The "Rising Wages" Myth In Trump's USA And How It Originated

The latest fulsome malarkey being propagated by the financial press and assorted pundits is that incomes are rising and Americans ought to feel more of a "wealth effect" than ever before. No one seems to mention how much of the current "deregulated" economy is still built on gig jobs, such as using Task Rabbit, and Uber here in Colorado - but still not earning enough to afford a median scale home in Denver (price: $549,000).   Or a median priced home here in the Springs ($355,000).

Why not? Because one would have to put together earnings from dozens of gigs every day to make enough money to afford such homes, or even a basic single bedroom apartment in Denver for $1,490 a month.  So the most the gig jobbers can manage is maybe- if they're lucky- finding a bedroom to rent in someone's home for $650 a month. That is now considered a great deal.

Oh yeah, the financial media is full of all the jobs going unfilled, but what are they exactly? In Colorado in general they include landscapers, agriculture workers, retail, restaurant wait staff (some 5, 600 positions vacant last month alone) and construction.  In the case of the wait staff one restaurateur even told the Denver Post he would immediately hire anyone "with a pulse"..  But still no takers, neither for line cooks. Why not? Well because one would need to earn at least $60,000 a year to afford even the most modest single bedroom apt. and neither job pays that much.

So, it was kind of laughable when on Sept. 12, the WSJ featured this editorial:

Trump's Income Bump - WSJ

In which it was claimed:

"Real median household incomes ticked up 1.8% to $61, 372 between 2016 and 2017 while the poverty rate dropped 0.4 percentage points to 12.3 % according to the Census Bureau. ...

Incomes increased across the distribution range with the share of people earning less than %15,000 declining 0.3 percentage points to 10.7%, the lowest level since 2007."

But how real is this income increase exactly?  When one turns to the front page of the same issue, one comes to an article by Janet Adamy and Paul Overberg with a similar leading header 'Incomes Rise, Poverty Falls Again' .  But when one reads between the lines, as it were, a different story emerges.

We learn, for example:

"Incomes have grown 10.4% in the past three years and last year's figure was the highest on record. But a change in  the way the numbers are calculated over time makes comparisons imperfect and census officials said last year's figure wasn't statistically different from income peaks in 1999 and 2007.

The result is that the typical American household's income is stuck where it was before the last two recessions.  The 2017 growth rate also lagged behind the previous two years."

In other words, last year's growth rate for income - the first full year of the Trump administration, saw less growth than the previous two years (for the Obama administration).  In addition, as the quote from the piece points out, "last year's figure wasn't statistically different from income peaks in 1999 and 2007."

WSJ columnist William Galston also reinforced this in his column yesterday (p. A13), writing:

"Most of the income gains from the post- Great Recession low of  $54, 700 in 2012 reflect increases in the number of people working and hours worked, rather than in hourly compensation for each worker."

Note that last part again, 'rather than the hourly compensation for each worker'.  In other words, most of the financial media that jabbers on about the great income surge is comparing applies and oranges. Galston supports that take when he goes on to write: "As we approach full employment income gains will be sustained only by rising wages."  In other words, rises in hourly compensation per worker.

Anyone else get the feeling we're being gamed here on the "rising" income issue? Maybe by media agents and sources committed to make Trump look better than Obama? 

The real reason incomes rose also was noted in the article by Adamy and Overberg, showing why so many workers really aren't that much better under the reign of Dotard:

"Incomes rose mostly because more people worked more hours and to a lesser extent because their wages increased."

And we also read:

"Some economists said they are puzzled that wages haven;t risen more quickly given the overall strength of the economy and an unemployment rate around 4 percent"

But we already know why, because most employers don't want to pay higher wages.  Recall in a January 10 post I cited a Denver Post Business column  (Jan. 7,   p. 3K, 'Don't Get Your Hopes Up For A Raise') from which  we learned first and foremost, companies would much rather give one off "bonuses" and leave out any permanent pay raises.  As the piece noted:

"Those one time bumps, whatever really precipitated them, don't mean higher wages are around the corner. ...And for now employers are in no hurry to raise them."

Why?  According to Paula Harvey, VP of Human Resources at Schulte Building Systems in Houston:

"Companies are really hesitant to give raises. When you give a raise, it's stuck in the pay system. It is something you're guaranteeing: it's becoming a fixed cost. "

Harvey insisted it's much better for companies to preserve "flexibility" so instead companies enact "variable pay". This can come in the form of one off bonuses - say on a per year basis- or if you are a stellar performer you can get a "bigger bump". Say equal to a half year's wage increase of 3 percent. (If you are a super star performer you have the optimal chance of getting a permanent good raise.)

