Tuesday, May 15, 2018

[NJFAC] April Unemployment: 3.9%. Be Glad, But Remember Those Left Behind by Frank Stricker

            Even those of us who think the U.S. economy is far from real full employment can admit that 3.9%  is a lot better than 5 or 6% unemployment. Unemployment's not been this low since December of 2000. Prior to that, you have to go back to the late 1960s to find unemployment rates under 4%. Some employers are now even eager to hire ex-convicts and people in prison, and at regular wages.
            It is a positive sign that more employers are complaining about labor shortages. As the economy continues to grow, it takes a little more effort for some employers to find workers. For agribusinesses, it's an extra problem because there's been less immigration from south of the border in recent years, and the work itself is strenuous and underpaid.
            Elsewhere, there's better times now in towns that were decimated by deindustrialization and capital flight. Then, young people left for the metropolis; now they don't want to come back, even when locals offer financial incentives. Around the country, fast-food business owners complain that they cannot find teenagers to work their stores. Some offer tuition reimbursements, bonuses, and even higher wages. It's just that tough for the bosses. But let's be realistic: it is tougher for severely underpaid fast-food workers, most of whom are adults, and who work every day to subsidize profits for owners and low prices for consumers.
            As to labor shortages, across the whole economy, there are millions of jobless people who can work. Six million were are actively searching for a job in April, and are considered unemployed. Some among them suffer extra-high unemployment. The rate for African- Americans was 6.6% in April, for black teens 29%, and for disabled people 8%. And that is the official count which leaves out a lot of people.
            Another fact suggests that there is no general labor shortage. Shortages should lift wages substantially; but wages aren't rising much. The mid-May earnings report from the Bureau of Labor Statistics is same-old, same-old. Real wages for rank-and-file employees in the private sector in April were exactly where they had been in April of 2017. Some labor shortage.
            But since unemployment is lowish, the lack of wage-growth is a puzzle. Why aren't average wages increasing? There are several explanations but I want to focus on two of them. One is a matter of will and ideology: employers' extreme application of the normal business practice of keeping wages down. As one commentator put it, "American businesses seem to think they are entitled to low-cost, untroublesome labor," so they resist the imperatives of the market. They began to do this in a big way in the 80s when Ronald Reagan led the assault on unions and working-class living standards. This fundamentalist effort to fend off wage hikes for rank-and-file workers is still with us, so that even when labor markets tighten up a little, some employers try every other thing than higher pay to attract workers.
            But there is a second, deeper explanation for why wages have not taken off, even with apparently full employment. There are millions of people who are essentially unemployed but are not counted as such. In other words, there is no general labor shortage, and the 4% official unemployment rate omits millions who are virtually unemployed. Here are three examples.[1]
            1. Every month, most newly employed people were not counted as looking for work and unemployed in the previous month. In January of 2018, 70% of the newly employed came off the sidelines. Big deal? Yes. This means there are a lot of people outside the labor force who are about to look for work or who are searching in a passive way or who are not searching at all, but all of whom are ready to work if their life situations change or attractive job possibilities come into view. In short, the population of those who would like to work but are not counted that way is large.
            2. Some of the people in this nearby labor force are mentioned in the government's regular employment survey. They are the 5 million people who say they want a job but are not currently searching for one.
            3. There is a very large group that includes quite a few people who either try for a job against heavy odds or don't even try. Poor and working-class prisoners were pushed into alienation and crime because of lousy labor markets due to racism, capital flight, and inadequate demand across the economy. Now, as ex-prisoners they again meet restricted job opportunities, and also harassment by the police and other officials. Some are caught up in a web of impossible situations that drive them back to crime if they are not already there.
            The number of felons in America jumped from 5 to 20 million between 1980 and 2010. Eight percent of adults in 2010 and 33% of adult African-American males had felony convictions. Many ex-prisoners do get jobs. Most face huge barriers. Studies have shown that ex-convicts are less than half as likely as others to get an employer call-back. More felons and even prisoners are being employed at regular jobs because of labor shortages in some locales across the country, but there are untold millions who will not get work even if they want it.[2]
            There's no general labor shortage. We'll know that there is one and that we are near real full employment when real wages rise 3, 4, or 5% for 3, 4, or 5 years running. We won't get there with anecdotes about employers who promise employee bonuses. Bonuses aren't widespread, they don't go into base pay, and often they don't amount to much. A $500 annual bonus for  someone earning a poverty-level income of $30,000 is not to be sneezed at, but it's only a 1.7% increase, and inflation wipes all of that out.
            In 2017, Trump, Ryan and the Cheatum Caucus gave huge tax-cut handouts to corporations and the rich. We know already that most of the new money is not going to job creation or higher wages. For real change, we'll need federal programs to create millions of good, regular jobs, and I know where we can get the money for it.
Frank Stricker is on the board of the National Jobs for All Coalition and is emeritus professor of History and Labor Studies at California State University, Dominguez Hills.
Notes

