An Economy That Turns American Values Upside Down

September 06, 2004

Op-Ed, NY Times
Published: September 6, 2004

The Labor Department reported last week that 144,000 payroll jobs were created in August. Let's put that in perspective.

The number was below market forecasts. It was also below the number of jobs needed to accommodate the growth in the employment-aged population. In short, this was not good news. It's only by the diminished job-creation standards that have prevailed since the last recession that any positive spin could be put on last month's performance.

As the Economic Policy Institute tells us, in a book-length report it is releasing today: "The United States has been tracking employment statistics since 1939, and never in history has it taken this long to regain the jobs lost over a downturn."

In "The State of Working America 2004/2005," the institute shows in tremendous detail how those lost jobs and other disappointing aspects of the recovery are taking a severe economic toll on working families.

According to the institute:

"After almost three years of recovery, our job market is still too weak to broadly distribute the benefits of the growing economy. Unemployment is essentially unchanged, job growth has stalled, and real wages have started to fall behind inflation. Today's picture is a stark contrast to the full employment period before the recession, when the tight labor market ensured that the benefits of growth were broadly shared.

"Prolonged weakness in the labor market has left the nation with over a million fewer jobs than when the recession began. This is a worse position, in terms of recouping lost jobs, than any business cycle since the 1930's."

What is happening is nothing less than a deterioration in the standard of living in the United States. Despite the statistical growth in the economy, the continued slack in the labor market has resulted in declining real wages for anxious American workers and a marked deterioration in job quality.

From 2000 through 2003 the median household income fell by $1,500 (in 2003 dollars) - a significant 3.4 percent decrease. That information becomes startling when you consider that during the same period there was a strong 12 percent increase in productivity among U.S. workers. Economists will tell you that productivity increases go hand-in-hand with increases in the standard of living. But not this time. Here we have a 3.4 percent loss in real income juxtaposed with a big jump in productivity.

"So the economic pie is growing gangbusters and the typical household is falling behind," said Jared Bernstein, the institute's senior economist and a co-author of the new book.

This is the part of the story that spotlights the unfairness at the heart of the current economic setup in the U.S. While workers have been remarkably productive in recent years, they have not participated in the benefits of their own increased productivity. That doesn't sound very much like the American way.

According to the institute, "Between 1947 and 1973 productivity and real median family income both grew 104 percent, a golden age of growth for both variables." That parallel relationship began to break down in the 1970's, but it is only recently that it fell apart altogether, leaving us with the following evidence of unrestrained inequity:

"In the 2000-03 period income shifted extremely rapidly and extensively from labor compensation to capital income (profits and interest)," so that the "benefits of faster productivity growth" went overwhelmingly to capital.

American workers are in an increasingly defensive position. In a tight labor market, when jobs are plentiful, workers have leverage and can demand increased wages and benefits. But today's workers have lost power in many different ways - through the slack labor market, government policies that favor corporate interests, the weakening of unions, the growth of lower-paying service industries, global trade, capital mobility, the declining real value of the minimum wage, immigration and so on.

The end result of all this is a portrait of American families struggling just to hang on, rather than to get ahead. The benefits of productivity gains and economic growth are flowing to profits, not worker compensation. The fat cats are getting fatter, while workers, at least for the time being, are watching the curtain come down on the heralded American dream.

Posted by manystrom at September 6, 2004 05:47 PM

Yeah but it won't last.
That ecological revolution we need is underway.
Listen to the tick of the speculation bomb.
Soon people will learn who are the real terrorists.

Posted by: DF at September 7, 2004 09:25 AM

There is no easy way to say this, but we need to have a wiping o the slate clean... the kind that is the result of a complete revolution, that reverts back to zero, in all the facets that our standards have need of correction. The clock needs to return to Oct 1929, with all debts, entitlements, laws, protection clauses in the fine print, all tenure rights, all claims as in Scripture jubilee year..all trade treaties cancelled. and all returned back.. This is the same as a revolution,... and while that MIGHT be what is coming down the pike, "regardless" ... A Legal cleaning of the slate would be a lot easier, and with less bloodshed.. It is the only way to returv to the level playing field we had pre= World War 2. It should go without saying that either the micro chip is going to be needed in order to vote, and those without the chip will not be allowed to be citizens of this USA... This IS drastic, but it is the only fair way to make the corrections. As long as there are too many poorly educated workers available for the low paying jobs that should be reserved for the student who is working on a part time basis to get his education, these foreign undocumented workers will only become part of the race riots, revolution, and these are extraordinary problems demanding extraordinary methods to bring this nation back to a good starting point.

in my opinion.. m schmidt

Posted by: muriel schmidt at September 7, 2004 05:24 PM

No "wiping of the slate clean" is necessary. The problems can be solved easily by a combination of a few simple measures:

1) Introduce legislation to the effect that interest paid on debt (past and future as well as private and public) can not exceed the figure of 2% (the real growth rate of the economy). At the same time put effective limits on the creation of new debt. Such a legislation should be worldwide in order to avoid capital flight. Otherwice capital controls might be necessary.

2) To solve the social security crisis, increase retirement age from 65 to 75 years.

3) To create new jobs, decrease the real pay rate, preferably by high inflation of the currency. The inflation should forcefully adjust national consumption to be less than national production.

4) To solve the health care crisis, promote the production of higher quality food. The food produced in the US is in general of poor quality and of the wrong kind (example: too much sugar production leading to obesity). This is one of the reasons for exploding health care (medicare) costs.

5) To solve the energy crisis, introduce rationing on gas and oil consumption. This measure alone could solve the trade deficit problem.

Posted by: Robert Sczech at September 8, 2004 04:40 AM

America is just " exchanging dollars ".

Let the fall of the Roman Empire begin.

Posted by: bob herron at September 27, 2004 12:19 AM

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