Posts Tagged ‘wages’

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All three remaining presidential candidates—Donald Trump, Hillary Clinton, and Bernie Sanders—have decried the loss of manufacturing jobs in the United States and have promised, in one way or another, to bring those jobs back.

However, as readers know, I hold no nostalgia for industry or for the supposedly good manufacturing jobs that were the mainstay of the American Dream in the postwar period.

to the extent that manufacturing jobs were “good jobs” (and, in my view, we do need to dispute that idea that they really were “good jobs”), it wasn’t because workers produced real, tangible goods; it’s because the workers were unionized and were able (with the aid of higher real minimum wages, better-financed government supervision of worker safety, and so on) to bargain over their pay and working conditions. They aren’t able to do that now in most of the private-sector service-producing industries. In other words, it’s not what workers produce but under what conditions they produce.

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I continue to believe we need to puncture the myth that all those manufacturing jobs were good jobs. We also need to look at what’s happened with those jobs in recent decades. As you can see from the chart above, while U.S. manufacturing wages (for production and nonsupervisory workers) were higher than the hourly wages for all private-sector workers until a decade ago, they’re now less (by more than a dollar an hour). That’s why, as the National Employment Law Project (pdf) has shown, manufacturing production wages now rank in the bottom half of all jobs in the United States.*

So, Ben Casselman is right:

For all of the glow that surrounds manufacturing jobs in political rhetoric, there is nothing inherently special about them. Some pay well; others don’t. They are not immune from the forces that have led to slow wage growth in other sectors of the economy. When politicians pledge to protect manufacturing jobs, they really mean a certain kind of job: well-paid, long-lasting, with opportunities for advancement.

The problem is, we’re not seeing those kinds of decently paid, secure jobs anywhere across the landscape of the U.S. economy—in manufacturing, services, or anywhere else.

The precipitous decline in unions is one part of the explanation. At a more general level, however, at least as significant (even when unions were stronger) is the fact that workers have little say in the main institutions governing the economy—in the enterprises where they work, the communities in which they live, and the governments they vote for and to which they pay taxes.

Until that changes—until workers are able to participate in making key decisions about their lives and livelihoods—the promise of creating more jobs in one sector or another is merely a pipe dream that is being manufactured to keep things just as they are.

 

*However, while many analysts overlook this, it is still the case that weekly earnings for manufacturing workers (the red line in the chart below) remain higher than those for other workers in the private sector (the blue line):

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Everyone knows that most of the jobs created during the so-called recovery are not particularly good. Most of them are for very low pay and offer few if any benefits.

Not so, according to the Wall Street Journal:

were all the jobs we created since the recession bad? Well, yes and no. It’s true that many low-wage industries have been growing, many middle-wage industries have shrunk, and more people work part time or for minimum wage than did a decade ago. But it’s also true many middle- and high-wage industries are growing too, and the number of minimum wage and part-time workers has gradually been declining over the past five years.

Well, let’s see, according to the data they themselves provide. But let’s do it not in terms of percentage increases (because, obviously, a high percentage increase on a small basis doesn’t generate a lot of jobs) but, instead, in terms of the total number of employees (in the private sector).

Here’s what we end up with for the top ten economic sub-sectors:

 

Consider that the average weekly pay (in April 2016) for all private-sector workers was $880.79.

Obviously, then, the two largest sub-sectors, in which there has been double-digit growth since December 2007, are Leisure and Hospitality and Food Services and Drinking Places. both of which have weekly earnings less than half the average for the entire private sector. You can add to that pattern of low-wage growth Employment Services and Food and Beverage Stores.

Meanwhile, three sectors that have traditionally paid middle-class wages—Construction, Speciality Trade Contractors, and Durable Goods—have seen declines in the number of jobs since the crash.

So, what are we left with? Hospitals, whose average is inflated by high-earning physicians and managers, which has seen job growth, and Credit Intermediation and Related Activities, which also has a high average, raised by well-compensated brokers and managers, which has actually seen a decline in the total number of jobs.*

The only possible conclusion is, that’s not a mixed picture. The current recovery can only be characterized as follows: the creation of plenty of low-wage jobs, the destruction of many formerly middle-income jobs, and an increase in jobs in one sector characterized by obscene levels of inequality.

Needless to say, workers are justifiably angry about the so-called economic recovery. Therefore, like the crew of the fabled ship, they’d have every right to hang a metaphorical albatross around the necks of the real-life descendants of the Ancyent Marinere.

 

*That just leaves Membership Associations and Organizations—and I have no idea what that is.

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Over the course of the next month, millions of high-school and college students will be graduating. And, to judge by the circumstances of other young workers these days, the world that awaits them is pretty dismal.

It’s not their fault. They may be gifted and full of energy but the economic stars are aligned against them. Capitalism is failing them.

