In his state of American business speech, US Chamber of Commerce President Tom Donohue asserted that the US economy will grow by 3.2% in 2011, and somewhere around 2.5 million jobs will be created. Wall Street’s dumping of safe US Treasury bonds is seen as another sign that they can grab higher yields through risk-taking, and that the economy presents those high-yield opportunities. The predictions keep rolling in, and they signal growth, regardless of the storm clouds on the horizon from things like the European debt crisis, housing prices, and state and local budget cuts.
If growth – and even mass hiring – does return, there will be a temptation from the establishment to wipe their hands of the matter, pronounce everything secure and content, and bask in the glow of a restored US economy. There will not be a lot of time for reflection on the damage caused by the Great Recession, damage that was wholly unnecessary, brought about by deregulation and bad public policy tilted to a financial oligarchy. None of the elites were touched by that damage; instead it fell on the backs of the average American worker, particularly in the form of lower wages as far as the eye can see.
" In California, former auto worker Maria Gregg was out of work five months last year before landing a new job—at a nearly 20% pay cut.
In Massachusetts, Kevin Cronan, who lost his $150,000-a-year job as a money manager in early 2009, is now frothing cappuccinos at a Starbucks for $8.85 an hour.
In Wisconsin, Dale Szabo, a former manufacturing manager with two master’s degrees, has been searching years for a job comparable to the one he lost in 2003. He’s now a school janitor.
They are among the lucky. There are 14.5 million people on the unemployment rolls, including 6.4 million who have been jobless for more than six months.
But the decline in their fortunes points to a signature outcome of the long downturn in the labor market. Even at times of high unemployment in the past, wages have been very slow to fall; economists describe them as “sticky.” To an extent rarely seen in recessions since the Great Depression, wages for a swath of the labor force this time have taken a sharp and swift fall. "
I could offer a few reasons for this. First, you have a long-term decline of labor unions, the one force in this country that argued for higher wages and income security. That upward pressure on wages impacts union and non-union households alike, and when this recession hit, that pressure was too minor to carry much leverage. Second, the labor downturn is higher than any other since the Depression, which significantly reduces the bargaining power for workers. With so many people out of work, the unemployed are more likely to take whatever they can get. Third, you have the long-term decline of manufacturing jobs (if not manufacturing itself, which has become more automated) as a sector with skilled labor that can earn a middle-class wage. The alternative for workers without a college education is essentially the low-wage service sector, which can squeeze their employees to a far greater degree than in manufacturing. Finally, related to the decline in manufacturing jobs, there’s at least some credence to the idea that vanishing sectors (declines in jobs that automation or technology render obsolete, like travel agents or filing clerks) force employees to retrain and accept entry level positions later in their careers.
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This being the Wall Street Journal, there’s an obligatory paragraph about how wage cuts increase American competitiveness globally. But that’s bunk. 70% of your economy is devoted to consumer spending, and somehow wage cuts and reducing the purchasing power of consumers will improve the economic outlook?
Regardless of the reasons, declining wages has enormous effects on workers and their families. Studies show that children of fathers who get laid off end up with lower earnings decades into the future. The impacts are deep, and they reduce upward mobility, as income keeps flowing for the lords of finance but not those struggling to stay in the middle class.
And that’s already a problem for a nation with one of the lowest incidences of social mobility anywhere in the industrialized world. People don’t want to hear this, they want to believe in the great meritocracy that is America, but that’s just not the case anymore. In arguing for a moral economics, Paul Krugman writes:
" So when you hear conservatives talk about how our goal should be equality of opportunity, not equality of outcomes, your first response should be that if they really believe in equality of opportunity, they must be in favor of radical changes in American society. For our society does not, in fact, produce anything like equal opportunity (in part because it produces such unequal outcomes). Tell me how you’re going to produce a huge improvement in the quality of public schools, how you’re going to provide universal health care (for parents as well as children, because parents in bad health affect childrens’ prospects), and then come back to me about the equal chances at the starting line thing [...] The point, though, is that anyone who claims that transferring some income from the most fortunate members of society to the least is a vile injustice is closing his eyes to the obvious reality of how the world works. "
And the best example of that comes when you study these depressing wage statistics.