But for the rest it's 'catch as catch can'.  In other words, permanent salary bumps are just too expensive and if "times get tough, the needed pay cuts hurt morale and productivity".

Despite the WSJ editorial's humping the income increase, it is mostly just a big myth, and nothing's changed since that Jan. 10 blog post.  Indeed, in The Weekend Financial Times we learn companies have been even more tightfisted. According to Heidi Shierholz, senior economist at the Economic Policy Institute, insists that companies have contributed to personal financial insecurity in the first place by removing financial safety nets. She goes on to say:

"As well as keeping wages as low as possible they have shifted the risks involved in meeting retirement obligations by eliminating final salary pension schemes".

Adding:

"My concern is employers can implement low cost, gimmicky financial welness programs, instead of putting real skin in the game - investments in employees in the form of higher wages and higher retirement contributions."

In other words, despite all the media hype and hoopla,  corporations, companies, employers are still getting the better of their workers.   William Galston's final words in his WSJ column are a sobering reminder that our income situation is no where as rosy as we've been led to believe:

"One thing is clear: Current policies offer little hope of reversing the steep decline in the share of U.S. income that flows to workers, Unless we change course, today's loss of confidence in a better future will persist."

Don't Blame Immigrants For Slow - Or No- Wage Growth!

Graph showing average hourly earnings growth and  effect of one 'basket' of companies increase in labor costs since 2016, relative to a basket with high labor costs. (From The Wall Street Journal, yesterday, p. A1)

It is odd that the WSJ op-ed 'The Elites Feed Anti-Immigrant Bias' (July 10, p. A15) stands in stark contrast to the same day front page story ('Workers Welcome Wage Gains, But Companies Feel Squeeze').  In the op-ed we are asked to believe that it is hordes of Mexican immigrants getting hired and degrading white Americans' hourly wages.  In the second, we learn the real reason is that companies are simply reluctant to have shrinking profit margins via higher labor costs. (See graph)

The first piece gives an anecdote from a guy  whose fiancee earns $31 an hour and has worked at the same company for "21 years" while "Mexicans have been hired at $8 an hour".  The guy adds:

"I don't want to be racial but that's all they're hiring".

On which I call bollocks.  The fact is, no company or virtually none, is hiring Mexican immigrants at that quoted low wage rate to do quality work at a quality company. Where Mexican immigrants are working  now is where they're most needed, i.e. at landscaping jobs, construction, and agriculture - and even then not enough can be hired because of Dotard's immigration policies. Employers are having to partake in "lottos" to get the workers they need.

The anecdote above was preceded by this remark from the author (Prof. Joan C. Williams):

"Yet real wage growth for the working class has been abysmal for a generation, and for many native born blue collar workers the culprit seems obvious - immigration"   Adding:

"Today less than half of Americans born in the 1980s earn more than their parents did, according to a National Bureau of Economic Research study led by Harvard economist Raj Chetty'>

Yes, but WHY is this the case?  More to the point, why are the blue collars blaming immigrants instead of corporate America and the economic ideology that fuels its excesses?

As I first noted in my book, The Elements of the Corporatocracy, ordinary workers have suffered a 'death of thousand cuts' since Neoliberalism came into vogue during the Reagan years. Robert McChesney in his excellent book, The Problem of the Media, Monthly Review Press, 2004, p. 49, writes:

"With the election of Ronald Reagan, the neoliberal movement had commenced. Neoliberal ideology became hegemonic not only among Republicans but also in the Democratic Party of Bill Clinton, Al Gore, and Joseph Liebermann. Differences remained on timing and specifics, but on core issues both parties agreed that business was the rightful ruler over society"

The problem with the Neoliberal, pro -free market idiom is that it denies the most basic security for the majority of citizens. In this way it feeds economic inequality while it rewards the speculator and banker class. It also helps to corrupt the political class via unregulated campaign contributions.

Jay Bookman aptly noted('The New World Disorder Evident Here, Abroad', in The Baltimore Sun, December 15, 1997):

"The global economy has been constructed on the premise that government guarantees of security and protection must be avoided at all costs, because they discourage personal initiative.  In times of crisis, however, that premise cannot be sustained politically. In times of trouble it is human nature to seek security and protection and to be drawn toward those who promise to provide it. That is how men such as Adolf Hitler, and Vladimir Ilyich Lenin came to power, with disastrous consequences.""

