Still Not Enough Jobs!

The economy produced 292,000 jobs in the final month of 2015, the Labor Department said Friday. Pundits had predicted a 200,000 plus increase in nonfarm jobs. And because job creation exceeded their predictions, those pundits and some economists will say the Fed has to continue to raise their rates this year. But in spite of the good jobs numbers over the past 3 months—some 2.7 million jobs were created in 2015—there are still more than 7 million job seekers that can only find part time work or no work.

Employment gains in November and October were also considerably stronger, Labor Department revisions show. Some 252,000 new jobs were created in November instead of 211,000. October’s gain was raised to 307,000 from 298,000, marking the biggest increase of 2015.

Graph: Marketwatch

But continuing to raise interest rates will only hurt economic growth, when real GDP growth is still in the 2 percent range. In fact, annual GDP growth has averaged just 2.21 percent since 2010, and been declining since 2000.

Why the slow growth? A major reason is the decline in household incomes since the 1970s that have barely kept up with inflation. Hourly pay has risen just 2.5 percent in the past 12 months, matching a six-and-a-half-year high—which isn’t very high. And that has hurt personal consumption—i.e., consumer spending—which hasn’t been able to rise enough to offset the other factors holding back growth—such as almost no government investment in R&D, and public infrastructure, seriously hurting economic productivity.

That’s because most jobs were created in the lower-paying service sector, while millions of higher-paying manufacturing jobs have migrated overseas. So most workers aren’t getting big bumps in their paychecks. Hourly pay usually rises at a 3 percent to 4 percent annual pace when the economy is really humming.

And that is the ‘real’ reason we have had almost non-existent inflation. It is the hourly pay of the 80 percent of non-supervisory workers that contribute two-thirds of product costs, and it is the direction of product costs that determine whether prices are rising (or falling).

In fact, the Fed should be signaling it wants inflation to rise to the 3 to 4 percent range, a sign that wages are finally rising beyond inflation.  Because that would raise market interest rates that savers are calling for, without the Fed having to intervene.

Harlan Green © 2016

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Where’s the Outrage, Mr. President?

Financial FAQs

Where’s the outrage, Mr. President, when the New York Times just reported that at least 250 Disney World employees have been discharged, with many forced to train their own foreign replacements that have temporary H-IB work visas? Those are visas that are supposed to supply foreign workers where no American workers can be found. Yet Disney discharged those supposedly ‘irreplacable’ American data managers, in order to replace them with foreign workers.

Where’s the outrage when this is not even a “loophole” as characterized by the NYTimes, but flagrant violation of federal guidelines for the H-1B visas? And this during a jobless recovery from the worst depression since the Great Depression?

The Times reported the legal requirements for eligibility of such work visas.  According to federal guidelines, the visas are intended for foreigners with advanced science or computer skills to fill discrete positions when American workers with those skills cannot be found.

Their use, the guidelines say, should not “adversely affect the wages and working conditions” of Americans. Because of legal loopholes, however, in practice, companies do not have to recruit American workers first or guarantee that Americans will not be displaced.

“The program has created a highly lucrative business model of bringing in cheaper H-1B workers to substitute for Americans,” said Ronil Hira, according to the Times article, a professor of public policy at Howard University who studies visa programs and has testified before Congress about H-1B visas.

As if to compound the hurt for American workers, former employees said “many immigrants who arrived were younger technicians with limited data skills who did not speak English fluently and had to be instructed in the basics of the work.”

This is not the first time you didn’t speak out for American workers, Mr. President. You were also conspicuously silent during the reelection of Wisconsin Governor Scott Walker, when he turned Wisconsin into a right to work state and banned collective bargaining of public workers, which has reduced union membership drastically.

This is even though Wisconsin was one of the first states to establish unions and the right to collective bargain, which should be the right of every worker employee.

So when will you finally begin to lead the support for working Americans whose incomes haven’t really risen since the 1970s (when inflation factored in), and wealth virtually destroyed from the busted housing bubble?

