The Wrongologist

What’s
Wrong Today:

Both
parties are arguing about whether individuals are better off today than when
Obama took office.

It’s irrelevant: The debate needs to be about which
candidate can create more middle class jobs over the next four years.

So,
What’s Wrong?

The
reason that neither party has a workable jobs plan is that they both expect more of the same for the next decade: jobs growth will mostly be in low wage
service jobs. This kind of jobs growth will continue the evisceration of our middle class that has been going on
for 40 years.

Jeff
Faux, a progressive economist who founded the Economic Policy Institute in
1986, is the author of the new book, The Servant Economy:
Where America’s Elite Is Sending the Middle Class. He argues that by the mid-2020s, even with the most optimistic assumptions about economic growth,
current trends indicate that the average American’s wages will drop about 20
percent.

As the National Employment Law Project report showed the other day, the jobs that have been
created since the end of the Great Recession are at a disproportionately lower wage. This has serious implications
for our ability to maintain annual GDP growth at the 3%-4% levels we have
typically experienced. It also has serious societal implications as we create a
larger working poor class and a declining middle class. The report found that :

• Lower-wage
  occupations were 21% percent of recession losses, but accounted for 58% of recovery growth.

• Mid-wage
  occupations were 60% of recession losses, but only 22% of recovery growth.

• Higher-wage
  occupations were 19% of recession job losses and 20% of recovery growth.

What
this means in real terms is that many of the people who had a middle class job
in 2008 now have a working poor job. The report goes on to say:

“The lower-wage
occupations that grew the most during the recovery include retail salespersons,
food preparation workers, laborers and freight workers, waiters and waitresses,
personal and home care aides, and office clerks and customer representatives.”

This table from the
NELP report shows that the 2.8 million
Mid-wage jobs lost ranged between $14 and $21/hour. That is, an annual
salary of between $29,120 and $43,680 per year. In most cases, these are not
jobs that offer career upside to the job holders.  Asking
our economy to replace jobs like these should not be an insurmountable challenge. 

It gets worse: As reported by the
Economic Populist,
food stamp usage is actually up according to the latest data. As of May 2012,
46,496,788 people are on food stamps in the United States. That’s 14.8% or over
1 in 7. The United States population in May 2012 was 313,878,000 and this
figure includes everyone, including people overseas. Food stamp usage has increased 2.4% from May 2011 and 0.5% from April 2012. This
shows that the working poor have traded a mid-wage job for a low-wage job using
food stamps to supplement a declining household income.  

Since October 2007, food stamp usage has increased
72.2%. Population
has increased 3.7% during the same time period. That
is how badly America is hurting. There are over 6
million
whose only income is food stamps. That means they are living on the streets
with absolutely nothing else. Nutrition
assistance (the SNAP program) now accounts for 67% of the USDA’s budget, compared with 26% in
1980.  

The
real political economy question:

Is not: “Are you better off today than you
were 4 years ago?”

Is: “Which party will return the middle class
to the levels we saw before 2008 by 2016?”

We are not facing the
same catastrophe today that we faced in September 2008.

Ours is a new catastrophe wherein a young person (educated or
not) can’t get a job and a mid-career person can only find a low wage job. This
will not turn around by itself, we need a structural change:

• Away
  from Corporatists driving our tax, finance and trade regulations
• Toward
  a state commitment to jobs creation

A friend in Australia
who reads this blog reminded me of a meeting he once had, when he was head of
an Asian Merchant Banking operation, with the Financial Secretary of Hong
Kong.  He asked the Secretary how a small group of British civil
servants had such success in building a high employment economy.  In
essence what Sir John told him was:

1. We were desperate – millions of
refugees were coming across the border from China and we had no money in the
coffers to look after them

2. We had to develop a policy that
put many people to work

3. That policy had to be enforced

Their
approach was that every piece of
legislation that was put forward had to pass a simple test: does this bill
increase employment or reduce it if we put it into effect?

If
yes, then it went on its way to the next stage; if no then it was reconsidered
and forced to pass that economic bar.  Simple but brilliant, although I
doubt they had as many so-called “independent” groups that “score” ideas in
Hong Kong as we do in DC.

My
friend thinks Washington could never do this. The Wrongologist thinks that
Obama might actually think that is a good idea… Would Romney? 

A
Final Thought:

The one answer
Democrats should use when asked what is holding the recovery back is: “the Republican economic agenda”.
As Mitt Romney himself admitted, he has replaced middle class jobs
with ones that don’t pay the bills.

And he’s gotten wealthy
doing so.

Mitt Romney is the
poster child for why middle class job growth is unlikely to get better, because
Mitt’s entire experience and success has come from using the rules set in place
by the corporatists that went before
him, helping to accelerate a downward trend in the number of middle
class households
that we’ve seen since the 1970s.

Many people are not better off than
they were four years ago because people just like Mitt built a different world
in the past 30 years by:

• Attempting
  to roll back the social safety net both parties built on the foundations of
  FDR’s response to the great depression,

• Paying
  lower state taxes when companies play one state against another for tax relief,

• Making
  retention of the Bush tax cuts a litmus test for political campaign funding,

• Approving
  bailouts for their Wall Street partners while they complain about bailing out
  the Auto industry,

• Offshoring
  jobs while blaming the lack of a “competitive” tax and regulatory climate in
  the US,

• Packing
  the Supreme Court so that the Citizen’s
  United case could begin the process of institutionalizing the
  corporatist agenda,

• Using
  social wedge issues to take voters’ attention away from economic issues.  

To the extent people aren’t better off,
it’s for precisely the same reasons Mitt (and his ilk) are better off.

Based on the track
records and current policies of both parties, neither is likely to do much to improve
our chances of coming out of this existing low wage crisis.

Without GDP growth,
our economy is doomed to second class status. Without more middle class jobs,
there will be little increase in demand for goods and services beyond the rate
of inflation, that is, limited GDP growth.

 

Part II of the Coming Political Reset will
examine what happens if these trends continue for the next 10+ years, as they
seem likely to do.