Category Archives: Economy

The Inequality of Declining Wages During the Recovery

Source: National Employment Law Project, Fact Sheet, July 2013

A previous NELP analysis found that while job losses during the recession were heavily concentrated in mid-wage occupations, the early recovery was led by employment growth in lower-paying occupations. This fact sheet turns from analyzing employment to analyzing occupational wage trends during the recovery to date. For the period 2009 to 2012 we find the following:
– Averaged across all occupations, real median hourly wages declined by 2.8 percent.
– Lower-wage and mid-wage occupations saw significantly bigger declines in their real median wages than did higher wage occupations.
– Real median wages fell by 5.0 percent or more in five of the top ten lower-wage occupations: restaurant cooks, food preparation workers, home health aides, personal care aides, and maids and housekeepers

State Economic Monitor: Quarterly Appraisal of State Economic Conditions

Source: Benjamin H. Harris, Yuri Shadunsky, Tax Policy Center, Issue 1, July 2013

From the abstract:
The inaugural edition of the state economic monitor reviews the health of various aspects of state economies, including employment, housing, state finances, and economic growth. This monitor documents key economic conditions through June 2013 in all 50 states, and also serves as a valuable collection of various state-level economic data. One key finding in this monitor is the remarkable breath of the economic recovery, with all but six states showing gains over the past three months and past year in indices of economic activity.

Slashed Public Payrolls Make the Unemployment Problem Worse

Source: Center for Effective Government, June 18, 2013

…Although the private sector is recovering, recent government policies have not been helping. The jobs situation would be substantially better if local, state, and federal governments were not cutting their payrolls. Since the start of the recession, about 528,000 government jobs have been eliminated, and a smaller percentage of the employed workforce works in government. The public sector added some jobs during the official period of the recession, but cut back more steeply since it technically ended. “Since the recovery began in June 2009, the public sector has lost nearly three-quarters-of-a-million jobs (737,000),” the Economic Policy Institute’s Heidi Shierholz pointed out. “These losses are an enormous drain on the recovery.”

The crunch in the public sector job market is exacerbating the substantial employment needs in the U.S. that are not being met. There are 11.8 million unemployed people; some 4.4 million (37 percent) have been searching for work for more than six months. Some 7.9 million are “involuntary part-time workers” – meaning they work part-time but want full-time work – and 780,000 have stopped searching for work altogether; these people are not counted in the official 7.6 percent unemployment rate….

…There is a legitimate debate about the best way government can create jobs – whether indirectly through greater spending on infrastructure and other investments that increase private sector hiring or through direct public sector hiring (school teachers, clean-up crews, etc.) – but in the last few years, the nation has not been having that debate. Instead, austerity-oriented politicians have been entirely focused on cutting down the size of government and immediate deficit reduction….While the economy has begun to slowly recover in the private sector, reductions in public sector spending over the last three years have held back growth and allowed unemployment to remain unconscionably high. The conversation should change. One of the best things we could do to reverse course is to end the slash-and-burn approach to government so prevalent since 2010….

The Asset Price Meltdown and the Wealth of the Middle Class

Source: Edward N. Wolff, US2010 Project, May 2013

After rising sharply through 2007, the collapse of the stock market and the sudden collapse in home prices took and immense toll on the assets of the middle class. This report summarizes what happened and why.

The most telling finding is that median wealth plummeted over the years 2007 to 2010, and by 2010 was at its lowest level since 1969. moreover, inequality of net worth, after almost two decades of little movement, rose sharply between 2007 and 2010. Inequalities rose by income class, by race/ethnicity, and across age groups.

The middle class benefited from very rapid asset appreciation during the 2001-2007 period (6.0 percent per year). But the steep drop in asset prices during the recession, particularly housing, hit the middle class harder than more affluent Americans and was the main cause of increasing wealth inequality after 2007. Similar trends are found for racial and age inequalities. Blacks and Hispanics increased their net worth relative to whites during 2001-2007 as did young adults in relation to older Americans, mainly because so much of their assets were tied up in home ownership. But these gains were wiped out durung the recession.