“Many American companies use H-1B visas to bring in small numbers of foreigners for openings demanding specialized skills, according to official reports,” said the Times. “But for years, most top recipients of the visas have been outsourcing or consulting firms based in India, or their American subsidiaries, which import workers for large contracts to take over entire in-house technology units — and to cut costs. The immigrants are employees of the outsourcing companies.”

You should be lauded for Obamacare, and the many other programs you support for the poorest Americans, but what about skilled American workers that are still losing their jobs through no fault of their own?

And now you want U.S. workers to trust your word that the Trans-Pacific Partnership trade agreement will be good for American workers, not just American corporations?

Harlan Green © 2015

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Higher Minimum Wage Strengthens Labor Unions

Popular Economics Weekly

Unions may have been weakened by Republican efforts to abolish labor’s collective bargaining power, (in order to weaken their support of Democratic Party policies), but that may be changing as unions have found a new cause—working to raise minimum wages.

Los Angeles is the latest city to raise the minimum wage—to $15/hour in 5 years. Los Angeles is the fourth city, and by far the largest, to enact a $15 minimum in the past year, reports the New York Times. The others are Seattle, San Francisco and Emeryville, Calif. (near San Francisco). A $15 minimum has been proposed in New York City, Washington, D.C., and Kansas City, Mo.

And labor unions in the service industries are behind the push. This is exactly what unions are good at—encouraging higher wages in non-union businesses to match union benefits, such as at MacDonalds, Walmart, and even Facebook. The vote by the Los Angeles City Council was 14-1 in favor. This means it is now on the national agenda.

The $7.25/hour national minimum wage was last set in July 2009. And, according to the University of California Davis Center for Poverty Research, in 2013:

• Five Southern states (Louisiana, Mississippi, Alabama, Tennessee and South Carolina) have no minimum wage laws.
• Four states (Wyoming, Minnesota, Arkansas and Georgia) have state minimum wage rates that are lower than the federal rate, so the federal minimum wage applies.
• Twenty states have laws that set the minimum wage at the federal rate.
• Twenty-one states and the District of Columbia set their rates higher than the federal rate. Currently the state of Washington has the highest minimum wage rate at $9.32 per hour.

Unions had been stymied by outright banning of collective bargaining, or even the requirement that members don’t have to pay dues when joining a unionized shop in many of the right to work states—25 at last count, all controlled by Republican legislatures. It is a I win-You lose bargain that Republican legislatures have made with workers in their own states. The outright suppression of workers’ wages only weakens economic growth, and indeed the reddest states with the strongest anti-union laws are also the poorest.

Several other cities, including San Francisco, Chicago, Seattle and Oakland, Calif., have already approved increases, as we said, and dozens more are considering doing the same. In 2014, a number of Republican-leaning states like Alaska and South Dakota also raised their state-level minimum wages by ballot initiative.

The 67 percent increase from the current California state minimum will be phased in over five years, first to $10.50 in July 2016, then to $12 in 2017, $13.25 in 2018 and $14.25 in 2019. Los Angeles businesses with fewer than 25 employees will have an extra year to carry out the plan. Starting in 2022, annual increases will be based on the Consumer Price Index average of the last 20 years. The LA City Council’s vote will instruct the city attorney to draft the language of the law, which will then come back to the Council for final approval.

Graph: EPI.org

This can only strengthen collective bargaining efforts in other states, a plus for union organizing efforts. Household incomes for most Americans have been declining since 1979. The above columns show real annual income growth from 1947-79 (blue) , and from 1979 to 2015(red) . It highlights the tremendous income inequality for the poorest Americans since then, partly due to the current national minimum wage of $7.25/hour.

“The effects here will be the biggest by far,” said Michael Reich, an economist at the University of California, Berkeley, who was commissioned by LA city leaders to conduct several studies on the potential effects of a minimum-wage increase. “The proposal will bring wages up in a way we haven’t seen since the 1960s. There’s a sense spreading that this is the new norm, especially in areas that have high costs of housing.”

The groups pressing for higher minimum wages said that the Los Angeles vote could set off a wave of increases across Southern California, and that higher pay scales would improve the way of life for the region’s vast low-wage work force.  Actually, it is already happening nationally, and popular even in the right to work states that have suppressed workers’ right for so long.