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Consider high-school graduates. According to the Economic Policy Institute, the official unemployment rate is 17.9 percent (compared to an overall rate of 5 percent)—and the underemployment rate (which combines official unemployment with workers who would like a full-time job but can only find part-time work and those who are so discouraged they’ve given up even looking for work) is an extraordinary 33.7 percent.

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Even college graduates, whose official unemployment rate is much lower (at 5.6 percent), face a very high underemployment rate (of 12.6 percent). That’s 1 in 8. And that doesn’t even take into consideration college graduates who are forced to have the freedom to take  jobs that don’t even require a college degree (e.g., the young college graduate working as a data-entry clerk).

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And there’s the issue of wages if and when they find a job. The real hourly wages for high-school graduates—both young and overall—are no higher today (at $10.66 and $17.11, respectively) than they were at the beginning of 2000 (when they earned $10.86 and $17.01).

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Again, college graduates are better off than workers with a high-school degree. But their wages, too, have been stagnant for the past decade and a half. Young college graduates today can expect to earn, on average, about $18.53 an hour today compared to $18.39 in early 2000; while all workers with a bachelor’s degree receive $31.40 an hour today, which is only slightly higher than in 2000 (when it was $29.39).

The usual argument one hears is that young people should be encouraged to go to college, after which they’ll face lower unemployment and receive higher wages.

That’s fine. I’m all in favor of increasing the chances and lowering the barriers for young people to study in the nation’s colleges and universities. But for young people, no matter how much education they’ve managed to obtain, current economic arrangements are failing them.

The members of the Class of 2016, no matter how gifted, have every right to be worried about what’s next.

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More than 7 years into the current recovery and all the talk is about the number of jobs created, the falling unemployment rate, and the prospect that workers’ wages are set to finally increase on a sustained basis. Problem solved!

But what about the 1 in 6 American workers who were let go during the Great Recession, victims of the 40 million layoffs and other involuntary discharges during the official downturn that began in December 2007 and ended in June 2009? Not to mention the fact that nearly 14 million people are still searching for a job or stuck in part-time jobs because they can’t find full-time work.

As the Wall Street Journal reports,

Even for the millions of Americans back at work, the effects of losing a job will linger. . .They will earn less for years to come. They will be less likely to own a home. Many will struggle with psychological problems. Their children will perform worse in school and may earn less in their own jobs. . .

Only about one in four displaced workers gets back to pre-layoff earning levels after five years. . .A pay gap persists, even decades later, between workers who experienced a period of unemployment and similar workers who avoided a layoff. Estimates vary, but by one analysis, people who lost a job during recessions made 15% to 20% less than their nondisplaced peers after 10 to 20 years.

And that’s just the tip of the iceberg. Workers who lost their incomes or received lower incomes if and when they found a new job have found it difficult to save and make purchases (and, in many cases, had to dip into what savings they had), own a home, send their children to college, and pay for healthcare.

Losing a job, of course, has more than just financial consequences for workers and their families.

Unemployment often is an isolating experience. A layoff can strip people of their identity as workers in a chosen field and their workplace-based social network of co-workers and other contacts. Researchers have linked job loss to stress, depression and feelings of distrust, anxiety and shame.

Alarming trends that emerged after the end of the 1990s economic boom may have been amplified by the latest recession. The death rate for middle-aged whites has been rising as a result of suicides, substance abuse and liver diseases, all potentially products of economic distress, according to research by economists Anne Case and Angus Deaton.

Data spanning the recession years show a link between high unemployment and increased abuse of painkillers and hallucinogens. The U.S. suicide rate climbed 24% between 1999 and 2014, a rise that accelerated after 2006, according to the Centers for Disease Control and Prevention. One study of Pennsylvania men who lost long-held jobs during the early 1980s found a spike in mortality following a layoff, with middle-aged men set to lose a year to 18 months off their lifespans.

Researchers have found that the children of people who lose their jobs perform worse on school tests and are more likely to repeat a grade. A father’s layoff is linked with a substantially higher likelihood of anxiety and depression in his children. In one study, the sons of men who were displaced from their jobs earned salaries that were 9% lower compared with otherwise similar children whose fathers had stayed employed.

And the list goes on.

What no one in charge seems to want to talk about is the fact that the economic trauma of the Second Great Depression “has left financial and psychic scars on many Americans, and that those marks are likely to endure for decades”—thus scarring not just millions of individuals and their families, but all of American society.

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If you look very closely, you’ll see an ever-so-slight turnaround in the capital and labor shares in the past year.

The profit share of national income has fallen (from 15.4 percent in the second quarter to 13.7 percent in the last quarter of 2015) while the wage share has risen (from 49.6 percent in 2014 to 50.4 percent in 2015).

So, Neil Irwin is correct:

In the last two or three years, as the economy has firmed up, workers have regained some of that bargaining power they lost in the recession. But they have not, not at this point at least, gained the power they lost over the last three decades.

