The Great Wage Slowdown of the 21st Century

From today’s NYT “UpShot” Blog  by David Leonhardt:

American workers have been receiving meager pay increases for so long now that it’s reasonable to talk in sweeping terms about the trend. It is the great wage slowdown of the 21st century.

The typical American family makes less than the typical family did 15 years ago, a statement that hadn’t previously been true since the Great Depression. Even as the unemployment rate has fallen in the last few years, wage growth has remained mediocre. Last week’s jobs report offered the latest evidence: The jobless rate fell below 6 percent, yet hourly pay has risen just 2 percent over the last year, not much faster than inflation. The combination has puzzled economists and frustrated workers.

Of course, there is a long history of pessimistic predictions about dark new economic eras, and those predictions are generally wrong. But things have been disappointing for long enough now that we should take the pessimistic case seriously. In some fundamental way, the economy seems broken.

I probably don’t need to persuade most readers of this view, so the better way to think about the issue may be to consider the optimistic case. And last week, in his most substantive speech on domestic policy in months, President Obama laid out that case.

Read the entire article here.

A Strong Jobs Report, Charted

From Oct. 3  NYT “TheUpshot” Blog by Neil Irwin:

Remember a month ago, when a crummy August jobs report raised some questions about just how robust the labor market recovery truly was? Never mind.

The September numbers are in, the last to be reported before midterm elections, and they show a job market that is recovering steadily but surely, with the unemployment rate falling below 6 percent for the first time since July 2008. And a solid 248,000 net new jobs were created.

But what are the finer details of the report telling us about the state of the American labor market? While the overall thrust of the report is unquestionably positive, there are some signs of continued weakness buried in the Labor Department numbers that give some reason for pause.

But first, the good news. The 248,000 gain in September payroll employment is part of a bigger trend over the last year, in which payroll gains have taken a decisive shift upward. You can see the shift in the chart of year-over-year job gains.

Over the course of 2014, the trend has risen from around 2.1 million net new jobs a year to 2.6 million as of September, the strongest since April 2006. That may be the single most important number to know to understand what people are talking about when they discuss the acceleration of American job creation.

So what about that unemployment rate? Crossing below the 6 percent threshold to 5.9 percent is surely a talking point we will hear from Democratic candidates in the remaining weeks of this election cycle, and there is no question it is good news.

And many of the internal details that are part of that decline in the unemployment rate are good, too. In September, 232,000 more people reported being employed and 329,000 fewer people reported being unemployed.

But here’s the less rosy sign of the report. The improving job market does not seem to be pulling people who left the labor force over the last few years back into it. In fact the size of the labor force actually ticked down by 97,000 in September, which in and of itself is too small a number in too volatile a series to make much of, but is part of a longer trend of the size of the labor force holding steady rather than increasing.

Read the entire article and see the graphics here.

Some Retail Workers Find Better Deals With Unions

From NYT September 7 by Rachel Swarns:

By now, the hardships endured by retail workers at clothing stores across New York City are achingly familiar: the frantic scramble to get assigned enough hours to earn a living on painfully low wages; the ever-changing, on-call schedules that upend child care arrangements, college schedules and desperate efforts to find second jobs.

Workers and government officials around the country are increasingly pushing for change. But for an example of more humane workplaces, there is no need to jet to Sweden or Denmark or Mars. We need look no farther than Midtown Manhattan, no farther than Herald Square.

Ladies and gentlemen, step right onto the escalators and glide on up to the sixth floor. Allow me to introduce you to Debra Ryan, a sales associate in the Macy’s bedding department.

For more than two decades, Ms. Ryan has guided shoppers in the hunt for bedroom décor, helping them choose between medium-weight and lightweight comforters, goose-down and synthetic pillows, and sheets and blankets in a kaleidoscope of colors.

But here is what’s truly remarkable, given the current environment in retail: Ms. Ryan knows her schedule three weeks in advance. She works full time and her hours are guaranteed. She has never been sent home without pay because the weather was bad or too few customers showed up for a Labor Day sale on 300-thread-count sheets.

