Posts Tagged ‘Wages’

‘Do you think that we have reached the end?’

March 22, 2016

I can hardly wait to read Thomas Frank’s new book.

Here’s another excerpt.

A while ago I spoke at a firefighters convention in the Pacific Northwest, talking as I always do about the ways we have rationalized these changes to ourselves.

Firefighters are the sort of people we honor for their bravery, but they also happen to be blue-collar workers, and they have watched with increasing alarm what has been happening to folks like them for the last few decades . . . watched as the people formerly known as the heart and soul of this country had their lives taken apart bone by bone.

listen,liberal.9781627795395They themselves still make a decent living, I was told—they are some of the last unionized blue-collar workers who do—but they can see the inferno coming their way now, as their colleagues in other parts of the country get their contracts voided and their pensions reduced.

After I spoke, a firefighter from the Seattle area picked up the microphone. Workers had been watching their standard of living get whittled away for decades, he said, and up till now they had always been able to come up with ways to get by.

The first adjustment they made, he recalled, was when women entered the workforce.  Families “added that income, you got to keep your boat, or your second car, or your vacation, and everything was OK.”  Next, people ran up debt on their credit cards.  Then, in the last decade, people began “pulling home equity out,” borrowing against their houses.

“All three of those things have kept the middle class from having to sink down into abject poverty,” he said. But now all three coping mechanisms were at an end.  There were no more family members to send to work, the expiration date had passed for the home-equity MasterCard, and still wages sank. His question was this: “Is there a fourth economic savior out there, or do you think that maybe we have reached the end?”

I had no good answer for him.  Nobody does.

Source: Listen, Liberal

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FDR on the minimum wage, and some charts

September 7, 2015

FDRsaidHat tip to Avedon’s Sideshow

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Pay, productivity and inequality

August 11, 2015

lawrence20150721-figure1

The chart shows the basic economic problem of the USA, and of other advanced countries as well.

Economic productivity continues to increase, but wages do not.

Economists Lawrence Mishel and David Ruccio reported recently on how pundits and economists have tried to explain it away, by re-defining employee compensation, re-defining productivity and re-defining the cost of living.

But, as Mishel and Ruccio both pointed out, none of the pundits were able to explain away the real cause of the problem—that the benefits of increase productivity are being siphoned off by the owners of financial assets and the upper-income brackets..

LINKS

Inequality Is Central to the Productivity-Pay Gap by Lawrence Mishel for the Economic Policy Institute.

Mind the gap—or else define it away by David Ruccio for occasional links and commentary.

Conversations Starbucks won’t have

April 2, 2015

Starbucks.conversation161Background: What ‘Race Together’ Means for Starbucks Partners and Customers.

Starbucks opens a conversation

April 2, 2015

Stargbucks.race

Background: What ‘Race Together’ Means for Starbucks Partners and Customers.

How to give American workers a pay raise

March 24, 2015

incomegrowthdistributionThe majority of American workers are getting less and less benefit from the growth of the American economy.

The pro-labor Economic Policy Institute notes that, since 1979, the U.S. economy (gross domestic product) has grown by 149 percent and productivity has grown 64 percent, but actual wages of most American workers, adjusted for inflation, are flat or declining.

Recently the EPI published an 11-point program for boosting American wages.   Here it is, with my comments.

1. Raise the minimum wage.

2. Update overtime pay rules.

3. Strengthen collective bargaining rights.

Stronger labor unions give workers power over their wages and working conditions independently of laws and regulations.  This is the most important change and a key to all the other changes.

4. Regularize undocumented workers.

Hiring unauthorized immigrants and relocating business activities to low-wage countries are two ways of doing the same thing—escaping the requirements of American labor law.   It is almost like competing with slave labor.  Since it is not feasible to deport the millions of unauthorized immigrants now in the United States, the only choice is to bring them under protection of the law.

5. Provide earned sick leave and paid family leave.

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Stockholders gain at the expense of the rest of us

March 13, 2015
wagesinfographic1200px

Unemployment is now officially below 6%, but the point is still valid.

Large businesses such as General Motors earmark less money for workers’ pay and for investment, research and technology compared to earlier eras.

