Review: Lost Jobs, Missing Workers, and Stagnant Wages

From NYT’s “Business Day” by ALICIA PARLAPIANO, SHAILA DEWAN and NELSON D. SCHWARTZ:

In the five years since the United States began its slow climb out of the deepest recession since the 1930s, the job market has undergone a substantial makeover. The middle class has lost ground as the greatest gains have occurred at the top and bottom of the pay scale, leaving even many working Americans living in poverty. The housing industry, once the primary engine of growth and a fountain of jobs, has shrunk, while health care, technology and energy have led the recovery.

After a long climb from the valley, the number of jobs has finally reached the previous peak of January 2008, with gains of more than 8.5 million jobs since early 2010. Still, the working-age population has grown substantially in the last six years, and the nation’s economy, by reliable estimates, is at least seven million jobs below its potential. That has cost Americans hundreds of billions of dollars in lost output.

With the weak recovery from the recession, more than four million people are still considered among the long-term unemployed, out of work for at least half a year. They face considerably dimmer prospects of finding another job as their skills deteriorate and their contact with the world of work fades.

And that does not count the more than six million who have opted out of the labor force altogether, even taking into account demographic factors like the aging of the population.

Economists hope that many such people will be lured back to work as business improves and that wages will rise as the labor market tightens. But for now, the slack in the economy has served to hold down pay; wages for roughly four-fifths of American workers have declined since 2007, after adjusting for inflation.

Read the entire article and review the interactive graphs here.

The Downward Ramp

From NYT’s “Opinion” by Thomas Edsall:

With the bursting of the tech bubble at the start of the 21st century, two decades of growth at the high end of the job market — once the province of college graduates with strong cognitive abilities — came to an abrupt halt, according to detailed studies of employment and investment patterns by three Canadian economists. We are still feeling the ramifications.

New evidence produced by Paul Beaudry and David A. Green of the University of British Columbia, and Ben Sand of York University, demonstrates that the collapse, between 1980 and 2000, of mid-level, mid-pay jobs — gutted by automation or foreign competition (and often both) — has now spread to the high-skill labor market.

The U-shaped pattern of job growth characteristic of recent decades – strong at the top and bottom, but weak throughout the middle — has now become “a bit more like a downward ramp,” according to David Autor, an economist at M.I.T. who documented the decline in mid-level jobs in the 1980s and 1990s.

Preliminary findings suggest that this trend is alarming in almost every respect. Just one example: the drying up of cognitively demanding jobs is having a cascade effect. College graduates are forced to take jobs beneath their level of educational training, moving into clerical and service positions instead of into finance and high tech.

This cascade eliminates opportunities for those without college degrees who would otherwise fill those service and clerical jobs. These displaced workers are then forced to take even less demanding, less well-paying jobs, in a process that pushes everyone down. At the bottom, the unskilled are pushed out of the job market altogether.

Read the entire article here.

NPR Reports: Does Raising the Minimum Wage Kills Jobs?

NPR’s David Kestenbaum investigates the question, Does raising the minimum wage kill jobs? Here is an overview:

President Obama has called for increasing the minimum wage, saying it will help some of the poorest Americans. Opponents argue that a higher minimum wage will lead employers to cut jobs.

Figuring out the effect of raising the minimum wage is tough. Ideally you’d like to compare one universe where the minimum was raised against an alternate universe where it remained fixed.

Economist David Card found the next best thing. In 1992, New Jersey was about to raise its minimum wage. Right next door, there was a parallel universe: Pennsylvania, which was not raising its minimum wage.

Card and a colleague decided to study what had happened to jobs at fast-food restaurants in both states. They surveyed restaurants and found that the number of jobs actually went up in New Jersey, which increased its minimum wage, compared to the number of jobs in Pennsylvania, which didn’t.

Card theorized that employers were making less money. The prices of hamburgers had gone up. But as far as he could tell, raising the minimum wage did not end up costing jobs.

The study and subsequent book, Myth and Measurement: The New Economics of the Minimum Wage, bugged economist David Neumark. He explains:

“It was presented as, ‘Economics has it all wrong.’ And I think that coupled with the evidence that the data looked kind of strange, just really prompted us to say, ‘Let’s go back and get what we think will be better data, and do the whole thing over again.’ “

Neumark and a colleague got actual payroll data from fast-food restaurants in New Jersey and Pennsylvania. They came to the opposite conclusion: Raising the minimum wage slightly reduced the number of jobs.

