Sunday, April 7, 2019

[NJFAC] It’s True: Real Wages Are Rising. But Fast Enough? And for How Long? Frank Stricker

             The real wage for rank-and-file workers in January of 2019 was 2% above what it had been in January of 2018. Last year was the second best of the last ten years. But will the good news continue? We're due for a recession, but even if we avoid that for a while, there are the usual impediments to strong wage growth: low rates of unionization, a federal minimum wage stuck at $7.25, and millions of workers just outside the labor force eager to work when decent jobs appear.* In the last ten years, the annual average increase in the purchasing power of a rank-and-file worker's wage has been 0.5%--half of a percentage point.
            Also, despite better labor markets, some capitalists seem confident enough of always finding workers to take back with one hand what they have given with the other. Amazon-Whole Foods is raising hourly rates, but it is also cutting hours for workers, many of whom aren't making that much to begin with. UBER slashed drivers' per mile rate from 80 cents to 60 cents. Even before the cut it was likely that after paying for the upkeep of the car, contributing to Social Security, and buying health insurance, many drivers weren't even earning the minimum wage. So labor markets aren't as strong as some observers say.
            But they are better and the average money wage--the dollar amount written on your paycheck--is up 3 to 4%, and after inflation, 2% a year. Why the good news? Inflation rates are low, partly because oil prices are down. Also, a fair number of state and local governments have raised their minimum wages. (In California, firms with at least 26 employees must pay $12 an hour this year and some localities require more than that.) And another reason: we're not close to full employment, but the number of desperate people who will work for very low pay must be shrinking and the ratio of job seekers to job slots has fallen. More employees have confidence that they can find a better job. The rate of workers quitting their jobs reached a 17-year high in 2018. Other evidence of tighter labor markets include the fact that job-ghosting--not letting your employer know you've quit--is on the rise. One recruiter says she's seen a spike in no-shows for job interviews and for first days on the job. What's more, the number of people working part-time who want full-time work is down and so is the number who say they are out of work due to illness and disabilities. (The number of such people rises when labor markets are bad.)
            In addition, unemployment rates for low-wage workers, less educated workers, and minorities are down. For example, African-American unemployment rates were 6.8% in January; they had been 16.5% in January of 2010. But--there's always a but--black unemployment rates are still double white rates. And in the next recession, people of color, the working poor, and people with less education will add more points to their unemployment rates than better off workers. Scholars Julia Hotchkiss and Robert Moore found that benefits to disadvantaged groups in hot economies are smaller than their losses in bad times.
            There are well-known solutions to such problems and to wage inertia. First, equality of access to good schools and good jobs. That means affirmative actions. Second, the federal minimum wage must be raised to $15. Third, there should be legislation that obligates the federal government and the Federal Reserve to avoid or soften recessions. Despite current restraint, if Federal Reserve officials believe that wages or prices are rising too fast, they will tighten credit to cut economic demand and raise unemployment. Fourth, as part of both anti-recession policy but everyday policy, the federal government should establish large-scale direct job-creation programs. One such program has been introduced into the House of Representatives by allies of the National Jobs for All Network. Several senators have their own ideas for job programs.         It seems crystal clear that the private sector does not create enough good jobs. Or maybe they do and I'm wrong. Perhaps a total real-wage increase of 12% over the last nineteen years is good enough for U.S. workers. I am pretty sure the robber baron class would not accept that kind of increase for themselves.
* I am not an economist, so I may not understand. But it's hard for me to accept that insufficient productivity growth is a key reason why wages aren't increasing much. In a just world, it might be so. In our real world, the robber baron class grabs most of the gains of rising productivity. They've been doing it for forty years now.
Frank Stricker is emeritus professor of history and labor studies at California State University, Dominguez Hills, and he is a board member of the National Jobs for All Network. He's written a book called American Unemployment: Past, Present, and Future.

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