In other words, the global Neoliberal dynamic inevitably paves the way for authoritarian populists like Trump and others to come to power.  Among the "thousand cut" insults sustained by U.S. workers compliments of corporations and the entrenched Neolib state:

(1) Cutting employee benefits, i.e. health plans - even after employees have retired with them.

(2) Eliminating defined benefits plans, such as provided standard corporate pensions - in favor or defined contribution plans (such as 401ks) in which workers are in it for themselves to accumulate adequate savings for retirement.

(3) Cutting wages - either de facto, or through eliminating the unions which protected them (much exacerbated after Reagan ascended to power)

(4) Firing/downsizing workers just before their retirement dates, so the company is free not to have to pay retirement plan benefits, or provide stock options, as per contract clauses.

(5) Re-engineering the workplace to increase its automation factor in order to dump workers, so increase profit margins by not having to pay benefits, etc.

(6) Shipping as many jobs as possible overseas, to places like Bangalore or Beijing, with labor costs barely 20% of what they are in the U.S. and no benefits to factor in.

(7) Firing - downsizing workers after mergers dictated by Wall Street interests, in order to enhance a company' profits through higher Wall Street share prices.

(8) Identifying older (over 50) workers as 'surplus' so that they can be replaced with younger workers for whom half the wages (or less) can be paid, with fewer benefits. (A recent 5-4 Supreme Court ruling a few years ago exacerbated this by asserting anyone claiming "age discrimination" could not file a suit in standing if that was the only charge)

(9) Eliminating nearly all permanent jobs which carry health and pension benefits, in favor of using 'temping', 'outsourcing' or some other device not requiring benefits. On the academic (university) front, using 'adjunct' professors, hired on a per hour, per course basis, without benefits., and with no possibility of 'tenure'.

(10) Tying health insurance to employment, so that when let go or fired, workers are waylaid again by having to do without critical protection

All of these in concert, have forced a massive marginalization of the workforce. It was so odious and extensive  - even by 1996-  that it prompted these powerful words of Charles Reich in his book, Opposing the System,p. 22:

"We have built a machine for dehumanization of such force and destructive power, thorough its accumulated assaults on human dignity, that we are creating kinds and degrees of damage to human beings beyond anything ever known, with totally unforeseeable consequences "


And as  Barbara Ehrenreich observed in her book, 'This Land is THEIR Land', p. 61:

"Market forces ensure that a volunteer army will necessarily be an army of the poor. The trouble is that enlistment doesn't do a lot to brighten one's economic future"

Probably no truer supporting statement ever appeared than barely 20 years ago, in an issue of Psychology Today  (July/August 1998, p. 10. Includes graph):

"Starting in the mid-1970s, the nation's quality of life parted company with its wealth, and the gap between social health, and GDP is now bigger than it's ever been."

A graph of 'quality life indices' vs. GDP (ibid.) shows the measured divergence. It also suggests that we devolved to a much sicker society than anyone imagined. The marginalization of the workforce, is surely one major barometer of that. The GINI coefficient, and research disclosing how it portends social and economic disintegration, is another. (The U.S. Gini coefficient is now at nearly 42.  Readers can track the Gini index increase at this St. Louis Federal Reserve site:

https://fred.stlouisfed.org/series/SIPOVGINIUSA


So how and when did the pre-eminence of market forces over human needs and welfare come about? It was actually brewing for dozens of years, perhaps since the collapse of LBJ's  "Great Society" in the mid to late 60s. From then on the real "elites" (which Prof. Douglas mentions) set out to render labor as cheap as feasible and hostage to Wall Street dictates and decisions.  Part of this was also based on twisted economic reasoning, e.g. as embodied in the Pareto distribution, e.g.


whereby the dollars from the affluent and the poor - or labor class - are treated differently.  This built in economic prejudice drives the Neoliberal machine and causes it to value affluent populations over ordinary workers, even as it tries to discourage the latter from enhancing their own welfare, say to do with health care.

Example:. Economist Marty Feldstein once suggested it makes more sense to give the ordinary worker with health insurance $1,499 NOT to get the colonoscopy, than to let her get the test and consume valuable specialist time and resources via a $2,000 "subsidy".  See also:

http://brane-space.blogspot.com/2011/06/modern-economics-its-evil-basis-pareto.html


In other words, capital is opted for over labor, and  profit margins trump higher wages, this was the topic of The Judas Economy: The Triumph of Capital and the Betrayal of Work, by William Wolman and Anne Colamosca.

