A widely held view in elite circles is that the rapid rise in inequality in theUnited States over the last three decades is an unfortunate side-effect of technological progress. In this story, technology has had the effect of eliminating tens of millions of middle wage jobs for factory workers, bookkeepers, and similar occupations.
These were jobs where people with limited education used to be able to raise a family with a middle class standard of living. However computers, robots and other technological innovations are rapidly reducing the need for such work. As a result, the remaining jobs in these sectors are likely to pay less and many people who would have otherwise worked at middle wage jobs must instead crowd into the lower paying sectors of the labor market.
This story is comforting to elites, because it means that inequality is something that happened, not something they did. They won out because they had the skills and intelligence to succeed in a dynamic economy, whereas the huge mass of workers that are falling behind did not. In this story, the best we can do for those left behind is empathy and education. We can increase opportunities to upgrade their skills in the hope that more of them may be able to join the winners.
That’s a nice story, but the evidence doesn’t support it. My colleagues Larry Mishel, John Schmitt, and Heidi Sheirholz, just published a papershowing that the pattern of job growth in the data doesn’t fit this picture at all. This paper touches on a wide variety of issues related to technology and wage inequality, but first and foremost, it shows that the story of the hollowing out of the middle does not fit the data for the 2000s at all.
Since 2000, the increase in employment has occurred almost entirely in low-wage occupations. There has been a decline in relative employment for both workers in middle wage and high wage occupations. If this “occupational shift story” explained trends in wages we should expect to see sharply rising wages for retail clerks, custodians and other workers employed in low-paying occupations.
Of course, we see the opposite. Workers in these occupations continued to lose ground in the 2000s as they did in the prior two decades. Their wages barely kept pace with inflation over the last three decades.
The paper makes an impressive case that technology is not the main explanation for the rise in inequality that we have been seeing. In fact, even MIT economics professor David Autor, the leading proponent of the occupational shift story concedes this point. He was quoted in a New York Times column saying of the view that technology explains inequality:
It can suck all the air out of the conversation … All economists should be pushing back against this simplistic view.
Given the evidence compiled by Mishel et al, it would be difficult to maintain that technology has been the main culprit in the upward redistribution of income that we have seen.
Category: The New Depression
Guess who pays for Walmart’s greed
Maybe you saw the news item about the Walmart near Canton, Ohio that’s holding an in-house canned food drive “so associates in need can enjoy Thanksgiving dinner.” It seems retail employees at the monster store are so badly paid, many of them can’t afford to eat right. The solution? Employees who aren’t quite starving should feed employees who are.
I showed the last part of the story to the swamp rabbit:
Walmart’s low wages come at a public cost. Because low-income workers still need housing and health care, taxpayers end up doling out millions in benefits to bridge the gap faced by many of the store’s retail workers. They have also led to strikes at Walmart stores from Seattle to Chicago to Los Angeles in recent weeks.
Even if the canned food drive successfully gathers enough to help out the Canton store’s low-income workers, many of them might not even be able to have the food on Thanksgiving. That’s because Walmart is one of a group of retailers that will open its stores for Black Friday sales beginning at 6 p.m. on Thanksgiving afternoon.
The rabbit said, “Somebody oughta do somethin’ about them greedy Arkansas skunks who own that company. Somethin’ to get their attention.”
The funky old rodent is in a foul mood because the weather’s getting too cold for his hangover cure, which is to jump off the porch of my shack and swim a few laps around the swamp. He’s been pestering me to buy him a bottle of Wild Turkey to get him through Turkey Day.
I said, “Walmart is beyond satire. It’s like trying to satirize Nazi war crimes. Not even that New Yorker guy, Andy Borowitz, could pull it off.”
“I ain’t talkin’ about no satire,” he said. “Skunks care about action, not words. Them associates oughta burn down one of them big, ugly stores. That’ll get their attention. Or walk out together and tell customers to shop somewhere else till Walmart pays a living wage.”
“That’s crazy talk,” I told him. “There aren’t enough employees willing to strike. When they fight back they don’t get a raise, they just get fired.”
He shrugged. “What’s worse, gettin’ fired or slow starvation? Ain’t nobody ever got nothin’ in this country without fightin’ for it. It don’t pay to be meek. It’s like my pappy used to say, the meeks shall inherit the dirt. You’re almost broke, you oughta know better.”
“You’re hopeless,” I said. “You’ve been in this swamp too long to know about the global economy. It’s too complicated for you to understand.”
He spit at the swamp. “Bullshit. The meeks can fight them skunks or they can kiss their asses. They can demand enough income to eat right or they can eat shit and die. What’s so complicated?”
It’s at moments like this that I usually buy him a bottle, which is what I did today. Anything to make him shut the f*ck up.
Footnote: Check out this story: “One Walmart’s Low Wages Could Cost Taxpayers $900,000 Per Year, House Dems Find.”