This is no fantasy. This is real life, in the heart of New York.

“I’m able to pay my rent, thank God, and go on vacation, at least once a year,” Ms. Ryan said. “There’s a sense of security.”

So what makes this Macy’s store so different? Its employees are represented by a union, which has insisted on stability in scheduling for its members. (Union workers enjoy similar scheduling arrangements at the Bloomingdale’s, H&M and Modell’s Sporting Goods stores in Manhattan.)

Now, I know the term “union” is a dirty word in some circles, even in this city, where labor still has considerable clout and has catapulted many workers into the middle class. But no one can deny that these union workers savor something that is all too rare in the retail industry right now: guaranteed minimum hours — for part-time and full-time employees — and predictable schedules.

This is no accident.

Read the entire article here.

When Tech Makes Work Worse

From yesterday’s NYT “Op-Talk” Blog by Anna North:

When we talk about robots taking people’s jobs, we often mean it almost literally — we envision if not the humanoid androids of science fiction, then at least machines programmed to do tasks once done by humans. But technology may also be altering Americans’ working lives in another way, via the software and hardware that companies use to determine when and how they work.

Read the entire article here.

Editorial: “Why You Hate Work”

From NYT “SundayReview” by TONY SCHWARTZ and CHRISTINE PORAT:

THE way we’re working isn’t working. Even if you’re lucky enough to have a job, you’re probably not very excited to get to the office in the morning, you don’t feel much appreciated while you’re there, you find it difficult to get your most important work accomplished, amid all the distractions, and you don’t believe that what you’re doing makes much of a difference anyway. By the time you get home, you’re pretty much running on empty, and yet still answering emails until you fall asleep.

Increasingly, this experience is common not just to middle managers, but also to top executives.

Our company, The Energy Project, works with organizations and their leaders to improve employee engagement and more sustainable performance. A little over a year ago, Luke Kissam, the chief executive of Albemarle, a multibillion-dollar chemical company, sought out one of us, Tony, as a coach to help him deal with the sense that his life was increasingly overwhelming. “I just felt that no matter what I was doing, I was always getting pulled somewhere else,” he explained. “It seemed like I was always cheating someone — my company, my family, myself. I couldn’t truly focus on anything.”

Mr. Kissam is not alone. Srinivasan S. Pillay, a psychiatrist and an assistant clinical professor at Harvard Medical School who studies burnout, recently surveyed a random sample of 72 senior leaders and found that nearly all of them reported at least some signs of burnout and that all of them noted at least one cause of burnout at work.

More broadly, just 30 percent of employees in America feel engaged at work, according to a 2013 report by Gallup. Around the world, across 142 countries, the proportion of employees who feel engaged at work is just 13 percent. For most of us, in short, work is a depleting, dispiriting experience, and in some obvious ways, it’s getting worse.

Read the entire article here.

Tony Schwartz is the chief executive of The Energy Project, a consulting firm. Christine Porath is an associate professor at Georgetown University’s McDonough School of Business and a consultant to The Energy Project.

Outrage Over Wall Street Pay, but Shrugs for Silicon Valley?

From the New York Times Blog “DealBook” by Steven Davidoff:

Big paydays on Wall Street often come under laserlike scrutiny, while Silicon Valley gets a pass on its own compensation excesses. Why the double standard?

Take Eric Schmidt, the former chief executive and current chairman of Google. Google’s compensation committee last month awarded Mr. Schmidt $100 million in restricted stock plus $6 million in cash. The stock vests in four years and comes on the heels of a $100 million award made in 2011.

It’s unclear why Google felt the need to award Mr. Schmidt this amount.

When asked for comment, a representative of Google directed me to the regulatory filing Google made disclosing Mr. Schmidt’s compensation award. The filing states the award was paid “in recognition of his contributions to Google’s performance in fiscal year 2013.” How about that for detail?