The point is then, that labor is devalued precisely because we live in a "Judas Economy" where capital is revered over it. One of the most disgusting aspects is that productivity in relation to GDP has increased more than 40% yet isn't registered because of the skewed way GDP is computed.

All of this is eminently proven by the front page WSJ story cited above,  with the graph) in which we learn:

"Rising wages are beginning to eat into the profits of some U.S. companies. Businesses from dollar stores to hotel operators to fast food chains have warned that higher labor costs have been a drag on their profits - a potential headwind for the nine year stock rally as it struggles for momentum ahead of the second quarter earnings season."

Adding:

"This is good news for U.S. workers ...but the higher costs pose a threat to some U.S. companies"

And we should also dispel the myth that this higher labor cost factor just impinges "some" companies. That's plain blarney and understatement because in fact all corporations have higher labor costs on their radar. I already noted (Jan. 10 post),

According to Paula Harvey, VP of Human Resources at Schulte Building Systems in Houston:

"Companies are really hesitant to give raises. When you give a raise, it's stuck in the pay system. It is something you're guaranteeing: it's becoming a fixed cost. "

She insisted it's much better for companies to preserve "flexibility" so instead companies enact "variable pay". This can come in the form of one off bonuses - say on a per year basis- or if you are a stellar performer you can get a "bigger bump". Say equal to a half year's wage increase of 3 percent. (If you are a super star performer you have the optimal chance of getting a permanent good raise.)

Of particular relevance was the question asked her: Why, if the labor market is so tight (such low unemployment), do wages remain stagnant?   She responded that  "You can blame a combination of factors including the globalization of the work force, job automation and the decline of unions.".

Meanwhile. managing director of Aspen Advisors, Andrew Gadomski (from a WSJ piece), admitted that when companies lament they can't find workers to fill key openings, that is code for: "I can find talent, I just don't want to pay them as much as they cost."

Nowhere are immigrants mentioned, nor should they have been, since they aren't grabbing good paying jobs nor are they the source of wage deterioration. Vastly bigger threats  include corporations too cheap to pay decent wages and AI robots.

In the realm of manual labor, columnist Jim  Hightower cites the example of "SAM" a robotic bricklayer that "lays three times as many bricks in a day as a human can". Hence, it has the potential to displace three times the number of human workers. Immigrants? Not a factor at all compared to 'SAM'.

What about higher level jobs? They're also at risk from bots, not immigrants.  Hightower points out the jobs of "accountants, bank loan officers, and insurance claims adjustors are "falling to the bots".   Why? Because they can calculate more rapidly and more accurately than humans- oh, and they don't require 401ks or health care plans!

It shouldn't take a rocket scientist or astrophysicist to figure out the ultimate goal of the Neoliberals and all economic "efficiency" (i.e. Pareto distribution)  fetishists is to eliminate human labor and its costs as far as possible. That includes immigrants, as well as homegrown American workers - of whatever class.

See also: 'Oil's Technology Spells End Of Roughneck Boom' - Artificial Intelligence and Automation Replace Oil Industry's Blue Collar Jobs'

https://www.wsj.com/articles/oils-new-technology-spells-end-of-boom-for-roughnecks-1531233085


Excerpt:

"Technology has already upended labor needs in most of the world's manufacturing. It's now upending the energy business  foretelling the end for one of the last sectors in America where blue collar workers could hold jobs paying six figure salaries. ....The energy sector has found it can use new technologies, to do the work better and cheaper and with few people. They have invested billions of dollars on what the industry calls 'digital oil fields', embracing artificial intelligence, automation and other technologies"

And:

http://www.smirkingchimp.com/thread/tim-koechlin/80098/imagining-an-economy-that-serves-the-99

Could Repukes Wreck The Economy By Cutting Food Stamps? Quite Possibly!

One doesn't have to read too much in the center right media before encountering the clarion call that food stamps, as part of SNAP (Supplemental Nutrition Assistance Program) need to be cut, pared back.  One need look no further, indeed, than the recent (Apr. 13) WSJ Editorial ('Working on Food Stamps') which makes a series of outrageous and unrealistic claims that the SNAP benefit ought to be cut. (The editorial included the graphic shown, claiming food stamps had become an entitlement).  We read, for example:

"More Americans need assistance during recessions like 2008, but the question is why so many have stayed on food stamps even amid the long expansion."

That;s really a "Duh!" response -eliciting statement, given no one outside the upper 1 percent would make it. They'd be regarded as mentally deficient or incompetent. The obvious reason "so many" still need food stamps is that not everyone benefited equally from the so called expansion. Mostly, those at the top made out while the rest saw their wages stagnate so they were simply not enough to cut the mustard, often even working two jobs.

