One Reason for Slow Wage Growth? More Benefits, Sort of

From today’s New York Times:

One of the most perplexing questions about the nation’s economic recovery is why a tight labor market has not translated into faster wage growth. Part of the answer appears to be that American workers are receiving a growing share of compensation in the form of benefits rather than wages.

The average worker received 32 percent of total compensation in benefits including bonuses, paid leave and company contributions to insurance and retirement plans in the second quarter of 2018. That was up from 27 percent in 2000, federal data show. The rising cost of health insurance accounts for only about one-third of the trend. And the data do not include the increased prevalence of nonmonetary benefits like flexible hours or working from home, or perks like gyms and “summer Fridays.”

Best Buy, the electronics retailer, began in July to offer four weeks of paid time off to its employees, including part-time workers, to take care of family members. The company decided that paid leave was the best way to show appreciation for its employees, said Jeff Shelman, a company spokesman. “Our philosophy is that our employees are our most important asset, and we want to take care of them and allow them to take care of the people that matter most to them in their lives,” he said.

For many workers, the returns from one of the longest economic expansions in American history have been paltry. Wages have grown more slowly than the economy in the wake of the 2008 crisis, and faster growth in recent months has been offset by rising inflation. Between August 2017 and August 2018, the most recent available data, average hourly wages increased by 2.9 percent, but after adjusting for inflation, the increase was just 0.2 percent, according to the Labor Department’s flagship survey.

Read the complete article here.

The stock market boom has given CEOs a raise. What about average workers?

From today’s PBS News Hour:

Over the past few years, many economic indicators have returned to where they were before the Great Recession — among them, the unemployment rate, which has dropped below the 5 percent mark of 2007, housing prices and the stock market, which has nearly doubled its pre-recession peak.

Another, buoyed by rising stock prices: the enormous pay difference between CEOs of the largest U.S. companies and their employees, who earn more than 300 times less than those at the top, according to new data.

Here’s a closer look at the issue.

How has CEO compensation changed?

In 2000, the average CEO was paid 343 times more than the average worker, according to the liberal-leaning Economic Policy Institute. That number dropped to about 188-to-1 in 2009.

It has since rebounded to 312-to-1 last year, according to a report from the Economic Policy Institute.

From 2016 to 2017, the average pay of CEOs from the top 350 publicly traded firms increased 17.6 percent — to $18.9 million — even after being adjusted for inflation, the group found.

How to close the gap

The reason for the pay disparity between CEOs and employees is relatively simple. Closing the gap is much more complex.

A number of methods have been proposed to close the gap, including a cap on compensation, clawbacks for poor performance or executive misconduct, and, as mentioned previously, mandatory publishing of CEOs’ salaries.

James Galbraith, the director of the University of Texas Inequality Project who also served as an adviser to Sen. Bernie Sanders’ presidential campaign, said U.S. companies should look to other countries where laws encourage business leaders to reinvest in their tangible products instead of their stocks.

Read the complete article here.

Americans Want to Believe Jobs Are the Solution to Poverty. They’re Not.

From today’s New York Times:

U.S. unemployment is down and jobs are going unfilled. But for people without much education, the real question is, Do those jobs pay enough to live on?

These days, we’re told that the American economy is strong. Unemployment is down, the Dow Jones industrial average is north of 25,000 and millions of jobs are going unfilled. But for people like Vanessa, the question is not, Can I land a job? (The answer is almost certainly, Yes, you can.) Instead the question is, What kinds of jobs are available to people without much education? By and large, the answer is: jobs that do not pay enough to live on.

In recent decades, the nation’s tremendous economic growth has not led to broad social uplift. Economists call it the “productivity-pay gap” — the fact that over the last 40 years, the economy has expanded and corporate profits have risen, but real wages have remained flat for workers without a college education. Since 1973, American productivity has increased by 77 percent, while hourly pay has grown by only 12 percent. If the federal minimum wage tracked productivity, it would be more than $20 an hour, not today’s poverty wage of $7.25.

