It’s the pay, stupid.
Bill Clinton was elected in 1992 on a simple, perceptive platform: “It’s the economy, stupid.” Well, the U.S. unemployment rate is remarkably low, but everyone seems remarkably unimpressed. Why? Because a job isn’t a good job. America has about 100 million problems right now, and no one’s talking about any of them. While endless hours of network television time has been spent bickering, I’d ask you to recall anything you’ve heard about helping Americans get good jobs. I’m going to say it until it sinks in: Wages for American workers have been flat-out stuck for a generation. Good jobs — solid, middle-class jobs that allow for a modest but comfortable middle-class existence — are disappearing as fast as land-line telephones.
Americans aren’t stupid. They know good jobs are disappearing — well-paid workers are losing out to lower-paid counterparts in China, in Mexico, and far more frighteningly, to robots.
It’s the pay, stupid.
Back in 2010, when the economy and the stock market started to perk up after the recession, professional economists fretted openly about a dreaded “jobless recovery.” Stocks were going up, corporate profits were going up, but no one was hiring. Turns out the jobless recovery wasn’t quite the problem. It was the good-job-less recovery.
We’re created more than 10 million jobs since the recessions. But many of those “new” jobs stink.
Sure, a 4.9 percent headline unemployment rate is positive. Even the more inclusive “U6” unemployment rate, which accounts for the underemployment and those who’ve given up looking, is under 10 percent, a massive improvement from 2010.
But here America’s new reality. The National Employment Law Project wrote in 2014 that jobs in low-wage industries accounted for 22 percent of job losses during the recession, but 44 percent of post-recession employment growth. At the time, there were 1.85 million more low-wage workers than at the start of the recession.
That story is repeated in local economies around the country. In high-flying, tech-friendly, startup-crazed Boston, more than 85 percent of the positions added since 2009 pay less than $38,000 a year. Gotta repeat that: 17 out of 20 new jobs pay less than $38,000. Or monthly take-home pay of around $2,000.
What’s going on? Why are wages so stubbornly low? When unemployment is this low, wages are supposed to go up, economists tell us. As I keep writing in The Restless Project, average-paying jobs should support purchase of average-priced housing, unless some externality is screwing with basic supply and demand. Well, plenty of externalities are at play. You can probably rattle them off as well as I. American workers are now competing with lower-wage workers in other countries. Labor unions have lost just about all their mojo, so workers have little bargaining rights or leverage. (For some reason, the people who scream about competition from China don’t support labor unions). Big data definitely favors big owners and their miserly, cost-cutting tricks over workers.
I fear all this pales in comparison to the labor shock on the way from really-low-wage workers now arriving on the scene — robots. Here’s a thought experimentL How many of those 1.85 million low-wage jobs created between 2010 and 2014 are robot-proof? Only the most menial of menials tasks, I’m here to tell you. In fact, the only safe jobs will be jobs where workers will be cheaper than the cost of robot upkeep.
We’re walking down a dark tunnel and that light at the end is a robot-powering train headed for us.
So, who has a plan for dealing with this, America’s real middle-class crisis?
Bernie? Donald? Hillary? Jeb!? Marco? Ted? John? Anyone?
Let me give you a head start. For decades, economists have extolled the virtue of letting markets and trade run fee. Lower trade barriers lead to more movement of money and goods, and that eventually benefits everyone. While that seems to be true…eventually being the key term… *some* economists are finally starting to recognize that people suffer during this process. A lot. For a long time.
Economics is called the dismal science for a reason. Economists seem way too willing to allow people to suffer while holding to their macro-economic theories which work nicely on perfect planets. Here on the dirty earth, things get messy. To wit: It’s generally believed that lowering trade barriers between low-wage and high-wage nations will make everyone richer, even folks who lose high-paying jobs to new competition, because they’ll simply get better jobs. Sadly, folks tend to skip over where those better jobs will come from, other than perhaps a token mention of “retraining.”
Here’s a great Economist story about this major concession economists are starting to make:
“Competition from Chinese imports explains 44% of the decline in employment in manufacturing in America between 1990 and 2007. For any given industry, an increase in Chinese imports of $1,000 per worker per year led to a total reduction in annual income of about $500 per worker in the places where that industry was concentrated.”
Substitute “robot” for Chinese worker and you’re going to see the same result.
Now, you can’t stop globalization, and we really can’t stop robots either. The terrible habit we have here in America is thinking that things will magically work out if we just close our eyes and keep walking down that dark tunnel. Check that, if we just send other people to walk down that dark tunnel for us.
Workers need help. And they are getting precious little. The same paper quoted above found that government spending on essentials like retraining after trade reform was only $58 for every $500 on lost wages.
That’s a raw deal.
America has been dismal about preparing our workforce for the 21st Century economy. Sure, there are some unicorns who combine luck and ingenuity to create apps that are worth billions, like Uber. But the vast majority of jobs Uber and its ilk create pay less than $15 or $20 an hour. And all those jobs are destined to be filled by self-driving cars, anyway. We force kids to borrow 5 or 10 years income to attend college and graduate school now; we certainly aren’t capable of helping mid-career adults learn something new.
So what do we do? Here’s part of the solution, as the Economist puts it:
“Generous trade-adjustment assistance, job retraining and other public spending that helps to build political support for trade are therefore sound investments. To make any of these policies work, however, economists and politicians must stop thinking of them as political goodies designed to buy off interest groups opposed to trade. They are essential to fulfilling trade’s promise to make everyone better off.”
Bernie? Donald? Hillary? I don’t care about making America great again. How about making America safe for the middle-class again? How would you do that? Building a wall and raising tariffs is one idea, but probably a terrible and temporary one. Lowing college loan interest rates by a point or two? OK, sure, that’s nice. Bernie Sanders comes closest to giving this middle-class angst a voice, and I enjoy a good Wall Street bash-fest as much as anyone, but I sure would rather hear more detailed plans for precisely how his administration would help create an environment that will encourage creation of good middle-class jobs.
You know, and I know, and they know, that the train is still headed right for us. Wages have been stagnant for a generation, under both Republicans and Democrats.
It’s the pay, stupid. The jobs. The *good* jobs. Where will they come from in the early 21st Century? Let’s talk about that.
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