This is why the WSJ's other argument, i.e. "that too many Americans haven't returned to the labor force" is totally false. The "too many" Americans cited are actually children and elderly or retired people - not working people!  The incessant carping about "missing" Americans or the "low labor participation rate" is bollocks, because with an extremely low unemployment rate - sitting at barely 4%  that doesn't fly.

If there are "missing workers" in jobs it's mainly because the immigrants who might have picked up the slack are now in hiding  - thanks to Trump's ICE raids and assaults on sanctuary cities. The situation now so bad that many crops are rotting in the fields, e.g.

• California crops rot as Trump's immigration crackdown creates farmworker shortage

As for the "missing workers" in the other jobs well, blame that - if 'blame' is indeed the word -  on  the baby boomers currently retiring or retired (like yours truly). We have left gainful employment by the millions, well, because we saved and invested and now no longer need to work.  This is not some sudden revelation either. It's been known for years that a "labor crunch" from retiring boomers was imminent, but too many refused to believe it, preferring to imbibe the media jabber we'd all  need to work to 90.

The stupid thing which the clueless Trumpies have done is to make that retirement loss of workers much worse by cracking down on immigrants! Even the WSJ managed to get that right in an earlier editorial, 'The Vanishing Caravan'  (April  6, p. A14) underscoring the folly of the current immigration limits:

"Faster growth from tax reform and deregulation means a tighter labor market that attracts more migrants. Mr. Trump would be wise to trade border security for reform that allows more legal immigration to meet the economy's needs. Then he wouldn't have to pull stunts like hyping a band of poor migrants as an invading army."

The REAL question is why, with the current tight labor market the wages aren't rising faster to support families that need it- so they can get off food stamps! 

To answer this, back in January I cited a Denver Post Business column  (Jan. 7 p. 3K, 'Don't Get Your Hopes Up For A Raise') . Therein it was revealed by Paula Harvey, VP of Human Resources at Schulte Building Systems in Houston:

"Companies are really hesitant to give raises. When you give a raise, it's stuck in the pay system. It is something you're guaranteeing: it's becoming a fixed cost. "

She insists it's much better for companies to preserve "flexibility" so instead companies enact "variable pay". This can come in the form of one off bonuses - say on a per year basis- or if you are a stellar performer you can get a "bigger bump". It is also coming by having more workers work overtime, as opposed to hiring new  workers - either because they can't find them or don't want to pay higher wages. 

One also needs to be mindful -  as Andrew Gadomski, managing director of Aspen Advisors,   observed in the same piece -  that when companies lament they can't find workers to fill key openings, that is code for:

"I can find talent, I just don't want to pay them as much as they cost."

Well, ok, fair enough. But then the media and other whiners can't bitch because more lower wage  - or stagnant wage workers living in high cost areas (like Denver) -resort to food stamps.

This is exactly why Colorado is now experiencing an exodus of many thousands of people from other states, who'd originally moved here to chase the gold ring. They soon learned their new job wages were  inadequate to cover their new location's housing costs. (Trulia recently estimated that only 29 percent of homes listed on the metro Denver market are affordable, and that was to those workers earning at least $70, 790 in 2015.  This from The Denver Post, April, 8, p. 10B)

The median listing price for homes on the Denver market now is:   $529,000

The average teacher and cop wages are significantly less than the $70-k figure, and with rents running nearly $1,500 a month for a typical Denver area apartment, it doesn't take a math genius or Mensa member to run the numbers to see that after accounting for a domicile (whether rent or mortgage) and utilities, food - say to feed a family of 4 - there will be scant disposable income left. Hence, the need to supplement via food stamps.

But here's the issue now, with this new Farm Bill, the GOP is determined to kill the goose that laid the supposed "golden egg" via more growth with their stupendous tax bill.  The reason is they want to cut food stamps by nearly $130 billion over a decade  (WSJ, 'Food Aid Cuts Would Hurt Grocers' p. B1. April 7-8).   That represents a "20 percent reduction of its current annual allotment of $63 billion"  and moreover, "could constitute one of the biggest yearly reductions in program sponsored purchases for retailers since the recession."

How serious is it? According to Alex Baloga,chief executive of the Pennsylvania Food Merchants Association, quoted in the article:

"It's well known that the food industry operates on a 1 percent profit margin. So there's no way to absorb any kind of decrease in sales, It's just that simple. It would be devastating."

