"Challenging the Oligarchy" is Paul Krugman's review of Robert Reich's new book, Saving Capitalism. In the review Krugman plots the demise of a popular explanation for lousy wages: skill-based technological change (SBTC). That view often amounted to blaming the victim. Reich was a champion of SBTC in the 90s. But he's changed. He and Krugman both understand now that low wages reflect power and politics, not low skills and new technologies. But I am not sure if either of them understand how much mainstream economics in America is warped by adherence to an ideal of free competitive markets.
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Report of the Labor Advisory Committee (LAC) on the TransPacific Partnership (TPP)
I. Executive Summary
On behalf of the millions of working people we represent, we believe that the TPP is unbalanced in its provisions, skewing benefits to economic elites while leaving workers to bear the brunt of the TPP's downside. The TPP is likely to harm the U.S. economy, cost jobs, and lower wages.
The primary measure of the success of our trade policies should be increasing jobs, rising wages, and broadly shared prosperity, not higher corporate profits and increased offshoring of America's jobs and productive capacity. Trade rules that enhance the already formidable economic and political power of global corporations—including investor-to-state dispute settlement, excessive monopoly rights for pharmaceutical products, and deregulatory financial services and sanitary and phyto-sanitary rules—will continue to undermine worker bargaining power, here and abroad, as well as weaken democratic processes and regulatory capacity across all 12 TPP countries.
The LAC entered the TPP process hopeful and optimistic that the TPP would finally be the agreement that broke the elite stranglehold on trade policy and put working families at the front and center. Unfortunately, we believe the TPP fails to strike the proper balance: of course it is difficult to convince Vietnam to implement freedom of association before the TPP enters into force once Vietnam has already agreed to provisions that will force it to pay higher prices for medicines and subject even its most basic laws to challenge by foreign investors in private tribunals. Given the misguided values enshrined in the TPP, it is no surprise that the economic rules it will impose will actually make it harder to create a virtuous cycle of rising wages and demand in all 12 TPP countries.
While the TPP may create some limited opportunities for increased exports, there is an even larger risk that it will increase our trade deficit, which has been a substantial drag on job growth for more than twenty years. Especially at risk are jobs and wages in the auto, aerospace, aluminum and steel, apparel and textile, call center, and electronic and electrical machinery industries. The failure to address currency misalignment, weak rules of origin and inadequate state
-owned enterprise provisions, extraordinary rights provided to foreign investors and pharmaceutical companies, the undermining of Buy American, and the inclusion of a labor framework that has proved itself ineffective are key among the TPP's mistakes that contribute to our conclusion that the certain risks outweigh the TPP's speculative and limited benefits.
As part of our work to create this report, the LAC reviewed our NAFTA report from more than 20 years ago and the history of trade agreements implemented since that time. What is stunning is that despite the mounting evidence that neoliberal trade and globalization rules do not create shared prosperity and inclusive growth, and despite the fact that some of NAFTA's biggest supporters, including former Labor Secretary Robert Reich, now agree with us that corporate
-driven trade doesn't work for workers, we are essentially having the same debate as we had regarding NAFTA.
The LAC urges the President in the strongest possible terms to reverse course now. Do not send this TPP to Congress. Instead, the TPP should go back to the negotiating table. We want to work with you and our counterparts in the other TPP countries to create a truly progressive TPP that uplifts working people, creates wage-led growth, diminishes income inequality, promotes infrastructure investment, protects intellectual property without undermining access to affordable medicines, and respects our democracy.
This is just one excerpt, published Dec 1 by EPI. The whole piece, Fact Sheet|Economic Growth can be found at EPI.org.
Won't strengthening the Fed's full-employment mandate impinge on the Fed's independence?
Not in historical context.The Fed was created by Congress and gets its guidance from Congress. Under the law, the Fed is supposed to pursue a policy that promotes maximum employment and price stability. Congress decided that these goals should be the basis for policy when it enacted the Humphrey-Hawkins Full Employment Act of 1978. The concern is that the Fed has placed more emphasis on the price stability portion of its mandate than Congress had intended when it passed the law. The purpose of theFull Employment Federal Reserve Actis to emphasize the need for the Fed to give more weight to the full employment part of its mandate. Passing this law would be no more of an interference with the Fed's independence than passing the 1978 lawThe Fed was created by Congress and gets its guidance from Congress. Under the law, the Fed is supposed to pursue a policy that promotes maximum employment and price stability. Congress decided that these goals should be the basis for policy when it enacted the Humphrey-Hawkins Full Employment Act of 1978. The concern is that the Fed has placed more emphasis on the price stability portion of its mandate than Congress had intended when it passed the law. The purpose of theFull Employment Federal Reserve Actis to emphasize the need for the Fed to give more weight to the full employment part of its mandate. Passing this law would be no more of an interference with the Fed's independence than passing the 1978 law.
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Here's an excerpt from the conclusion of Anne Case and Angus Deaton 's new study, Rising morbidity and mortality in midlife among white non-Hispanic Americans in the 21st century.
The whole study, with excellent graphs, is attached.