[1] None of these categories is a comprehensive estimate of the total number of people who are ready to work but not counted as unemployed, and each count includes people who are in the other counts.
 
[2] Alice Goffman, On the Run: Fugitive Life in an American City (NY: Picador, 2014);  Ben Casselman, "As Labor Pool Shrinks, Prison Time is Less of a Hiring Hurdle, " at nytimes.com/2018/01/13/business/economy/labor-market-inmates.html.
 
 
 

 

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Tuesday, May 1, 2018

[NJFAC] Will a Robot Take Your Job?

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Saturday, March 31, 2018

[NJFAC] We've Reached Real Full Employment! (April Fools)

Is the U.S. at Full Employment? Should We Put the Brakes on Job Growth to Avoid Inflation Down the Road?                                                                                 frank stricker
            The answers are no and no. Even when the official unemployment rate is 4.1%, we are not close to real full employment. And it does not appear that inflation is about to surge. If the authorities are really worried about it, they should develop counter-measures that do not cause more unemployment. 
            How these issues were worked on over the last fifty years is instructive. In 1969, after a 1964 tax cut, and hefty spending increases for the Vietnam war and for social programs, prices were rising 5.5% a year. But the official rate of unemployment was down to 3.5% and that lifted millions of people out of poverty. But there were  millions more who were still unemployed or underemployed. Some of these people rioted in America's cities. A special Department of Labor survey of ten inner-city communities revealed levels of unemployment that were much higher than those in the regular unemployment census.
            Yet in the late 60s and the 1970s, anti-inflation concerns often replaced anti-poverty and  employment concerns. Reducing demand for goods and workers was used to limit wage and price increases. A short recession in 1969-1971 raised unemployment and but did not moderate inflation much. Then world demand pushed food prices up and oil prices surged. The latter were a long-term and major cause of higher inflation, but it over time it seemed that wages got more blame than oil prices.
            In 1971-1974 President Richard Nixon tried wage-and-price controls--an interesting idea that worked pretty well in World War II--but unionists felt that wages were more tightly controlled than prices; and business leaders did not like price controls. So a possibly useful method for maintaining job growth while restraining prices was dismissed. Then the administration and the Federal Reserve engineered a deep recession--the worst since the 30s. But  textbook results did not follow. A new phenomenon was born: stagflation. Unemployment, which reached 8.5%, was supposed to limit wage and price increases, but it hardly made a dent. You'd have thought that this challenge to economic assumptions would cause experts to rethink the basics. If a recession with 8.5% unemployment did not have much effect on prices, perhaps the high-unemployment approach was wrong. But many experts doubled down on the old-time religion: if high unemployment did not tame inflation, then the economy needed more of it all the time. Not to worry. In the late 70s, former Nixon advisor, conservative economist Herbert Stein, wrote in the Wall Street Journal that people should simply consider that 7% unemployment was full employment. Guilt-problem solved,
            In the early 80s, Federal Reserve Chair Paul Volcker and President Ronald Reagan gave America a shocking recession with very high unemployment. The White House also joined the war on unions and working-class living standards. This recession and some lucky events got inflation rates way down. Job totals grew strongly, but many jobs were lousy ones.
            Economists, meanwhile, refined anti-worker inflation cures. A source here was conservative economist Milton Friedman's 1960s idea of a Natural Rate of Unemployment, below which unemployment must never be allowed to go. This Natural Rate idea was supported by contrived ideas of how workers reasoned about jobs and inflation. In  the 70s, Friedman's idea began to morph into NAIRU, the Non-Accelerating Inflation Rate of Unemployment.  The causative links between unemployment, wages, and prices were not always clear. But NAIRU was presented as a quasi-scientific way to determine how far down unemployment could go before wage-and-price inflation accelerated. While something like NAIRU seemed to work in the Reagan-Volcker recession, it did not have reliable predictive power. But it supplied scholarly sounding gobbledygook to justify the idea that workers had to bear the cost of inflation-fighting in the form of lost jobs and wrecked communities.