Key findings:
– Median wealth plummeted over the years 2007-2010.
– Middle class debt exploded from 1983 to 2007, already creating a highly fragile middle class. The situation worsened during the Great Recession. As a result inequality of net worth, after almost two decades of little movement, rose sharply between 2007 and 2010.
– The racial and ethnic disparity in wealth widened considerably in the years between 2007 and 2010. Blacks and especially Hispanics lost in net worth and equity in their homes.
– Young households (under age 45) also were pummeled by the Great Recession, as their wealth declined sharply in both absolute terms and in comparison with other households.

Related:
The Asset Price Meltdown and the Wealth of the Middle Class
Source: Edward N. Wolff, National Bureau of Economic Research, NBER Working Paper No. 18559, November 2012

River restoration projects revitalize ecologies, economies

Source: Derek Prall, American City and County, June 19, 2013

Urban river restoration – the process of using already existing resources to improve local ecologies and economiesis – is a growing trend in waterfront cities. Cities such as Columbus, Ga., and Phenix City, Ala., have seen benefits from such projects, and Grand Rapids, Mich., recently announced its $2.7 million plan to restore rapids to the Grand River.

The namesake rapids of Grand Rapids gradually disappeared during the mid-19th century, according to a report in the Aspen Daily News, due to to two human means of interference: riverbed quarrying and the cutting of canals to provide power. Similar to problems in Columbus, Ga., and Phenix City, Ala., the Grand River flowing through Grand Rapids provided few economic or recreational benefits to residents.

…Recognized by the White House Council on Environmental Quality, the Grand Rapids project is one of 11 newly selected additions to the Urban Federal Waters Partnership. Designed to revitalize urban communities, particularly those under economic stress, the partnership includes 13 federal agencies working to support community river restoration efforts with federal funding….

…The economic benefits of the project are expected to take time, according to GBP, but Whitewater Columbus is estimated to create 700 jobs and have an economic impact of $42 million per year….

Big Lie: America Doesn’t Have #1 Richest Middle-Class in the World…We’re Ranked 27th!

Source: Les Leopold, AlterNet, Economy, June 18, 2013

America is the richest country on Earth. We have the most millionaires, the most billionaires—and a increasingly poor “middle class.” America is the richest country on Earth. We have the most millionaires, the most billionaires and our wealthiest citizens have garnered more of the planet’s riches than any other group in the world. We even have hedge fund managers who make in one hour as much as the average family makes in 21 years! …Our middle class is falling further and further behind in comparison to the rest of the world. We keep hearing that America is number one. Well, when it comes to middle-class wealth, we’re number 27. …

The Capitalist’s Case for a $15 Minimum Wage

Source: Nick Hanauer, Bloomberg, View, June 19, 2013

The fundamental law of capitalism is that if workers have no money, businesses have no customers. That’s why the extreme, and widening, wealth gap in our economy presents not just a moral challenge, but an economic one, too. In a capitalist system, rising inequality creates a death spiral of falling demand that ultimately takes everyone down….

…Here’s a bottom-line example: My investment portfolio includes Pacific Coast Feather Co., one of the largest U.S. manufacturers of bed pillows. Like many other manufacturers, pillow-makers are struggling because of weak demand. The problem comes down to this: My annual earnings equal about 1,000 times the U.S. median wage, but I don’t consume 1,000 times more pillows than the average American. Even the richest among us only need one or two to rest their heads at night….Raising the minimum wage to $15 an hour would inject about $450 billion into the economy each year. That would give more purchasing power to millions of poor and lower-middle-class Americans, and would stimulate buying, production and hiring….

The Hourglass Society

Source: Stewart Lansley, Los Angeles Review of Books, May 28, 2013

Income inequality is now as high as it’s been since the Great Depression, and the middle class is nearly extinct…One of the most significant effects of America’s hourglass society has been the capping of opportunities and the emergence of downward mobility amongst the middle classes, a process that began well before the recession. Around 100 million Americans — a third of the population — live below or fractionally above the poverty level. A quarter of the American workforce end up in low—paid jobs, the highest rate across rich nations, while the wealthiest 400 Americans have the same combined wealth as the poorest half — over 150 million people….

