Largest Ever Low-Wage Worker Protest Sweeps United States

Thursday, April 16, 2015

by Common Dreams

'I Know We Will Win'

Day of action calling for a $15 minimum wage and the right to organize reached far beyond US borders

by Sarah Lazare, staff writer

"Fast-food workers are joining together and standing up for what’s right, and with students, #BlackLivesMatter activists, adjunct professors, home care, Walmart, child care, and airport services workers standing with us, we are stronger than ever," said Terrence Wise, fast food worker in Kansas City, Missouri.

In what is being called the largest low-wage worker protest the United States has ever seen, tens of thousands of fast food, laundry, home care, child care, retail, and education employees walked off the job or staged rallies on Wednesday in more than 200 cities across the country.

They were joined by workers in 35 countries on six continents, from New Zealand to Brazil to Japan.
The mobilization was part of the movement for a $15 dollar minimum wage in the U.S., which has touched off a nation-wide conversation about poverty and inequality since fast food workers began a series of rolling strikes and workplace actions more than three years ago.

"Fast-food workers are joining together and standing up for what’s right, and with students, #BlackLivesMatter activists, adjunct professors, home care, Walmart, child care, and airport services workers standing with us, we are stronger than ever," said Terrence Wise, a father of three who works at McDonald's and Burger King restaurants in Kansas City, Missouri, in a press statement. "I know we will win."

Backed by the Service Employees International Union, Wednesday's rallies were timed to coincide with Tax Day in the U.S., in a bid to highlight the fact that low-wage workers are forced to rely on public assistance to get by.

Under the banner "We are worth more," protesters are calling for living wages, as well as the right to organize in their workplaces without intimidation and retaliation.

In the streets on Wednesday, protesters made connections between social and economic justice. From Charleston, South Carolina to Ferguson, Missouri, protesters memorialized the lives of unarmed people of color killed by police and brought the message of the growing Black Lives Matter movement.

"We joined the Fight for $15 because, for us, racial justice is economic justice. We believe that Black workers have paid undeserved debts to greedy corporations for far too long," said Charlene Carruthers, national director for the Black Youth Project 100.

A report released on Monday by the National Employment Law Project finds that women and people of color are dramatically overrepresented in the underpaid work-force, with over 50 percent of African-American workers, and nearly 60 percent of Latino workers, making less than $15.

Wednesday's protests called for worker justice far beyond U.S. borders.

"The fast-food industry is dominated by a handful of multi-billion-dollar global companies, so we need to have a strong, global movement of workers pushing for better wages, better treatment and better rights," said Massimo Frattini, international coordinator for the International Union of Food workers in a press statement.
Participants say that this movement is a matter of urgency, amid rising inequality and plummeting wages in the U.S. and world-wide.

As Andrew Olson, McDonald's worker in Los Angeles put it in an interview with The LA Times, "Just because I work in fast food does that mean I should have to just scrape by in life?"

Looking to the future, journalist Rana Foroohar argued in Time that the Fight for $15 is proving a powerful force. "Politicians are going to have to grapple with this in the election cycle," wrote Foroohar, "because as the latest round of wage protests makes clear, the issue isn't going away anytime soon."

Low-wage jobs drive the recovery

By Ned Resnikoff -msnbc

It’s not uncommon to hear economics writers dismiss post-recession job growth as evidence of a “McJobs Recovery.” Sure, jobs may be slowly coming back, the argument goes, but not good jobs. Instead, employment growth seems to be largely concentrated in the sectors of the economy where wages are lowest.

That argument received some empirical ballast with the release of a report from the National Employment Law Project (NELP) that finds low-wage industries have grown at a disproportionately high rate since the end of the recession. The report’s author, policy analyst Michael Evangelist, finds that 44% of job growth since the end of the recession has been concentrated in industries where the median wage is $13.33 or less. That includes food service, retail, and administrative services (which includes jobs like security, maintenance, and janitorial work).

This is only the most recent in a series of NELP reports on the McJobs Recovery, all of which have found similar results. Evangelist told msnbc the consistency suggests this might be more than a hiccup on the road back to relative prosperity.

“Early on when we were doing these reports, we just speculated cyclical factors,” he said. “So one year into the recovery, consumer demand was growing and you’d see more growth in the restaurant food service industry.” But as food service continued to grow at a disproportionately high rate, NELP analysts came to see unbalanced growth as a more stable feature of the economic landscape.

“Now we’re five years into this and these are still the industries that are growing quickly,” said Evangelist.

Food service isn’t just one of the economy’s most fecund sectors: It’s also its most unequal, according to another report released last week by the left-leaning think tank Demos. In that study, Demos policy analyst Catherine Ruetschlin found that food services and retail had bigger worker-to-CEO compensation gaps than any other sector of the economy.

The steady encroachment of low-wage jobs may help to explain why median income in the United States has begun to stagnate even as the wealth of the country’s economic elite soars into previously unexplored altitudes. Last week, The New York Times reported that America no longer leads the world in median wealth, having been surpassed by Canada for the first time in at least decades.

No Economy For Americans

Paul Craig Roberts

The Dow Jones stock average closed Friday at 17,137, despite the fact that the payroll jobs report was a measly 125,000 new jobs for August, an insufficient amount to keep up with the growth in the working age population.

The low 125,000 jobs figure is also inconsistent with the Bureau of Economic Analysis’ second estimate of second quarter 2014 US GDP growth of 4.2 percent–a figure beyond the capability of the present-day US economy.

Clearly, the economic numbers are out of sync with one another. They are also out of sync with reality.

One of the reasons the stock market average is high is the massive liquidity the Federal Reserve has pumped into the banking system since 2008. Instead of going into consumer inflation, the money went into stock and bond price inflation.

Another reason for the artificial high stock market is the multi-trillion dollar buy-back of their own stock by US corporations. Many of these corporations have even borrowed from the banks in order to drive up their share prices with heavy purchases, thus maximizing executive bonuses and the values of stock options for board members. In effect, they are looting their own firms by loading the companies with debt in order to drive up executive and board incomes.
The stock market’s rise is not because consumer incomes and real retail sales are growing. Real family median incomes have been falling, and real retail sales, at best, are flat.

Let’s look at the composition of the pathetic 125,000 new jobs, and then we will examine whether these jobs are real or make-believe. (Keep in mind that payroll jobs include part-time jobs and that the number of payroll jobs is not the number of people employed, because many Americans make ends meet by working two and even three jobs.)

As I have reported for many years, the US economy no longer is capable of creating goods producing jobs. The Bureau of Labor Statistics August payroll jobs report shows zero manufacturing jobs. I read the other day that the US now has four or five times more people on food stamps than in manufacturing jobs.
The jobs of the New Economy are in lowly paid, nontradable domestic services–the jobs that characterize a Third World Economy.

Perhaps reflecting the collapse of retail sales, retail trade lost 8,400 jobs in August.

“Professional and business services” accounted for 47,000 or 38% of August’s new jobs. Of these 47,000 new jobs, 49% consisted of “administrative and waste services,” largely temporary help services.

“Health care and social assistance” accounted for 42,700 or 34% of the new jobs of which 53% consists of “ambulatory health care services.”
Waitresses and bartenders accounted for 21,100 or 17% of the new jobs.

There were 8,000 new government jobs or 6% of the 125,000 new jobs.

That’s it. That is the job picture of “the world’s only superpower,” “the world’s largest economy,” “the world’s richest people.” It is the picture of employment in a Third World country.

And now for the real question: Are those 125,000 new jobs really there, or are they a statistical mirage? Statistician John Williams (shadowstats.com) says the jobs are a mirage produced by “the changing seasonal adjustments within the concurrent-seasonal adjustment process used by the Bureau of Labor Statistics” and by the birth/death model, which assumes that many more unreported new jobs are created each month by new start-up businesses than are lost from unreported business closings. Williams says that without the gimmicks used by BLS to create jobs that are not there, the actual change in August payrolls “was a solid contraction in excess of 125,000 jobs.” In other words, the economy did not gain 125,000 jobs. It lost 125,000 jobs.

Beginning with the Clinton regime, the American economy has only worked for the One Percent, and it only works for them because the government makes the 99 percent bail out the One Percent. The American economy is an Aristocratic Economy that works for the government-privileged few, but not for anyone else. To understand this hard fact, read Nomi Prins book, All The Presidents’ Bankers.

Of course, the real figures are more like the Ten Percent and the 90 percent. The One Percent caught on, because the upper reaches of that one percent are all multi-billionaires with more money than a family could spend in multiple lifetimes.

The time has passed when American corporations had a sense of social responsibility. Two distinguished Americans writing in Daedalus, one of the few remaining publications not (yet) under corporate control, show that US corporations have become socially dysfunctional because they only serve shareholders and executives.