SO we are clear, that cut in SNAP would therefore  deliver a major hit to aggregate demand. Recall as per my posts during and after the 2008 recession, that ) Aggregate Demand or AD is the total demand for final goods and services in an economy at a given time. It specifies the amounts of goods and services that will be purchased at all possible price levels. This is the demand for the gross domestic product  GDP) of a country..

Clearly if the grocery sector is clobbered by this Farm Bill, via cuts to SNAP, there'd be a measurable hit to the GDP (estimated of up to 0.4% per year) given some  16 million households would no longer receive all their benefits on cards. (Instead they'd get meager benefits from food "boxes" with oats, canned beans, potatoes, rice, etc delivered to them - via food purchased wholesale by the government.

In other words, Trump's government would cut the national grocers entirely out of the purchase-demand loop, and little wonder grocers and trade groups have criticized this diversion. (ibid., p. B2)  Let's also note, for reference here, that if the grocery sector's  1 percent profit margins are cut or eliminated  they will have no choice other than to lay off workers.  Given the PA Food Merchants Assoc.  alone represents  3,500 grocery and convenience stores, and if an average of 10 workers are laid off from each, that is 35,000 more dependents who'd almost surely be needing food stamps.

Are the Trumpkins and GOP not bright enough to see this? That their SNAP cuts will likely crash their "golden economy" and lead to another recession? I doubt it, because the Right's ideologues - bent on austerity for the masses (who voted for Trump in droves) -  aren't invested in reality.

The reality is how these economic misfits incessantly yap about fiscal discipline and exploding deficits, yet when they're in power, inevitably pig out. The most recent episode of fiscal "gluttony" was their tax bill which promised to deliver huge benefits to corporations and ordinary workers alike.  But the corporations just used their largesse to buy back their own shares, thereby increasing stock valuations even further  '"making it even more difficult for stocks to absorb bad news without falling further". (WSJ, April 11, p. B14)

As for ordinary blokes, well, they aren't spending as the Reeps expected. (WSJ, today, 'Despite Tax Cuts, Consumers Shy From Spending',  p. A3). And why is this? According to Susan Sterne, president of Economic Analysis Associates:

"It's an old recovery, people just don't need as much."

But this isn't too surprising given for a $40,000 a year primary wage earner, the tax cut amounts to a total of barely $300 for a year. In which case  6- odd bucks a week wouldn't even be visible on their pay stubs. But they will most likely need food stamps, given their wages are stagnating while corporations would rather buy back shares than give decent pay.  So the tax cut bill's payoff is....drumbeat!  Zilch, zero, while digging us into $1 trillion-plus added deficits.

And then, lastly, we beheld insult being added to injury as today's WSJ editorial ('Crowding Out K-12 Education') lambasted striking teachers in Oklahoma and Kentucky.  In the case of the Okie teachers, they were too greedy given they were already to receive a $6,100//yr raise (By gasp! raising taxes on oil and gas) and besides "Oklahoma educators' mean annual pay only lags $1,000 - 3,000 behind the overall state mean of $43,340".  In other words, once that $6,100 is tacked on, they're above the state mean so there shouldn't be any more complaints.  As for the striking Kentucky teachers, they failed to appreciate poor little Gubernator Matt Bevin was just trying to make state "pension reform" a priority  - especially preventing greedy teachers from "gaming the system", i.e. "cashing in on accrued sick days at the end of their careers."

NO mention of how these OK and KY teachers have often had to also work Walmart jobs to make ends meet for their families. But that's the way the elites in this country roll.

The WSJ's  editors/ and business elite's hand wringing over food stamps  and Medicaid expansion - as well as striking teachers' greed-   is not to be taken seriously until and unless the GOP and its minions follow their own advice about fiscal responsibility. In the meantime, their best play is leaving the SNAP as it is, unless they plan to increase benefits! Oh, and giving those striking teachers the pay raises they deserve so they also don't have to resort to food stamps.

See also:

http://www.smirkingchimp.com/thread/jill-richardson/78775/another-counterproductive-assault-on-food-stamps

Why Labor Productivity Needs To Be Redefined And GDP Eliminated

Once more labor productivity is being criticized as too low (e.g. Worker Productivity Remained Sluggish in 2017, WSJ,  Feb. 2, p A2).  Using the graph and other stats, the WSJ author (Eric Morath) is led to write:

"Soft productivity gains is an impediment to stronger wage gains and ultimately better economic growth".


