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Posts Tagged ‘inequality’

Mother Jones has another dispatch from the excellent Economic Hardship Reporting Project, with this edition focused on temporary employment. It underscores, in visceral detail, how an increasingly prevalent mode of employment leaves workers economically insecure (and often unsafe).

To get one thing straight, the temporary sector isn’t exactly taking over the economy. There is a difference between “fast growing” and “huge,” and this sector is clearly the former:

In the early 1980s, employment in the “temporary help services” industry—which covers both temp workers and employees of the firms that supply them—stood in the several hundreds of thousands. Now it’s 2.5 million, a seven-fold increase in less than four decades. By 2020, the BLS foresees more than 440,000 new jobs in the sector.

However, the details of it are depressing:

Back at the Labor Ready office, I have to wait nearly 30 minutes to receive my check. The job paid $8 an hour—minimum wage. For five hours of labor, I get $37.34 after taxes. I am not paid, however, for the four hours on call, or the time spent in transit to and from the job site, or waiting to get paid. None of this meets the legal definition of wage theft, but it sure feels like it…

Labor Ready’s Oakland workforce is nearly entirely black, excepting the branch manager, who is white. Most of the workers I talk to are searching for stability but finding it elusive. They include homeowners in foreclosure, apartment-dwellers who are being evicted, and residents of motels negotiating for a few more days. And many express hope they can parlay a temp gig into something permanent…

The potential to convert a temp job into full-time employment is one of the benefits promoted by Labor Ready, but the company doesn’t actually know at what rate this happens…

Yet there’s little evidence to support the claim that temp agencies help impoverished workers…Providing low-skill workers with a temp job, they wrote, “is no more effective than providing no job placements at all.”

There is not really a big policy takeaway from this. There will always be a need for low-skilled workers, and it seems like increasingly these jobs will not even offer the protections of permanent employment. Certain things, like strengthening the safety net and increasing the minimum wage, will be a help. However, the growth of the temporary model may be seen as undermining any gains that organized labor or cooperative enterprises might seek- it would be hard to imagine either growing as fast as this sector. Clearly, our society will need to rethink how labor can have solid footing in a temp economy.

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When I picked up Jamie Galbraith’s new book, “Inequality and Instability,” (OUP) I was expecting something pretty simple: a pithy narrative of how inequality in the 2000s destabilized the world economy by forcing demand to grow through a credit bubble. However, Galbraith did waited until the very end to cover that argument. Instead, he spent the majority of the book using inequality as a lens to recast our economic history from the last several decades.

For those seeking a Krugman-esque polemic that weaves together narrative threads on how the crisis happened (as I was), this book may be disappointing. It offers a rich set of essays on inequality that draw from careful work of applied statistics. Galbraith develops a novel approach to dealing with income and wage data for inequality statistics, and then hops around the globe, retelling the stories of regions and countries alike in light of data on inequality. By sector, region, and year, Galbraith shows how countries from Cuba to Argentina to Norway have changed over time.

His data yields rich insights; for example, based on a careful study of US data, he concludes,

There are practically no jobs to be had in the winning sectors…the American economy became leveraged, in such a way that its performance as a whole came to depend on the possibility of a very small number of people becoming very rich in very limited lines of work.

Piketty and Saez have offered data that shows the fractal-like qualities of the entire income distribution, but Galbraith’s data, by sector and region, show that economic geography matters deeply.

Later, writing about Argentina and Brazil, Galbraith finds that

declining inequality in this part of Latin America appears directly linked to a weakening of the political forces that supported neoliberal globalization.

Galbraith’s sector-level view of the economy leads to some key conclusions about finance as well- he finds that finance drives inequality, and as it siphons more and more of total income, its cycles drive employment as well. With these insights in hand, Galbraith does eventually get around to the argument I was waiting for:

The financial crisis…was the consequence of a deliberate effort to sustain a model of economic growth based on inequality that had, in the year 2000, already ended….when the collapse came, it would utterly destroy the financial sector.

Of course, finance’s role in the economy persists heavily, and economists and politicians alike continue to debate its value. What is clear from Galbraith’s work, though, is that growth based on finance will likely not be shared, and thus, not sustained.

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Revisions and all, we are 300,000 jobs richer than we were a month ago. There are plenty of blog reactions you can read to this report, all of which tease out the different cyclical and structural aspects, short and long-term implications, much better than I could. Check out Mark Thoma’s links for a smattering.

My own reaction, yesterday morning, was cynical as ever- “great news for Barack Obama!” As I read my Twitter feed over breakfast, I particularly enjoyed Neil Irwin’s tweet: “that sound you hear is champagne corks in the West Wing.” Indeed, Obama’s Intrade odds jumped 1.5% to 57%, the highest level since August, when the Europe news was getting worse. OK, let’s leave that cynical reaction aside.