They do this in order to be able to hand over more money to stockholders in the form of dividends and stock buybacks.

The reason is that stockholders have leverage and workers don’t, and stockholders no longer take the long view. In 1960, the average stockholder owned a stock for eight years, Harold Meyerson reported in the Washington Post.  Now they sell their stocks after four months, and, when high-frequency trading is factored in, it’s 22 seconds.[1]

Passive, short-term stockholders, unlike the original investors, contribute little or nothing to the value of a company.  Why should their interests be paramount?

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Why doesn’t technology make us all better off?

March 11, 2015

epi2

We Americans long enjoyed the world’s highest material standard of living, and we were told that was because of the superior productivity of American industry.  That sounds like common sense.  If you want more, you need to produce more.  Obviously.

Click to enlarge.

Click to enlarge.

But about 30 or so years ago, this changed.  Our productivity continued to increase, but our wages and salaries didn’t increase along with it.

Why?

Some say that the problem is technology.   Automation means that fewer wage-earners are needed, and our work had less value.   So naturally there are fewer jobs, and employers generally don’t have to pay as much to find people to take these jobs.

Fewer wage earners are needed.  Needed by whom?  Our work has less value.  Value to whom?

They are less needed, and of less value, to the corporate boards and wealthy stockholders who own the technology.  Or, to put it another way:  Capitalists, not workers, own the means of production.

Click to enlarge.

Click to enlarge.

It’s true that the average factory worker or retail clerk did not personally create the technological innovations that made it possible for them to do more with the same amount of work.  But neither did the average corporate executive or corporate stockholder.

If technology is owned and controlled by a small financial elite, then the applications of technology will be such to benefit that elite.

It is possible that, in acting in their own interest, the elite will do things that are good for society as a whole.  It also is possible that they will do things that are bad for society as a whole.

Click to enlarge.

Click to enlarge.

When that happens, we the people need to understand that their power and ownership is not based on divine right or impersonal economic laws.   It is the result of corporate structures and legal rights established by law, and laws can be changed.

Some radical thinkers, such as Stanley Aronowitz, David Graeber, Richard D. Wolff and Gar Alperovitz, are reviving the idea of worker ownership and public ownership of the means of production, which is not the same thing as government ownership.

More moderate reformers think it is just necessary to change the balance of power within society.

The important thing, as I see it, is to stop letting priorities be determined by the “job creators,” the ones who own the machinery, the research laboratories and the so-called intellectual property.   The question is not whether they need us.  The question is whether we need them.

LINKS

Of Flying Cars and the Declining Rate of Profit by David Graeber for The Baffler.

Why Wages Won’t Rise by Robert Reich.

The Great Decoupling of the U.S. Economy by Andrew McAfee on his blog.

Global lessons on inclusive growth by Jason Furman for Policy Network.

The Most Important Economic Chart by Atif Mian and Amir Sufi for House of Debt.

The wedges between productivity and median compensation growth by Lawrence Mishel for the Economic Policy Institute.

 

 

Germany on the same path as the USA

December 12, 2014
Wage and productivity growth in Germany

Wage and productivity growth in Germany

Via VoxEU

Some years back I wrote a post holding up Germany as a role model for the United States.  I said Germany’s policies showed that a nation can have a strong labor movement and a strong social safety net and yet have a growing economy and success in world markets.

I failed to recognize that Germany was and is following the same path as the United States—high profits, wage stagnation and financialization.  Germans are better off than Americans only because their starting point was higher when they started on the road to decline.

The chart shows that German productivity is increasing, just as in the United States, but German wage-earners aren’t getting the benefit of it.

Just like in the USA.

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What’s wrong, and what to do about it

December 3, 2014

whatswrongwithuseconomy_a_final1_infographic350w

The AFL-CIO has an excellent series of infographics about what’s wrong with the U.S. economy, which I have put into this post.  For those who have a little time, I link to four articles explaining the infographics.  For those who have more time, I then link to background information on which the articles are based.

My only argument with the AFL-CIO is that they attribute bad economic policies exclusively on Republicans, while ignoring Wall Street Democrats such as Bill and Hillary Clinton, Barack Obama, Joe Biden, Chuck Schumer and Christopher Dodd.