"Although the epidemic of pain, suicide, and drug overdoses preceded the financial crisis, ties to economic insecurity are possi- ble. After the productivity slowdown in the early 1970s, and with widening income inequality, many of the baby-boom generation are the first to find, in midlife, that they will not be better off than were their parents. Growth in real median earnings has been slow for this group, especially those with only a high school education. However, the productivity slowdown is common to many rich countries, some of which have seen even slower growth in median earnings than the United States, yet none have had the same mortality experience."
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The sword of Damocles hangs over the head of the American labor movement. This spring the U.S. Supreme Court will rule on Friedrichs vs. CTA, a case that could end automatic union membership in all government jobs. If this "right to work" effort goes the way the right wing hopes, it would be followed by an aggressive and well-funded direct mail and robo-call campaign to encourage public sector employees to "give yourself a raise" by dropping their union memberships and ceasing to pay dues or fees.
Misleadingly titled "right to work" laws prohibit unions in the private sector from negotiating fees for the services they are compelled to provide to all workers they represent. They are designed to reduce unions' income and power. First introduced in 1947, these laws used to be limited to the former slave states of the Confederacy. But in recent years, a coordinated right-wing drive has expanded these laws to a majority of states, including union strongholds like Michigan and Indiana. Thanks in part to such laws, unions today represent only 7 percent of private sector workers. But factoring in the public sector raises total union density to 12 percent. Unions with substantial public sector membership—AFSCME, SEIU, the teachers unions—are the last remaining large, powerful unions in the U.S. Friedrichs is nothing less than an assassination attempt on the union movement.
....According to a recent Gallop poll, 58% of Americans support unions and want to see them strengthened. Research shows that one in three American workers would vote for a union at their workplace if an election were held today.
But a union election won't be held today at most workplaces. Vicious employer resistance and retaliation, a broken legal process and declining union resources stand in the way of most workplaces winning the majority vote that is required in our all-or-nothing union representation system.
Of course, the workers who want a union want… a union. They want an organization that can help raise their wages and improve their benefits, protect them from arbitrary and capricious firings and gives them voice in how things get done at work. All that a union can provide an at-large member right now is discount AT&T cell phone plans and pet health insurance. At-large memberships are not likely to lead to millions of new union members.
But there might be a couple hundred thousand people willing to pay 10 bucks a month to belong to a movement. Potentially faced with the immediate loss of exactly that many current members, that's an attractive proposition to unions. The key will be to actually bring a movement into people's homes, and that means connecting at-large union membership with advocacy and legislative campaigns.
A "right to your job" movement
Opening up the labor movement and pursuing new rights for all workers would help get labor out of the box of thinking mostly about unionized workplaces and appearing to be a special interest. Unions' recent embrace of ambitious efforts to raise state-level minimum wages to $15 has so far been at the heart of these efforts. Upwards of 24 million working people would receive a raise if the pathetic federal floor of $7.25 an hour was raised to just $10, so the Fight for $15 has a huge built in constituency beyond just fast food workers.
....
Imagine how quickly the debate would change if unions fought for and won meaningful job protections for all workers in a state! Call it a "right to your job" law. Such a law would lay bare just how cynically manipulative and hollow the so-called "Right to Work" laws are.
To be meaningful, such just cause laws would have to include some kind of a court in which to hear cases. This could be as simple as mandating private mediation and arbitration or as complex as creating new state regulatory agencies to hear such cases. If workers did have a court in which they could defend their employment, unions would have something real to offer at-large members as a part of joining the union. And with that offer comes the potential for substantial membership growth.
A radical departure for labor
Attempting to legislate job protections, pay and benefit increases for large groups of workers who probably won't become dues-paying union members would be a radical departure for the American labor movement. Unions have, for historical reasons, preferred to make their gains in contract bargaining. The early labor movement, in the 19th century, did work to pass laws on wages, hours and factory conditions. They saw most of those laws overturned, as well as many of their strikes and boycotts enjoined, by conservative courts that viewed unions' efforts as violations of private contracts and disturbances of interstate commerce.....
