Posts Tagged ‘wages’

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Readers know the old adage: in this world nothing can be said to be certain, except death and taxes.

And, we should add, employers complaining they can’t find enough good workers.

The fact is, if workers were really scarce, their wages would be rising dramatically. That’s how things works in a capitalist labor market: employers who want to hire workers offer higher wages.

But, according to the latest report from the Bureau of Labor Statistics, average hourly earnings of private-sector production and nonsupervisory employees increased by 4 cents to $21.84—and weekly earnings by $1.34. That’s an annual rate of just 2.1 percent, the same as the rate of inflation.

Workers’ wages continue to increase at a very slow rate because the situation is exactly the opposite of what employers claim: workers are not scarce, they’re abundant.

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While the official unemployment rate (the red line in the chart above) was 4.8 percent in January, the expanded (or U6) rate—which includes marginally attached workers and those who are employed part-time but prefer full-time jobs (the green line in the chart)—was a much higher 9.4 percent.

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Meanwhile, the civilian employment-population rate (the ratio of total civilian employment to the civilian noninstitutional population or, more simply, the portion of the adult population 16 years and older that is employed) was still below 60 percent—and thus far less than its pre-crash peak (in December 2006) of 63.4 percent.

There are in fact plenty of potential workers out there—in the labor force and in the larger working-age population. But employers would rather complain than pay higher wages to hire them.

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It sure looks like a recovery: consumer confidence, corporate profits, and the stock market are all up. Way up over their Great Recession lows, as is clear from the chart above.

But the U.S. Conference of Mayors [ht: ja] is also reporting an increase in the demand for emergency food assistance. Forty-one percent of surveyed cities reported that the number of requests for emergency food assistance increased over the past year, while 71 percent of the cities reported an increase in the number of people requesting food assistance for the first time.

From the report (pdf):

Increased requests for food assistance were accompanied by more frequent visits to food pantries and emergency kitchens. Forty-one percent reported an increase in the frequency of visits to food pantries and/or emergency kitchens each month. . .

When asked to identify the three main causes of hunger in their cities, 88 percent named low wages; also 59 percent said high housing costs and poverty. Forty-one percent cited unemployment and 23 cited medical or health costs.

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Since the end of the recession, wage increases (almost 23 percent, in nominal terms) have not been able to keep pace with the increase in rental rates for housing (which are up 26 percent).

And the situation is even worse for extremely low-income households, according to the National Housing Trust Fund (pdf). The more than 10 million extremely low-income households accounted for 24 percent of all renter households and 9 percent of all U.S. households—and they face a shortage of more than 7 million affordable rental units. Thus, 75 percent of extremely low-income households are severely cost-burdened, spending more than half of their income on rent and utilities. And that means they don’t have enough money left over for food.

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Which is why cities across the country, from Charleston to Seattle, have had to increase the amount of food they distribute—7 years into the so-called recovery.

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When it comes to artificial intelligence and automation, the current White House seems to want to have it both ways.

On one hand, it warns about the potentially unequalizing, “winner-take-most” effects of the economic use of artificial intelligence:

Research consistently finds that the jobs that are threatened by automation are highly concentrated among lower-paid, lower-skilled, and less-educated workers. This means that automation will continue to put downward pressure on demand for this group, putting downward pressure on wages and upward pressure on inequality. In the longer-run, there may be different or larger effects. One possibility is superstar-biased technological change, where the benefits of technology accrue to an even smaller portion of society than just highly-skilled workers. The winner-take-most nature of information technology markets means that only a few may come to dominate markets. If labor productivity increases do not translate into wage increases, then the large economic gains brought about by AI could accrue to a select few. Instead of broadly shared prosperity for workers and consumers, this might push towards reduced competition and increased wealth inequality.

But then it invokes, and repeats numerous times across the report, the usual mainstream economists’ nostrums about the “strong relationship between productivity and wages”—such that “with more AI the most plausible outcome will be a combination of higher wages and more opportunities for leisure for a wide range of workers.”

Except, of course, historically that has not been the case—certainly not in the United States.