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‘Never tell anyone how much you make’

June 9, 2014

Another of my father’s favorite admonitions was that I should never tell anyone what my income was.   If I did, some people would envy me because of how much I made, and others would look down on me because of how little I made.

This is one of the few instances in which I think my father was wrong.  You can’t stand up for your interests if you don’t know where you stand in regard to others.

stock-vector-vector-employee-or-boss-presenting-a-paycheck-illustration-5251492I broke that rule when I joined the Newspaper Guild, the labor union representing reporters on the Rochester (NY) Democrat and Chronicle.  I agreed with the Guild that there was no way to determine whether we were being paid fairly until and unless we knew what each of us were paid.

I was surprised to learn that my salary was on the upper end of the scale.  I was paid more than a number of reporters that I thought were better than I was.

The probable reason was that, when I applied for the job, I was undecided whether I really wanted to leave my old job, and so, almost unconsciously, negotiated a high starting salary.   Pay raises were usually a percentage of base pay, so my higher starting salary meant my income was higher than it otherwise would have been for the whole 24 years I worked for the D&C.

I didn’t think I was overpaid; I thought they were underpaid.  But it was interesting as an example of how random a pay system can be even when, like ours, it is supposedly based on merit.

A labor reporter named Steven Pearlstein wrote a good article on this topic for the Washington Post.  He pointed out that many companies discourage or even forbid employees to discuss their pay among each other.  At the same time corporations conduct wage surveys and share wage information so as to avoid getting into a bidding war for good employees.

Knowledge is power, whether for the employer or the employee.  I think it makes sense for employees to share information readily with each other, not so readily with future employers.

My idea of a just society is one in which every person could post his or her annual income, and the sources of it, on a bulletin board, and nobody would have any reason to feel embarrassed at what was revealed.

The labor scene: Links and comments 8/30/13

August 30, 2013

graph-the-1-percents-jobless-recovery-01Here are some good articles for reading on Labor Day weekend.

Our Sad, Misunderstood Labor Unions by David Macaray for Counterpunch.

Labor unions are the only organizations whose purpose is to defend the rights of working people.  Why, then, have they gotten such a bad name?

Reversing the Labor Movement’s Free Fall by Stanley Aronowitz in Logos.

Aronowitz argues that labor unions must go beyond collective bargaining and champion the interests of working people across the board.

The AFL-CIO’s New Strategy by Shamus Cooke for Counterpunch.

While the AFL-CIO leadership recognizes the need for new strategy and tactics, it is limited by its commitment to the Democratic Party and the anti-union Obama administration.

unionincomeProductivity Rose 7.7 Percent Post-Recession; Workers Have Seen None of It by David Dayen for Naked Capitalism.

The decline of labor unions is turning the United States into a low-wage nation.

Workers Greatest Power Over Owners and Bosses? The Ability to Stop Work and Walk Out by James Cersonski for AlterNet.

Largest fast food strike ever: 58 cities will be affected by Joseph Eidelson for Salon.

Workers in the fast-food industry use strikes to protest unfair treatment and low wages rather than waiting until they can negotiate contracts.

Fast Food, Retail Worker Strikes Do Honor to King Legacy by David Dayen for Naked Capitalism.

Martin Luther King’s 1963 speech was given for the March on Washington for Jobs and Freedom, and he was murdered while in Memphis, Tenn., to support a strike by municipal garbage collectors.   If he were alive, he would support union organizers of low-wage workers and strikers against low-wage companies.

Click to view

Five reasons for optimism about labor unions this Labor Day by John Logan for The Hill.

Return on investment (of labor) is falling

July 11, 2013

blog_nelp_wage_declines

The United States officially has been in economic recovery in 2009.  Economic output, as measured by Gross Domestic Product, is up.  Corporate profits are up.  The stock market has reached new highs.  So, according to the law of supply and demand, wages should be rising, too.  Right?  Wrong.

Economics writer Felix Salmon has the figures.

