Sunday, September 05, 2010

Finding Jobs on Labor Day

September 5, 2010, 7:58 a.m.

Former Labor Secretary Reich Has Economic Solution
(bought to you by*)

Reducing the unnecessarily high numbers of workplace deaths, injuries and disease is always high on labor's wish list -- as we were recently reminded in Iowa City. "Danger in the Workplace; Honoring Those Who Built and Build America," September 1, 2010.

But ranking right up there for labor, especially during this "jobless recovery" (or "jobless stagnation") economy, is finding jobs at which one can both labor and support a family.

Even "unemployment" is inching up. But the much more relevant measure is "underemployment."

"Underemployment" is the total number of those (1) who have recently been "laid off," plus (2) those who have given up looking, plus (3) those working part time who want and need full time work. So far as I know even that number excludes those who are working full or part time, but at jobs, and for pay, far below the level warranted by their professional training, skills and experience (not to mention financial need).

And according to the Gallup Chief Economist, the company's latest survey finds that number, at 18.6%, is now roughly two times the rate of "unemployment." Dennis Jacobe, "U.S. Underemployment at 18.6% in August," September 2, 2010 ("Underemployment, as measured by Gallup, was 18.6% in August, up from 18.4% at the end of July. Underemployment peaked at 20.4% in April and has yet to break below 18.3% this year.")

And of course, even these average numbers presume boiling water comfort. You know the line, "If your foot's in a bucket of ice water, and your hand is in a pan of boiling water, on average you're comfortable."

For professional men and women with advanced university degrees and some years of experience, unemployment, while always devastating for those experiencing it, now affects almost no larger a percentage than in economic boom times, and when it does it tends to last a shorter time for them than the "average time" for others.

For African-American high school dropouts it's a different story. And this is a goodly number of Americans. "In the inner cities, more than half of all black men do not finish high school." Erik Eckholm, "Plight Deepens for Black Men, Studies Warn," New York Times, March 20, 2006.

Eckholm reports, "Black men in the United States face a far more dire situation than is portrayed by common employment and education statistics, a flurry of new scholarly studies warn . . ..

"In 2000, 65 percent of black male high school dropouts in their 20's were jobless — that is, unable to find work, not seeking it or incarcerated. By 2004, the share had grown to 72 percent, compared with . . . 19 percent of Hispanic dropouts. Even when high school graduates were included, half of black men in their 20's were jobless in 2004, up from 46 percent in 2000."

And bear in mind, this is a report from 2006, the "good old days" compared with the worst of the current downturn.

I have repeatedly argued in this blog for a federal jobs program, like those President Roosevelt created in the 1930s. If you want to jump start an economy that is 80% driven by consumer spending, and you're willing to invest trillions of dollars to do it, getting everyone employed is what seems to me to be the no-brainer solution (however politically unpopular in some quarters).

For example, when the car dealers' lots are filled with cars, because consumers either don't have the money to buy them or are too concerned about their future to risk doing so, it makes little sense to give money to corporate CEOs to build more plants and hire more workers. Why would a rational automobile CEO do that; to stack the newly manufactured cars on top of the ones already sitting out on the dealers' lots? One could have easily predicted (as I and a great many others did) that this kind of "stimulus" was not going to work for any sector of our economy (manufacturing, service, or retail). And it hasn't.

(Which is not to say that it has not had any, even very limited, short-term effect whatsoever. It is only to say that it has, rather obviously, not solved our problem -- as, I contend, putting everyone to work with those trillions of dollars would have done, and rather promptly and permanently.)

While that approach is certainly consistent with former Secretary of Labor Robert Reich's understanding of our challenge, I'll be the first to acknowledge that his analysis is far more sophisticated than my own. Robert B. Reich, "How to End the Great Recession," New York Times, September 3, 2010, p. A21.

Organized labor is down to about 7 percent of the private work force.. . .

None of the standard booster rockets are working: near-zero short-term interest rates from the Fed, almost record-low borrowing costs in the bond market, a giant stimulus package and tax credits for small businesses that hire the long-term unemployed have all failed to do enough.