The push for a $15-an-hour minimum wage is not confined to populous coastal states, said the New York Times. In Kansas City, Mo., activists recently collected enough signatures to put forward an August ballot initiative on whether to raise the minimum wage to $15 by 2020. The City Council is deliberating this week over how to respond and could pass its own measure in advance of the initiative.

Of course, there is an additional bonus to state budgets for raising the minimum wage. It takes many of those income earners at the bottom off state assistance programs like Medical, food stamps, and even welfare rolls. Why shouldn’t everyone support such a grand bargain?

Harlan Green © 2015

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Repubs Anti-Science Agenda Endangers US

Financial FAQs

Last week, the House Science, Space, and Technology Committee, headed by Texas Republican Lamar Smith, approved a bill that would slash at least three hundred million dollars from NASA’s earth-science budget, says the New Yorker’s Elizabeth Colbert. “Earth science, of course, includes climate science,” Representative Eddie Bernice Johnson, a Texas Democrat who is also on the committee, noted. (Smith said that the White House’s NASA budget request favored the earth sciences “at the expense of the other science divisions and human and robotic space exploration.”)

This is just the Republican’s latest effort to cut more funding from those government agencies that provide climate data to help us predict all kinds of natural disasters, such as hurricanes and tornadoes. Have they forgotten Hurricanes Sandy, or Katrina, or the record number of tornadoes that have hit the Midwest and South? House Republicans are now passing bills that are dangerous to everyone’s health, in a word.

It is becoming more obvious why the Republican Party have been so anti-science; in fact anti-all scientific research. It enables them to deny any reality that will decrease the profits of their supporters, such as the Koch Brothers with a net worth of $100 billion, no matter the danger to the environment. They have been denying climate change of any kind in order not to have to put CO2 scrubbers on their power plants that emit so much heat.

Representative Johnson tried to get the cuts eliminated from the bill, but her proposed amendment was rejected. Defunding NASA’s earth-science program takes willed ignorance one giant leap further, says Colbert. It means that not only will climate studies be ignored; but weather data won’t be collected that helps to predict the increasing number of natural disasters.

It takes Republicans’ efforts to dumb down their electorate to a whole new level. Their intentions were first apparent when Wisconsin’s Tea Party Governor Scott Walker recently proposed turning the University of Wisconsin into a trade school, after the Republican-led legislature banned collective bargaining of school teachers, in an effort to dumb down their public educational system.

His latest salvo was directed at the University of Wisconsin. He proposed not only to cut its budget, but proposed downsizing its mission from that of higher education to supply more workers, whoever they might be. Walker’s new budget proposal would slash $300 million from the University of Wisconsin system over the next two years. That’s a 13 percent reduction in state funding.

The vote on the NASA bill came just a week after the same House committee approved major funding cuts to the National Science Foundation’s geosciences program, as well as cuts to Department of Energy programs that support research into new energy sources. As Michael Hiltzik, a columnist for the Los Angeles Times, noted, the committee is “living down to our worst expectations.”

This willful ignorance of anything scientific endangers much more than our health and worsening environment. It endangers all scientific research—solely in order to protect the profits of their wealthiest supporters.

The practical implications of the proposed cuts are certainly disturbing. (It’s going to be hard for D.O.E. to find new energy sources if it isn’t even looking for them.) But perhaps even more distressing is the mindset that led to them. The “I’m not a scientist” line that all Republican candidates to date have espoused is basically a declaration of willed ignorance, said Colbert.

It highlights the dangers that such an agenda presents not only to scientific research, but to the health and well being of all Americans.

Harlan Green © 2015

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Expanding Social Security – Decreasing Inequality

Popular Economics Weekly

What, you say? We should expand, not shrink, social security benefits in the face of horrendous budget deficits of late? Elizabeth Warren put into the Senate Budget proposal for 2015 an amendment to protect social security, and even increase its benefits, when conservative pundits and pols have been chanting for years that it would drive the federal budget into bankruptcy. (Her amendment was defeated by the Republican majority, of course.)