Historically in the US, corporations had responsibilities to their customers, employees, communities, and owners. In recent years this has been changed. Today corporations only have responsibilities to their shareholders. If profits go up, executives receive performance bonuses for serving shareholders.

Reducing executive success to one indicator has has enormous negative consequences for everyone else. Americans are suffering in many ways. Their jobs, both manufacturing and professional tradable services such as software engineering, have been moved offshore and given to foreigners. Americans have been deprived of interest income so that the former bank officials in charge of the US government can save the banks that deregulation permitted to over leverage with debt and risk.

The costs of customer service has been shifted to customers who lose large amounts of time waiting to connect with a live person who can correct the mistake the company has made. The unleashing of greed as the only business virtue and pressure from Wall Street for greater profits has caused many service providers, such as telephone and Internet, to forego maintenance and upgrade of facilities in order to hold down costs and boost profits. My telephone ceased to work on September 3, and my service provider lacks sufficient work crews to repair my line prior to the evening of September 8. Last year my Internet provider could not reestablish my Internet service for 10 days. If you call about a bill or a service problem, the companies keep you on the line forever awaiting a real person while they try to sell you new services even though the ones you have purchased don’t work.

Sufficient service crews to provide satisfaction for customers means higher costs, less profits, less shareholder earnings and less performance bonuses for managers. Guess who pays the price for the large rewards to owners and managers–the customers.

I remember the days of AT&T, a regulated monopoly. Everything worked. Any problem was fixed within two hours, barring a major catastrophe such as a hurricane or tornado. The telephone was answered no later than the third ring by a real person, not a voice recording, and the person who answered could fix any problem. There was no menu of a half dozen or dozen from which to select and to wait another quarter hour while being given sales pitches.

Profits made by imposing costs on customers are not legitimate profits. Profits made by
relocating American jobs offshore are not legitimate profits. Profits achieved by bailouts of managerial mistakes by taxpayers who provide the bailout funds but don’t share in the bonuses are not legitimate profits.
Profits achieved by monopoly concentration, as now exists in the financial “services” industry, are not legitimate profits.

In America, franchises, chains, and big-box stores have destroyed a wide array of independent and family businesses that allowed enterprising Americans an independent existence.

Deregulated free-market America has created an economy that serves only the few, which explains the extraordinary concentration in the 21st century of income and wealth in fewer and fewer hands–another defining characteristic of a Third World country.

American capitalism has failed. It can no longer produce jobs for the work force, and its
profits come from its political ability to impose costs on the American population.

The Truth about the American Economy

A Lie That Serves The Rich
Paul Craig Roberts, John Titus, and Dave Kranzler

The labor force participation rate has declined from 66.5% in 2007 prior to the last downturn to 62.7% today. This decline in the participation rate is difficult to reconcile with the alleged economic recovery that began in June 2009 and supposedly continues today. Normally a recovery from recession results in a rise in the labor force participation rate.

The Obama regime, economists, and the financial presstitutes have explained this decline in the participation rate as the result of retirements by the baby boomers, those 55 and older. In this five to six minute video, John Titus shows that in actual fact the government’s own employment data show that baby boomers have been entering the work force at record rates and are responsible for raising the labor force participation rate above where it would otherwise be.

It is not retirees who are pushing down the participation rate, but those in the 16-19 age group whose participation rate has fallen by 10.4%, those in the 22-14 age group whose participation rate has fallen by 5.4%, and those in the 24-54 age group whose participation rate is down 2.5%.

The offshoring of US manufacturing and tradable professional service jobs has resulted in an economy that can only create new jobs in lowly paid, increasingly part-time non-tradable domestic service jobs, such as waitresses, bartenders, retail clerks, and ambulatory health care workers. These are not jobs that can support an independent existence. However, these jobs can supplement retirement incomes that have been hurt by many years of the Federal Reserve’s policy of zero or negative interest rates. Those who were counting on interest earnings on their savings to supplement their retirement and Social Security incomes have reentered the labor force in order to fill the gaps in their budgets created by the Fed’s policy. Unlike the young who lack savings and retirement incomes, the baby boomers’ economic lives are not totally dependent on the lowly-paid, part-time, no-benefits domestic service jobs.

Lies are told in order to make the system look acceptable so that the status quo can be continued. Offshoring America’s jobs benefits the wealthy. The lower labor costs raise corporate profits, and shareholders’ capital gains and performance bonuses of corporate executives rise with the profits. The wealthy are benefiting from the fact that the US economy no longer can create enough livable jobs to keep up with the growth in the working age population.

The clear hard fact is that the US economy is being run for the sole benefit of a few rich people.

The Economy is Falling Further and Further Behind

Defining Success Downward 

by DEAN BAKER

Proponents of austerity both in the United States and Europe are eager to claim to success for their policies. In spite of economies that look awful by normal standards, austerity advocates are able to claim success for their policies by creating a new meaning for the word.

In Europe we have the bizarre story of both George Osborne, the UK’s chancellor of the exchequer, and Olli Rehn, the European Union’s commissioner for economic and monetary affairs, claiming success for their austerity policies based on one quarter of growth. Apparently, they are arguing that because their policies did not lead to a never-ending recession, they are a success. Remarkably, they seem very proud of this fact.

In the United States we were treated to the Wall Street Journal boasting of the success of the 2011 debt ceiling agreement on the eve of another standoff on the budget and the debt ceiling. The measure of success in this case appears to be that the sequester budget cuts put in place by the agreement are still in place and that the economy has not collapsed as a result. By this standard the WSJ has a case, but as with the austerity crew in Europe, this is a rather pathetic bar.

First, it is worth noting that many of the disaster warnings about the sequester from President Obama and the Democrats were grossly exaggerated. There was no plausible story in which cutting 5 percent of the discretionary portion of the federal budget would lead to imminent disaster. Most departments have some amount of reserves in various forms that they can tap into in order to minimize the impact of these cuts over a relatively short period. This meant nothing horrible happened when the sequester first began to bite on March 1.

However this doesn’t mean that the sequester is harmless. Suppose the 5 percent cutback rule was applied to any major corporation, even a highly profitable one such as Verizon or Apple. Surely these companies could find ways to reduce their operating expenses by 5 percent. They could put off hiring workers to fill vacancies. They may delay renovating office space. Perhaps they would freeze or cut some workers’ pay.

In the short-run there would probably be little change in the company’s ability to operate. After all, much of what they do is already baked into the cake. Verizon is going to be a huge and highly profitable wireless and phone company in 2013 and 2014 even if they cut back their marketing and don’t do proper maintenance and care for their network for six months or a year. In time of course the cutbacks will take a toll and likely lead to serious loss of market share and profits.

In the case of the federal government, we will see departments that are less able to do their jobs over time. This has been highlighted most clearly at the National Institutes of Health, where many promising lines of research were abandoned because of the sequester. But there will be similar stories in other departments.

Also, while kicking federal employees is apparently great sport for many, over time these people will look for other jobs and those who will replace them will likely be less qualified. Most people don’t want to work at a job where their pay and hours can be cut at any time for reasons that have nothing to do with their performance.

Employers in the private sector understand this fact even if it too complicated for members of Congress. This means that we can expect future government employees, like air traffic controllers, meat inspectors, and FBI agents, to be less qualified and committed than the current crew. The Wall Street Journal might think it some great victory that this deterioration has not been evident six months after the sequester, but people with more knowledge of the business world might be less impressed.

But the deterioration of government services might be the less important damage done by the sequester. The more visible and certain damage is the slower growth of the economy and higher unemployment.

Businesses hire people and undertake investment when they see demand for their product and/or have a new innovative idea. Outside of Wall Street Journal editorial page land, no business increases employment or undertakes investment because the government has laid off workers and cut back spending. This means that the government cutbacks directly reduce employment and curtail growth.

In the last two years, the government sector has shed 200,000 jobs. In a comparable period in the last recovery (August 2003 to August 2005) it added more than 300,000 jobs. This difference of 500,000 jobs would have a substantial impact on the labor market, especially when we consider that spending by these workers can be expected to increase the employment impact by at least 50 percent, bringing the total gain to 750,000 workers.

We can tell a similar story about growth, which has averaged just 2.2 percent over the last two years. This pace is less than most estimates of the economy’s potential growth rate, which means that rather than making up ground lost in the recession, we have been falling further behind the economy’s potential level of output. According to the Congressional Budget Office we are losing roughly $1 trillion in output a year because of the lack of demand in the economy.

So we know the sequester will give us deteriorating government services, higher unemployment, and slower economic growth. That’s the track record which prompts the Wall Street Journal’s boasts and advocacy of more austerity.

Changes in Mean Hourly Wages

Another Phony Jobs Report

Well, I'm still offline for the foreseeable future, but I had to share this...--jef


From A Government That Lies About Everything
June 7, 2013  | Paul Craig Roberts


June 7, 2013. The payroll jobs report for May released today continues the fantasy.