Depressing
Krugman agrees with Larry Summers that we may be in a permanent slump:
Again, the evidence suggests that we have become an economy whose normal state is one of mild depression, whose brief episodes of prosperity occur only thanks to bubbles and unsustainable borrowing.
Why might this be happening? One answer could be slowing population growth. A growing population creates a demand for new houses, new office buildings, and so on; when growth slows, that demand drops off. America’s working-age population rose rapidly in the 1960s and 1970s, as baby boomers grew up, and its work force rose even faster, as women moved into the labor market. That’s now all behind us. And you can see the effects: Even at the height of the housing bubble, we weren’t building nearly as many houses as in the 1970s.
Another important factor may be persistent trade deficits, which emerged in the 1980s and since then have fluctuated but never gone away.
Why does all of this matter? One answer is that central bankers need to stop talking about “exit strategies.” Easy money should, and probably will, be with us for a very long time. This, in turn, means we can forget all those scare stories about government debt, which run along the lines of “It may not be a problem now, but just wait until interest rates rise.”
More broadly, if our economy has a persistent tendency toward depression, we’re going to be living under the looking-glass rules of depression economics — in which virtue is vice and prudence is folly, in which attempts to save more (including attempts to reduce budget deficits) make everyone worse off — for a long time.
I know that many people just hate this kind of talk. It offends their sense of rightness, indeed their sense of morality. Economics is supposed to be about making hard choices (at other people’s expense, naturally). It’s not supposed to be about persuading people to spend more.
But as Mr. Summers said, the crisis “is not over until it is over” — and economic reality is what it is. And what that reality appears to be right now is one in which depression rules will apply for a very long time.
Poverty, straight up
From a blog called killermartinis, a stark account of living in poverty:
…Rest is a luxury for the rich. I get up at 6 AM, go to school (I have a full course load, but I only have to go to two in-person classes) then work, then I get the kids, then I pick up my husband, then I have half an hour to change and go to Job 2. I get home from that at around 12:30 AM, then I have the rest of my classes and work to tend to. I’m in bed by 3. This isn’t every day, I have two days off a week from each of my obligations. I use that time to clean the house and soothe Mr. Martini and see the kids for longer than an hour and catch up on schoolwork. Those nights I’m in bed by midnight, but if I go to bed too early I won’t be able to stay up the other nights because I’ll fuck my pattern up, and I drive an hour home from Job 2 so I can’t afford to be sleepy. I never get a day off from work unless I am fairly sick. It doesn’t leave you much room to think about what you are doing, only to attend to the next thing and the next. Planning isn’t in the mix…
Read the whole piece. It’s as if someone said “Just the facts, ma’am,” and the blogger said OK, here you are, and what came out was an artfully plain explanation of why poverty often feels like quicksand — the more you struggle against it, the deeper it sucks you in.
The headline is “Why I make terrible decisions,” but the piece illustrates how hard it is not ro make terrible decisions when none of your options is good. The best you can do is choose the option that seems less bad than the others. When you’re poor, this is the same thing as high-stakes gambling.
But it looks like the story might not end on a grim note. Another blogger apparently read the killermartinis post and said, damn, maybe I can help drag this woman onto solid ground. So the other blogger apparently established an online fund to help pay to have KM’s teeth fixed. Check it out.
And it seems KM’s “terrible decisions” piece may have caught the eye of a literary agent.
All of this seems to be on the up-and-up, although the cynic in me is always suspicious of Frank Capra-esque plot twists. Again, check it out.
Caught in a revolving door
Of unemployment. And this is why I’m in a constant state of low-level fury at our nation’s leadership:
On a cold October morning, just after the federal government shutdown came to an end, Jenner Barrington-Ward headed into court in Boston to declare bankruptcy.
It took weeks to put the paperwork together, given that her papers and belongings were scattered across the country — there was a broken-down car and boxes of paperwork in Virginia Beach, clothes in Colorado and personal possessions at a friend’s house in Somerville, Mass. She managed to estimate her income — maybe $5,000 last year, but maybe half that this year — from odd jobs. Soon, she would officially have nothing.
It has been a painful slide. A five-year spell of unemployment has slowly scrubbed away nearly every vestige of Ms. Barrington-Ward’s middle-class life. She is a 53-year-old college graduate who worked steadily for three decades. She is now broke and homeless.
Ms. Barrington-Ward describes it as “my journey through hell.” She was laid off from an administrative position at the Massachusetts Institute of Technology in 2008; she had earned about $50,000 that year. With the recession spurring employers to dump hundreds of thousands of workers a month and the unemployment rate climbing to the double digits, she found that no matter the number of résumés she sent out — she stopped counting in the thousands — she could not find work.