Indeed, the profit share remains much higher than it was 30 years ago (6.8 percent in the third quarter of 1986) and the wage share much lower (it was 54.6 percent in 1986).

Remember, then, before releasing those balloons, the history of capitalist instability. It tells us that an economic downturn will—once again, with a regularity that continues to escape the notice or understanding of mainstream economists and politicians—reverse those temporary capital losses and labor gains.

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No doubt, author Neal Gabler [ht: ja] has a pretty nice pot to piss in. But he doesn’t have enough money to pay for a $400 emergency.

That puts him in the same situation as 47 percent of Americans who, according to the most recent Board of Governors of the Federal Reserve System’s “Report on the Economic Well-Being of U.S. Households” (pdf), “say they either could not cover an emergency expense costing $400, or would cover it by selling something or borrowing money.”

And there’s more:

  • Thirty-one percent of respondents report going without some form of medical care in the 12 months before the survey because they could not afford it.
  • Just under one-quarter of respondents indicate that they or a family member living with them experienced some form of financial hardship in the year prior to the survey.

It’s not that Gabler and almost half of all Americans are poor. But they’re stretched to (and, for many, beyond) the limit and find themselves in a situation of financial fragility.

They wouldn’t be able to cover an emergency expense costing $400! That’s a car repair, a new appliance, or a minor medical procedure. Or a trip to see an ailing relative.

In fact, according to a recent study by Payoff [ht: db], a financial wellness company, 23 percent of Americans—and 36 percent of Millennials—have experienced “a debilitating degree of stress surrounding their finances, resulting in pathological effects on their thoughts, feelings and behaviors that are most commonly associated with post-traumatic stress disorder.”

What the hell is going on?

Mainstream economists aren’t going to be a lot of help since, as Gabler notes, they’ve mostly ignored the situation.

They had unemployment statistics and income differentials and data on net worth, but none of these captured what was happening in households trying to make a go of it week to week, paycheck to paycheck, expense to expense.

What about psychologists? Here’s the best Brad Klontz, a financial psychologist (whatever that is) can come up with: “If you want to have financial security, it is 100 percent on you.”*

So, we’re back to real people like Gabler:

Life happens, and it happens to cost a lot—sometimes more than we can pay.

Yet even that is not the whole story. Life happens, yes, but shit happens, too—those unexpected expenses that are an unavoidable feature of life. Four-hundred-dollar emergencies are not mere hypotheticals, nor are $2,000 emergencies, nor are … well, pick a number. The fact is that emergencies always arise; they are an intrinsic part of our existence. Financial advisers suggest that we save at least 10 to 15 percent of our income for retirement and against such eventualities. But the primary reason many of us can’t save for a rainy day is that we live in an ongoing storm. Every day, it seems, there is some new, unanticipated expense—a stove that won’t light, a car that won’t start, a dog that limps, a faucet that leaks. And those are only the small things.

And when those financial emergencies arise, many of us don’t have the wherewithal to cover them.

As we know, those at the top are doing just fine. They continue to get their cut of the surplus—and to spend it on luxury cars and boats, apartments and houses, baubles and art. And put the rest in offshore accounts.

But many of the rest of are stretched by a combination of stagnant wages and salaries (going back decades now), escalating expenses (especially for healthcare and education), and barely regulated debt mechanisms (like credit cards). So, we live paycheck to paycheck, with barely any savings for eventualities (much less retirement), trying our best to keep it all together. . .

And then shit happens.

 

*Kontz is “co-founder of Your Mental Wealth™ and the Financial Psychology Institute, and a Partner of Occidental Asset Management, LLC.”

 

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Posted: 29 April 2016 in Uncategorized
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Capitalism is, if anything, remarkably unstable.

Yesterday, the Dow Jones Industrial Average dropped more than 200 points (a bit more than 1 percent). And, today, it’s already down more than half that amount—and headed lower.

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What’s going on?

Well, for one thing, corporate profits are declining.

U.S. corporate profits, weighed down by the energy slump and slowing global growth, are set to decline for the third straight quarter in the longest slide in earnings since the financial crisis.

Weakness was felt across the board, with executives from Apple Inc. to railroad Norfolk Southern Corp. and snack giant Mondelez International Inc. saying the current quarter remains tough. 3M Co., which makes tapes, filters and insulation for consumer electronics, forecast continued weak demand for that industry. Procter & Gamble Co.reported sales declines in its five business categories despite price increases.

And that’s exactly how capitalism works: corporations got exactly what they wanted in the early years of the recovery—with cheap financing, low wages, and foreign sales, which fueled high profits. And now those same conditions are coming back to bite them. And so they’re deciding to engage in less investment, which is further slowing growth and cutting into profits.

As we know, under capitalism, what goes up must come down—even for capitalists and their profits.