And now potential Republican candidates such as Chris Christie are finding other ways to downsize social security, when social security isn’t the problem, and when record income inequality is getting worse during the recovery, not better.

No, what has driven the budget deficits have been concerted efforts by Republicans since R Reagan to cut maximum tax rates from 70 percent to the current 35 percent, while cutting government programs that would boost growth and productivity, such as public infrastructure spending, education, and even Research and Development.

All have proven records of increasing productivity—from our national freeway system, to DARPA’s funding of the Internet. Republicans have even gone so far as to cause a downgrade of sovereign treasury debt from its historic AAA rating by shutting down the government briefly in 2012.

Warren's recent effort was the product of a long progressive campaign that preceded her election. Pundits, such as the Huffington Post and the New York Times’ Paul Krugman have been pushing for the expansion of retirement benefits for years. In the past decade, left-of-center policy wonks became increasingly worried about retirement security for Americans. Corporate pension plans—many of which offered decent and secure retirement payments—were going the way of the dinosaurs. In 1980, about 40 percent of private-sector workers received such pension payouts; by 2006, that number had dropped to 15 percent.

In general, many retirement plans had shifted to private 401(k) accounts, and these often were woefully inadequate for supporting retirees in a climate of stagnating wages and scant savings. And the recent Wall Street collapse ravaged pensions and personal investments, illustrating that 401(k)s were a shaky foundation for retirement. Progressives and retirement policy wonks began looking for another option. The obvious answer was expanding Social Security.

In March 2012, the AFL-CIO called for "changing the terms of debate by focusing on the crisis of retirement security." Over the next year and a half, progressives policy shops and activists answered the call to arms. In April 2013, the New America Foundation, a progressive think tank, published a plan to expand benefits. "Our main purpose in doing that was to move the goal posts," says Michael Lind, a cofounder of the New America Foundation. Around the same time, two Democratic senators, Tom Harkin of Iowa and Mark Begich of Alaska, introduced bills to expand benefits.

Yet in November 2013, the Washington Post editorial board slammed the expansion push as "liberalism gone awry." It noted that "even the rich have finite resources; government can only go to that well so many times…Unchecked entitlement spending for the elderly crowds out spending" on young Americans and other priorities,” said the Post.

This is utter supidity. The Washington Post is now defending the rich? What “finite” resources we have created have all gone to the wealthiest since the end of the Great Recession. They garnered 90 percent of the income to be precise, while the 90 percent’s income bracket actually declined, mainly because wages and salaries have declined while the financial markets rallied for investors.

Graph: Seeking Alpha

The result has been anemic growth for the past 2 decades, far below historic growth rates. “In the last two decades, like in the case of many other developed nations, its growth rates have been decreasing,” said Trading Economics. “If in the 50’s and 60’s the average growth rate was above 4 percent, in the 70’s and 80’s dropped to around 3 percent. In the last ten years, the average rate has been below 2 percent and since the second quarter of 2000 has never reached the 5 percent level.”

That’s what happens when all income gains go to the top income brackets, and actual laws prevent wage and salary earners from even bargaining for more, such as Wisconsin’s banning of collective bargaining for its public employees that include teachers and health care workers.

There is good reason to expand social security benefits. There just has to be the political will to pay for it, and given the gains of those who can most afford to, we should be worrying more about growing the economy than a budget deficit that is the result of decades of anti-growth policies.

Harlan Green © 2015

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Governor Scott Walker vs. Education

Financial FAQs

It is hard to believe, but prospective presidential candidate Wisconsin Governor Scott Walker’s main platform seems to be his antipathy towards education, and higher education, in particular. He has obfuscated his near hatred of higher education to date by getting his Republican-Controlled Legislature to first ban public union collective bargaining, especially unions for teachers and public health nurses.

But the veil that has obscured his anti-education agenda is lifting. His latest salvo is directed at the University of Wisconsin. He proposes not only to cut its budget, but proposed downsizing its mission from that of higher education to supply workers, whoever they might be. Walker’s new budget proposal would slash $300 million from the University of Wisconsin system over the next two years. That’s a 13 percent reduction in state funding.