NELP, the National Employment Law Project, has taken a detailed look at what happened to wages during the recovery — specifically, between 2009 and 2012.  They looked at the annual Occupational and Employment Statistics for three years — 2007, 2009 and 2012 — and created a list of wages for 785 different occupations.  They then split those occupations into five quintiles, according to income; the lowest quintile made $9.49/hr, on average, last year, while the highest quintile averaged $40.23/hr.  […]

The big-picture lesson that NELP draws is that between 2009 and 2012, real median hourly wages fell by 2.8% — and that the poorer you were to start with, the more your wages fell.  The top quintile didn’t do well: their wages dropped by 1.8%, in real terms.  But the fourth quintile did particularly badly: its wages fell by 4.1%, on average. 

To take one example, occupation 39-5012 — that’s Hairdressers, Hairstylists, and Cosmetologists — was earning $12.00 an hour, in 2012 dollars, in 2009.  But by 2012 they were earning just $10.91 per hour: a drop of more than 9%. 

Or look at occupation 51-6042 (“Shoe Machine Operators and Tenders”): that job saw wages fall 14%, in real terms, in just three years, with nominal wages falling from $12.69 to $11.69 per hour.

The charts show the large range of outcomes: some occupations are doing great.  At the top end, the highest-paid profession on the list, Psychiatrists, went from earning $69.48 per hour in 2007, to $83.33 per hour in 2012.  That’s a real increase of 8.3%.  But overall, everybody is doing pretty badly.

So what’s going on?

20120314-graph-the-1-percents-jobless-recovery-01

Click on Wage deflation charts of the day for Felix Salmon’s full article.

Click on The 1 Percent’s Jobless Recovery for the Century Foundation’s article.

The generation gap

July 8, 2013

3utd2t

All too true!   When I attended high school in the late 1940s and early 1950s, we all took for granted that anybody who was willing to work hard could get a job of some kind, anybody with a high school diploma could get a good job, and anybody with a college degree could get an excellent job.

Now the vast majority of Americans have high school diplomas, and more Americans than ever before have college degrees, but this isn’t enough to guarantee them good jobs, or even jobs at all.  All it has done is to raise the bar.

Click on Master’s is the new Bachelor’s to read about the next step in degree inflation.

Source of the graphic: quickmeme

Why wages are falling (British version)

June 21, 2013
Rising profits, declining wages in Great Britain

Rising profits share, declining wages share in Great Britain

A British blogger reports that the same thing is going on in Britain as in the USA.

Back in the 70s and 80s, bosses could often not efficiently monitor their workers. To keep pilfering and skiving within tolerable limits they therefore had to pay better than market-clearing wages, to buy goodwill.  The upshot was that wages rose even during downturns, because bosses feared that real wage cuts would create discontent and thus increase thieving, insubordination and malingering.

This led to a huge literature in economics on efficiency wages, gift exchange and insider-outsiders, which tried to explain high and sticky real wages.

However, as Frederick Guy and Peter Skott have shown, socio-technical change since the 80s such as CCTV, containerization and computerized stock control has made it easier for bosses to monitor workers.  Direct oversight means they don’t need to worry about buying workers’ goodwill.  They are instead using the Charles Colson strategy: “When you’ve got ’em by the balls, their hearts and minds will follow.”

Years ago, firms wanted smaller but motivated workforces.  Now they can control workers directly, they don’t need to worry so much about motivation except, of course for top-level managers who cannot be directly monitored – hence their rising incomes.

All this has three implications:

1. Talk of “wage rage” misses an important point.  At the point of production – to use a quaint Marxian phrase – there is little meaningful rage, because workers can do little to fight falling real wages.  (This poses the danger that such rage will find perhaps misdirected political expression, such as in antipathy towards immigrants.)

2. Issues of industrial organization – how firms are organized – have important macroeconomic effects. Macroeconomics cannot be easily studied separately from industrial organization.   Economists need to look inside the “black box” of industrial structure.

3. You cannot understand economics without understanding power.  The fact is that bosses’ power has risen and (many) workers’ power has declined. In this sense, the rising incomes of the 1% and the fall in real wages for the average worker are two manifestations of the same process.

Click on Stumbling and Mumbling for the original.  Hat tip to Avedon’s Sideshow.

