David Cay Johnston is one of my favorite writers on economics. He presents complex issues in language that is easy to follow and compelling to read. In a commentary published by Al Jazeera, Johnston notes that the recent growth in the U.S economy has not led to a growth in income reported on income taxes. In fact, average income reported dropped from $63,297 in 2012 to $61,668 in 2013. Johnson also presents a chart that tracks labor’s share of income since WWII. Since 2001, capital has been taking a bigger and bigger piece of the pie. He points to political factors, such as the outsourcing of factory jobs due to trade deals. He cites President Obama’s 2011 deal with South Korea as costing “thousands of manufacturing jobs.” He also demonstrates that all working people have been losers recently. While those making $250,000 or more a year did see a 4.8% increase in their reported income in 2013, their total income fell by 8.6% and average income by 12.8%.
What’s the moral of the story? The investor class is king. Workers are more productive than ever. Unemployment is down. Somehow, reported income is declining for all working people. As Johnston warns at the end of his commentary, “The American economy is getting bigger, but average incomes are shrinking. If that trend continues, it will eventually spell economic, social and political trouble for the country.” Johnston’s words frighten me more than ISIL. The real terror is economic.
According to the United Nations, more than 200 million people are unemployed worldwide. Population of adults looking for work is growing faster than new jobs. This problem could mean big problems in the near and long term U.S. job market. Politicians from both parties are pushing a new trade deal with Asia, The Trans-Pacific Partnership (TPP). Many critics think this trade deal would be worse than NAFTA as a catalyst for moving U.S. jobs offshore. If the data from the U.N. is accurate, developing nations will have more people willing to work for pennies on the hour. Our leaders need to promote fair trade that protects American workers, not free trade that only serves the interest of investors and their bankers.