[Of course, a "right to A job" would be even better. j]
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With the unemployment rate falling to 5.3 percent, the lowest in seven years, policy makers are heaving a sigh of relief. Indeed, with the technology boom in progress, there is a lot to be optimistic about. Manufacturing will be returning to U.S. shores with robots doing the job of Chinese workers; American carmakers will be mass-producing self-driving electric vehicles; technology companies will develop medical devices that greatly improve health and longevity; we will have unlimited clean energy and 3D-print our daily needs. The cost of all of these things will plummet and make it possible to provide for the basic needs of every human being. I am talking about technology advances that are happening now, which will bear fruit in the 2020s. But policy makers will have a big new problem to deal with: the disappearance of human jobs. Not only will there be fewer jobs for people doing manual work, the jobs of knowledge workers will also be replaced by computers. Almost every industry and profession will be impacted and this will create a new set of social problems — because most people can't adapt to such dramatic change. If we can develop the economic structures necessary to distribute the prosperity we are creating, most people will no longer have to work to sustain themselves. They will be free to pursue other creative endeavors. The problem, however, is that without jobs, they will not have the dignity, social engagement, and sense of fulfillment that comes from work. The life, liberty and pursuit of happiness that the constitution entitles us to won't be through labor, it will have to be through other means. It is imperative that we understand the changes that are happening and find ways to cushion the impacts. .... The industrial revolution unfolded over centuries. Today's technology revolutions are happening within years. We will surely create a few intellectually-challenging jobs, but we won't be able to retrain the workers who lose today's jobs. They will experience the same unemployment and despair that their forefathers did. It is they who we need to worry about. The first large wave of unemployment will be caused by self-driving cars. These will provide tremendous benefit by eliminating traffic accidents and congestion, making commuting time more productive, and reducing energy usage. But they will eliminate the jobs of millions of taxi and truck drivers and delivery people. Fully-automated robotic cars are no longer in the realm of science fiction; you can see Google's cars on the streets of Mountain View, Calif. There are also self-driving trucks on our highways and self-driving tractors on farms. Uber just hired away dozens of engineers from Carnegie Mellon University to build its own robotic cars. It will surely start replacing its human drivers as soon as its technology is ready — later in this decade. As Uber CEO Travis Kalanick reportedly said in an interview, "The reason Uber could be expensive is you're paying for the other dude in the car. When there is no other dude in the car, the cost of taking an Uber anywhere is cheaper. Even on a road trip." The dude in the driver's seat will go away. Manufacturing will be the next industry to be transformed. Robots have, for many years, been able to perform surgery, milk cows, do military reconnaissance and combat, and assemble goods. But they weren't dexterous enough to do the type of work that humans do in installing circuit boards. The latest generation of industrial robots by ABB of Switzerland and Rethink Robotics of Boston can do this however. ABB's robot, Yumi, can even thread a needle. It costs only $40,000. China, fearing the demise of its industry, is setting up fully-automated robotic factories in the hope that by becoming more price-competitive, it can continue to be the manufacturing capital of the world. But its advantage only holds up as long as the supply chains are in China and shipping raw materials and finished goods over the oceans remains cost-effective. Don't forget that our robots are as productive as theirs are; they too don't join labor unions (yet) and will work around the clock without complaining. Supply chains will surely shift and the trickle of returning manufacturing will become a flood. But there will be few jobs for humans once the new, local factories are built. With advances in artificial intelligence, any job that requires the analysis of information can be done better by computers. This includes the jobs of physicians, lawyers, accountants, and stock brokers. We will still need some humans to interact with the ones who prefer human contact, but the grunt work will disappear. The machines will need very few humans to help them. This jobless future will surely create social problems — but it may be an opportunity for humanity to uplift itself. Why do we need to work 40, 50, or 60 hours a week, after all? Just as we were better off leaving the long and hard agrarian and factory jobs behind, we may be better off without the mindless work at the office. What if we could be working 10 or 15 hours per week from anywhere we want and have the remaining time for leisure, social work, or attainment of knowledge? Yes, there will be a booming tourism and recreation industry and new jobs will be created in these — for some people. There are as many things to be excited about as to fear. If we are smart enough to develop technologies that solve the problems of disease, hunger, energy, and education, we can — and surely will — develop solutions to our social problems. But we need to start by understanding where we are headed and prepare for the changes. We need to get beyond the claims of a Luddite fallacy — to a discussion about the new future.
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After reviewing more than 200 scholarly papers on the minimum wage for their book What Does the Minimum Wage Do?, Dale Belman and Paul J. Wolfson have found that it does pretty much what policymakers intended it to.
Their conclusions, in a nutshell:
[I]ncreases in the minimum wage raise the hourly wage and earnings of workers in the lower part of the wage distribution and have very modest or no effects on employment, hours, and other labor market outcomes. The minimum wage can then, as originally intended, be used to improve the conditions of those working in the least remunerative sectors of the labor market. While not a full solution to the issues of low-wage work, it is a useful instrument of policy that has low social costs and clear benefits.
This thorough study recently won Princeton University's 2014 Bowen Award for the year's outstanding book on labor and public policy.
Belman and Wolfson describe the above conclusions as "things we know with confidence" -- with the caveat that they come from studies of moderate minimum wage increases like those in the United States over the past few decades.
Their findings, they note, don't square with critics' claims that the minimum wage has unintended consequences that defeat its purpose by raising unemployment among low-income workers and providing too many benefits to people who don't need them:
The moderate increases seen in the United States have resulted in increased earnings with little or no effect on employment. The increase in earnings has gone largely to households in the lower half of the earnings distribution.
Critics often call for scrapping the minimum wage because the Earned Income Tax Credit (EITC) provides a better way of helping low-wage workers. Belman and Wolfson have a more nuanced reading, more consistent with the views of those of us who think the minimum wage and EITC are complementary policies, not competing approaches, for achieving the same goal:
While not a stand-alone policy for resolving the issues of low income in the United States, the effectiveness of moderate increases in the minimum wage in raising earnings with few negative consequences makes it an important tool for labor market policy.
Policymakers have to consider many practical questions in crafting legislation to raise the minimum wage. But they shouldn't be swayed by arguments that it doesn't have the intended positive effects. The evidence is strong that it does.
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