Sunday, September 6, 2015

September 6 2015. I often write that the earnings of most U.S. workers are in decline (after inflation is factored in). The movers and shakers seem quite content to ignore that worrying fact. They really shouldn’t. It is not indicative of a healthy economy. The American Business Model has serious structural problems which are being largely ignored.



THE DATA ARE OUT THERE IF YOU ARE PREPARED TO LOOK. WHAT YOU FIND WILL DEPRESS YOU (or maybe not, if you are an unfettered capitalist—and regard social concern as something for wimps)

The objective of any economic system should be to enhance the quality of our economic lives—and thus the quality of our lives in general. When I say “our economic lives,” I’m not talking about a privileged elite—but the population as a whole. All of us.

My concern is about “We The People,” not the decidedly privileged 20 percent who do very well out of the current American Business Model—nor the ultra-rich 1 percent who dominate the political system

Here, I’m not arguing for wealth and income equality—or any utopian ideal—but a fair and equitable economic system which factors in the quirks and imperfections of human nature, and deals with the reality that bad things can happen to good people (and vice versa).

To be more specific, I believe we need an incentive based, competitive, economic system, starting from a base of equal opportunity which pays well, includes a comprehensive social safety net, is geared to full employment, and which emphasizes innovation, creativity, maximizing human potential, and pays singular attention to those hard to quantify factors that uplift the human spirit like social capital, health, the arts, the quality of our environment—and that vital concept, the public good. Paradoxically, an effective competitive economy must also be a cooperative one.

But how on earth do we achieve that? Actually, we know perfectly well how to do it. We have these things called principles from which we derive rules (also known as laws and regulations). We simply decide what is appropriate to be done when—and by who. A great deal of trial and error is involved but that’s how society works—or should work. Sometimes we lose the plot.

At present, the so-called ‘Free Market’ is becoming increasingly monopolistic as large corporations merge and take each other over—yet the trust which underpins societal cooperation has never been in worse shape. The U.S. is evolving the worst of both conditions—fortunately with some notable exceptions at city level.

Similarly, an effective economic system must balance active government with the private sector—with constant experimentation required to determine who does what best. That condition will evolve and change—because people and circumstances do. But to say something like “The private sector always does things better,” is ridiculous. There are good governments and bad governments much as there are effective corporations and truly terrible ones. That apart, at a certain point, both both government and private organizations become so large and bureaucratic that it is hard to tell the difference. The worst situation of all is when is when government and corporate power and influence becomes intertwined to feed of the public at large. That is sometimes called ‘Crony Capitalism’ because that is exactly what it is. It is where the U.S. is right now.

To that end, I’m a somewhat pragmatic economist. I’m primarily interested in what works based upon the best evidence available. Fortunately, these days, we can lay our hands on a great deal of data and now have the means—thanks to technology—to collect, store, analyze, and learn from it, at speed.

That means we can make decisions based upon facts rather than ideology.

Are we doing so? So far, the American Business Model has rejected facts in favor of ideology—and the nation is much the poorer for it.


Low-Income Workers Have Shrinking Paychecks Thanks To Stagnant Wages and Increasing Living Costs

The Atlantic · by Gillian B. White · September 4, 2015

Since the recession officially ended in 2009, Americans have watched the economy slowly improve: More people are back to work, unemployment has decreased 4.9 percentage points from its height, and economic growth is slowly increasing, up 2.4 percent in 2014. But there are those who haven’t seemed to benefit much from these gains. A recent report from the National Employment Labor Project (NELP) found that for workers in the lowest-paying jobs things have actually gotten worse.

According to NELP’s report, the real unemployment rate—which would also count those who are working part-time who would rather be working full time—remains above 10 percent though the national average is currently listed as almost half that, at 5.1 percent. It’s also worth noting that improvement in unemployment has been vastly uneven, and problems of long-term unemployment, discouraged workers, and low labor-force participation are still plaguing the U.S. labor market.

But perhaps one of the most disheartening factors of the recovery has been persistently stagnant wages, which haven’t budged significantly for years. That means that though the economy might seem to be on the mend, most people aren’t feeling or seeing the real benefits. And that has ripple effects for people’s spending habits, preventing them from putting money back into the economy. But the bigger problem for low-wage workers is that when stagnant wages are coupled with the rising cost of of living, paychecks don’t stretch as far. The result is decreased purchasing power, a phenomenon, which the paper calls wage-loss. And it’s much more problematic among the lowest-income workers.

Decline in Real Wages 2009-2014 NELP

According to their research, between 2009 and 2014, wage loss across all jobs averaged 4 percent. For those in the lowest one-fifth of earners, those losses averaged 5.7 percent.

The picture grows more grim when separating by occupation: Those who work as janitors, cooks, housekeepers, and home health aides had their real wages drop the most, as much as 8.9 percent, leading to lost wages of about $437 each year.

Although an annual loss of around $400 might not seem like a lot, for the households at the bottom of the pay-scale that are already struggling to make ends meet, a few hundred dollars can be a big deal. Perhaps the most distressing finding in the report is that these low-wage jobs—the ones where declines in real wages have been the most acute—are also the jobs that have hired the highest share of new workers during the recovery. That means that the many workers who have been counted as successfully rejoining the labor force, will face continued economic hardship.

“The wage foundations for millions of new jobs over the coming years could be especially shaky and inadequate, providing little economic security,” write Claire McKenna and Irene Tung, the paper’s authors. “Workers in these jobs are typically less resilient to unemployment, illness, and other destabilizing life events, and as their numbers grow, so too will the consequences of this instability.”

The Atlantic · by Gillian B. White · September 4, 2015

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