That might be explained by the poor performance of the Wisconsin economy since he took office—an economy now ranked below all other comparable Midwestern states.

A harbinger of what Walker might face came in an immediate uproar on social media this month after his staff proposed changing the university’s focus on the pursuit of truth, known as the “Wisconsin Idea,” to a grittier focus on “workforce needs.”

"Inherent in this broad mission are methods of instruction, research, extended training and public service designed to educate people and improve the human condition," is part of the University of Wisconsin's mission statement.

What is wrong with that mission, you ask? It speaks to a well-educated mind, is Walker’s problem, apparently. If Walker gets his way, that sentence, along with "Basic to every purpose of the system is the search for truth," would be entirely cut from the charter. Walker also seeks to cut statements reinforcing the university's commitment to working with out-of-state institutions and its prioritization of "programs with emphasis on state and national needs."

In its place, Walker proposes language stating Wisconsin only provides a state education because it is constitutionally required and among its top priorities are meeting "workforce needs." So the U. of Wisconsin should be down-sized to a trade school?

On reflection, Walker’s anti-education agenda fits right in with the current Republican Party’s prejudice against modern education in general, scientific knowledge and empirical facts in particular, such as the denial of global warming. Republicans have even proposed abolishing the Department of Education, a cabinet position, which helps to keep their supporters in the poorer red states literally ignorant of those facts that would better their lives.

It was in 2011 that Walker pushed through a law, Act 10, that slashed the power of public employee unions to bargain, and cut pay for most public sector workers.  As a special slap to teachers, Walker exempted the unions of police, firefighters and state troopers from the changes in collective bargaining rights but not educators. 

Teachers protested for a long time, closing schools for days, but the law passed, and the impact on teachers unions in Wisconsin has been dramatic: according to this piece by Washington Past columnist Robert Samuels. The state branch of the National Education Association, once 100,000 strong, has seen its membership drop by a third, and the American Federation of Teachers, which organized in the college system, has seen a 50 percent decline.

Graph: Wisconsin Budget Project

The effect on Wisconsin’s economy has been even more dramatic. The latest comprehensive state employment data from the U.S. Bureau of Labor Statistics and the Quarterly Census of Employment and Wages (QCEW) reveals that Wisconsin continues to lag both the national rate of job growth as well as the rates of employment gain in most other states. Between December 2012 and 2013, Wisconsin gained 26,816 jobs, posting an annual employment growth rate of 0.98 percent, significantly trailing the national job growth rate of 1.75 percent during the same period.

Thus, Wisconsin’s year-over-year job growth in fourth quarter of 2013 was just slightly over half the national rate – a level of underperformance that has been consistent since 2011. Overall, Wisconsin ranked 37th among the 50 states in the rate of total employment growth between December 2012-13. Wisconsin trailed every single neighboring Midwestern state (Illinois, Indiana, Iowa, Michigan, Minnesota, and Ohio) in year-over-year employment growth between December 2012-13.

Walker is destroying Wisconsin’s economy, in other words. Right now he is pushing to demolish union organizing once and for all with his proposal to make Wisconsin a Right to Work state, which will further depress its economy. And this man wants to run for President of all 50 states?

Harlan Green © 2015

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Opposing the Bully Mentality—Part II

Financial FAQs

How does one stop the bullies? Put simply, find a way to stand up to them. Economic bullies behave no differently than individuals when confronted by a person or organization willing to oppose them. But how are the 80 percent that are wage and salary earners to do that whose incomes has been whittled away since the 1970s by anti-union legislation and outright banning of collective bargaining in many of the right to work states?

Popular culture has enshrined the superhuman heroes who have tamed bullies; from Superman and Wonder Woman, to Batman, and now Captain America taming Nazi bullies. But taming economic bullies doesn’t have a popular precedent other than Robin Hood, it seems.

And Robin Hood was an English legend. America can only come up with its opposite, reverse Robin Hoodism, or taking from the poor and giving to the rich. That is how Nobelist Paul Krugman characterizes Republican attempts to cut taxes further and oppose raising the minimum wage.