I had a reality check this morning, courtesy of the inner city of Baltimore, while driving to a church men’s breakfast in the DC area. I was riding with two fellow congregants from Luther Place Memorial Church- one an old-timer who is something of a social justice junkie, the second a community activist in Baltimore, who works to transform vacant lots to community spaces. The old-timer began to ask for our reactions to the jobs report. Before I could say my piece about it helping Obama but not being good enough for a real recovery, the activist jumped in and said, “I don’t pay attention to that stuff. Where I work, the unemployment rate is 50 to 70 percent. These reports just aren’t relevant to them.”

We immediately moved to discussing Mitt Romney’s remarks, and agreed about how out of touch he seems by saying he’s not concerned about the very poor. Ed the activist knows that way more than 5% of Americans are very poor, and no, the safety net is not catching them.

We didn’t get into the politics of it much deeper than that. But it’s clear to me that there’s a simple fact people like Mitt Romney will never comprehend, and that most of us progressives too easily forget (especially when we get “good” economic news). Our economy has been leaving many behind for some time now. The great recession has made things worse, and there is no such thing as an economic recovery in places like inner city Baltimore.

This whole conversation was underscored well by a reflection from Richard Rohr, read toward the end of this breakfast (and it was quite serendipitous- our reader opened to the book to a random page). It was titled “Who are the poor?” and it read,

“The Gospel sounds very different to a man with a full stomach than it does to a man with an empty stomach…that’s why Jesus said the Gospel had to first be preached to the poor.”

When we hear the jobs report, with our full stomachs, we have all manner of reactions that will inherently be divorced from the reality that the poor experience. Yes, the January jobs report matters. Cynically, it helps Obama on the margins, which is good, because he is way better than the other guy. But, jobs reports like these are not good enough. 

This is true in the limited sense that we are far from full employment, which we rightly hear from Mark Thoma, Dean Baker, et al. However, this jobs report is more importantly not good enough when read by those with empty stomachs. Unfortunately, with our current economic structure, no jobs report will be Gospel or good news to them.

The first Friday of every month this year, we will hear a (hopefully) six-digit number. Pundits and economists will weigh in, good and bad. Let’s just all keep in mind that a jobs report sounds very different to a man with a full stomach than it does to a man with an empty stomach. We should all work for an economy in which jobs reports can be truly good news for the swelling ranks of the poor.

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Many criticize the Occupy Movement as having muddled goals and nebulous ideas, and that it therefore will be unable to change anything. But this viewpoint misses the entire point.

The Occupy Movement recognizes a fundamental problem: that it is generous to call our political system a democracy, when so few have so much more influence in Washington than the rest of us. This leads to policies and systems coming out of Washington that do not work for everyone, but rather for those who helped craft them. Remedying this situation is an enormous task, and it is not a goal of the Occupy Movement to come up with a single silver-bullet solution. Rather, the Occupiers realize that the first step to ameliorating the situation is to talk about it. The entire political discourse is already too small. The Occupy Movement is simply creating a space in which these issues can become part of the public discourse. It is a space which can accomodate, for the first time in decades, perspectives that are larger than the Republican/Democrat polarization. Those who are unimpressed, unsettled, or unsympathetic to such an approach lack either thoughtfulness or creativity.

The cable news channels, for one, seem unwilling to comprehend this approach to action. Unable to reduce the Occupy Movement to a bumpersticker-size slogan, cable news networks prefer to dismiss the Occupiers as confused and restless. It really is a shame when dwelling in thoughtfulness, complexity, and creativity receives so little credit.

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Piñata of Benevolence

“We have this fantasy that our interests and the interests of the super rich are the same. Like somehow the rich will eventually get so full that they’ll explode. And the candy will rain down on the rest of us. Like there’s some kind of piñata of benevolence. But here’s the thing about a pinata: it doesn’t open on it’s own. You have to beat it with a stick.”

— Bill Maher

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World of Class Warfare

What to do when Jon Stewart is the most interesting economic analyst on cable news?

See Warren Buffet vs. Wealthy Conservatives and The Poor’s Free Ride is Over

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Steven Greenhouse, who generally covers labor issues for the NYT, has a blog post about a new paper on the current “jobless and wageless recovery.” The authors (Andrew Sum, Ishwar Khatiwada, Joseph McLaughlin, and Sheila Palma, from the Center for Labor Market Studies at Northeastern University) present the most comprehensive statistics I’ve seen on how capital has recovered in lieu of labor. The chart below, for example, shows that 92% of national income growth has gone to corporate profits in the current recovery.

The same dynamics that led us into the crisis are leading us forward in stagnation. There is no reason to expect a vibrant recovery in consumption if all gains in output and productivity are going to corporations, while government money is running to the sidelines.

The authors don’t delve into what’s causing this dynamic, but it should be obvious to anyone who has followed American political economy in the last 3 decades. Corporations simply have too much power in economic and political spheres. American workers and voters are no longer organized to fight this power. I originally saw the election of 2008 as a correction from the usual feedback loop, and it certainly has been in some ways, but certainly not to the extent that is needed.