Goods producing jobs declined, with manufacturing losing another 4,000 jobs, but the New Economy produced 179,000 service jobs.

Are these jobs the high-powered, high-wage “innovation jobs” that economists promised would be our reward from Globalism. I’m afraid not.

According to the Bureau of Labor Statistics, the jobs created are the usual lowly paid
non-exportable domestic service jobs–the jobs of a third world country.
Retail trade accounts for 27,700 of the jobs.

Wholesale trade accounts for 7,900 jobs.

Ambulatory health care services accounts for 15,300 of the jobs.

Waitresses and bartenders account for 38,100 of the jobs.

Local government accounts for 13,000 of the jobs.

Amusements, gambling, and recreation account for 12,500 of the jobs.

Temporary help services provided 25,600 jobs.

Business support services provided 4,300 jobs.

Services to buildings and dwellings provided 6,400 jobs.

Accounting and bookkeeping services provided 3,100 jobs.

Architectural and engineering services provided 4,900 jobs.

Computer systems design and related provided 6,000 jobs (most filled by H-1B work visas).

Management and technical consulting services provided 3,200 jobs.

For a decade this has been the jobs profile of “the world’s most powerful economy.” It is the profile of third world India 40 years ago. The jobs that made the US the dominant economy have been moved off shore by corporations threatened by Wall Street with takeovers if they did not increase their profits.

The easiest way for corporations to increase profits is to take advantage of cheap labor in countries with massive quantities of unemployed labor.

So, if we believe the BLS report, and the reported new jobs are not simply a product of faulty season adjustments and a faulty birth-death model, why is the financial press happy that the US economy can only create third world jobs? Why was the stock market up on the news that the US economy has created 179,000 third world jobs? Would rational markets be up on such discouraging news?

But are the jobs really there?

With retail sales going nowhere, why 35,600 new jobs in wholesale and retail trade?

With real median incomes declining, why 38,100 more waitresses and bartenders? For every month as long as I can remember the BLS reports numerous new jobs in waitresses and bartenders, despite the long-term decline in real median income.

In the May jobs report, where are the jobs for the vast number of new college graduates?

The US now has more hotel maids, bartenders, and waitresses than it has manufacturing workers. The US has twice as many people employed in government than in manufacturing.
The services of maids, bartenders, waitresses, and government cannot be exported.
Therefore, the US trade deficit remains large and without exports to reduce it, a crisis in itself.

What the BLS jobs reports have been telling us for many years is that the US economy is in crisis, in a death-spiral. Yet, not a handful of economists’ voices have been raised.

Today president obama’s economist said that the notch upward in the unemployment rate was because the economic outlook was so good that more people were encouraged to enter the labor market than there were new jobs available.

The conclusion is inescapable: The same government that lies about weapons of mass destruction, Saddam Hussein’s al-Qaeda connections, Iranian nukes, and so on, also lies about jobs, the unemployment rate, the inflation rate, rigs every financial and commodity market, pretends that terrorism is such a threat that the US Constitution must be set aside and that Americans are safer without the protection of habeas corpus and due process.

It is amazing how rare terrorism is, especially with Washington in the second decade of trying to stir up terrorism by invading countries on totally false pretenses, murdering citizens of countries, such as Pakistan and Yemen with drones, and supporting Israel’s never-ending murder and dispossession of the Palestinians.

After such massive provocations from Washington, one would think that the world would be ablaze with terrorism. But it isn’t.

As there is so little terrorism, Washington and its presstitute media call those who resist
Washington’s invasion of their countries “terrorists.” Everyone who resists Washington’s military aggression is a terrorist. Just ask the New York Times, Fox News, or any neoconservative. Or, for that matter, the Bilderbergs, the Council on Foreign Relations, the Trilateral Commission, and Homeland Security, the Gestapo organization that now defines all American dissenters to be “domestic extremists.”

Washington’s claim that Americans have “freedom and democracy” is the sickest joke in human history.

In 21st century America, defendants have no more rights than the accused in Nazi Germany or Stalinist Russia. The FBI now shoots suspects brought in for questioning in the back of the head even before the suspect is arrested.

Long before Bradley Manning’s trial the presstitutes have convicted the accused based on lies leaked by the prosecutors. Consider Bradley Manning. After three years of detention, including one year of torture, he is brought to a rigged trial as a national security danger. All that Bradley Manning did was to comply with the Military Code and report war crimes. As his corrupt superiors did not want to know, he complied with his duty, apparently, by going public.

Now he is being made an example. The message is clear: Support Washington’s war crimes or be destroyed.

The Amerika that exists today has more in common with Nazi Germany than with the America in which I grew up. The young don’t know any different. But those my age realize that we have lost our country. America no longer exists.

From Bad Jobs to Good Jobs

Sunday, 05 May 2013| By Colin Gordon, Dissent

What happened to the good jobs? This is the question posed by fast-food workers who walked out in New York and Chicago in recent weeks. It is the question posed by activists in those corners of the economy—including restaurants and domestic work and guest work—where the light of state and federal labor standards barely penetrates. And it is the question posed (albeit from a different set of expectations) by recent college graduates for whom low wages and dim prospects are the dreary norm.

There is no shortage of suspects for this sorry state of affairs. The stark decline of organized labor, now reaching less than 7 percent of private-sector workers, has dramatically undermined the bargaining power and real wages of workers. The erosion of the minimum wage, with meager increases overmatched by inflationary losses, has left the labor market without a stable floor. And an increasingly expansive financial sector has displaced real wages and salaries with speculative rent-seeking.

New work by John Schmitt and Janelle Jones at the Center for Economic and Policy Research recasts this question, posing it not as a causal riddle but as a political challenge: what would it take to get good jobs back?

Schmitt and Jones start with a basic distinction between good jobs (those that pay $19 an hour or better and offer both job-based health coverage and some retirement coverage) and bad jobs (those that meet none of these criteria). Each of these categories accounts for about a quarter of the workforce (the rest fall somewhere in between), with the share of good jobs slipping since 1979 and the share of bad jobs creeping up. The goal, by simulating the impact of different policy interventions, is to increase the share of good jobs and to eliminate—as much as possible—the bad jobs entirely.

Some policies—however salutary—would have little impact on this “good job-bad job” distribution. Raising the minimum wage, for example, would boost the earnings of 30 million workers, but it would do so by transforming bad jobs into not-quite-so-bad jobs. A worker earning $10 an hour without benefits, after all, is still pretty far removed from a good job.

The graphic below summarizes the findings of Schmitt and Jones, for men and women, for five policy changes. Gender pay equity, not surprisingly, would yield some small gains for women—a slightly higher percentage of good jobs, and slightly lower percentage of bad jobs. A 25 percent increase in college attainment yields only a modest improvement, a finding consistent with other research suggesting that wages are falling despite increasing educational attainment and not because there is some “skills” mismatch between available workers and available jobs.

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There is a stronger payoff for collective bargaining, which Schmitt and Jones simulate with an increase in union density sufficient to capture the same number workers as the increase in college attainment (in the first scenario, 8.7 percent of the workforce are given college diplomas; in the second, 8.7 percent of the workforce are given union cards). This yields not only a union wage premium but higher rates of job-based health and pension coverage. But the payoff is not as big as one might expect, probably because labor’s ability to deliver such benefits to its members has fallen as its share of the workforce has gone down. Simply bumping up the union density rate, in other words, is not the same thing as reclaiming the labor movement of past generations. The strongest payoff comes with socializing and universalizing health and retirement coverage. Adopting either would erase the bad jobs entirely. Adopting both would push the share of good jobs to nearly half (50 percent for men, 39 percent for women). This resonates with our understanding of the perverse logic of job-based social policy—which tends to widen inequalities (good jobs, after all, are the ones with good benefits) rather than close them. It resonates with our understanding of the broader benefits of universal social policy—which wipes away not only the waste and stigma associated with risk-rating and means-testing, but the crushing insecurity of going uncovered or uninsured. And it resonates with our political and economic realities, in which incremental progress on social policy (maybe just in the states) seems more likely than a surge in labor organization and more resourceful than deep personal investments in education.

Minding the reality gap

Minding the Gap
Matt Asher - Probability and statistics blog

Officially, unemployment in the US is declining. It’s fallen from a high of 9.1% a couple years ago, to 7.8% in recent months. This would be good news, if the official unemployment rate measured unemployment, in the everyday sense of the word. It doesn’t. The technical definition of “U3″ unemployment, the most commonly reported figure, excludes people who’ve given up looking for work, those who’ve retired early due to market conditions, and workers so part time they clock in just one hour per week.