That’s because the real problem has to do with the structure of the economy, not the business cycle. No booster rocket can work unless consumers are able, at some point, to keep the economy moving on their own. . . .

But consumers no longer have the purchasing power to buy the goods and services they produce as workers; for some time now, their means haven’t kept up with what the growing economy could and should have been able to provide them.

This crisis began decades ago when a new wave of technology — things like satellite communications, container ships, computers and eventually the Internet — made it cheaper for American employers to use low-wage labor abroad . . .. The median male worker earns less today, adjusted for inflation, than he did 30 years ago.

But for years American families kept spending . . .. How did families manage this trick? First, women streamed into the paid work force. . . .

Second, everyone put in more hours. . . .

[T]third: going ever deeper into debt. . . . From 2002 to 2007, American households extracted $2.3 trillion from their homes. . . .

Now we’re left to deal with the underlying problem that we’ve avoided for decades. Even if nearly everyone was employed, the vast middle class still wouldn’t have enough money to buy what the economy is capable of producing.

Where have all the economic gains gone? . . . In the late 1970s, the richest 1 percent of American families took in about 9 percent of the nation’s total income; by 2007, the top 1 percent took in 23.5 percent of total income.

It’s no coincidence that the last time income was this concentrated was in 1928. . . .

The rich spend a much smaller proportion of their incomes than the rest of us. . . . [T]he economy is robbed of the demand it needs to keep growing and creating jobs. . . .

[T]he rich . . . invest their earnings . . . anywhere around the globe where they’ll summon the highest returns — . . . often it’s the Cayman Islands, China or elsewhere. . . .

Meanwhile, as the economy grows, the [middle class] spending fuels continued growth . . .. But because this situation can’t be sustained, at some point — 1929 and 2008 offer ready examples — the bill comes due.

This time around, . . . averting another Great Depression-like calamity removed political pressure for more fundamental reform. We’re left instead with a long and seemingly endless Great Jobs Recession.

[T]here is only one way back to full recovery: through more widely shared prosperity. In the 1930s, the American economy was completely restructured. New Deal measures — Social Security, a 40-hour work week with time-and-a-half overtime, unemployment insurance, the right to form unions and bargain collectively, the minimum wage — leveled the playing field.

In the decades after World War II, legislation like the G.I. Bill, a vast expansion of public higher education and civil rights and voting rights laws further reduced economic inequality. Much of this was paid for with a 70 percent to 90 percent marginal income tax on the highest incomes. And as America’s middle class shared more of the economy’s gains, it was able to buy more of the goods and services the economy could provide. The result: rapid growth and more jobs.

By contrast, little has been done since 2008 to widen the circle of prosperity. . . .

[Comparable] measures would not enlarge the budget deficit because they would be paid for. In fact, such moves would help reduce the long-term deficits by getting more Americans back to work and the economy growing again.

Policies that generate more widely shared prosperity lead to stronger and more sustainable economic growth — and that’s good for everyone. The rich are better off with a smaller percentage of a fast-growing economy than a larger share of an economy that’s barely moving. That’s the Labor Day lesson we learned decades ago; until we remember it again, we’ll be stuck in the Great Recession.
Clearly, turning trillions of dollars over to our wealthiest one percent has not helped the poor, the working poor, the underemployed, the working class and the middle class.

It is said that "a rising tide lifts all boats." Whether or not that's true, the absence of any tide at all moves no one's boat. Thus, it turns out that while the rich (and the politicians they control) have been doing in the rest of us, they have been shooting themselves in the wallet as well.

* Why do I put this blog ID at the top of the entry, when you know full well what blog you're reading? Because there are a number of Internet sites that, for whatever reason, simply take the blog entries of others and reproduce them as their own without crediting the source. I don't mind the flattering attention, but would appreciate acknowledgment as the source -- even if I have to embed it myself.
-- Nicholas Johnson
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