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Ezra Klein indirectly rebuts my post from last night (of course I’m under no illusion that he has read it). He argues that it’s hard to pay workers well in America. I think he’s wrong, but this is the crux of his argument:

So then the question is why were manufacturing jobs traditionally high-wage jobs? There seem to be a few answers to this (unions, industrial policy, capital intensity, etc), but the one that I’ve found most persuasive is that they could be. To a degree I really didn’t understand before picking through the endless tables and graphs in ‘Where Are All The Good Jobs Going?‘, high wages were a choice that businesses could make. Some of them were forced into making that choice through unions and some of them were lured into making that choice because they wanted the best workers. But a lot of them just made that choice because, well, they could…

Foreign competition has made the wage gap between different sorts of workers vast: Paying American workers a good wage while the other guy pays Thai workers a bad wage leaves you at much more of a competitive disadvantage than paying American workers a good wage while the other guy pays American workers a mediocre wage. Unions are partially in decline because of policy, but they’re partially in decline because these forces make it very hard for them to survive. Bottom line? It’s hard to pay workers well in America now, even if you want to…

I’d really like to find an answer that’s more interesting than “education” here. And maybe I will. I’m toying around with the idea that we’re in a weird interregnum period in which a lot of other countries have become rich and educated enough for their workers to compete with our workers but not quite rich and educated enough for their workers to begin buying things from our workers, and that this’ll largely sort itself out as time goes on.

I don’t think Ezra’s last paragraph will bear much fruit- these forces of globalization seem unlikely to equilibrate. Regarding his fallback of education, I think most of my rebuttal comes in my post from last night, which of course is completely ripped off of Larry Mishel’s excellent work. The important fact, though, is that profits have been doing just fine- yes, they fell during the crisis, but they have soared in the recovery.

Profits show that businesses can choose to pay better; however, because labor is weak, they don’t, and because their political power is strong, they have to give back relatively less in corporate taxes. The power gap is the reason why businesses can afford to pay better wages, and create more jobs, but choose not to. The power gap will not go away on its own, but will only accelerate without a political movement to restructure our economy.

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Larry Mishel has a new briefing paper with the Economic Policy Institute. In it, he argues that more education will not cure our employment deficits or our inequality. The succinct claim is made early on:

The huge increase in wage and income inequality experienced over the last 30 years is not a reflection of a shortfall in the skills and education of the workforce. Rather, workers face a wage deficit, not a skills deficit.

Mishels brings a lot of time series and cross-tab data to refute the structural unemployment argument:

This argument implies that unemployment difficulties reside in the workers who are unemployed: they either are located in the wrong place or do not have the required skills for the currently available jobs. If this is so, then macroeconomic tools such as fiscal policy (spending or tax cuts) or monetary policy cannot address our unemployment or long-term unemployment situation. But surprisingly, perhaps amazingly, there is no systematic empirical evidence for such assertions.

He specifically takes on the claim that we need more higher education:

The point for our current purposes is that the pay of college graduates is as disconnected from productivity growth as is the pay of high school graduates. Vastly expanding college enrollment and completion will do nothing to address this problem…

Together, these trends suggest that the forthcoming supply of college graduates is meeting the growing demands of employers for such workers. Moreover, these trends suggest that a rapid expansion of the supply of college graduates will cause the wages of college graduates to decline, assuming that the productivity–pay gap continues unabated.

Mishels concludes:

It is not the economy that has limited or will limit strong income growth, but rather the economic policies pursued and the distribution of economic and political power that are the limiting factors.

Education is a favored response to inequality and unemployment for many mainstream economists of all stripes. Its proponents are then able to say that by favoring equal education, they favor equal opportunity. However, a class lens shows that this leveling does not actually happen. Rather, a relatively powerful and small group of people will continue to capture societal surplus, while wages for everyone else will stagnate relative to what they produce. It needs to be said again and again- power matters. There is also no guarantee that increased education will lead to more jobs, as our economy has clearly not shown that tendency in the last several decade.

If the bottom 90% of Americans have no say over how surplus is distributed, they will continue to get less than their productive share as the incomes of the very top fly away. This issue holds for the uneducated, high school educated, and college educated- however, the college educated are relatively productive enough that they end up earning plenty to get by (although this could become less true).

Thus, we realize that as Mishels says, the wage gap and jobs gap do not come from a skills gap but a class gap and a power gap. Unemployment and stagnant wages are structural, but not in the sense that conservative neoclassical economics define it. They are a result of the capitalist power dynamics and employer relations in our society. Fiscal stimulus and education are both admirable goals, but we need radical changes to restore our economy’s long-term ability to create quality jobs. Mishels doesn’t drive at the solutions to these problems, but I’m really glad he helps dispel some important mainstream economic myths.

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