….The most damaging impact of growing inequality has been on the American — and global — economy. It has been one of the central rules of market economics that inequality is good for growth and stability. The idea was enshrined in the postwar writings of the New Right critics of the model of managed capitalism that emerged after the war. “Inequality of wealth and incomes is the cause of the masses’ well being, not the cause of anybody’s distress” wrote the Austrian—American economist Ludwig von Mises, one of the leading prophets of the superiority of markets, in 1955.

It was a theory that gained traction during the global economic crisis of the 1970s and with the publication in 1975 of a highly influential book, Equality and Efficiency: The Big Tradeoff, by the late American mainstream economist Arthur Okun. This theory — that you can have either more equal societies or more economically successful ones, but not both — has been used to justify the growth of inequality in the United States, a trend that has since spread to a majority of the rich world. One of the telling by—products of the current economic crisis is that this theory is now being challenged. It is now being increasingly argued that the levels of income concentration in recent times have had a significant negative effect on the economy, bringing slower growth and greater turbulence and contributing to both the 2008 crash and the lack of a sustained recovery….

Children of the Great Collapse

Source: Jared Bernstein, American Prospect, May 29, 2013

The stimulus was great for poor kids while it lasted. Now even bare-bones aid is at risk…

…Here’s a piece of good news of which you might not be aware: The U.S. safety net performed a lot better than you thought during the recent downturn, which was the deepest since the Depression. Thanks to expansions to the Child Tax Credit, the Earned Income Tax Credit, food stamps, and unemployment insurance—all beefed up by the $840 billion Recovery Act—the safety net almost wholly mitigated the rise in child poverty. Even middle-income households saw most of their income losses substantially offset by tax and transfer policies that sharply ramped up to help them.

That’s the good news. The bad news is that most of the Recovery Act’s outlays have now been spent, and pressure to reduce deficits leaves other spending on children and families under assault….

300 Million Engines of Growth: A Middle-Out Plan for Jobs, Business, and a Growing Economy

Source: Jennifer Erickson and Michael Ettlinger, Center for American Progress, June 2013

From the introduction:
This report lays out a wide-ranging plan for economic progress. It is a plan that encompasses investment and reform. It is a plan that proposes doing more of some things but, importantly, it is a plan to do more things well.

The agenda presented here is based on what we know makes an economy grow and prosper and what we know are the keys to good jobs and a good quality of life, including:
– A well-educated, secure, and growing middle class that underpins strong demand, entrepreneurialism, innovation, and productivity
– Greater private and public investments deployed more strategically
– A fair playing field for business and workers, both domestically and internationally
– Leadership in science and technology
– Effective institutions and governance

…This report describes a set of proposals across a range of areas from education to innovation and infrastructure that are actionable now and would be an important step to putting us on that path. We divide our policies into two categories: those that strengthen the American people and give them the capability to succeed, and those that build an economic and business environment that puts these talents to use and rewards them. The policies described in this report are numerous and range in scope, interacting and accumulating to form a plan that will boost U.S. economic growth and generate the good jobs that underpin widely shared prosperity. We summarize below the key problems we are seeking to address, the approach we take to their solution, and examples of the policies that we propose. The rest of this report offers a more detailed analysis of the problems and the full range of recommended policies….

Chapters include:
Strengthening the American people
Make the United States first in education
Advance primary and secondary education
Advance postsecondary education
Raise workplace standards
Realize the potential of immigration

Strengthening the economic environment

Create the mechanisms for an adaptive national economic strategy
Lead in clean and efficient energy
Promote science and technology research and development
Balance trade
Rebuild our infrastructure
Restore the housing cornerstone
Ensure capital is available for growth
Construct a responsible, pro-growth tax and budget policy