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For example, from the early 1970s to the present, workers’ wages have not kept pace with increases in productivity. Not by a long shot. As is clear from the chart above, productivity since 1973 has risen much more than workers’ compensation—72.2 percent, compared to a paltry 9.2 percent.

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And while over the same period hours worked have in fact fallen, the decrease in the United States (a minuscule 5.6 percent) has been far less than the increase in productivity—and much less than in other countries, such as France (24 percent) and Germany (27.3 percent).

So, yes, whether the use of artificial intelligence leads to improvements for U.S. workers—in the form of higher wages and fewer hours worked—”depends not only on the technology itself but also on the institutions and policies that are in place.”

But the experience of the past four decades suggests it will not benefit the American working-class.

And there’s nothing to suggest that trend won’t continue—unless, of course, there is a radical change in economic institutions and policies, which allow workers to have much more of a say in the technologies that are adopted and how wages and hours are set.

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We all know that the recovery since the Great Recession has been highly skewed. But has it hurt whites more than blacks and Hispanics, thereby explaining Donald Trump’s victory in the presidential election?

That’s the story being told by Eduardo Porter (here and here), relying on data from the Economic Cycle Research Institute (pdf). Their basic argument is that, of the millions of net new jobs created since the pre-recession highwater mark of November 2007, most of them went to black and Hispanic (and Asian) workers, not to white workers (who make up the majority of the workforce).

The numbers are correct—but their analysis is seriously incomplete.

According to the numbers that serve as the basis of ECRI analysis (and which are represented in the chart above), about 5.5 million more workers are employed now compared to nine years ago (the purple line)—including 4.9 million more Hispanic (green line) and 2.3 million more African American (blue line) workers but 722 thousand fewer white (red line) workers.*

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It comes as no surprise that those different job trajectories are reflected in the different trajectories of the employment-population ratio. Whereas the overall ratio and the ratio for whites have barely changed (at 59 and 60 percent, respectively) since the recession ended, the other ratios have in fact changed—rising for both Hispanics (from 59.3 to 62.2) and blacks (from 52.9 to 56.6).

So, there are differences in job growth, a large part of which can be accounted for by different regional growth patterns (large cities vs. small towns and rural areas), sectoral shifts (services vs. industrial production), and demographic profiles (both the proportion of the working-age population and retirement rates).

However, in every other way, the different groups within the American working-class have moved in tandem.

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For example, the labor-force-participation rate has declined over the past nine years—in general and for each subgroup, white, black, and Hispanic—and remains now just above record lows.

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Unemployment rates have also moved in the same direction—first rising dramatically after the crash and then falling during the recovery (but still remaining above what they were before the crash).

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Meanwhile, workers’ wages have barely budged—overall and for whites, blacks, and Hispanics—between the fourth quarter of 2007 and the third quarter of 2016.

The folks at the Center for Economic and Policy Research get it:

Porter is right in seeing support for Trump as being to a substantial extent a response to bad economic prospects. But the economic prospects of working class whites in the last decade were not notably worse than the prospects of working class blacks.

And, I would add, all the other groups that make up the American working-class.

The fact is, all members of the working-class—white, black, and Hispanic—have been victimized during the Second Great Depression. As I have shown elsewhere (e.g., here and here), as a class, they’ve fallen further and further behind the tiny group of employers and wealthy individuals at the top. That’s the real skewed nature of the economic recovery.

As I see it, the difference in their political allegiances and voting patterns cannot then be explained by white workers losing out to black and Hispanic workers. It’s due, instead, to the fact that one group that has been left behind (working-class whites) threw in their lot with one candidate (right-wing,  white-nationalist Trump)—while other members of the working-class (blacks and Hispanics), who have been equally left behind, simply could not.

And, soon, all of them will discover Trump’s promises were no more than dog-whistle politics and his economic program will leave them even further behind.

 

*The numbers don’t sum correctly (even without including Asian workers) because white Hispanics may be double-counted as both white and Hispanic, and black Hispanics may be double-counted as both black and Hispanic.