Most critically, unemployment excludes the 14 million American on disability benefits, a number which has quadrupled over the last 30 years. If you include just this one segment of the population in the official numbers, the unemployment rate would double. On Saturday, This American Life devoted their entire hour to an exploration of this statistic. Russ Robert’s, who’s podcast I’ve recommend in the past, discussed the same topic last year. Despite the magnitude of the program and the scale of the change, these are the only outlets I know of to report on the disability number, and on the implications it has for how we interpret the decline in U3 unemployment.

Targeting the number, not the reality

Statistics, in the sense of numerical estimates, are measures which attempt to condense the complex world of millions of people into a single data point. Honest statistics come with margins of error (the most honest indicate, at least qualitatively, a margin of error for their margin of error). But even the best statistical measures are merely symptoms of some underlying reality; they reflect some aspect of the reality as accurately as possible. The danger with repeated presentations of any statistic (as in the quarterly, monthly, and even hourly reporting of GDP, unemployment, and Dow Jones averages), is that we start to focus on this number by itself, regardless of the reality it was created to represent. It’s as if the patient has a high fever and all anyone talks about is what the thermometer says. Eventually the focus becomes, “How do we get the thermometer reading down?” All manner of effort goes into reducing the reading, irrespective of the short, and certainly long-term, health of the patient. When politicians speak about targeting unemployment figures, this is what they mean, quite literally. Their goal is to bring down the rate that gets reported by the Bureau of Labor Statistics, the number discussed on television and in every mainstream source of media.

Politicians focus on high profile metrics, and not the underlying realities, because the bigger and more complicated the system, the easier it is to tweak the method of measurement or its numeric output, relative to the difficulty of fixing the system itself. Instead of creating conditions which allow for growth in employment (which would likely require a reduction in politicians’ legislative and financial powers), the US has quietly moved a huge segment of its population off welfare, which counts against unemployment, and into disability and prisons — the incarcerated also don’t count in U3, whether they are slaving away behind bars or not.

How metrics go bad

Over time, all social metrics diverge from the reality they were created to reflect. Sometimes this is the result of a natural drift in the underlying conditions; the metric no longer captures the same information it had in the past, or no longer represents the broad segment of society it once did. For example, the number of physical letters delivered by the postal service no longer tracks the level of communication between citizens.

Statistics and the reality they were designed to represent are also forced apart through deliberate manipulation. Official unemployment figures are just one example of an aggressively targeted/manipulated metric. Another widely abused figure is the official inflation rate, or core Consumer Price Index. This measure excludes food and energy prices, for the stated reason that they are highly volatile. Of course, these commodities represent a significant fraction of nearly everyone’s budget, and their prices can be a leading indicator of inflation. The CPI also uses a complex formula to calculate “hedonics,” which mark down reported prices based on how much better the new version of a product is compared to the old one (do a search for “let them eat iPads”).

I don’t see it as a coincidence that unemployment and inflation figures are among the most widely reported and the most actively manipulated. In fact, I take the following to be an empirical trend so strong I’m willing to call it a law: the greater the visibility of a metric, the more money and careers riding on it, the higher the likelihood it will be “targeted.” In this light, the great scandal related to manipulation of LIBOR, a number which serves as pivot point for trillions of dollars in contracts, is that the figure was assumed to be accurate to begin with.

Often the very credibility of the metric, built up over time by its integrity and ability to reflect an essential feature of the underlying reality, is cashed in by those who manipulate it. Such was the case with the credit ratings agencies: after a long run of prudent assessments, they relaxed their standards for evaluating mortgage bundles, cashing in on the windfall profits generated by the housing bubble.

Why we don’t see the gaps

It might seem like the disconnect between a statistic and reality would cause a dissonance that, once large enough to be clearly visible, would lead to reformulation of the statistic, bringing it back in line with the underlying fundamentals. Clearly there are natural pressures in that direction. For example, people laid off at the beginning of a recession are unlikely to believe that the recovery has begun until they themselves go back to work. Their skepticism of the unemployment figure erodes its credibility. Unfortunately, two powerful forces work against the re-alignment of metric and reality: the first related to momentum and our blindness to small changes, the second having to do with the effects of reflexivity and willful ignorance.

In terms of inertia, humans have a built-in tendency to believe that what has been will continue to be. More sharply, the longer a trend has continued, the longer we presume it will continue — if it hasn’t happened yet, how could it happen now? Laplace’s rule of succession is our best tool for estimating probabilities under the assumption of a constant generating process, one that spits out a stream of conditionally independent (exchangeable) data points. But the rule of succession fails utterly, at times spectacularly, when the underlying conditions change. And underlying conditions always change!

These changes, when they come slowly, pass under our radar. Humans are great at noticing large differences from one day to the next, but poor at detecting slow changes over long periods of time. Ever walked by an old store with an awning or sign that’s filthy and falling apart? You wonder how the store owner could fail to notice the problem, but there was never any one moment when it passed from shiny and new to old and decrepit. If you think you’d never be as blind as that shop keeper, look down at your keyboard right now. As with our environment, if the gap between statistic and reality changes slowly, over time, we may not see the changes. Meanwhile, historical use of the statistic lends weight to it’s credibility, reducing the chance that we’d notice or question the change — it has to be right, it’s what we’ve always used!

The perceived stability of slowly changing systems encourages participants to depend on or exploit it. This, in turn, can create long term instabilities as minor fluctuations trigger extreme reactions on the part of participants. Throughout the late 20th century and the first years of the 21st, a large number of investors participated in the “Carry Trade,” a scheme which depended on the long term stability of the Yen, and of the differential between borrowing rates in Japan and interest rates abroad. When conditions changed in 2008, investors “unwound” these trades at full speed, spiking volatility and encouraging even more traders to exit their positions as fast as they could.

These feedback loops are an example of reflexivity, the tendency in some complex systems for perception (everyone will panic and sell) to affect reality (everyone panics and sells). Reflexivity can turn statistical pronouncements into self-fulfilling prophecies, at least for a time. The belief that inflation is low, if widespread, can suppress inflation in and of itself! If I believe that the cash in my wallet and the deposits in my bank account will still be worth essentially the same amount tomorrow or in a year, then I’m less likely to rush out to exchange my currency for hard goods. Conversely, once it’s clear that my Bank of Zimbabwe Bearer Cheques have a steeply declining half-life of purchasing power, then I’m going to trade these paper notes for tangible goods as quickly as possible, nominal price be damned!


Don’t look down

If perception can shape reality, then does the gap between reality and statistic matter? Clearly, the people who benefit most from the status quo do their best to avoid looking down, lest they encourage others to do the same. More generally, though, can we keep going forward so long as we don’t look down, like Wile E. Coyote chasing the road runner off a cliff?

The clear empirical answer to that questions is: “Yes, at least for a while.” The key is that no one knows how long this while can last, nor is it clear what happens when the reckoning comes. Despite what ignorant commentators might have said ex post facto, by 2006 there was wide understanding that housing prices were becoming un-sustainably inflated. In 2008, US prices crashed back down to earth. North of the border, in Canada, the seemingly equally inflated housing market stumbled, shrugged, then continued along at more level, but still gravity-defying trajectory.

The high cost of maintaining the facade

Even as the pressures to close the gap grow along with its size, the larger the divergence between official numbers and reality, the greater the pressures to keep up the facade. If the fictional single entity we call “the economy” appears to be doing better, politicians get re-elected and consumers spend more money. When the music finally stops, so too will the gravy-train for a number of vested interests. So the day of reckoning just keeps getting worse and worse as more and more resources go into maintaining the illusion, into reassuring the public that nothing’s wrong, into extending, pretending, and even, if need be, shooting the messenger.

It’s not just politicians and corporations who become invested in hiding and ignoring the gap. We believe official statistics because we want to believe them, and we act as if we believe them because we believe that others believe them. We buy houses or stocks at inflated prices on the hope that someone else will buy them from us at an even more inflated price.

My (strong) belief is that most economic and political Black Swans are the result of mass delusion, based on our faith in the quality and meaning of prominently reported, endlessly repeated, officially sanctioned statistics. The illustration at the beginning of this post comes from a comic I authored about a character who makes his living off just this gap between official data and the reality on the ground, a gap that always closes, sooner or later, making some rich and toppling others.

The Real Unemployment Rate Is Worse Than You Think - 23.3% (even that11.6 number is too low)

When you factor in all those who have stopped looking because thereare no jobs,those forced to work part-time because there are no jobs in their professional field, those forced to retire early because there are no jobs, those who are living off their parents because there are no jobs, you get a Real Unemployment rate of 23.3%, as illustrated by the above chart. Worse than all but 2 yeqars during the Great Depression.

Our (s)Elected Officials have failed us completely. They do the bidding of their corporate masters while we suffer at their hands.

Low-wage job growth: Most New Jobs are Low Wage Food Service Jobs

But they should be grateful they even have jobs, right?