“In the past, Republicans would justify tax cuts for the rich either by claiming that they would pay for themselves or by claiming that they could make up for lost revenue by cutting wasteful spending. But what we’re seeing now is open, explicit reverse Robin Hoodism: taking from ordinary families and giving to the rich. That is, even as Republicans look for a way to sound more sympathetic and less extreme, their actual policies are taking another sharp right turn.”

So the cards seem to be politically stacked against those who oppose the economic bullies. “(But) It wasn’t always this way,” says Marketwatch’s Rex Nutting. “In the 1950s, 1960s and into the 1970s, trade barriers, strong unions and discrimination gave workers (white male workers, that is) more bargaining power to get higher pay. It created the middle class.”

The result of such economic bullyism is that American wages haven’t grown since the 1970s, except for a brief period in the 1990s, when the Federal Reserve allowed the unemployment rate to fall to 4 percent, before beginning to raise interest rates. Thank you, President Clinton (and then Fed Chairman Greenspan during his easy money phase).

The share of national income that goes to labor (including the CEO’s salary and his stock options) has plunged from about 63 percent to 57 percent, says Nutting. The 6 percent of national income that’s going to profits instead of wages amounts to nearly $900 billion a year.

Graph: WSJMarketwatch

“For corporate businesses, after-tax profits are at record levels as a share of national income,” says Nutting. “Since the recession ended, profits are up 65 percent to $1.68 trillion last year. Small businesses aren’t doing quite so spectacularly, but their income is up 13 percent and their net worth is up 33 percent to $8.7 trillion since the recession ended. And the workers? Even after a big gain in the first quarter, median wages are down 3 percent since the recession ended.”

Many commentators and sociologists in particular assert 9/11 brought modern economic bullying to a high point. It’s rationale was the US put on a semi-permanent war footing, so that “Allegiance to the old public virtues—respect of the Bill of Rights, the Geneva Conventions and the rule of domestic and international law—was mocked and dismissed as quaint and soft by our new drill sergeants, according to a recent Canadian study. “From then on a state of emergency replaced the rule of law and set itself up as the norm.”

On a personal, workplace level, “If we are in a constant war-like mode societally, it sounds trivial, it sounds child-like, it sounds naively utopian to say, ‘Can’t we all get along?’” says Gary Namie of the Workplace Bullying Institute. “If you call for civility or a suspension of unmitigated, unfettered aggression, they call you a wimp. They think you are a wimp.”

There is another term for economic bullies, used by Professor Krugman, among others, in his most recent NYTimes column. They are sadomonetarists, or bankers and economists who want to tighten credit even during such tough economic times, as now: “At some level it has to reflect an instinctive identification with the interests of wealthy creditors as opposed to usually poorer debtors. But it’s also driven, I believe, by the desire of many monetary officials to pose as serious, tough-minded people — and to demonstrate how tough they are by inflicting pain.”

That, of course, is the most cogent definition of a bully. They want to demonstrate how tough they are, regardless of the consequences. For instance, the NAACP recently posted a report by Devin Burghart, Leonard Zeskind and the Institute for Research & Education on Human Rights called “Tea Party Nationalism,” exposing what it calls links between various Tea Party organizations and racist hate groups in the United States, such as white-supremacist groups, anti-immigrant organizations and militias, who have by definition, the bully mentality.

The bully mentality manifests in many forms, besides politically. The gun lobby via the NRA, ALEC, and other organizations have succeeded in blocking government study of the causes of gun violence, even though 31,000 gun-related death occur per year, the highest by a factor of 10 of any country in the world. Needless to say that inhibits development of policies and laws that might lower gun violence, whether in the schools or our inner cities.

So it turns out the bully mentality is part of human nature, really, and so part of our culture. It is then up to those employees who want to better themselves to find a way to oppose that culture and mentality. That means pushing back against the fear that such bullying engenders in all of us—against the ‘boss’ mentality, as well. Remember, such fear has to also be felt by those economists and politicians that allow it.

Harlan Green © 2014

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