Which in itself is a rather strange comment given it has been precisely "stronger wage gains" in concert with higher bond yields - that has spooked the stock market causing it to dump nearly 2.7 % of gains. (The worry being the higher wages will lead to inflation and the Federal Reserve raising interest rates - which means the cost for business borrowing and credit increases.)

He also writes (ibid.):

"When workers don't become more productive, it may be difficult for business to justify larger raises for workers. Firms may instead opt to add more employees rather than increase pay for current staff."

Which is more patent codswallop, given I earlier (Jan. 10) quoted Paula Harvey, VP of Human Resources at Schulte Building Systems in Houston:

"Companies are really hesitant to give raises. When you give a raise, it's stuck in the pay system. It is something you're guaranteeing: it's becoming a fixed cost. "

In other words, companies don't wish to give raises on account of being stuck with a fixed wage rate for their employees, not because they aren't working productively or hard enough. Today's workers are producing every bit as much as they were in early years - it's just that the metric is no longer capturing the work!

Before commencing my argument that labor productivity as currently defined is archaic, let's provide a definition:

Labor productivity is a measure of economic growth within a country. Labor productivity measures the amount of goods and services produced by one hour of labor; specifically, labor productivity measures the amount of real gross domestic product (GDP) produced by an hour of labor.

What could be wrong with that? Well, plenty! Namely, if the GDP is in error or doesn't measure what is really needed, then the labor productivity will be off too. Hence, the WSJ's (and other) sources criticism of this productivity will be baseless.   As  Financial Times contributor David Pilling writes in a recent  TIME Viewpoint article ('Why GDP Is A Faulty Measure Of Success',  Feb. 5, p. 41):

"Invented in the 1930s, the figure is a child of the manufacturing age - good at measuring physical production but not the services that dominate modern economies. How would GDP measure the quality of mental health care or the availability of day care centers and parks in your area?  Even Simon Kuznets, the Belarussian economist who practically invented GDP, had doubts about his creation."

This has import for the other claims made about falling productivity in the WSJ piece, i.e.:

"Nonfarm, business sector productivity, measured as the goods and services produced per hour worked, advanced 1.2 percent last year from 2016...That matched the average rate recorded from 2007 through 2017 and is well below the 2.1 % annual rate averaged since 1947."

Says who?  GDP is supposed to measure the total production and consumption of goods and services in the United States. But the numbers that make up the Gross Domestic Product by and large only capture the monetary transactions we can put a dollar value on. Almost everything else is left out: old growth forests that maintain cooling and act as CO2 repositories, watersheds, animal habitats, e.g. the Everglades, and costs of infrastructure maintenance. But ALL of these count toward  the physical security and welfare of a society. If bridges collapse owing to maintenance failure and hundreds or thousands of drivers are inconvenienced, delayed  - then that has an economic impact!

In addition, there are hundreds of other contributions not registered that arguably have  major economic impacts. For example, a 2015 Forbes article highlighted how 40 million family caregivers in the U.S. are putting their own careers on hold to provide unpaid care — sometimes for decades.   The estimated  total value of the care has been put at nearly $1 trillion. This isn't reckoned into the GDP but IF it were,  the labor productivity cited in the WSJ would surely be much higher in the years since 2007 - maybe even double or (1.2%) x 2  2.4 %. Which would then exceed the rate cited since 1947.

Just saying!

What to use in place of GDP? The Index of Sustainable Economic Welfare which was first proposed by Eco-economist Herman Daly of the University of Maryland. is a prime alternative  Daly's point was that the GDP was too artificial and narrow an indicator of economic health. He argued that if one incorporated all the "externalities" usually dismissed or ignored by standard economic models, people would be more parsimonious in how they consume which would yield a better world.

Ignoring these externalities leads us into a fool's paradise where we come to believe things are much better than the GDP numbers show. Similarly with energy, conveniently ignoring externalities of cost and demand leads too many to envisage a pie-eyed future of never-ending growth (based on producing material output)  and ever more intense energy consumption.

All this translates inexorably into “growth” and woe betide you if you dare intimate (as Prof. Daly has done) that a zero or negative growth index may be a lot better for humans, if they hope not to outstrip their resource support base. Right now, indeed, we already know that humans are consuming the equivalent of 1.5 Earths every year. See, e.g.

http://www.footprintnetwork.org/

This is obviously unsustainable, which means we desperately need to replace the industrial age GDP and sooner rather than later.

No surprise that a decade ago a panel headed by Nobel Prize winning economist Joseph Stiglitz concluded we are  "mismeasuring our lives" using GDP.

