Economic Policy Institute — Labor Day Series

Economic Policy Institute

Black workers endure persistent racial disparities in employment outcomes

Part of the series Labor Day 2019: How Well Is the American Economy Working for Working People? Summary: Black workers are twice as likely to be unemployed as white workers overall (6.4% vs. 3.1%). Even black workers with a college degree are more likely to be unemployed than similarly educated white workers (3.5% vs. 2.2%). When they are employed, black workers with a college or advanced degree 3h

Working people have been thwarted in their efforts to bargain for better wages by attacks on unions

Part of the series Labor Day 2019: How Well Is the American Economy Working for Working People? Summary: The share of workers represented by unions has dropped by more than half since 1979—from 27.0% to 11.7% in 2018. Not coincidentally, the share of income going to the top 10% has escalated in this period—these high earners now capture nearly half of all income. The decline of unions is not beca3h

Low-wage workers are suffering from a decline in the real value of the federal minimum wage

Part of the series Labor Day 2019: How Well Is the American Economy Working for Working People? Summary: The real value of the federal minimum wage has dropped 17% since 2009 and 31% since 1968. Workers earning the federal minimum wage today have $6,800 less per year to spend on food, rent, and other essentials than did their counterparts 50 years ago. Some states have raised their minimum wages 3h

Wage growth is being held back by political decisions and the Trump administration is on the wrong side of key debates

Part of the series Labor Day 2019:The fact that the unemployment rate has averaged 3.8% over the past year (its lowest 12-month average since 1970) might make one think that times are flush for American workers and that there is widespread agreement that the U.S. economy is being well managed by elected officials. But while times are better for workers today than they were 10, five, or even three years ago, a crucial ingredient for workers’ well-being—faster-growing wage growth—still hasn’t appeared. This wage failure might be why the public seems unwilling to give President Trump (and his Republican supporters in Congress) credit as good economic managers despite today’s low unemployment rate. In fact, the president and his supporters in Congress are responsible for a number of policy decisions that will reliably harm workers’ future prospects for wage growth.1

David F. Ruccio — I ran out of words to describe how bad the recovery numbers are

Workers’ wages have been stagnant for the past decade across the 36 countries that make up the Organisation for Economic Cooperation and Development. But the problem has been particularly acute in the United States, where the “low-income rate” is high (only surpassed by two countries, Greece and Spain) and “income inequality” even worse (following only Israel).

The causes are clear: workers suffer when many of the new jobs they’re forced to have the freedom to take are on the low end of the wage scale, unemployed and at-risk workers are getting very little support from the government, and employed workers are impeded by a weak collective-bargaining system.

That’s exactly what we’ve seen in the United State ever since the crisis broke out—which has continued during the entire recovery.…

"It's the distribution, stupid."

Occasional Links & Commentary
I ran out of words to describe how bad the recovery numbers are
David F. Ruccio | Professor of Economics, University of Notre Dame

Bill Mitchell — Eurozone recovery is much weaker than the headline figures might suggest

Macron to save the EZ? Not likely.

Bill Mitchell – billy blog
Eurozone recovery is much weaker than the headline figures might suggest
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill McBride — Goldman's July NFP Preview

Employment and wage growth picking up finally. Green shoots?

Calculated Risk
Goldman's July NFP Preview
Bill McBride

Bill Mitchell — IMF recommends that firms should increase real wage growth in Japan

I read two articles/reports today about Japan. The first was a Fairfax article (March 21, 2016) from a journalist who invariably peddles the neoliberal economic myths. The second was from the IMF extolling the virtues of higher wages in Japan. What? Yes, you read the second point correctly. The IMF considers that an essential new policy element (a “fourth arrow”) is required in Japan in the form of real wages growth outstripping productivity growth by around 2 per cent. It wants the government to legislate to ensure that happens. In general, the IMF solution for Japan is in fact one of the key changes that nations have to do bring in to restore some sense of stability into the world economy. Governments around the world has to ensure that real wages growth, at least, keeps pace with productivity growth and that workers can fund their consumption expenditure from their earnings rather than relying on ever increasing levels of credit and indebtedness. This will of course require a fundamental change in our approach to the interaction between society and economy. It will require increased employment protection, larger public sector employment proportions, decreased casualisation, and legislative requirements imposed upon firms to pass on productivity gains. It’s no small order, but it is one of a number of essential changes that we will have to do introduce as part of the abandonment of neoliberalism.

Bill Mitchell – billy blog
IMF recommends that firms should increase real wage growth in Japan
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Michael Stephens — The Supposed Decade of Flat Wages Was Worse Than We Thought

It’s well known that the wages of US workers have become disconnected from productivity growth, with real wages growing much more slowly than advances in productivity over the last several decades. This is a key part of the story of widening income inequality.

But these observed trends actually understate the degree to which working people have been left behind. New research reveals that the US economy is doing a worse job passing on productivity gains to workers than the wage growth (or even stagnation) numbers suggest.

The Levy Institute’s Fernando Rios-Avila and the Atlanta Fed’s Julie Hotchkiss looked back to 1994 and tried to see what proportion of real wage growth since then can be accounted for by key changes in the demographic profile of the labor force: principally, the fact that the average worker has become older (i.e., more experienced) and more educated.

What they found is that over 90 percent of real wage growth between 1994 and 2013 was due to demographic shifts. And the 2002–13 period, commonly referred to as the decade of flat wages, is more accurately described as “a decade of declining real wages within age/education worker profiles.” If we control for demographics, wages are back to where they were in 1998.

Multiplier Effect
The Supposed Decade of Flat Wages Was Worse Than We Thought
Michael Stephens

Matthew Boesler — Goldman Sachs Chief Economist Jan Hatzius Argues The Fed Should Target Wage Growth Instead Of Inflation

In the report, Stehn and Hatzius devise a model to test whether an increased focus on wage inflation would lead to better Fed policy outcomes.

Their findings: the wage growth focus could help the Fed steer clear of policy mistakes in the future.

Target unemployment and the rest will take care of itself. Adapted from "Look after unemployment," JM Keynes said, "and the budget will look after itself." — J. M. Keynes

Employment and wage growth are lagging indicators. They can therefore remain depressed long after recessions are officially over based on leading indicators and persist through much of the "recovery" period.

Looking at employment and wages, the US has been in a depression for over five years with no end it sight.

Business Insider — Clusterstock
Goldman Sachs Chief Economist Jan Hatzius Argues The Fed Should Target Wage Growth Instead Of Inflation
Matthew Boesler