April 5, 2013
The Fries-With-That Economy 
By CATHERINE RAMPELL


Dollars to doughnuts.

One of the more striking patterns in the recovery has been the fast clip of low-wage job growth. The best example of this is probably in food services and drinking places, which have been adding jobs for 37 consecutive months. (Employment over all has been growing for 30 consecutive months.) Over that time, eating and drinking places have added 856,200 jobs.

As a result of all this cumulative hiring, the industry accounted for almost one in 13 of all American jobs in March. That is the highest share it has held.

Source: Bureau of Labor Statistics, Haver Analytics.

The average hourly wage in food services and drinking establishments is $11.98, which is about half that for the private sector over all ($23.82 an hour).

I should note, by the way, that the National Restaurant Association says its members are still not very upbeat about the future of the economy.

And also, the trends in food services growth are still not nearly as impressive as those in health care, which has been growing nonstop in both recession and recovery. Health care employment as a share of total employment is also at its high, at 10.7 percent.

Inequality Rages as Dwindling Wages Lock Millions in Poverty

Tuesday, January 15, 2013 by Common Dreams 
New study shows just how hard 'working poor' got hit in wake of 2008 crisis
- Jon Queally, staff writer

The official unemployment rate in the US may be slowly ticking down (mainly due to the fact that after a year, unemployed workers are no longer considered unemployed even though they still need work and aren't included in the BLS data), but the rank of those who classify as 'the working poor' has continued to skyrocket, according to a new report.

Hit hardest by the trend of stagnant wages are those in service industries, like retail jobs, food preparation, clerical work and customer assistance.

Along with overall income inequality growth in the US, a new report by Working Poor Families Project says that over 200,000 families fell into poverty in 2011 even with both parents working.

National job growth saw a recovery from the worst days following the 2008 housing crash and subsequent financial crisis, but even as the recession ebbed in some areas or for some groups, many middle class or lower-middle class workers who returned to employment did so with much reduced wages.

As lead author of the report, Brandon Roberts, points out in an op-ed at Reuters on Tuesday:

These are not just the unemployed. Rather they are families that, despite having a working adult in the home, earn less than twice the federal poverty income threshold – a widely recognized measure of family self-sufficiency. They are working, but making too little to build economically secure lives. And their number has grown steadily over the past five years.

They are cashiers and clerks, nursing assistants and lab technicians, truck drivers and waiters. Either they are unable to find good, full-time jobs, or their incomes are inadequate and their prospects for advancement are poor.

The report, which analyzed figures from the US Census in 2011, determined that nearly 10.4 million such families - or 47.5 million Americans - now live at or below poverty, defined as earning less than $45,622 for a family of four.

Data showed that the top 20 percent of Americans received 48 percent of all income while those in the bottom 20 percent got less than 5 percent.

Statistics also showed that roughly 23.5 million, or 37 percent, of U.S. children lived in working poor families compared with about 21 million, or 33 percent, in 2007, the report said.

"Although many people are returning to work, they are often taking jobs with lower wages and less job security, compared with the middle-class jobs they held before the economic downturn," the report said. "This means that nearly a third of all working families ... may not have enough money to meet basic needs."

“We’re not on a good trajectory,” Brandon Roberts, who manages the privately-funded Working Poor Families Project, told The Washington Post. “The overall number of low-income working families is increasing despite the recovery.”

And Reuters reports:

The group's analysis adds to the body of data focused on the slipping U.S. middle class even as there are signs of the nation's economy slowly coming back to life with improvements in the housing sector and lower unemployment rate.

For some Americans, the comeback has yet to begin.

Data showed that the top 20 percent of Americans received 48 percent of all income while those in the bottom 20 percent got less than 5 percent, the report said.

The analysis also found regional differences.

States in the South, such as Georgia and South Carolina, and those in the West, such as Arizona and Nevada, had the greatest increase in the number of working poor. The increase was slower in the Mid-Atlantic and Northeast.

"It's important to draw attention to the fact that there are real families behind those statistics," said Alan Essig, who heads the Georgia Budget and Policy Institute, adding that his state is still struggling with housing and unemployment.

And the Washington Post adds:

The growth in the ranks of the working poor coincides with continued growth in income inequality. Many of the occupations experiencing the fastest job growth during the recovery also pay poorly. Among them are retail jobs, food preparation, clerical work and customer assistance.

Older, Eager, and Unemployed: When Even Santa Can’t Get a Job

Friday, December 7, 2012 by The Nation

by Greg Kaufmann

 

In May 2012, Richard Crowe was laid off when the steel mill where he had worked for thirty-four years was shut down. He’d worked there since graduating from high school. New ownership filed for bankruptcy.

“The judge threw the workers’ contract out, the owners walked away with $20 million, and we got nothing,” says Crowe, who is 54, and lives in eastern Ohio.

Seven months later, Crowe is one of 5 million “long-term” unemployed workers in the US who have been looking for work for more than six months. They are disproportionately older (over 50), women, and minorities, and according to Friday’s jobs report, their employment prospects haven’t much improved.

If Congress doesn’t extend the unemployment insurance program by the end of this year, 2 million of these workers will lose their benefits between Christmas and New Years Day; another 1 million by April 2013; and over 5 million people will be without benefits by the end of 2013, according to the National Employment Law Project (NELP). This would occur at a moment when there are still 12 million people unemployed, and there are approximately 3.4 unemployed applicants for every available job opening. (it's more than 12 million unemployed and more than 5 million long-term unemployed but his heart is in the right place--jef)

“The jobs are still not there,” says Edith Harrison, 59, who lives in Colorado Springs and was laid off from her job at a senior assisted living facility in August. “How can you cut unemployment benefits off, and blame someone for not being able to get a job, when they didn’t create the situation?”

“I worked all my life. I paid into unemployment, I paid into Social Security, I paid into everything. I want off this unemployment, I want a job.”

The antipoverty effect of unemployment insurance is significant and undeniable. In 2010, the program lifted 3.2 million people above the poverty line (less than $18,000 for a family of three). In 2011, it lifted 2.3 million people above the line, including 620,000 children. (The program had less of a poverty reducing effect last year in part because a provision in the Recovery Act that paid an additional $25 per week in benefits was allowed to expire.) The average benefit is just $291 per week and it covers approximately 40 percent of a typical family’s food, housing, and transportation costs.

What is most egregious to both Harrison and Crowe is the stereotype—voiced by people who want to cut the program or drug test benefit recipients—that unemployed people are lazy and would rather collect modest benefits than work.

“It’s funny, but it’s pathetic—a lot of people think you’re out here for a handout,” says Crowe. “I worked all my life. I paid into unemployment, I paid into Social Security, I paid into everything. I want off this unemployment, I want a job.”

In fact, Crowe has applied for 157 jobs. He and his wife are willing to relocate—they put their son through college and he is now living independently. Crowe has applied for jobs in Nevada and South Carolina—in the steel industry and in new lines of work.

“In the steel industry, companies are hiring 20 year olds that have never even been in a mill before, and passing on people like me—an experienced operator and maintenance technician,” says Crowe. “Then you go look at other jobs and they say ‘you don’t have no experience.’”

He recalls applying for a job delivering packages for UPS. The interviewer looked over his resume and asked, “Pretty much you worked in the mill all your life?”

“Yeah,” Richard told her.

“Have you ever had any experience delivering packages?”

“I felt like telling her, ‘Yeah, once a year, I play Santa Claus,’” he tells me, laughing. “This is the stuff you go through.”

Harrison says she gets up early every morning—“ just like I’m going to work”—drinks her coffee, and gets on the computer to search for jobs. (this is what nearly all unemployed people do. They want jobs so they treat their job search like a job--jef)

“Retail, restaurants and customer service—most of the jobs out there—they say they want people who are ‘high energy’ for a ‘fast-paced environment’,” she says. “I’m not saying I can’t do it, but I’m 59, and if they have a choice they’re going to take the person who’s younger.”

Crowe also thinks his age is making it difficult for him to land a new opportunity. He has applied for many jobs knowing that he’s overqualified, including warehouse work. Often, he doesn’t even receive a reply, and sees the jobs still being posted months later.

“It’s my age holding me back. I can’t prove that, but I’m getting that feeling after going through all this,” he says. “If they see a 5 or 6 in front of your age—I’m just visualizing when people look at that they just laugh and throw your application off to the side.”

Unemployment benefits are a lifeline for Harrison and Crowe. In 2002, Harrison was laid off from her job as a secretary for the local school district. (She had also previously worked as a secretary in Detroit Public Schools for nineteen years, and as a case manager and skills development specialist for Goodwill Industries.) She ended up homeless, and sleeping on couches in the homes of families and friends. She fears it could happen again.

“I don’t want to go through that again,” she says. “How can you find a job if you don’t have anyplace to stay? When you’re out there, your life is just all up in the air. It takes a long time to come back from that.”