Mr. Schmidt already owns shares worth billions of dollars in Google, and has a net worth of more than $8 billion, according to Forbes. So the latest award amount is just a few ducats to him.

As chairman, Mr. Schmidt does make a substantial contribution to Google, including helping the company negotiate a settlement with the European Union in an antitrust case. But his pay is extraordinarily high for a chairman. The typical director at a Standard & Poor’s 500 company was paid $251,000 in 2012, according to Bloomberg News. Mr. Schmidt is above that range by over $100 million.

Still, the pay award was greeted with few questions and apparently no criticism from Google’s shareholders or others. Compare this with the continued outcry over Wall Street executive pay.

The latest was the criticism of Jamie Dimon’s pay for 2013, given the many regulatory travails of his bank, JPMorgan Chase. The bank’s board awarded Mr. Dimon $20 million in pay for 2013, $18.5 million of which was in restricted stock that vests over three years.

In doing so, the JPMorgan board stated that the award was justified because of JPMorgan’s “sustained long-term performance; gains in market share and customer satisfaction; and the regulatory issues the company has faced and the steps the company has taken to resolve those issues.”

While JPMorgan may be hogging the regulatory limelight at the moment, other Wall Street banks have faced that glare and have been questioned about their chief executives’ compensation. Total pay for Lloyd Blankfein of Goldman Sachs, no stranger to regulatory scrutiny, has not yet been disclosed, but he was recently awarded $14 million in stock. Once his cash bonus is announced, Mr. Blankfein will probably be paid an amount similar to Mr. Dimon’s.

Like JPMorgan’s board, Goldman’s board has sought to justify such pay and is criticized just the same.

This double standard for finance and technology doesn’t make sense.

Read the entire article here.

Why I Didn’t Give Year-End Bonuses

From the New York Times blog, “You’re the Boss” by Jay Goltz:

A couple of weeks ago, my production manager asked me a question that I have not looked forward to answering for several years now. “Are we going to be giving any bonuses this year?” asked Dale, who oversees 38 people in my picture-framing business.

For years, I have given an end-of-the-year bonus to everyone who works for me — the exception being when sales have declined because of a recession. Unfortunately, that’s been the case since 2008. I told Dale that there would be no bonuses for 2013. We are doing better, we are almost there, but it would be irresponsible for me to give them out at this point.

My businesses are all home-furnishings-related, which means they rely on discretionary spending, and they are most certainly affected when consumer confidence falls. In our case, and the case of many small-business owners I know, business has not rebounded from this recession the way it did from the previous recessions I have lived through.

Although it has been several years since the recession came to an official end, there have been plenty of other issues keeping things challenging: more competition, changing buying habits, higher expenses, to name a few. I don’t mean to complain. Things are continuing to get better for my businesses, in part because of the (slowly) improving economy and in part because several investments that I made in new products, new equipment and a new warehouse and production building are beginning to pay off. None of these improvements came cheap, and in the short-term, they all had a negative impact on our cash flow. I remain confident, however, that they are starting to help and will pay off in the long term.

I asked Dale if he wanted me to explain the situation at the weekly production meeting? I didn’t take the time to explain last year, and I now know that wasn’t a good decision. But it was easy, which is often a bad sign.

Dale: “You could just skip the meeting. I’m afraid that no matter what you say, people are going to be aggravated.”

Jay: “You know what? You’re the one that has been on the front line with people asking for more money and I think you may be suffering from battle fatigue. I have to believe that most people will understand. And even if it is only some of them who don’t, I think I owe them an explanation.”

Dale: “You’re right. Have the meeting. We’ll see what happens.”

Jay: “I have to tell you, I’m a little frustrated myself. We didn’t lay anyone off, we have gotten everyone back to full hours plus a good amount of overtime, and this year we have caught up on raises. I would have loved to give out bonuses, but the thought of people being mad that they didn’t get a bonus — abonus! — when we didn’t make enough money to justify it, doesn’t make me feel great. If I wanted to be cynical, I could argue that I should have never started giving bonuses in the first place.”