But this was not the end of things. The authors of the original paper then went back and redid the experiment using government data. And they came to the same conclusion as from the first study: Raising the minimum wage did not cost jobs.

Findings like these are the reason the debate over the minimum wage goes on and on — not just among politicians, but also among economists.

The newest study, which the Congressional Budget Office published in February, says raising the minimum wage could cost 500,000 jobs. But it would also increase hourly wages for more than 16 million people.

Listen to the entire story here.

Shutdown: Complacency on Wall Street Could Be Worse Than a Panic

From the New York Times “DealBook” Blog by Jason Eissenger:

Don’t look to a market panic to save us.

We are in upside-down world, where a freak-out now would help stave off financial devastation later. By staying cool, the markets are making a crisis more likely.

Sure, the stock market has ebbed lower, but it hasn’t plunged. Short-term bond markets have hiccupped. Spreads on United States credit default swaps have widened, indicating a slighter greater fear of default, but nothing drastic. The financial media keep grasping at any movement to demonstrate investors are worried. But market participants simply don’t think that the government will end up doing something so obviously reckless and harmful as refusing to pay its debts.

Wall Street’s lack of worry reflects cynicism about Washington (who doesn’t feel that?) but also a deep misreading of how significant the ideological fissures are in the capital. Wall Street is misunderstanding the extremism of the House Tea Party Republicans who precipitated the government shutdown and debt ceiling crisis.

READ THE COMPLETE ARTICLE HERE.

Jobless economic recovery stalled by electoral politics, party complicity

The Labor Department released its monthly jobs report today, and the picture was quickly muddled by Democratic and Republican pandering in an election year that is almost exclusively focusing on economic recovery. According to the report private employers added only 120,000 jobs to the economy in March, a disappointing number according to most analysts compared with the previous two months each of which added almost twice that number. Despite this slowing of the pace of hiring the unemployment rate dropped slightly from 8.3 to 8.2 percent.

However, the unemployment rate comes from a separate survey of households rather than employers and indicates that a lower portion of the population were looking for work rather than indicating more workers being added to the economy. Therefore, it is almost useless to look to the unemployment rate as a significant determinant of economic recovery without adding the caveat that fewer people looking for work does not strong job growth make.

The economic picture is further clouded by election year politics in which both parties seem to do little else but blame the other party for “failed economic policies.” In a speech this morning at the White House conference on “Women and the Economy,” President Obama acknowledged the difficulties posed by anemic job growth, calling the report worrying but stressing that the unemployment rate continues to decline (albeit, slowly). The President did not mention other disappointing news identified in the report. For example, fewer than half the persons in recent months added to payrolls, or that the drop in unemployment reflected the fact that more people had dropped out of the labor force.

The Republican front-runner, Mitt Romney, wasted no time in blaming the President personally for economic forces put in motion long before Obama’s election and far beyond his executive powers to change. “Millions of Americans are paying a high price for President Obama’s economic policies, and more and more people are growing so discouraged that they are dropping out of the labor market altogether,” Mr. Romney said.

To be fair, millions of Americans have been dropping out of the labor market over the last twenty years as a permissive regulatory environment, corporate tax loopholes, and other factors such as technological innovation encouraged American companies to move jobs and profits overseas. Yet, Mr. Romney has virtually nothing to say to his peers who are truly responsible for the economic malaise of the country.

Congressional leaders proved no better in offering Americans either a correct diagnosis or reasonable policies for extricating Americans from this malaise. House Speaker John A. Boehner said, “Today’s report shows that families and small businesses are still struggling to get by because of President Obama’s failed economic policies.” Surely, Mr. Boehner means that families and small business are struggling from an economic collapse precipitated by his party’s commitment to crony-style capitalism under eight years of Bush the Younger’s reign.

Politically speaking, the problem with the economy is that no one is willing to tell it like it is. After more than two decades of Republican-style economics, supported more or less by the Democratic Party and its ties to corporate America as well, Americans are neither getting the truth of the matter nor making much progress. Income inequality, poverty, the uninsured are at their highest levels since the Great Depression. Then again, so are profits margins and executive compensation as American corporations sit on mountains of cash they have expropriated from workers, consumers, and investors alike.

The conjunction of these two facts—deepening inequality and corporate greed—are the two largest road blocks standing in the way of economic recovery. Until politicians do their job, and some of this reserve is redistributed in the form of more hiring, rising wages, and pension and health care reform, there is little hope either of addressing this country’s many economic problems or escaping its self-inflicted malaise.