Harrison says her $227 per week benefit helps her “keep the lights on” and pay the rent.

Crowe receives $382 per week and says it covers his utilities and his car payment. He and his wife are also using their retirement savings “just to survive.”

“If they don’t renew these benefits, I won’t have any income,” says Crowe. “I’ll lose my house, I’ll lose everything.”

Judy Conti, federal advocacy coordinator for NELP, says she is “cautiously optimistic” that unemployment insurance will be reauthorized for 2013—either as part of any “grand bargain” or a more limited package of cuts and revenues prior to January 1. She notes that the $30 billion program was included in President Obama’s initial offer to Republicans to avert the fiscal cliff. She also says NELP has had lengthy and productive conversations with Democratic leadership, staff members for most of the Democratic Senate Caucus, and many House members as well.

“All of them really do understand how important and crucial this program is right now,” says Conti.

On the other hand, conservatives continue to demand that any reauthorization of unemployment insurance must be paid for, but Conti says that that shouldn’t be difficult to achieve through any bill that includes significant cuts and savings.

“We’re not really seeing the same kind of pushback we have seen in previous years,” says Conti, “where Representatives have wanted to change the nature of the program, or beat up on the unemployed as lazy.”

It also can’t hurt that Mark Zandi, chief economist of Moody’s, estimates that every $1 in unemployment benefits generates $1.61 in economic activity—since those benefits are spent so quickly. Also, the Congressional Budget Office found that reauthorizing the program for 2013 would create 300,000 jobs.

While she waits to see how this plays out in Congress, Harrison is doing her best to keep her spirits up.

“I used to stay on that computer from the beginning of the day to nighttime looking for work,” she said. “I would have a headache, wouldn’t even eat—had to make myself eat. Now I try to keep balance—get up early in the morning, get on that computer—and after so long and so many resumes, I stop. You don’t want to make yourself sick. I just stay prayerful.”

As for Crowe, he says the ordeal has taken a toll on his family—especially his wife, who he says “worries every day” as they try to cobble together enough money through unemployment benefits, her low-wage work, and their retirement savings.

“I’m doing everything in my power that I can, but I can’t make someone hire me,” he says.

Read more of this post, including relevant numbers and additional resources, here.

More Jobs with Lousy Wages...

...and the Desertion of Non-College White Men From the Democratic Party
Friday, November 2, 2012
robertreich.org

 

The two most important trends, confirmed in Friday’s jobs report from the Bureau of Labor Statistics, are that (1) jobs slowly continue to return, and (2) those jobs are paying less and less.

Today’s report showed 171,000 workers were added to payrolls in October, up from 148,000 in September. At the same time, unemployment rose to 7.9 percent from 7.8 percent last month. The reason for the seeming disparity: As jobs have begun to return, more people have been entering the labor force seeking employment. The household survey, on which the unemployment percentage is based, counts as “unemployed” only people who are looking for work.

As I’ve said, you have to take a single month’s report with a grain of salt because the job reports bounce around a great deal, and are often revised. Last month the BLS announced that 114,000 new jobs were created in September. Today the BLS revised that September figure upward to 148,000.

Overall, the jobs trend is in the right direction. The President and Democrats can take some comfort.

The most disturbing aspect of today’s report is the continuing decline of wages. Average hourly earnings climbed 1.6 percent in October from the same time last year. That’s not enough to match the rate of inflation – meaning that hourly earnings continue to drop in real terms.

It’s also the smallest gain since comparable year-over-year records began in 2007, before the Great Recession. Earnings for production workers – about 80 percent of the workforce — rose only 1.1 percent in the 12 months to October. That’s way behind inflation, and the weakest wage growth since the BLS began keeping records on wages in 1965.

The biggest challenge ahead isn’t just to get jobs back. They’re coming back. It’s to raise the wages of most Americans.

This isn’t a new challenge. The median wage has been flat for three decades, when you adjust for inflation. Since 2000 it’s been dropping.

What does all of this have to do with the upcoming election? Plenty. Some of the biggest wage losses over the last several decades have been among white men who haven’t attended college. And, not coincidentally, they’re the ones who have been abandoning the Democrats in droves.

Three decades ago, non-college white men were solidly Democratic. Many of them were unionized. They had jobs that delivered good middle-class incomes.

But over the last three decades they stopped believing the Democratic Party could deliver good jobs at decent wages.

Republicans have done no better for them on the wages — in fact many policies touted by the GOP, such as its attack on unions, have accelerated the downward wage trend.

But Republicans have offered white non-college males the scapegoats of racism and immigration — blaming, directly or indirectly, blacks and Latinos — and the solace of right-wing evangelical Christianity. Absent any bold leadership from Democrats, these have been enough.

Overlooked GOP Budget Provision Would Fuel Offshoring With New Tax Incentives

Corporate shill, Rep. Paul Ryan (R-Wis.) sucks. You people in his district need to vote that greedy fucker out after you vote Gov. Scott Walker out. Both are corporate-serving shills whose task is to destroy the collective bargaining process, offshore the good jobs, and turn all workers into wage slaves. The sooner they fail, the sooner we will have REAL progress.--jef



Wednesday, May 9, 2012 by In These Times
Ryan Shrugs: Overlooked GOP Budget Provision Would Fuel Offshoring With New Tax Incentives
by Roger Bybee

 

GOP House Budget Chair Paul Ryan reigns as the GOP’s resident economic genius, even as the productive base and health of his own southeastern Wisconsin district deteriorates under the impact of the very policies he has championed: deregulation, cuts to the social safety net, and “free trade”-fueled offshoring of jobs. 

In recent years, Ryan’s congressional district has been hollowed out by the loss of major employers like Delco in Oak Creek (3,800 jobs, mostly going to Mexico), Chrysler in Kenosha (850 jobs sent to Mexico with the help of auto industry “bailout” funds), and General Motors in Janesville (a plant closing wiped out 2,800 jobs directly and another 3,000 jobs in nearby supplier plants).

A devotee of hyper-capitalist author Ayn Rand, Ryan has seen the misery and, well, shrugged, just like Rand's Atlas. At least that's what his latest federal budget, which was passed by the House in late March, implies. In the face of suffering in his district and across the nation, Ryan's "Path to Prosperity" would deepen the economic polarization of America by heaping new riches on the 1%. A little-understood provision in it would make the exodus of jobs even worse by creating huge new tax incentives for corporations to relocate more jobs and assets overseas.

Although praised by Mitt Romney as “marvelous,” Ryan’s plan is so extreme it has gained criticism from even the conservative U.S. Conference of Catholic Bishops and other theologians for its sweeping cuts on programs serving the poor—which comprise about 62 percent of deficit-cutting measures in the budget—despite their tiny share of the overall federal budget. While cutting $3.3 trillion from safety-net programs such as Medicaid and food stamps, Ryan, a practicing Catholic, is all for creating $3 trillion in new tax breaks for corporations and the rich.

A PERNICIOUS PROVISION
Among the most pernicious provisions of Ryan’s tax breaks is a plan to halt the authority of the U.S. government to tax the foreign profits of U.S. corporations once they are brought back into the country, notes tax expert David Cay Johnston, author of Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense and Stick You With The Bill. Known in right-wing parlance as “extra-territoriality,” this proposal would be disastrous to both U.S. jobs and tax revenues.

“Ryan’s plan would insure that any profits created offshore by U.S. corporations would never be taxed by the U.S. government,” explains Johnston, who won the 2001 Pulitzer Prize for his work as The New York Times' tax reporter. “This would create a tremendous incentive to move more and more U.S. jobs overseas to escape taxes on the profits that foreign workers produce for them,” Johnston says.

“Up until now, we’ve been losing good jobs because CEOs practice a kind of labor ‘arbitrage,’ seeking the most advantageous place to locate their plants based on low wages,” Johnston says. “It doesn’t take a genius to see that if your labor costs are about $40 an hour at a major unionized —$27 an hour plus benefits—you can save money if you relocate the work to China where the cost may be $4 an hour or under.”

Right now, foreign-generated profits of U.S. firms are not taxed until they are brought back into the United States. But a huge number of multinational corporations like Apple and GE and Nike use a variety of accounting tricks to essentially launder their profits before moving money home.

The key mechanism to this systematic tax avoidance is not the territory in which profits are generated, said Johnston. "Territoriality is a phony issue,” he stated “What's critical is the ability of corporations to form hundreds of corporations.”

These arrangements permit some subsidiaries to artificially charge other parts of the corporation high fees for the use of logos and brand names, and then to place the real profits in tax havens like the Cayman Islands.

