What’s
Wrong Today
Yesterday
we wrote about inequality and how for some, notably the
ultra-rich and their Republican servants, the word is a proxy for class
warfare. Today, let’s go beyond talk of class warfare and look at the tools at our
disposal to improve the level of equality in America.
What
can be done to reduce inequality? The Obama Administration said raising the
minimum wage was a good starting point.
If we are
talking about a $10.10/hr. minimum wage, then according to theĀ Economic Policy
Institute,
(EPI) about 30 million Americans
would get raises, including the thousands of Wal-Mart employees. That would clearly
help inequality.
Reducing
unemployment could have the largest impact on inequality. In his SOTU, President Obama mentioned
that 8 million jobs were created during his time in office. Since peaking at 10%
in October 2010, the unemployment rate has fallen more than 3 percentage
points. But The EPI’s new report on long-term unemployment has some encouraging
and depressing findings. Here is the encouraging finding:
people out of work for 27 weeks or longer fell to 3.8 million in December, down
from 4.7 million 12 months earlier. The average duration of unemployment is now
37.1 weeks, down from 38 weeks at the end of 2012
The depressing
finding: (emphasis by the Wrongologist)
are 28 states, plus the District of Columbia, where more than a third of the
unemployed have been jobless for six months or more. In New Jersey (46.6%), the
District of Columbia (46.6%), and Florida (46.2%), nearly half of the unemployed are long-term unemployed
Based
on the 2010 Census, in four of the five states with
the largest populations, more than 40% of unemployed people have been out of
work for at least six months.
Restoring
unemployment insurance to the long-term unemployed or Disability insurance to those finding themselves out of work will help a little, but it
doesn’t move the inequality needle. People need jobs. And while Mr. Obama
touted a new commitment fromĀ chief executives to give long-term unemployed
workers a “fair shot at new jobs,” that won’t change things in a significant
way.
Here’s
why:
Google
has 47,756 employees, Facebook has 5,790. Microsoft has 100,000, Amazon has
109,000. Apple has 80,300. That totals to 342,846 full and part-time jobs. That’s
just 10% more than GE, which has 305,000 by itself.
And
the total employment of these tech giants equates to roughly two months of new
job seekers that enter the US job market every
month.
In
other words, it’s a pipe dream to believe that the tech giants, Internet
startups, and app developers will ever
employ the same number of people that manufacturing once did. There will
be even fewer realistic routes to full employment in the US as robots become
cheap, efficient, and more flexible.
Last
year, a new Wal-Mart opened in DC and advertised that 400 people would be
hired. Over 20,000 people applied for those 400 jobs, making it harder to get a job at Wal-Mart than to get into Harvard.
And, when there are 10 jobs and 30 job seekers, that doesn’t mean that society
has 20 slackers.
It has
become clear that we have entered an era where businesses just don’t need as
many people to produce the goods and services we use each year. The problem
will become even clearer with the introduction of self-driving cars (goodbye to
most taxi, bus and truck drivers) in the next 10-20 years. Bluntly, there
simply won’t be enough job slots for the entire population.
This means it’s time to assess the future
of work in the US.
Job
openings in the US have improved since the bottom of the Great Recession, but we
still have nearly 1.2 million fewer jobs
available on a monthly basis than before the recession:
And
there are roughly 3 unemployed people looking for each of those available jobs.
Ā
Lastly, today, we still
have 2 million fewer people working than were working in 2008!
Is
it any wonder that Pew Research says that the proportion of
Americans who identify themselves as middle class has dropped sharply in recent
years? Today, about as many Americans identify themselves as lower or
lower-middle class (40%)Ā as say they are in the middle class (44%). At the
same time, the share of the public who says they are in the lower or
lower-middle classes rose by 15 percentage points, from 25% in 2008 to 40%.
This is inequality we cannot fix
without wholesale changes in our politics. The Anti-Keynesians are just plain
wrong; they are never confused by facts, they just ignore them.
Full
employment could return in time. According to the Wall Street Journal, the number of
children US women are expected to have over their lifetime slipped last year to
1.88 from 1.89 in 2011. That is below the nation’s so-called “replacement rate”
of 2.1.
Compare
that to the birth rates during the late 1940’s and 1950’s when we experienced
the Baby Boom, and it ranged from 3.0-3.5.
All
of that means we may get back to equilibrium of jobs required to jobs offered
sometime in the next 20 years, but not
in the next 5 or 10 years. In the meantime, we areĀ going to have to recognize that work, as we
currently conceive it, may no longer be the principal contribution to society
for many adults.Ā
One thing
we could be doing is refreshing our infrastructure. The American Society of
Civil Engineers provides an annual report card on our crumbling
infrastructure. It shows that we need to spend $3.6 Trillion on our
infrastructure by 2020.
Rebuilding
our infrastructure could be a great source of temporary jobs that could help
bridge our workers to the point where all the Boomers will have retired and our
smaller, more-tech-savvy work force can be at near-full employment.
We will
pay for the lives of these out-of-work people indirectly, through unemployment
benefits, food stamps, Social Security, Medicare and Medicaid, so what would be
wrong with paying many of them directly while we upgrade our roads, ports,
airports and build a ubiquitous high-speed Internet?
We used to live in an
industrial age, an Adam Smith and Karl Marx world, where the worker sought to
do as little as possible and the boss tried to get the worker to do as much as
possible. But today, in our self-serve economy, that’s
just not true. Today, people supply their own locomotion.Ā It will take another
generation for that to be a frictionless factor in our world of work.
Income
distribution is something society can and should decide. There is no intrinsic
reason why most of the benefits of our technology economy should go only to the
1% – that is really a matter of policies such as tax policy, minimum wage
policy, and pension policy.
In a
democracy, these policies should be decided by the majority, not by the 1% and their
political servants.
We make heroes of entrepreneurs without even realizing that most of them are cannibals. Though a few are creating something new which changes the game (a first cell phone, or a tablet computer) most are just doing something that seizes business from others.
That may be fine but it does not deserve special applause, thus, Walmart essentially used brute force to seize business from small town shops (relying on the tax dollars from gas taxes to fund the highway infrastructure necessary for its business). Amazon too is a cannibal, destroying first the book business and now seizing just about everything else – it depends on monopoly cable internet infrastructure and good road, working post office etc.
These bigger “more efficient” enterprises reduce jobs in the end.
So it is with Staples, or with the myriad business service organization that exist replace aspects of formerly large HR departments (from benefits management companies, to temp agencies).
It may all be progress, but especially for the parts that depend on highways and large scale development (often backed with tax dollars) we need to be careful about lionizing the cannibals.