LACK OF GOOD JOBS IS OUR MOST URGENT PROBLEM

ABSTRACT: The most urgent problem facing the US right now is a lack of jobs, especially jobs that pay middle class wages and provide benefits. Unemployment is high and long-term. The jobs being created during our 4 year old economic recovery are disproportionately low-wage, low skill jobs.

Fast food workers are emblematic of the low wage, low skill jobs being created. The typical fast food worker makes $8.69 per hour. As a result, over half of fast food workers rely on public, taxpayer funded benefits to make ends meet. The cost to taxpayers is estimated to be $7 billion per year. Meanwhile, the fast food corporations make billions of dollars in profits and pay tens of millions of dollars to their senior executives. Workers at Walmart, the largest employer in the US, are in a similar situation. These very profitable corporations can afford to raise their workers’ wages to $15 an hour – a wage they could live on without public assistance. In the meantime, taxpayers are subsidizing these corporations.

It used to be that unions and government provided workers with a voice and the power to balance that of the large employers. Today, that voice and power are largely gone. Therefore, wages, benefits, and job security have been eroding. Starting in the late 1970s, the historic link between growth in the economy and productivity on the one hand, and growth in workers’ wages on the other hand, was severed. We undid or failed to adopt rules for our economy that ensure the gains of economic and productivity growth are widely and fairly distributed.

The failure of our policy makers in Washington to focus on creating jobs, let alone good jobs, and on spurring economic growth is the clear and tragic result of the ascendancy of politics over rational policy making.

FULL POST: The most urgent problem facing the US right now is a lack of jobs, especially jobs that pay middle class wages and provide benefits. Unemployment is high and long-term – since 2010 roughly 40% of those unemployed and actively looking for work have been unemployed for more than 6 months. This is triple the rate of long-term unemployment in the period from 2000 – 2007. [1]

The official unemployment rate is 7.2% based on those who are actively looking for a job. It would be significantly higher, well over 10%, if those who have given up looking were included. And higher still if the under-employed were included – those working part-time who would like to be working full-time and those who are working at jobs for which they are over-qualified.

The jobs being created during our 4 year old economic recovery are disproportionately low-wage, low skill jobs. (See post of 9/27/13 for more detail.) High unemployment and low wage jobs are key factors in our slow economic recovery (consumers’ lack purchasing power), in the government’s budget deficit (reduced tax revenues), and in growing inequality (95% of the economic gains during the recovery have gone to the richest 1%). As a result, income and wealth inequality have increased to levels not seen since the 1920s.

Fast food workers are emblematic of the low wage, low skill jobs being created. The typical fast food worker makes $8.69 per hour. Two-thirds of them are adults, most of them bring home at least half of the family’s income, and a quarter of them have children. Only 13% get health insurance through their employers.

As a result, over half of fast food workers rely on public, taxpayer funded benefits to make ends meet. The cost to taxpayers is estimated to be $7 billion per year; much of it is for health care, but also food assistance and other economic supports. [2] You can watch a 2 minute video about this, which includes a recording of the McDonald’s help line telling a 10-year employee with 2 children to access food stamps and Medicaid, at
http://lowpayisnotok.org/mcvideo/?utm_campaign=LowPay&utm_medium=email&utm_source=mcvideo-r.

Meanwhile, the fast food corporations make billions of dollars in profits and pay tens of millions of dollars to their senior executives. For example, McDonald’s has 700,000 employees. They are estimated to get $1.2 billion a year in taxpayer funded benefits. McDonald’s is very profitable, making $5.5 billion a year and paying its CEO $13.8 million. It has just purchased a $35 million luxury jet for its executives, which costs at least $2,400 an hour to operate.

Workers at Walmart, the largest employer in the US, are in a similar situation. They make an average of $8.80 an hour. When General Motors was the largest employer in the 1950s, it paid its workers about $50 to $60 an hour (adjusted for inflation). As with the fast food workers, we taxpayers are supporting Walmart workers with multiple types of public assistance. [3]

These big, profitable corporations operate with a business model that uses low paid and part-time workers, typically without benefits, who are, therefore, unable to afford the necessities of life. This leaves taxpayers to pick up the tab for the public benefits they need. These very profitable corporations can afford to raise their workers’ wages to $15 an hour (see post of 9/8/13 for more detail)  – a wage they could live on without public assistance. In the meantime, taxpayers are subsidizing these corporations.

Nationally, the typical workers’ wages, adjusted for inflation, have barely increased over the last 30 years. (See post of 9/2/13 for more detail.) The typical male worker in 1978 was making around $48,000 (adjusted for inflation), while the average person in the top 1% earned $390,000. By 2010, the typical male workers’ pay had gone down, while the person in the 1% had their pay more than double. Today, the richest 400 Americans have more wealth than the bottom half of the country, 150 million people, combined.

It used to be that unions and government provided workers with a voice and the power to balance that of the large employers. Today, that voice and power are largely gone. Therefore, wages, benefits, and job security have been eroding. Workers are not even receiving the benefits of their increased productivity. As a result, we are losing the middle class, equal opportunity, and upward mobility. This is undermining our economy and our democracy.

In the first 4 years of the current recovery, the richest 1% of Americans took home 95% of the income gains. In stark contrast, between 1946 and 1978, as the economy doubled in size, everyone’s income doubled as well.

Starting in the late 1970s, the historic link between growth in the economy and productivity on the one hand, and growth in workers’ wages on the other hand, was severed. Income gains started going to the richest Americans and people in the middle, the typical worker, saw their wages stagnate. Part of the problem is that we didn’t adapt to globalization and technological change. We didn’t change public policies. We didn’t change the rules of our economy to continue to provide opportunity, upward mobility, and ensure that economic and productivity growth were broadly shared. We could have done so, but we didn’t. [4]

Among other things, we let the minimum wage fall behind inflation. If it had kept up with inflation, the national minimum wage would be $10.40 today instead of $7.25. If productivity improvement was included, it would be at least $15 an hour. We deregulated the financial system, both domestically and internationally, favoring investors and corporations over workers. And we didn’t include labor standards in trade treaties. Meanwhile, we cut tax rates on high incomes and wealth substantially.

If we had a democracy that was working for the people, the average citizen and worker would have the voice and power to see that their interests and the greater good were served. Instead, we undid or failed to adopt rules for our economy that ensure the gains of economic and productivity growth are widely and fairly distributed – without sacrificing efficiency or innovation. The failure of our policy makers in Washington to focus on creating jobs, let alone good jobs, and on spurring economic growth is the clear and tragic result of the ascendancy of politics over rational policy making. This failure may put their political careers at risk because every poll shows that the public is much more concerned about jobs and the economy than any other issue, including the deficit.


[1]       Woolhouse, M., 10/22/13, “Long search finally ends,” The Boston Globe

[2]       Johnston, K., 10/16/13, “Public aid crucial to fastfood workers,” The Boston Globe

[3]       Moyers, B. with Reich, R., 9/20/13, “Inequality for all,” http://billmoyers.com/episode/full-show-inequality-for-all/

[4]       Moyers, B. with Reich, R., 9/20/13, see above

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