 5 cents in December. Over the year, average hourly earnings have risen by 2.2 percent. In January, average hourly earnings of private-sector production and nonsupervisory employees increased by 7 cents to $20.80.

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Even then, from a bit longer view, there’s not much to cheer at all: average hourly earnings continue to limp along at an annual growth rate of about 2 percent, far below previous increases and much below the growth in productivity.

Looking beyond the headlines, one thing then is clear: there’s been very little recovery for the majority of people more than five years after the official end of the Great Recession.

Class War by Other Means

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Greece has gone from tragedy to triumph—from the tragedy of austerity-induced suicides to the triumph of the anti-austerity landslide victory of Syriza.

So, before we get lost in the media hysteria of “radical leftists,” “firebrand” leaders, and jittery international financial markets, let’s be clear about what Greek voters rejected on Sunday.

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Greek workers rejected an austerity program that has led to a decline of more than 25 percent in Gross Domestic Product since 2007.

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They rejected an austerity program that cut government spending by almost 40 percent since 2009.

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They rejected an austerity program that led to a dramatic rise in unemployment—to 29 percent.

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They rejected an austerity program that led to a dramatic rise in unemployment among young people—to over 60 percent.

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And they rejected an austerity program that, in just one year (2013), led to a decline in real wages of 6 percent.

In other words, in decisively rejecting the austerity program, Greek voters have found a way to move beyond tragedy and to give an enormous electoral triumph to Syriza.

 

Naomi Klein, in her book The Shock Doctrine, made us all aware of disaster capitalism—”the rapid-fire corporate reengineering of societies still reeling from shock”—which has occurred across the world, from Pinochet’s Chile to post-Katrina New Orleans.

But what about examples of people creating practices and institutions other than capitalism in societies that are reeling from shock, what we might call disaster noncapitalism?

We certainly saw many examples during the First Great Depression in the United States, of which King Vidor’s long-overlooked film is the best cinematic account.

More recently, beginning in 2000, Argentine workers recuperated more than 180 enterprises, thus creating thousands of jobs, forming a broad network of mutual support among the worker-run workplaces, and generating many community projects.

And now, of course, we have Greece’s solidarity movement, which unfortunately has received much less attention in the run-up to Sunday’s election than the fears stoked by those who want us to believe continued austerity is the only option.

Yes, Greece is a dramatic example of at least some aspects of disaster capitalism, the way a country can be pummeled into submission in order to maintain the privileges of a tiny minority at home and abroad. But it’s also an example of its opposite—of how people are willing to band together, in the worst of circumstances (with soaring unemployment, declining wages, and Draconian cuts to government services), to invent new kinds of economic institutions.

The Peristeri health centre is one of 40 that have sprung up around Greece since the end of mass anti-austerity protests in 2011. Using donated drugs – state medicine reimbursements have been slashed by half, so even patients with insurance are now paying 70% more for their drugs – and medical equipment (Peristeri’s ultrasound scanner came from a German aid group, its children’s vaccines from France), the 16 clinics in the Greater Athens area alone treat more than 30,000 patients a month.

The clinics in turn are part of a far larger and avowedly political movement of well over 400 citizen-run groups – food solidarity centres, social kitchens, cooperatives, “without middlemen” distribution networks for fresh produce, legal aid hubs, education classes – that has emerged in response to the near-collapse of Greece’s welfare state, and has more than doubled in size in the past three years.

“Because in the end, you know,” said Christos Giovanopoulos in the scruffy, poster-strewn seventh-floor central Athens offices of Solidarity for All, which provides logistical and administrative support to the movement, “politics comes down to individual people’s stories. Does this family have enough to eat? Has this child got the right book he needs for school? Are this couple about to be evicted?”

As well as helping people in difficulty, Giovanopoulos said, Greece’s solidarity movement was fostering “almost a different sense of what politics should be – a politics from the bottom up, that starts with real people’s needs. It’s a practical critique of the empty, top-down, representational politics our traditional parties practise. It’s kind of a whole new model, actually. And it’s working.”