Click on The Market Oracle for the source of the chart.

Why don’t politicians care about working people?

March 28, 2013
Mark Thoma

Mark Thoma

Mark Thoma, professor of economics at the University of Oregon and host of the Economist’s View web page, wonders why politicians in general and Democrats in particular are so little concerned about the plight of American working people.

Consider… four facts from a recent speech by Federal Reserve Governor Sarah Raskin.

  • First, around two-thirds of the jobs lost during the recession were in moderate-wage occupations, but more than one-half of subsequent job gains have been in low wage jobs.  As she says, recent job gains have been largely concentrated in lower-wage occupations.
  • Second, since 2010 the average wage for new hires has actually declined.
  • Third, about one-quarter of all workers are “low wage” (just over $23,005 per year in 2011 dollars).
  • Finally, involuntary part-time work is increasing, and more than a quarter of the net employment gains since the end of the recession involve part-time work.

[snip]

I don’t blame Republicans for their efforts.  I wish the working class was more important to Republicans, and I cannot understand their indifference to the struggles of so many people.  But that’s not who Republicans are.  Fundamentally, it’s the party of the rich and this is a chance to lower government spending and reduce the pressure for tax increases on high-income households.

I do, however, blame Democrats for allowing them to be successful.  Even though unemployment is extraordinarily high and job opportunities, when they exist at all, are mostly at reduced wages, and even though the future for the working class looks increasingly bleak, too many Democrats have aided and abetted Republicans in this diversion of attention from jobs to the national debt.

Click on Why Don’t Politicians Care about the Working Class? for Thoma’s entire article.

Click on Focusing on Low- and Moderate-Income Working Americans for Sarah Raskin’s speech.

Hat tip to occasional links & commentary

Corporate profits highest on record, wages lowest

June 27, 2012

Corporates profits are taking the largest share of the national output on record.

Wage-earners are getting the smallest share of the national output on record.

The fraction of Americans with jobs is the smallest in more than 30 years.

It does no good for corporations to do well if people aren’t doing well.  Things need to be brought back into balance.

One thing I learned in 24 years working for Gannett newspapers was that when you want to present economic data, one good chart can be worth a thousand words.  For more good charts, click on Dear America: You Should Be Mad As Hell About This and The Economy: Time for Companies to Pay Their Employees More by Henry Blodget of Business Insider, where I first saw the charts above.

What’s wrong with the U.S. economy

May 16, 2012

Hat tip to Making Light.

Winning the race to the bottom

August 30, 2011

Low wages in states such as Mississippi, Alabama and South Carolina, and rising wages and worker unrest in China, may cancel out the cost advantage of locating factories in China, according to the Boston Consulting Group, a management consultant firm.

In short, the United States is competing by driving down the earnings of American workers rather than on the basis of superior inventiveness, productivity and management.

Here is the situation, as reported by Labor Notes:

Wages for China’s factory workers certainly aren’t going to rise to U.S. levels soon.  BCG estimates they will be 17 percent of the projected U.S. manufacturing average—$26 an hour for wages and benefits—by 2015.

But because American workers have higher productivity, and since rising fuel prices are making it even more expensive to ship goods half way around the world, costs in the two countries are converging fast. …

BCG bluntly praises Mississippi’s “flexible unions/workers, minimal wage growth, and high worker productivity,” estimating that in four years, workers in China’s fast-growing Yangtze River Delta will cost only 31 percent less than Mississippi workers.

That’s before you figure in shipping, duties, and possible quality issues. Add it all up, says BCG, and “China will no longer be the default low-cost manufacturing location.”

Labor costs typically are only 10 to 15 percent of the total cost of a manufactured product, so a small wage differential doesn’t make a big difference.

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A wage crisis, not just a jobs crisis

July 29, 2011

Michael Cembalest, chief investment officer for J.P. Morgan Chase, says corporate profits are high largely because the wages of American workers are at a 50-year low relative to the size of the U.S. economy and to corporate sales.  From his point of view, corporate profits are what matters, but he thinks they rest on a shaky economy.  Hence the title of his report: Twilight of the Gods.

Here’s a summary of his report by Harold Meyerson in The Washington Post.