Dale: “I understand, but you know how people are. They are more upset if you take something away than if you never gave it to them in the first place.”

Jay: “I know. But I would like to believe that they will get it. I can tell you this, while I wish we could have given bonuses, I certainly don’t feel guilty about it. It would have been a really bad business decision. We’re growing again, we’re stable, and if everything goes as planned, we should be able to give bonuses in 2014.”

So I had the meeting about two weeks before Christmas. I explained all of the things that we have been spending money on, and all of the good results that have started to pay off. For the sake of those employees who were not here five years ago, I went through our sales history. And I reminded them that they are working at a stable company in an unstable market. And I thanked them all for working together to get us where we were. As they say in sports, I left it all on the field. There were no comments or questions. Everyone went back to work, except for me.

I waited around until the jury came back, which took about 20 minutes. One of the supervisors gave me the verdict: Several people he spoke to said they appreciated that I had given them the whole story. They understood that we have been rebuilding, and they are happy to have a stable job where they are treated well.

Now, do I believe that everyone is happy all of the time and that they think I am the greatest boss ever? Of course not. But we have very little turnover, which is part of the reason I believe that most employees understand and that most appreciate the fact that I appreciate them. And if the rest are justpretending to get it, that’s O.K., too. I plan on giving bonuses out at the end of 2014, and if that happens, it will be a very happy day for me, as well as for them.

Job Situation Looks a Little Worse

From the New York Times Economix Blog by Floyd Russell:

Every year at this time, the Labor Department tells us how badly it blew the previous year’s job figures. In each of the last two years, it turned out that job growth was better than previously estimated. But not this year.

The revised numbers come because the government has access to better data, after a long delay. The earlier figures come from a survey of employers, with the numbers adjusted for the government’s estimate of how many jobs were created by new employers, and lost from failing companies that could not, of course, respond to the survey.

The revised figures come from state unemployment insurance premium figures. Employers must pay insurance premiums based on how many employees they have each month, and those numbers are deemed more reliable, even though it takes a long time to compile them.

The new numbers are called the “benchmark revisions,” and they are preliminarily announced in September, although they are not made final until the followed February.

Today’s announcement sounded positive if you did not study it, and some news reports reflected that misreading of it.

“The preliminary estimate of the benchmark revision indicates an upward adjustment to March 2013 total nonfarm employment of 345,000 (0.3 percent),” said the Labor Department’s announcement.

But then it explained that all of that gain, and more, came from changing definitions, not new jobs.

The monthly job figures exclude some workers, like the self-employed, and it counts household workers as self-employed. But now it has revised its definitions, and decided that “establishments that provide nonmedical, home-based services for the elderly and persons with disabilities” should be classified as health care companies. “Many of these establishments were previously classified in the private households industry,” it said.

That added 490,000 workers to the total reported number for last March. On an apples-to-apples basis, however, the result is to reduce job growth in the 12 months through last March by 124,000.

The old numbers indicated that job gains in those 12 months averaged 169,000 per month. This change will shave that figure to 159,000.

It is not a big change, but the direction is not encouraging.

Addendum: The Bureau of Labor Statistics says that it will adjust figures going back at least several years, so that comparisons will not be distorted.

On America’s Sinking Middle Class

From the New York Times
September 18, 2013
By Eduardo Porter

In some respects, 1988 has the feel of an alien, distant era. There was no such thing as the World Wide Web then. The Soviet Union was still around; the Berlin Wall still standing. Americans elected a Republican president who would raise taxes to help tame the budget deficit.

On Tuesday, however, the Census Bureau reminded me how for most Americans 1988 still looks a lot like yesterday: last year, the typical household made $51,017, roughly the same as the typical household made a quarter of a century ago.

The statistic is staggering — hardly what one would expect from one of the richest and most technologically advanced nations on the planet.