American workers are being shut out of the profits they are helping to generate. The decline of unions is a big reason. During the 20th century, inequality in America decreased when unionization increased, but economic transformations and political attacks have crippled organized labor, emboldening corporate interests and disempowering the rank and file. This imbalanced economy explains why America’s poverty rate has remained consistent over the past several decades, even as per capita welfare spending has increased. It’s not that safety-net programs don’t help; on the contrary, they lift millions of families above the poverty line each year. But one of the most effective antipoverty solutions is a decent-paying job, and those have become scarce for people like Vanessa. Today, 41.7 million laborers — nearly a third of the American work force — earn less than $12 an hour, and almost none of their employers offer health insurance.

Read the complete article here.

In America, wage growth is getting wiped out entirely by inflation

From today’s Washington Post:

Rising prices have erased U.S. workers’ meager wage gains, the latest sign strong economic growth has not translated into greater prosperity for the middle class and working class.

Cost of living was up 2.9 percent from July 2017 to July 2018, the Labor Department reported Friday, an inflation rate that outstripped a 2.7 percent increase in wages over the same period. The average U.S. “real wage,” a federal measure of pay that takes inflation into account, fell to $10.76 an hour last month, 2 cents down from where it was a year ago.

The stagnant pay comes despite accelerating U.S. growth, which has increased in the past year and topped 4 percent in the second quarter of 2018 — the highest rate since mid-2014.

The lack of raises have befuddled economists and policymakers, who hoped that after job openings hit record highs and the unemployment rate dipped to the lowest level in decades, employers would give beefy raises to attract and retain employees. But so far, gains have been slight, and small recent increases are now being eclipsed by rising prices.

Inflation hit a six-year high this summer, driven in part by a jump in energy costs. The price of a gallon of gas has increased 50 cents in the past year, up to a national average of $2.87, according to AAA. Some analysts expect the climb in energy prices to halt soon, which should bring the overall inflation rate down and possibly lift real wages slightly.

Consumers are also paying more for housing, health care and car insurance, the federal government reported Friday. Additional price hikes could be coming as President Trump’s new tariffs boost prices of cheap imported products U.S. consumers rely on. And many economists warn that growth might have peaked for this expansion.

Read the complete article here.

Further Thoughts on a Job Guarantee

From today’s New York Times “Opinion” Section by Paul Krugman:

As I wrote the other day, Alexandria Ocasio-Cortez may call herself a socialist and represent the left wing of the Democratic party, but her policy ideas are pretty reasonable. In fact, Medicare for All is totally reasonable; any arguments against it are essentially political rather than economic.

A federal jobs guarantee is more problematic, and a number of progressive economists with significant platforms have argued against it: Josh BivensDean BakerLarry Summers. (Yes, Larry Summers: whatever you think of his role in the Clinton and Obama administrations, he’s a daring, unconventional thinker when not in office, with a strongly progressive lean.) And I myself don’t think it’s the best way to deal with the problem of low pay and inadequate employment; like Bivens and his colleagues at EPI, I’d go for a more targeted set of policies.

But I’m fine with candidates like AOC (can we start abbreviating?) proposing the jobs guarantee, for a couple of reasons. One is that realistically, a blanket jobs guarantee is unlikely to happen, so proposing one is more about highlighting the very real problems of wages and employment than about the specifics of a solution. Beyond that, some of the critiques are, I think, off base.

Here’s the way some of the critiques seem to run: a large share of the U.S. work force – Baker says 25 percent, but it looks like around a third to me – makes less than $15 an hour. So offering these workers a higher wage would bring a huge rush into public employment, implying a very expensive program.

What’s wrong with this argument? The key point is that all those sub-$15 workers aren’t just sitting around collecting paychecks: they’re producing goods and (mostly) services that the public wants. The public will still want those services even if the government guarantees alternative employment, so the firms providing those services won’t go away; they’ll just have to raise wages enough to hold on to their employees, who would now have an alternative.

Now, that doesn’t mean zero job loss. Employers might replace some workers with machines; they would have to raise prices, meaning that they would sell less; so private employment might go down.

