Saturday, October 12, 2013

Jobs Crisis Halfway through our Lost Decade

We've had 5 years of little progress in the unemployment problem. The unemployment rate was last reported as 7.3 percent, compared to 4.6 percent 6 years ago. Economic Policy Institute: "The U.S. labor market is only about one-fifth the way to a full recovery; and as long as the jobs crisis festers, inflation-adjusted wages will stagnate or fall for the vast majority of workers.

The current pace of job growth is still slower than what's needed for the economy to return to full employment any time soon. At this pace, it will be more than five years until we get back to the pre-recession unemployment rate.

The numbers show that we have made surprisingly little progress fixing the damage caused by the Great Recession. One of the best measures for assessing that progress is the "employment-to-population" ratio (EPOP), which is simply the share of the working-age population with a job. The EPOP is currently 58.7 percent (The 63.2% "labor participation rate" is the lowest since May 1978.)

Some of the lack of progress in the EPOP can be explained by demographic trends such as retiring baby boomers and increasing college enrollment of young people. To better gauge, the employment-to-population ratio of “prime-age” workers (age 25–54) dropped from over 80 percent in early 2007 to 75.9 percent in 2013. In other words, we are four years into the "recovery", but we have climbed only about one-fifth of the way out of the hole left by the Great Recession.

An analysis by the Economic Policy Institute shows that at least three million total jobs have been lost in this recovery due to public-sector job cuts and other cuts in government spending (not counting the recent government shutdown) and to the fact that those cuts have also had a ripple effect in the private sector (the "multiplier effect" happens when jobs are added).

The very high unemployment of the last four years has exerted strong downward pressure on wage growth, since the existence of so many unemployed workers relative to job openings, combined with the lack of outside job opportunities for workers with jobs, means employers don’t have to pay substantial wage increases to get and keep the workers they need.

Between 1979 and 2007 wages and salaries as a share of overall income fell from 70 percent to 60 percent. Over this same period, the income going to the top 1 percent of households has more than doubled, from 9 percent to 19 percent. (Since the Great Recession ended, the income gap has only grown wider.)

Political inaction, or “political drift,” on the minimum wage — allowing the real minimum wage to be eroded by inflation — or unionization policy is certainly part of the story. Globalization and international trade have exerted downward domestic wage pressure while increasing returns to wealth, with pressures on inequality growth stemming both from irreversible market forces and certain trade policy choices (such as NAFTA and the proposed TPP)

The Washington Times: U.S. workers must protect themselves from uncontrollable influences. The employment cycle has changed throughout the decades. Prior to the 1990s, employees were dedicated to one company for most of their careers. They were loyal. If they were well-qualified and willing to step up to the challenge, their salaries and benefits increased steadily and fairly predictably throughout their careers.

In general, self-protection, selfishness and self-interest in the workplace are undesirable worker traits since companies want to hire workers who are devoted to the interests of the business. But company loyalty is a two-way street, which many companies seem to have forgotten.

At this time, it’s clear that neither publicly traded nor privately owned companies are putting the American worker first. In addition, the government is stalled and unions, save those in the public sector, are quite weak. In this environment, American workers must learn to protect themselves, no longer relying on corporate or government promises. They must plan for any potential outcome. (Workers who filed for jobless benefits on or after June 24 of this year qualify for just the 26 weeks of benefits -- 20 in some states -- because the federal extended program ends in December.)

Federal Reserve Chair nominee Janet Yellen: "Long-term unemployment can make any worker progressively less employable, even after the economy strengthens. These are not just statistics to me. We know that long-term unemployment is devastating to workers and their families.” For Yellen, economics is not a dry subject: it is about real lives, and she believes it is worth risking a little inflation if it results in jobs. She has also analyzed single motherhood, denying it is a result of welfare payments and blaming it on a decline in shotgun weddings.

No comments:

Post a Comment