The many successes of disaster noncapitalism in Greece are one of the reasons Syriza has a good chance of winning tomorrow’s election.

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Will market forces solve the problem of stagnant wages and growing inequality?

Mark Thoma says no.

The idea that an improving economy will overcome the problem of stagnating real wages and rising inequality that has existed for decades is suspect. Why should this time be any different from the past? Sure, improvements in labor demand relative to supply could make some difference, and a tight labor market is certainly better for the working class than a labor market will high levels of unemployment and a large number of discouraged workers, but should we suddenly expect workers to receive a higher share of national income – income that has increasingly flowed to those at the very top of the income distribution – once we reach full employment?

The data in the chart above appear to confirm Thoma’s review. Yes, there are moments (such as in 1969 and 2000) when a low unemployment rate gave a boost—however temporary—to the share of national income going to labor. However, as a general trend, the wage share has been falling from 1970 onward (from 51.5 percent then to less than 42 percent today) across many periods of both high and low unemployment.

Today, even as the official unemployment rate continues to decrease, the falling wage share—and, with it, an increasingly unequal distribution of income—shows no sign of abating.

Hence Thoma’s reasonable conclusion:

So long as we continue to believe that market forces and the attainment of full employment will solve the problem of stagnating wages and rising inequality. . .inequality will continue to be a problem.

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rigid wages

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Mainstream economists continued to be mystified by the fact that, even as the official unemployment rate has decreased, workers continue to get the same wages as before. That is, nominal wages for many workers in the United States simply aren’t increasing—that is, they are “upwardly rigid.”

The question is, why? The best mainstream economists (like Mary C. Daly and Bart Hobijn) can come up with is “pent-up wage cuts.”

Downward rigidities prevent businesses from reducing wages as much as they would like following a negative shock to the economy. This keeps wages from falling, but it also further reduces the demand for workers, contributing to the rise in unemployment. Accordingly, the higher wages come with more unemployment than would occur if wages were flexible and could be fully reduced.

As the economy recovers, the situation reverses and the pressure to cut wages dissipates. However, the accumulated stockpile of pent-up wage cuts remains and must be worked off to put the labor market back in balance. In response, businesses hold back wage increases and wait for inflation and productivity growth to bring wages closer to their desired level. Since it takes some time to fully exhaust the pool of wage cuts, wage growth remains low even as the economy expands and the unemployment rate declines.

Ah, if only the labor market were like the market for oranges!

The fact is, during the downturn, employers respond to slack demand not by lowering nominal wages (hence the “downward rigidities” mainstream economists so deplore), but by firing workers, replacing full-time workers with part-time workers, and increasing productivity (which mainstream economists can only celebrate). The result is a growth in the Industrial Reserve Army (as we can see in the dramatic growth in, and the still-elevated level of, the so-called U6 unemployment rate).**

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That pool of unemployed and underemployed workers (plus the availability of workers abroad, in China and elsewhere, together with the low level of unionization and the introduction of new, labor-displacing technologies) serves to regulate the level of wages: keeping nominal wages from rising even as economic growth picks up. In other words, employers don’t need to increase wages, either to keep their existing workers or to hire new ones. There are so many members of the Reserve Army of Unemployed and Underemployed workers willing to take whatever jobs are available that employers simply don’t need to increase wages.

That’s where the blame should be placed—not on”pent-up wage cuts,” but on employers who are unwilling to increase wages, even as their profits reach new record highs.

 

*This is a histogram of reported wage changes over the past year for U.S. workers who have not changed jobs throughout the year. This histogram (calculated by the Federal Reserve Board of San Francisco) is overlaid with a normal distribution centered at the median reported wage change.

**The U6 unemployment rate counts not only people without work seeking full-time employment (the more familiar U3 rate), but also counts “marginally attached workers and those working part-time for economic reasons.”