As a result of Apple’s complex tax maneuvers, including such exotically-named tricks as “the Double Irish,” the corporation has been able to sharply drive down its U.S. tax burden. The impact has been immense, as a recent front-page New York Times investigation concluded:

Without such tactics, Apple’s federal tax bill in the United States most likely would have been $2.4 billion higher last year, according to a recent study by a former Treasury Department economist, Martin A. Sullivan. As it stands, the company paid cash taxes of $3.3 billion around the world on its reported profits of $34.2 billion last year, a tax rate of 9.8 percent. (Apple does not disclose what portion of those payments was in the United States, or what portion is assigned to previous or future years.)

Apple is far from exceptional in this respect. GE has been particularly fortunate, Citizens for Tax Justice reported:

Over the past decade, GE’s effective federal income tax rate on its $81.2 billion in pretax U.S. profits has been at most 1.8 percent…. GE is one of 30 major U.S. corporations that paid zero – or less – in federal income taxes in the last three years.

But this reality is rarely made visible in our commercial media, which instead uncritically transmit Republicans’ incessant claims of uncompetitive and excessive tax burdens. If the Obama campaign is smart, it will seize upon the Romney-endorsed House budget and condemn its favorable treatment of U.S. companies' foreign profits and new incentives for offshoring.

Low-Wage Jobs and the Stalled Recovery

Growth at the Bottom
by EILEEN APPELBAUM


Slower-than-expected employment growth in March 2012 has brought the halting pace of economic recovery into sharp focus again. Nearly three years since the recession officially ended in June of 2009, 12.7 million people are still out of work and unable to find a job—a figure that rises to 22.8 million if workers who have given up looking but still want to work and those employed part-time because of the poor economy are included.

Demand for goods and services has been slow to recover—consumer spending has been hampered by a loss of housing wealth, continued high unemployment, and economic insecurity while government spending has been hamstrung by political infighting in Washington. The job growth that has occurred has been largely concentrated in very low wage occupations.

Economic theory—and common sense—tells us that high unemployment will persist until demand picks up. Businesses are not going to increase the pace at which they hire workers until the pace of spending increases.

Despite the obvious employment gap that results from the shortfall in spending, some observers contend that it is a mismatch between the skills of unemployed workers and the skills employers require that is responsible for the continuing high unemployment. Many of the ills of the labor market have been attributed to a supposed hollowing out of the job distribution—to “job polarization.”

Indeed, the claim that middle-skill/middle-income jobs in the United States are disappearing while jobs at the top and bottom of the occupational ladder are growing has been put forward as the explanation for four decades of wage stagnation for men.

Today, the claim that employers have good jobs but can’t find workers with the right skills to fill them has gained currency in the popular press. Yet such an imbalance between supply and demand would cause wages to rise in those occupations, and no such increase in pay can be observed.

Now a new study attributes the jobless recoveries following recent recessions to such job polarization. The study’s authors argue that jobs in the middle of the skill and income distribution disappear during recessions and fail to come back during recoveries. How real is job polarization?

The job polarization thesis is widely attributed to work by David Autor and his colleagues. But as Autor makes very clear, it is only the decade of the 1990s that can be characterized by a hollowing out of middle-skill jobs. In that decade, according to Autor, employment growth was most rapid in high-skill jobs, was modestly positive in low-skill jobs, and was modestly negative in middle-skill jobs.

From 1999 to 2007, in contrast, Autor finds that employment growth was concentrated in the bottom third of the skill distribution, a pattern that has persisted through the recovery from the 2007-2009 recessionand that is expected to persist to 2020.

Looking at the nature of job growth as economic recovery took hold, the National Employment Law Project found that lower-wage occupations—retail sales persons, office clerks, food prep workers, and stock clerks topped this list—grew by 3.2 percent from the first quarter of 2010 through the first quarter of 2011, and mid-wage occupations grew by 1.2 percent, while higher-wage occupations declined by 1.2 percent. Occupational projections to 2020 tell a similar story.

The Bureau of Labor Statistics projects that five of the top six occupations with the most job growth from 2010 to 2020 will be low-wage jobs that require little or no post-high school education—retail sales persons, home health aides, home care aides, office clerks general, and food prep and serving workers. Personal care aides and home health aides are also the two fastest growing occupations according to these projections.

Thus the job polarization of the 1990s has been replaced in the last dozen years by job growth that is dominated by occupations in the bottom tier of the skill and wage distributions. This trend is likely to continue in the absence of policies that increase demand more broadly in the economy and that improve wages and working conditions for the millions of workers—mainly women—in the occupations that are growing. Low wages in the expanding occupations limit gains in consumer spending and hamper more robust job growth.

The Land of the Mega-Rich

No Jobs for Americans
by PAUL CRAIG ROBERTS

On March 9th, the Bureau of Labor Statistics (BLS) announced that 227,000 new nonfarm payroll jobs were created by the economy during February. Is the government’s claim true?

No. Statistician John Williams (shadowstats.com) reports that 44,000 of these jobs or 19% consist of an add-on factor derived from the BLS’s estimate that 44,000 more unreported jobs from new business start-ups were created than were lost by unreported business failures. The BLS’s estimate comes from the bureau’s “birth-death model,” which works better during normal times, but delivers erroneous results during troubled times such as the economy has been experiencing during the past four years.

Taking out the 44,000 added-on jobs reduces the February jobs number to 183,000, but does not provide a full correction. In an economy as troubled as the US economy is, most likely the deaths exceeded the births, but we don’t know what the number is. Was it 20,000? 50,000? What number do we deduct from the 183,000? We simply do not know.

Williams reports that seasonal adjustment factors do not work properly during troubled economic times and add their own overstatement to the jobs figure. If anyone could estimate the overestimate of new jobs that results from malfunctioning seasonal adjustments, it is John Williams, but he doesn’t provide an estimate.

Most likely, the new jobs did not exceed 150,000, a figure that would merely keep even with population growth and thus not reduce the rate of unemployment, which, consistent with this deduction, remained constant.

Let’s look now at the kind of jobs that were created. Of the new jobs reported by BLS, 92% are in services. Of this 92%, only 7% could possibly relate to exportable services–architectural, engineering, and computer systems services.

Of the reported new service jobs, 29% are in health care and social services. The categories that account for the health services jobs are ambulatory health care services and hospitals. Waitresses and bartenders account for 20% of the reported new jobs.

Employment services account for 29% of the new reported jobs. Transportation and warehousing accounted for 5% of the reported new jobs, despite a loss of 60,000 jobs in general merchandise and department stores.

In other words, the vast majority of the new jobs are low paying jobs, except for a few truck drivers.

Other conclusions that we can draw are:

The US has nothing to export to reduce its massive trade deficit, which has, sooner or later, disastrous implications for the US dollar.

Middle class income jobs are declining, with polarization at the two extremes.

US economic policy continues to focus on the mega-rich at the expense of 99% of the population. US interest rates are kept at, or near to, zero in order to maximize mega-bank earnings, while depriving tens of millions of retired Americans of interest income on their lifetime savings, forcing them to spend their capital in order to live, thus depriving their heavily indebted children of inheritance.

In short, the US is well on its way to becoming a third world country, as I predicted would be the case in 20 years at a Brookings Institution conference in Washington DC early in the 21st century.

America is no longer the land of the free and independent. It is the land of the 1% mega-rich.

Outsourcing Jobs, Offshoring Markets

The Political Economy of Redistribution

by ALAN NASSER

Conventional economic wisdom teaches that it is not in the interests of employers to drive wages down to desperation levels, since most consumers are wage earners and consumption demand generates from 66 to 72 percent of the Gross Domestic Product.

Were employers to drive wages too low they would  at the same destroy their customer base, which is good for neither capital nor labor. This line of reasoning assumes that capitalism is  organized such that each nation’s labor market is both entirely domestic and the sole source of  the demand for its economy’s output. But capitalism is a global system and its sovereign components are not closed economies. The typical large corporations’ labor pool and customer base are now globally dispersed. In fact, the last few decades has seen the creation, for the first time in history, of a global labor market.

The outsourcing of jobs has become common knowledge, and is perceived by most working people as a significant source of the nation’s unemployment woes. The loss of jobs to cheaper labor markets is nothing new; it has been building since the 1960s. In 1959, manufacturing represented 28 percent of domestic output.  In 2008, it represented 11.5 percent. This tendency has accelerated with the deregulation of cross-border capital flows.

Since 2000 the United States has lost thousands of factories and a total of about 5.5 million manufacturing jobs, representing a 32 percent decline. By the end of 2009, less than 12 million Americans worked in manufacturing. The last time we saw those numbers was in 1941.

Widget production is not the only sector thast has seen job outsourcing. We are perhaps most familiar with offshore phone centers, but all sorts of uptown jobs have also been shipped out. Highly trained engineers and draftsmen, architects, computer programmers and other kinds of high-tech workers are increasingly employeed by US companies in China, Russia, India, and the Philipines.