Michael Cembalest, the chief investment officer of J.P. Morgan Chase, … asserted in the July 11 edition of Eye on the Market, the bank’s regular report to its private banking clients, that “U.S. labor compensation is now at a 50-year low relative to both company sales and US GDP.”

Click to view

The primary subject of Cembalest’s report isn’t wages. It’s profits — specifically, the fact that profit margins (the share of a company’s revenue that goes to profits) of the Standard & Poor’s 500 companies are at their highest levels since the mid-1960s, despite the burdens of health-care costs, environmental compliance and other regulations that are presumably weighing down these large companies.

“There are a lot of moving parts in the margin equation,” Cembalest writes, but “reductions in wages and benefits explain the majority of the net improvement in margins.”  This decline in wages and benefits, Cembalest calculates, is responsible for about 75 percent of the increase in our major corporations’ profit margins.

Or, to state this more simply, profits are up because wages are down. That’s not the only reason profits are up — innovation and offshoring factor in as well — but among the reasons, it’s a doozy.

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Recovery feeds profits, starves wages

July 1, 2011

Economists at Northeastern University have found that the current economic recovery in the United States has been unusually skewed in favor of corporate profits and against increased wages for workers.

In their newly released study, the Northeastern economists found that since the recovery began in June 2009 following a deep 18-month recession, “corporate profits captured 88 percent of the growth in real national income while aggregate wages and salaries accounted for only slightly more than 1 percent” of that growth. … …

According to the study, between the second quarter of 2009, when the recovery began, and the fourth quarter of 2010, national income rose by $528 billion, with $464 billion of that growth going to pretax corporate profits, while just $7 billion went to aggregate wages and salaries, after accounting for inflation.

The share of income growth going to employee compensation was far lower than in the four other economic recoveries that have occurred over the last three decades, the study found.

“The lack of any net job growth in the current recovery combined with stagnant real hourly and weekly wages is responsible for this unique, devastating outcome,” wrote the report’s authors, Andrew Sum, Ishwar Khatiwada, Joseph McLaughlin and Sheila Palma.

According to the Bureau of Labor Statistics, average real hourly earnings for all employees actually declined by 1.1 percent from June 2009, when the recovery began, to May 2011, the month for which the most recent earnings numbers are available.

via NYTimes.com.

Click on The Wageless, Profitable Recovery for the original article by Steven Greenhouse in the New York Times, which includes a link to the full Northeastern University study.

Hat tip for this link to Marginal Revolution, where Tyler Cowen wrote that such a steep “gradient” is unprecedented.

When will we be not willing to take it anymore?

June 6, 2011
Average number of weeks the unemployed were without work.  Click to view.

Yesterday I had a long lunch with a friend of mine who is struggling to survive in today’s job market.  He gets by with a patchwork of part-time and temporary jobs, but has not met with success in getting a regular job in spite of doing everything humanly possible.

He took out a student loan in order to get an advanced degree in his field, and found that his degree makes him less, not more, employable.  His experience is that employers don’t want highly qualified specialists.  They want jacks-of-all-trades who are willing to work cheap, which is what my friend has become.  This does not discourage him.  He is determined to do whatever it takes.  His situation is not unusual.  It is very common.

I said as much, and he pointed out that he is fortunate, compared to the vast majority of people in history, and in the world today.  The vast majority would be glad to get a sack of flour, or a sack of beans, potatoes or rice.  In New York, London and Paris of 150 years ago, an unemployed person could literally starve to death.  Yet here we were, eating delicious food in one of the Rochester area’s all-you-can-eat Chinese buffets.

Neither my friend nor I lives lavishly by American standards, but we don’t lack food, clothing, shelter or medical care.  Compared to the victims of the Haiti earthquake or the Pakistan floods, or even our journalist and teacher peers in places like Lagos, Cairo or Bangkok, we have wealth beyond the dreams of avarice.

I don’t claim that present conditions are unendurable.  I would be willing to accept greater economic austerity to achieve some valid purpose, to invest in the future for my little grand-nieces.  What angers me is that current economic insecurity serves nothing except the sense of entitlement of those who hold the levers of economic power.

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