A picture – or a graph – can be worth a thousand words. In a recent blog post, Paul Krugman includes a graph that tracks the wages of U.S. workers from 2007-Present. Between 2009-2010, the average wage of American workers takes a sharp drop. In the years since 2010, wages have remained stagnant. This graph helps us understand why many American remain downbeat despite the “good” news about job growth. Too many people are working hard and running in place – or–worse still – falling behind. As Krugman says, our political leaders don’t get it or don’t care. Hopefully they will wake up before it’s too late.
Conservatives and Neoliberals often blame unemployment on the skills gap, the claim that jobs are open because workers are not able to fill them. Paul Krugman takes this claim apart by pointing to the most deadly thing of all – facts. Using economic data and a tool called the Beveridge Curve, Krugman shows that the rate of unemployed based on skills is its usual rate. Rather than blaming workers for not being skilled, shouldn’t we be debating better ways to train workers and educate students? Shouldn’t we be talking about how to invest in the future?
Paul Ryan claims to care about poor people. During a speech at a conservative conference, he said Democrats support school lunch programs so children can have “full bellies and empty souls.” Disgusting. How can anyone talk about poor children in such a callous way? I understand that Ryan and his fellow conservatives believe that the state should not provide a safety net. While I disagree with that belief, it is not the same thing as claiming that state programs empty our souls. The last time I checked good Pope Francis was teaching Jesus’ message to care for the poor. Ryan must understand the message to be that Jesus wants us to cut food programs for children – in the name of saving their souls.
Paul Krugman discusses this story in a much more intelligent way. I’m too livid to try to be rational about this. Over 20% of the children in America live in poverty. Most of the nutrition they receive comes when they are at school. Save their souls – and transfer the money to billionaires and corporations. That’s true morality.
Ellen Brown writes at the blog Web of Debt. She probably understands the American economy and what is wrong with it as well as anyone, including Paul Krugman. Writing in Common Dreams, she turns her critical eye to Detroit and who will win in the bankruptcy. Brown points out that the city’s debt to banks are based on “swap” rates that favor the banks in the case of debt. Further, the rates are based on LIBOR ratings, which were manipulated. So did Detroit go bankrupt, or was it set up to fail by the people who are first in line to liquidate assets?
Brown goes on to examine the possible fall out of a Detroit bankruptcy. Many cities and counties have problems similar to Detroit. The formula seems to be: Burn the workers to pay the bankers. Brown presents an alternative: Why not have a Bank of Detroit, a proposal first made by Virg Benaro in his run for governor in 2010. North Dakota has had a bank for many years, and it does not need to ask for credit, especially time bombs likes the “swaps” used to finance Detroit.
Ellen Brown is great. She understands that the banking system works too often to hurt the economy of main street. In advocating for local governments to run their own banks, she pushes against the momentum to privatize public assets. The problem is that many politicians, especially Republicans, worship what they call a “free” market. They will not listen to any kind of argument for public investment or common good. Voters need to dig deep and see that if we keep giving in to nonsense stories like the Detroit bankruptcy, the only winners will be the people who have been winning big for the last 30 years: Bankers.
P.S. On a positive note, Brown has a blog post that discusses San Francisco’s attempt to launch a city bank.
Many experts point to consecutive months of job growth as if they were talking about Joe DiMaggio’s famous hitting streak. At the same time, they say the growth is not good enough, which makes them sound reasonable. It also hides ignores a growing problem: Too many of the new jobs are low wage.
Writing for MSNBC, Suzy Khimm reports that over a third of the 195,000 jobs added in June were in the hospitality industry, which usually generates low-wage positions. Khim also notes that new jobs are more likely to be part-time than they were before the Great Recession. Paul Krugman’s view of the situation is even more dismal: “Full recovery still looks a very long way off. And I’m beginning to worry that it may never happen.” To a degree, Krugman blames his usual suspects: the Fed and the Austerians. However, this time he adds a new culprit: voters who don’t seem to care.
In my encounters with clients who are employed, the story is not much better. They talk about small raises or flat salaries, increased workloads, and employers that only know how to ask for more. Yesterday, I wrote about workers in China kidnapping their boss. In the U.S., workers and voters just seem beaten down. They blame government, but they don’t change it. They blame the poor, most of whom are working at low wage jobs, and they ignore the people who have benefitted most from this broken economy.
Sure, the monthly jobs numbers sound good again. Look below those numbers, and you see another bridge waiting to fall.
Huffington Post republished an article from the New York Times that outlines the impact of austerity on the job market. Deficit-cutting mania has impacted the unemployment rate by as much as 1%. It has also hurt economic growth, which would generate even more jobs. Without taking sides, the article describes inaction by the Republican Party, which has contributed to the current state of the economy. For my part, I would also take the President to task for not doing a better job of communicating the problem to the American people. His willingness to compromise and look for a “Grand Bargain” has made a confusing situation worse. Bottom line: Government action – not deficit reduction – will generate jobs.
We fret about unemployment in the U.S., but we seldom consider the problem in other countries. Huffington Post linked to an article at 247wallst.com that lists European countries with the highest unemployment. Japan and the U.K. have slight higher unemployment. Countries like Greece (26.4%) and Spain (26.3%) face much higher, rates which are similar to estimates for the U.S. in the Depression of 1930s.
What if the U.S. had 25% unemployment? We would have a major problem. Even at the current rate, many job seekers are having problems finding jobs. Worse still, wages have flat and in some cases declined. Like Paul Krugman, I believe the government should play some role as an employer of last resort. It’s not a matter of the clichéd attack on Keynes that one worker fills a hole and another fills it. There is work to be done: infrastructure, public safety, education, and healthcare. We need to invest to build good country where everyone has opportunity. We have the wealth. We need the will.
Paul Krugman has posted two very disturbing blogs on wages. In one, he demonstrates that median earnings for full-time male employees have been flat since the 1970s. How do people compensate for inflation? Krugman answers this question with a second graph that shows rising levels of debt from the 1980s-2010. In his second post, Krugman contrasts a steady growth in productivity over 40 years with a flat line for hourly compensation since the 1970s. If this graph is accurate, who benefited from the increase in productivity? It wasn’t hourly workers.
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