But all this is true about increases in the minimum wage, too. And we have a lot of evidence on what minimum wage increases do, because we get a natural experiment every time a state raises its minimum wage but neighboring states don’t. What this evidence shows is that minimum wage hikes have very little effect on employment.

So if we think of a job guarantee as a minimum wage hike backstopped by a public option for employment, we should not expect a mass migration of workers from private to public jobs.

Read the complete article here.

 

Robots or Job Training: Manufacturers Struggle to Improve Economic Fortunes

From today’s New York Times:

For Anthony Nighswander, rock-bottom unemployment is both a headache and an opportunity. For businesses and workers, it could be the key to reversing one of the country’s most vexing economic problems: slow productivity growth.

Mr. Nighswander is president of APT Manufacturing Solutions, which builds and installs robotic equipment to help other manufacturers automate their assembly lines. Lately, business has been booming: With the unemployment rate now below 4 percent, he says he gets calls every day from companies looking for robots to help ease their labor crunch.

The problem is that Mr. Nighswander faces a hiring challenge in his own business, especially because, in this town of fewer than 4,000 people near the Indiana border, the pool of skilled workers is shallow. But rather than turn to robots himself, he has adopted a lower-tech solution: training. APT has begun offering apprenticeships, covering the cost of college for its workers, and three years ago it started teaching manufacturing skills to high school students.

 “I never thought that I would be training high school students in our facilities,” Mr. Nighswander said. “What I knew was that I was in survival mode. I knew the orders for robots and for automation were coming in faster than I could get the jobs out.”
That kind of urgency could prove to be a powerful economic force. The investments in training and automation by Mr. Nighswander and his customers should, over time, make their companies more productive. Multiplied across thousands of companies, those decisions could have benefits for companies and workers that endure even after today’s hot economy inevitably cools.
Productivity — how much value the economy generates in an average hour of work — gets less public attention than more intuitive economic concepts such as employment and wages, but it may be even more fundamental.
Rising productivity — whether through better technology, more educated workers or smarter business strategies — is why people’s economic fortunes, on average, improve over time. When productivity growth is strong, companies can afford to pay workers more without eating into their own profit margins, letting a rising tide lift all boats.
Since the end of the Great Recession, however — and, to a lesser extent, even during the stronger economic times that preceded it — productivity growth has been confoundingly weak, forcing business owners and workers to compete over a relatively meager sliver of economic growth. There have been peaks and valleys, but not since the dot-com boom of the late 1990s and early 2000s has the American economy consistently delivered productivity growth above 2 percent a year.
Now some economists think a rebound could be on the way. For most of the recovery, wage growth has been anemic, suggesting companies faced relatively little pressure to invest in automation or to find other ways to squeeze more production out of workers. But as the labor market tightens, companies’ incentives could be changing.

Read the complete article here.

Opinion: When Companies Supersize, Paychecks of Workers Shrink

From today’s New York Times:

Anyone with a cellphone should have paid attention to the big merger news on April 29: T-Mobile and Sprint announced their intention to tie the knot after years of speculation. If it goes through, it will leave the country with just three major wireless carriers instead of four.

Less noticed, on the same day, about a dozen other corporate marriages were announced worldwide, worth a combined $120 billion. So far this year, $1.7 trillion worth of deals have been declared globally, higher than the pre-financial-crisis record set in 2007. This year’s big-dollar mergers in the United States range from Cigna’s purchase of Express Scripts, oil refiner Marathon Petroleum buying rival Andeavor, and Dr Pepper Snapple cozying up to Keurig Green Mountain. That’s in addition to AT&T’s play for Time Warner in 2016, CVS’s offer for Aetna, and Amazon swallowing up Whole Foods.

All this activity means fewer companies, which means less competition. For consumers, that can raise prices if the merged companies face less pressure to keep things cheap. That’s the main test these deals have to pass: whether regulators, including the Justice Department and Federal Trade Commission, think consumers will fare worse.