            As cheap imports ballooned and union membership sagged, the official unemployment number could get pretty low (4% in 2000) without much increase in prices. But NAIRU lived on and was often equated with full employment. Economists thus defined full employment by reasoning backward from the level of unemployment they guessed was needed to keep the lid on wages, not forward by what was necessary to employ everyone who wanted a job. More economists grew skeptical of NAIRU, but in 2017-2018, the staffs at the Federal Reserve and the Congressional Budget Office seem to believe this: 4.7% unemployment = full employment = NAIRU. But the official unemployment rate is 4.1%--lower than NAIRU--and wages and prices are not taking off.
            There are several reasons why 4.1% unemployment does not send wages and prices soaring. These reasons include falling union density and a flood of cheap foreign goods. But another reason is that real unemployment is much higher than 4.1%. There are millions of potential workers and quiet job-wanters who are ready to work but not counted as unemployed. The U.S. has a labor surplus, not a labor shortage. It's true, for example, that in some locales, there aren't enough truckers available at customary wage levels, so owners have to pay more. That's good, but let's not get too excited: $19.50 an hour and no company-supported health insurance is not exactly the lap of luxury, especially if you are making sizeable payments on your truck.
            We need to reframe the conventional view of current labor markets. There is no general shortage of workers today. Labor markets are just getting to where they should be. A huge fraction of workers are still paid rotten wages. It's not a labor shortage when tens of millions of workers earn less and often much less than $20 an hour. There are millions of potential employees outside the labor force and ready to work. (There is some duplication among the following groups, but the total may be as high as ten million.) There are five million people every month who say they want a job although they are not currently looking for one. These people offer a variety of explanations for why they are not looking, including illness, family responsibilities, and the belief that they will not find a job; some of them eventually go to work.
            Some of these 5 million are among the 7 million prime-age (25-54) males who are not working or even looking for work. Some of these men live in depressed areas in Chicago, Detroit, Cleveland, Paterson and Ocean City, New Jersey, rural areas of Alabama and Mississippi, West Virginia, East St. Louis, El Centro, California, and dozens of other left-behind communities. Some are disabled and some are drug addicts. But the number of disabled people in the labor force is rising and so is the number of prime-age men. There is, also, more demand for ex-prisoners--people who usually face huge barriers to getting hired. It is noteworthy too that the rate of employment for people without high-school diplomas is rising and that the percentage of people 55 and over who are in the labor force, which was 30% in 1993, is now 40%. These facts show that there is a large pool of labor that is not called unemployed but is virtually unemployed and ready to work.
            So looking at the big picture, we can emphasize the labor shortage: it's a boohoo situation for employers who have to accept the kinds of workers they used to reject. How tragic for them. Or we can say that labor markets are just beginning to function as they should. And good times for workers have barely begun. Over the last year, after-inflation wages for average employees and for new hires have not moved.
            Going forward, we should push for fuller employment--let's start by aiming for 3.0% in the official count--and we want wages on the up escalator. We've not had 3.0% since World War II. Before we get there, will inflation fears cause the Fed to put the brakes on job growth? What should people do about inflation? If inflation rates are only modestly higher, and less than wage increases, people should pressure the authorities to leave things alone. If wages are increasing at 4 to 5% and prices at 2 to 3%, and consistently so, that's a good deal for workers in the lower half. But what if prices surge? I don't have the answer but there are a variety of options. I wish some of the geniuses who run the government and the economy would have their experts working on anti-inflation policies that don't push millions of people down into unemployment and poverty. If politicians really love workers--many say they do--why have they gifted corporations and rich people with trillions of dollars in 2001, 2003, and 2017--no obligation to create jobs or raise wages--but not approved a new WPA to provide good jobs for millions who still need them, or authorized a measly hundred million dollars for Institutes to Study Solutions to High Inflation That Don't Require More Unemployment and Low Pay? Finally, why is the Fed is turning NAIRU-ish, raising interest rates to slow job growth, when there is still a lot of underlying unemployment to solve? 
Frank Stricker is in the National Jobs for All Coalition. He taught history and labor studies at CSUDH for thirty-five years. He has just written What Ails the American Worker? Unemployment and Rotten Jobs: History, Explanations, Remedies. For some sources behind this essay, e-mail frnkstricker@aol.com.
 