“I’ve been turned down from McDonald’s because I was told I was too articulate,” she says. “I got denied a job scrubbing toilets because I didn’t speak Spanish and turned away from a laundromat because I was ‘too pretty.’ I’ve also been told point-blank to my face, ‘We don’t hire the unemployed.’ And the two times I got real interest from a prospective employer, the credit check ended it immediately.”
For Ms. Barrington-Ward, joblessness itself has become a trap, an impediment to finding a job. Economists see it the same way, concerned that joblessness lasting more than six months is a major factor preventing people from getting rehired, with potentially grave consequences for tens of millions of Americans.
The mutilated economy
Krugman, writing from the IMF research conference:
It’s pretty clear, however, that the blockbuster paper of the conference will be one that focuses on the truly ugly: the evidence that by tolerating high unemployment we have inflicted huge damage on our long-run prospects.
How so? According to the paper (with the unassuming title “Aggregate Supply in the United States: Recent Developments and Implications for the Conduct of Monetary Policy”), our seemingly endless slump has done long-term damage through multiple channels. The long-term unemployed eventually come to be seen as unemployable; business investment lags thanks to weak sales; new businesses don’t get started; and existing businesses skimp on research and development.
What’s more, the authors — one of whom is the Federal Reserve Board’s director of research and statistics, so we’re not talking about obscure academics — put a number to these effects, and it’s terrifying. They suggest that economic weakness has already reduced America’s economic potential by around 7 percent, which means that it makes us poorer to the tune of more than $1 trillion a year. And we’re not talking about just one year’s losses, we’re talking about long-term damage: $1 trillion a year for multiple years.
Continue reading “The mutilated economy”
The unemployment benefits cliff
As I think you’ve figured out by now, these cuts aren’t economically sound. They’re just punitive:
[…] unemployment benefits to jobless workers for longer than the normal maximum of 26 weeks have been extended repeatedly, although the maximum duration of benefits has fallen from a peak of 99 weeks to 73 weeks. The Emergency Unemployment Compensation program, financed by the federal government for states that meet certain unemployment and state benefit thresholds, is scheduled to end Jan. 1.
The recent fiscal showdown in Washington make further extensions less likely. And the end of these emergency unemployment benefits could create a further drag on the economy.
The so-called food stamp cliff “may be more of a sidewalk curb,” Mr. Feroli wrote in an email. “The bigger cliff, which I’m surprised people aren’t talking about, is emergency unemployment benefits Jan. 1.” That, he estimated, could shave 0.4 percentage point off growth in the first quarter next year.
Calling Charles Dickens
Some days, it’s harder than ever to read this stuff:
An Ohio woman was collared for petty theft after she was caught swiping $2.87 in change from a fountain last week.
Deidre Romine said she had just fished the coins out of the Logan County Courthouse fountain in Bellefontaine to buy food when a cop approached her on Oct. 7.“The cop asked me what I was doing and I was afraid to tell him,” Romine told WBNS-10TV. “The money didn’t belong to anybody, so I just took it out of there.”
After the officer found the stolen change in her pocket, he issued her a summons to appear in court on a petty theft charge.
The unemployed woman said she’s been struggling to make ends meet and about to lose her apartment and now she’s worried that she’ll get locked up.
“I’m trying to feed myself and I’ve got four cats I’m raising and trying to feed them,” she said. “I might go to jail.”But one man launched an online donation drive to help Romine fight her case.
Going backwards
The elite hate it when Carter says things like this:
OAKLAND, Calif. (AP) — Former President Jimmy Carter said Monday that the income gap in the United States has increased to the point where members of the middle class resemble the Americans who lived in poverty when he occupied the White House.
Carter offered his assessment of the nation’s economic challenges Monday at a Habitat for Humanity construction site in Oakland — the first of five cities he and wife Rosalynn plan to visit this week to commemorate their three-decade alliance with the international nonprofit that promotes and builds affordable housing.
The recent economic downturn revealed that families living in even comparatively well-off, but expensive regions like the San Francisco Bay Area are economically insecure, he said.
“Even in one of the wealthiest parts of the world there is a great deal of foreclosures and now a great deal of people who are fortunate to own their own houses owe more on them than the houses are worth in the present market, and that’s all changed in the last eight years,” Carter said during an exclusive interview with The Associated Press.
The only state that stopped welfare payments
Why are conservatives so mean?
Arizona’s decision to withhold welfare checks because of the federal government shutdown appears to make it the only state to cut off funding for the very poor because of the budget crisis, according to policy experts.
The state stopped payments averaging $207 a week to 5,200 families eligible for Temporary Assistance for Needy Families after Tuesday’s government shutdown. TANF provides cash assistance and other support to low-income children and their parents.
The Arizona Republic reports the decision came despite assurances from federal officials that states would be reimbursed for any payments they made for the federal program. It also comes as the state sits on a $450 million rainy day fund.