That narrow focus on consumer prices hides another, potentially more dangerous side effect. A growing body of evidence has found that as mergers thin the ranks of businesses, workers have fewer options when they look for jobs. That reduces their bargaining power and, in turn, is part of why wages have stagnated.

Read the complete article here.

Public Servants Are Losing Their Foothold in the Middle Class

From today’s New York Times:

The anxiety and seething anger that followed the disappearance of middle-income jobs in factory towns has helped reshape the American political map and topple longstanding policies on tariffs and immigration.

But globalization and automation aren’t the only forces responsible for the loss of those reliable paychecks. So is the steady erosion of the public sector.

For generations of Americans, working for a state or local government — as a teacher, firefighter, bus driver or nurse — provided a comfortable nook in the middle class. No less than automobile assembly lines and steel plants, the public sector ensured that even workers without a college education could afford a home, a minivan, movie nights and a family vacation.

In recent years, though, the ranks of state and local employees have languished even as the populations they serve have grown. They now account for the smallest share of the American civilian work force since 1967.

The 19.5 million workers who remain are finding themselves financially downgraded. Teachers who have been protesting low wages and sparse resources in OklahomaWest Virginia and Kentucky — and those in Arizona who say they plan to walk out on Thursday — are just one thread in that larger skein.

The private sector has been more welcoming. During 97 consecutive months of job growth, it created 18.6 million positions, a 17 percent increase.

But that impressive streak comes with an asterisk. Many of the jobs created — most in service industries — lack stability and security. They pay little more than the minimum wage and lack predictable hours, insurance, sick days or parental leave.

The result is that the foundation of the middle class continues to be gnawed away even as help-wanted ads multiply.

Read the complete article here.

Breaking News: Kentucky teachers rally at State Capitol over state budget

From today’s LA Times:

Thousands of Kentucky teachers filled the streets near the state Capitol in Frankfort on a cold, overcast Monday to rally for education funding.

Teachers and other school employees gathered outside the Kentucky Education Assn. a couple of blocks from the Capitol chanting, “Stop the war on public education” and holding or posting signs that say, “We’ve Had Enough.”

“We’re madder than hornets, and the hornets are swarming today,” said Claudette Green, a retired teacher and principal.

The rally is happening after hundreds of teachers called in sick Friday to protest last-minute changes to their pension system.

Teacher unrest is not just limited to Kentucky. Educators in Oklahoma were gearing up Monday to march on their state capital as well.

Oklahoma teachers are demanding that lawmakers approve more education funding just days after the Legislature did just that.

Some teachers are saying the legislation signed by Gov. Mary Fallin last week was not enough. The measure increases taxes on cigarettes, fuel and oil and gas production to provide teachers with raises of about $6,100, or 15% to 18%.

Read the complete article here.

Robots Are Coming, and Sweden Is Fine

From New York Times:

From inside the control room carved into the rock more than half a mile underground, Mika Persson can see the robots on the march, supposedly coming for his job here at the New Boliden mine.

He’s fine with it.

Sweden’s famously generous social welfare system makes this a place not prone to fretting about automation — or much else, for that matter.

Mr. Persson, 35, sits in front of four computer screens, one displaying the loader he steers as it lifts freshly blasted rock containing silver, zinc and lead. If he were down in the mine shaft operating the loader manually, he would be inhaling dust and exhaust fumes. Instead, he reclines in an office chair while using a joystick to control the machine.

He is cognizant that robots are evolving by the day. Boliden is testing self-driving vehicles to replace truck drivers. But Mr. Persson assumes people will always be needed to keep the machines running. He has faith in the Swedish economic model and its protections against the torment of joblessness.

“I’m not really worried,” he says. “There are so many jobs in this mine that even if this job disappears, they will have another one. The company will take care of us.”

In much of the world, people whose livelihoods depend on paychecks are increasingly anxious about a potential wave of unemployment threatened by automation. As the frightening tale goes, globalization forced people in wealthier lands like North America and Europe to compete directly with cheaper laborers in Asia and Latin America, sowing joblessness. Now, the robots are coming to finish off the humans.

Read the complete article here.