 
 
 
 
 

 

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Thursday, March 15, 2018

[NJFAC] The Federal Job Guarantee--Paul, Darity and Hamilton, CBPP

The Federal Job Guarantee - A Policy to Achieve Permanent Full Employment March 9, 2018 Mark Paul[1], William Darity, Jr.[2], and Darrick Hamilton[3]

....
At today's relatively low unemployment rate of 4.1 percent (January, 2018), 6.7 million workers remain unemployed, an additional 5 million are working part-time though they would prefer full-time work, and job seekers still substantially outnumber job openings.[5] Moreover, this aggregate picture masks the fact that unemployment does not affect all workers equally. Historical unemployment data highlight the persistent trend of discriminatory labor market practices that result in substantially higher unemployment rates for some social groups. For instance, black workers routinely face an unemployment rate that is roughly twice that of white workers, even after controlling for educational attainment.[6][7] There is recent evidence that narrowing of the racial unemployment gap occurs as the labor market tightens, but these gaps may be exacerbated during economic downturns.[8]
....

Conclusion

A job guarantee would fundamentally transform the current labor market in the United States. Our current conception of full employment is inadequate; we discuss a bold policy in this paper to bring the United States to a permanent, more accurate indicator of full employment­—by which we mean that everyone who seeks a job can find one at non-poverty wages. Beyond providing full employment, the job guarantee could be a turning point for American workers. Workers are faced with stagnating real wages and a continued erosion of labor's share of income. The job guarantee could significantly alter the current power dynamics between labor and capital—particularly for low-wage workers and traditionally marginalized groups.

Benefits of the program reach beyond those directly employed under the NIEC. If a job guarantee were to be implemented, it also would function as a de facto employment floor in the labor market. Private employers would have to offer wages and benefits that are at least competitive with the NIEC in order to attract workers. The universal nature of the program would ensure jobs for all—including those with some forms of disability who may not be employed through the private sector. The universal design is critical to ending working poverty and involuntary unemployment; this is in contrast to other forms of intervention in the labor market, such as minimum wage laws, which do not ensure access to employment in the first place. Nevertheless, complementary changes to the existing social insurance system would be necessary to eliminate poverty entirely, as some individuals may be unable to work for various reasons.[54]

Despite the discussion of full employment as a national priority for nearly a century now, policymakers have failed to deliver an economy that prioritized employment for all. Full employment is a goal that the private market in unable to achieve, therefore requiring government intervention in the labor market. Above, we discuss a transformative policy proposal—a federal job guarantee—whereby the government engages in the direct hiring of workers at non-poverty wages to achieve, and maintain, a full employment economy. Whether or not policymakers agree with the specifics we suggest in our proposal, we encourage them to think about bold solutions to achieve and maintain full employment. Restructuring our public policies to eradicate involuntary unemployment and poverty is within our reach.

Profs. Darity and Hamilton are on the Advisory Board of NJFAC. Hamilton will join Senator Bernie Sanders in a town hall on March 19th. See details below. jz

Senator Bernie Sanders will hold a televised town hall on March 19th to address the issue of economic inequality. Tune in live as Milano Professor of Economics and Urban Policy, Darrick Hamilton joins Sen. Bernie Sanders, Sen. Elizabeth Warren (D-Mass), and filmmaker Michael Moore on the four-person panel. 

"The town hall, called "Inequality in America: The Rise of Oligarchy and Collapse of the Middle Class," will take place from 7 to 8:30 pm ET before a live audience in the auditorium of the U.S. Capitol. It will be broadcast online with the help of the event's digital media partners, The Guardian, NowThis, The Young Turks and Act.tv." – HuffPost

Read More.