I have written several times before about how measures of social and economic well-being in the United States have slipped compared to other advanced countries. But it is even more poignant to recognize that, in many ways, America has been standing still for a full generation.

It made me wonder what happened to progress.

Consider: 36 years ago this month, when NASA launched the Voyager 1 probe into space, 11.6 percent of Americans were officially considered poor. The other day Voyager sailed clear out of the solar system into interstellar space — the first man-made object to do so — recording its environment on an 8-track deck.

Using the same official metric — which actually undercounts the poor compared to new methods used by the Census today — the poverty rate is 15 percent.

To be sure, we have made progress over the last 25 years. The nation’s gross domestic product per person has increased 40 percent since 1988. We’ve gained four years’ worth of life expectancy at birth. The infant mortality rate has plummeted by 50 percent. More women and more men are entering and graduating from college.

We also have access to far more sophisticated consumer goods, from the iPhone to cars packed with digital devices. And the cost of many basic staples, notably food, has fallen significantly.

Carl Shapiro, an economist at the University of California, Berkeley and an expert on technology and innovation who stepped down from President Obama’s Council on Economic Advisors last year, calls the progress in information technology and biotechnology over the last 25 years “breathtaking.”

“Most Americans partake in the benefits offered by these new technologies, from smartphones to better dental care,” Professor Shapiro said. Still, he acknowledged, “somehow this impressive progress has not translated into greater economic security for the American middle class.”

In key respects, in fact, the standard of living of most Americans has fallen decidedly behind. Just take the cost of medical services. Health care spending per person, adjusted for inflation, has roughly doubled since 1988, to about $8,500 — pushing up health insurance premiums and eating into workers’ wages.

The cost of going to college has been rising faster than inflation as well. About two-thirds of people with bachelor’s degrees relied on loans to get through college, up from 45 percent two decades ago. Average student debt in 2011 was $23,300.

In contrast to people in other developed nations, who have devoted more time to leisure as they have gotten richer, Americans work about as much as they did a quarter-century ago. Despite all this toil, the net worth of the typical American family in the middle of the income distribution fell to $66,000 in 2010 — 6 percent less than in 1989 after inflation.

Though the bursting of the housing bubble and ensuing great recession takes a big share of the blame for families’ weakening finances, it is nonetheless startling that a single financial event — only a hiccup on the road to prosperity of Americans on the top of the pile — could erase a generation worth of progress for those in the middle.

Though the statistics may be startling, the story they tell is, unfortunately, not surprising. It is the story of America’s new normal. In the new normal the share of the nation’s income channeled to corporate profits is higher than at any time since the 1920s, while workers’ share languishes at its lowest since 1965.

In the new normal, the real wages of workers on the factory floor are lower than they were in the early ’70s. And the richest 10 percent of Americans get over half of the income America produces.

“Almost all of the benefits of growth since the trough of the Great Recession have been going to those in the upper classes,” said Timothy Smeeding, who heads the Institute for Research on Poverty at the University of Madison-Wisconsin. “Middle- and lower-income families are getting a smaller slice of a smaller economic pie as labor markets have changed drastically during our recovery.”

This story is about three decades old.

In 2010, the Department of Commerce published a study about what it would take for different types of families to achieve the aspirations of the middle class — which it defined as a house, a car or two in the garage, a vacation now and then, decent health care and enough savings to retire and contribute to the children’s college education.

It concluded that the middle class has become a much more exclusive club. Even two-earner families making almost $81,000 in 2008 — substantially more than the family median of about $60,000 reported by the Census — would have a much tougher time acquiring the attributes of the middle class than in 1990.

The incomes of these types of families actually rose by a fifth between 1990 and 2008, according to the report. They were more educated and worked more hours, on average, and had children at a later age. Still, that was no match for the 56 percent jump in the cost of housing, the 155 percent leap in out-of-pocket spending on health care and the double-digit increase in the cost of college.

So either we define the middle class down a couple of notches or we acknowledge that the middle class isn’t in the middle anymore.