If indeed it is true (and it is) that the millions of man-hours that go into Wikipedia  (which brings human knowledge to  virtually everyone) "adds not a cent to GDP" then something is seriously amiss. Because if that's so then it also doesn't add a single extra unit to labor productivity. Hence, those millions of man hours of research, writing, editing go unrecorded in our grand economic metric.  This is absurd.

We can't keep using this antiquated metric which is totally detached from reality.  "Production" simply cannot be measured in output of material units of slim Jims, Barbie dolls, Legos, Ipads, Ipods or X Boxes alone. Apart from being skewed toward one type of production it omits an entire other universe that now needs to be reckoned in - including for things like Wikipedia, unpaid care giving and generation of art or music, as well as abstract research/

See also:

http://www.smirkingchimp.com/thread/dean-baker/77576/three-percent-gdp-growth-and-democrats-irresponsible-opposition-to-trump-tax-cuts

Why You Won't Be Getting A Pay Raise Anytime Soon

As I noted in an earlier (June 19) post, quoting managing director of Aspen Advisors, Andrew Gadomski (from a WSJ piece), when companies lament they can't find workers to fill key openings, that is code for: "I can find talent, I just don't want to pay them as much as they cost."

Now from a Denver Post Business column  (Jan. 7 p. 3K, 'Don't Get Your Hopes Up For A Raise') we learn the raise situation is even more dire. We learn, first and foremost, companies would much rather give one off "bonuses" and leave out any permanent pay raises.  As the piece noted:

"Those one time bumps, whatever really precipitated them, don't mean higher wages are around the corner. ...And for now employers are in no hurry to raise them."

Why?  According to Paula Harvey, VP of Human Resources at Schulte Building Systems in Houston:

"Companies are really hesitant to give raises. When you give a raise, it's stuck in the pay system. It is something you're guaranteeing: it's becoming a fixed cost. "

She insists it's much better for companies to preserve "flexibility" so instead companies enact "variable pay". This can come in the form of one off bonuses - say on a per year basis- or if you are a stellar performer you can get a "bigger bump". Say equal to a half year's wage increase of 3 percent. (If you are a super star performer you have the optimal chance of getting a permanent good raise.)

But for the rest it's 'catch as catch can'.  In other words, permanent salary bumps are just too expensive and if "times get tough, the needed pay cuts hurt morale and productivity".

But why, if the labor market is so tight (such low unemployment), do wages remain stagnant?  You can blame a "combination of factors including the globalization of the work force, job automation and the decline of unions."

In the case of the first, jobs can be dispatched to anywhere in the world . In effect, factory workers in Pennsylvania compete for jobs not only with each other but also in China and Mexico where wages are lower..  And tech workers, say in Silicon Valley, also compete with tech workers in India. So do tech customer service reps - say working for Comcast or Xfinity.

Automation speaks for itself, and is now taking over most repetitive jobs.In fact, it will merely be a matter of time before 'higher level" work is also taken over by AI-robots using quantum computing technology.   And as colummist Jim Hightower points out, already the jobs of "accountants, bank loan officers, and insurance claims adjustors are "falling to the bots"

Why? Because they can calculate more rapidly and more accurately than humans. What about "journalism"? Well, the associated press already uses an AI program to "write thousands of financial articles and sports reports".  Meanwhile, FORBES uses an AI system called  'Quill" to pen its articles.

The same applies to the realm of manual labor, and Hightower cites the example of "SAM" a robotic bricklayer that "lays three times as many bricks in a day as a human can". Hence, it has the potential to displace three times the number of human workers.

Meanwhile, unions - which had fought ceaselessly for improved wages and working conditions - are slowly going the way of the Brontosaurus - this as more offshore workers and automation renders unions redundant.

All of this portends a much more difficult path to the middle class, or remaining there. Currently, according to the Pew Research Center, the minimum qualification to be considered middle class is to be independent of government support. That means an income which is "self-sufficient": no food stamps, no Medicaid, or other extraneous gov't inputs.  In Denver right now, an income of $47,000/yr. is generally regarded as meeting this standard. But barely 2 in 5 Denverites  meet it, mainly because they spend up to 50 percent of income on rent or mortgage.

And who benefits most from the GOP tax rewards? According to the same article:

"Dan Ryan who runs a Nashville -based executive search firm predicts the main winners will be the star performer - the same people companies are already plying with bigger raises and bonuses."

Looking for a pay raise this year? The optimal way to get it is to leave your existing job and find another paying more, according to Ryan and other experts. The problem? You are going to encounter stiff competition from others attempting the exact same strategy.