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National Jobs for All Coalition
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Tuesday, March 6, 2018

[NJFAC] High Wages Improve Economic Performance

Even McKinsey Gets It: High Wages Improve Economic Performance

Economic stagnation is the outcome of conscious policy choices.

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Thursday, February 15, 2018

[NJFAC] Wages Again? Yup. It’s a Swamp Out There, So Let’s Review the Facts

Wages Again? Yup. It's a Swamp Out There, So Let's Review the Facts      Frank Stricker
            Every other day, Mr. Trump and his cronies tell us that wages have increased since their great American policies began. And every other month, reporters discover a wage surge. Recently, you could have read that average hourly pay had risen 4.9% or 2.9% or some other substantial number. Reporters have been searching for a wage upswing for a long time, and especially now that unemployment seems low and demand for workers high. But unemployment is not so low, as is apparent in NJFAC's alternative monthly rate.
            Sometimes reporters don't bother to talk about real wages, that is, after the effects of inflation are accounted for. They also tend to talk about the whole non-farm, private sector work force, which gives too much weight to the success of the minority that is doing well. We should be talking about rank-and-file workers.  When we do, we find that real hourly wages went up--hold your breath--0.1% from December of 2016 through December of 2017. That's one-tenth of one percent for a year. How about January of 2017 through January of 2018? Still just 0.1%.
            Thanks, Don. On Valentine's Day, the Vice-Liar in Waiting, Mike Pence, said that 4.5 million workers were getting raises because of administration policies. But the employed work force is 155 million and two-thirds of them are not doing well. The losers include Trump's white working-class supporters. Their pay is lagging and they are getting less than their share of new jobs; sometimes college graduates are getting jobs they used to get. Overall, wages for people in the top 40% are substantially higher than they were in the 1970s, but wages for the bottom 60% are about where they were 45 years ago.
            Obviously wage stagnation is not just Donald Trump's fault. At least Trump talked about it. But he's done nothing to fix it. Will his white working-class supporters get tired of the circuses and look for something real?  And will they find it? Will Democrats across the country in this election year promise to work for a $15 federal minimum wage? They did not do so in 2016. It's the very least they should be doing on the wage front right now. 
 
Sources: Bureau of Labor Statistics, Real Earnings--January 2018, 2; Robert Shapiro, "The New Economics of Jobs is Bad News for Working-Class Americans--and Maybe for Trump," Brookings, January 16, 2018; The Hamilton Project, Thirteen Facts about Wage Growth (September, 2107), Fact 2.
Frank Stricker is Emeritus Professor of History and Labor Studies at California State University, Dominguez Hills, a member of the National Jobs for All Coalition, and has written What Ails the American Worker? Unemployment and Crummy Jobs: History, Explanations, Remedies.
 
 
 
 
 
 

 

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Tuesday, January 23, 2018

[NJFAC] What explains wage stagnation?

Why Is It So Hard for Americans to Get a Decent Raise?

A new answer could change how we think about unions, monopolies, and the minimum wage. By Jordan Weissmann Jan 16, 2018

....
Since 1979, inflation-adjusted hourly pay is up just 3.41 percent for the middle 20 percent of Americans while labor's overall share of national income has declined sharply since the early 2000s. There are lots of possible explanations for why this is, from long-term factors like the rise of automation and decline of organized labor, to short-term ones, such as the lingering weakness in the job market left over from the great recession. But a recent study by a group of labor economists introduces an interesting theory into the mix: Workers' pay may be lagging because the U.S. is suffering from a shortage of employers.

The paper—written by José Azar of IESE Business School at the University of Navarra, Ioana Marinescu of the University of Pennsylvania, and Marshall Steinbaum of the Roosevelt Institute—argues that, across different cities and different fields, hiring is concentrated among a relatively small number of businesses, which may have given managers the ability to keep wages lower than if there were more companies vying for talent. This is not the same as saying there are simply too many job hunters chasing too few openings—the paper, which is still in an early draft form, is designed to rule out that possibility. Instead, its authors argue that the labor market may be plagued by what economists call a monopsony problem, where a lack of competition among employers gives businesses outsize power over workers, including the ability to tamp down on pay. If the researchers are right, it could have important implications for how we think about antitrust, unions, and the minimum wage.....



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