In these neoliberal times we are no longer scandalized to learn that this pattern is heartily championed by none other than the chairman of president Obama’s Council on Jobs and Competitiveness, Jeffrey Immelt, who happens to be CEO of General Electric. 2010 was a banner year for GE, when $9.1 billion of its total profits of $14.2 billion came from its overseas operations. Immelt pulls no punches in his indifference to US workers. At a December 6, 2002 investors meeting he enthused:

“When I an talking to GE managers, I talk China, China, China, China, China. You need to be there. You need to change the way people talk about it and how they get there. I am a nut on China. Outsourcing from China is going to grow to 5 billion. We are building a tech center in China. Every discussion today has to center on China. The cost basis is extremely attractive. You can take an 18 cubic foot refrigerator, make it in China, land it in the United States, and land it for less than we can make an 18 cubic foot refrigerator ourselves.”~Jeffrey Immelt, CEO of GE

This is the man Obama put in charge of a committee assembled to address the nation’s unemployment crisis. But don’t think that Immelt’s obsession with overseas economic activity is only about cheap labor and lower costs. He goes on:

“Today we go to Brazil, we go to China, we go to India, because that’s where the customers are.” 

My goodness, this looks like the Leninist thing about the insufficiency of domestic markets to absorb the economy’s output. The US worker is not only becoming decreasingly important as an input to production, (s)he is no longer seen by big capital as the most promising customer, the most robust source of sales revenue.

On both the supply side and the demand side, the US worker/consumer is perceived as incrementally inessential. The former Labor Secretary under Clinton and current liberal blogger Robert Reich thinks that this strategy is irrational, even on capitalist terms:

“Corporate profits are up right now largely because pay is down and companies aren’t hiring. But this is a losing game even for corporations over the long term. Without enough American consumers, their profitable days are numbered. After all, there’s a limit to how much profit they can get out of cutting American payrolls or even selling abroad. European consumers are in no mood to buy. And most Asian economies, including China, are slowing.” 

Reich doesn’t get it.

The reference to “European consumers” is beside the point; Immelt and company don’t have Europe in mind. Exports are indeed the name of the current game, but the consumers are thought by the elite to be found in the emerging markets. Obama has for years been chanting the “export more, consume less” mantra as the key to US economic revival. His bosses reason by process of elimination. They know that the economy’s total product is generated by four and only four kinds of spending: consumption demand, investment demand, government demand and export demand. Consumption is not promising as a spur to production and profits because most consumers are wage earners, and they are low-paid, have taken absolute reductions in pay, are heavily indebted and are un- or underemployed. Investment doesn’t cut it for two reasons: no employer invests when purchasing power is exceptionally low, and, more importantly and completely unacknowledged by commentators, the present depression is not caused by a scarcity of productive facilities or by outdated equipment. A well developed complement of productive facilities is fully in place and ready to go. There is no need for additional investment. As for government spending for productive purposes, this is ruled out by the neoliberal consensus.

Obama has repeatedly stressed that recovery must be rooted in the fabled self-restorative workings of the private sector.

We are left with exports as the economic Open Sesame. Obama has laid out the game plan in some detail in a speech, on his National Export Initiative, to the annual conference of the Import-Export Bank (March 11, 2010):

“The world’s fastest-growing markets are outside our borders. We need to compete for those customers because other nations are competing for them.”

The focus on exports is consistent with the current geopolitics of the elite, which is reliably registered in the business press, most notably in such key journals as Foreign Affairs, The Financial Times and The Economist. There is thought to be a global shift of manufacturing activity from “the West” to “the East,” as the economically mature US, Europe and Japan deindustrialize while the emerging markets, mainly in Asia, take up the global slack by developing their own industrial prowess. Reich’s observation that “most Asian economies, including China, are slowing” is correct but inconsequential. What matters, as Obama notes, is where the “world’s fastest-growing markets” are to be found. Asia’s current slowing growth is compatible with the rapid growth, within China and India for example, of a new middle class and a nouveau riche. These are viewed by Western elites as where the present and prospective action is.

A now notorious Citigroup report encapsulates this economic cosmology in its thesis that “the World is dividing into two blocs – the Plutonomy and the rest.” Mounting inequality has become planet-wide. In a globalized world, the story goes, national consumers  -“the US consumer”, “the French consumer”, “the Japanese consumer”- are obsolete. There are only the rich and the rest. The former are proportionally small in number but growing rapidly as neoliberal policy transfers to them the resources of the rest. The latter are accordingly marginal to what matters to the owning class.

A US-based CEO of one of the world’s largest hedge funds told a writer for The Atlantic that “the hollowing out of the American middle class didn’t really matter.” The CEO described the subject of an executive discussion earlier this year: “… if the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile means one American drops out of the middle class, that’s not such a bad trade.”

The Chief Financial Officer of a US internet company expresses the same sentiment:

“We demand a higher paycheck than the rest of the world. So if you’re going to demand 10 times the paycheck, you need to deliver 10 times the value. It sounds harsh, but maybe people in the middle class need to decide to take a pay cut.” 

At the summer 2010 Aspen Ideas Festival, the CEO of the Silicon Valley firm Applied Materials claimed that were he starting from scratch, only 20 percent of his workforce would be domestic. “This year, almost 90 percent of our sales will be outside the US. The pull to be close to the customers -most of them in Asia-  is enormous.” And Thomas Wilson, CEO of Allstate, is unabashedly frank about the way in which globalization generates an opposition between working-class and business interests:

“I can get [workers] anywhere in the world. It is a problem for America, but it is not necessarily a problem for American business… American businesses will adapt.” (See Chrystia Freeland, “The Rise of the New Global Elite,” in The Atlantic, January/February 2011.)

What all this comes to is a political economy of redistribution. Slow global economic growth over the past 30 or 40 years, and with no end in sight, has been construed by the Left as an indication of spreading “crisis,” a failure of capitalism to live up. From the perspective of working people the characterization is on the mark, since capitalism’s legitimizing ideology assures us that all will prosper when capitalism is doing its job. But from the point of view of capitalists, whose objective is to accumulate wealth, slow growth is not necessarily a sign of crisis, since wealth can be accumulated by redistribution, by widening inequality, in the absence of robust growth rates. This is what is currently taking place intra- and internationally. The outsourcing of jobs and customers is part of that game. Profits are revenues minus costs. Revenue maximization is thought by elites to be sought offshore.

Cost reduction is to be created everywhere.

We can call this the Third-Worldization of the Rest, or, if we focus on the wage-earners of the developed countries, the creeping obsolescence of the working class. Workers can of course never be rendered entirely obsolete. What is happening is that we are approaching that condition asymptotically. One might object that there are clear limits to how impoverished working people can be made – after all, workers have to be maintained as work-ready. Upward redistribution can only go so far. But ever-widening inequality is perceived by elites as feasible by virtue of the limitless possibilities of greater indebtedness. Workers can make ends meet by indefinitely mortgaging their future income.

It is not far-fetched to see a growing resemblance of US and poor-country workers.

High-priced economic forecasters and consultants are known to refer to the US as “Europe’s Mexico.” In the near future, they predict, some US states, mostly in the South but also including California and the Rust Belt, will be not only the cheapest manufacturing locations in the developed world, but also competitive with India and China. Wages are rising in the production- and service-oriented poor countries and falling in the rich ones. And US workers tend to quiescence, while unrest in brewing in the periphery. Costs of production are gradually converging between China and the US: declining-wage US workers are more productive, and fuel prices are expected to continue to rise, making it increasingly expensive to ship goods around the world. Non-union workers contracted by Ford to do inspection and repairs at the Dearborn truck plant make $10 an hour without benefits, which is projected to be less than the Chinese average by 2015.

Companies like Ford, Caterpillar, Wham-O Inc. (Frisbees), Master Lock, Suarez Manufacturing and General Electric have recently relocated production from China and Mexico to Georgia, Ohio, Indiana, Wisconsin, California and Michigan. This may or may not be a growing trend, but the mere fact of some US regions becoming newly competitive with Mexico and China bespeaks the declining fortunes of the US worker.

The New York Times’s favorite neoliberal wild man Thomas Friedman summarizes the immiseration project in his trademark manner: the task in our country is to “cut public sector pay, freeze benefits, slash jobs, abolish a range of welfare entitlements and take the ax to programs such as school building and road maintenance.” Friedman goes on to excoriate US and Western European workers for believing in the “tooth fairy” and expecting government services without paying for them. In America, Friedman says, the baby-boomers, who inherited the prosperity of the post-war years, had “eaten through all that abundance like hungry locusts… After 65 years in which politics in the West was, mostly, about giving things away to voters, it’s now going to be, mostly, about taking things away. Goodbye Tooth Fairy politics, hello Root Canal politics.”  (May 9, 2010)

The oligarchy has laid out, in plain and simple terms, its game plan. What shall be our response?