by John Harrington
When the financial crisis hit the global economy in late 2007, there was a “reset,” not only on the U.S. economy in general and financial institutions specifically, but a major reordering of the labor market and American workers. This crisis represented the ending bell for the middle class, including upward labor mobility and decent jobs that included healthcare and retirement benefits. It also, unlike previous recessions, resulted in a major and continuing decline of labor-force participation in our economy.
Labor force participation continues to decline. Many workers who lost their jobs in the latest recession following the financial crisis are not returning to the workforce. In December 2007, the month the recession started, 66% of the working age population had a job or was looking for one. In September 2014, that number declined to 62.7%, the lowest since 1978.
Another interesting statistic is that between November 2013 and November 2014, the U.S. labor force grew by 0.7%, compared to a growth rate of 1.7% in the 60s, 2.6% in the 70s, 1.6% in the 80s, and 1.2% in the 90s. By 2018 none of the baby boomers will be in what is considered the prime working-age category (between 25 and 54), and by 2021 more than half of the boomers will be over age 65, participating in Medicare and drawing social security.
The U.S. economy added 252,000 jobs in December and the unemployment rate fell to 5.6% from 5.8% in November, and 6.7% a year earlier, average hourly earnings fell by 0.2% from November. While it slightly improved in December, it didn’t change the fact that the working poor are getting poorer.
Obviously, many baby boomers have been retiring and many that lost their jobs in the recession are unable or unwilling to rejoin the workforce. Many that have rejoined are either working part-time or working in dead end, minimum wage service jobs. Many retired early, or went on disability, or are simply getting through life precariously, relying on friends and family, using up savings or home equity, borrowing, or holding more than one part-time job, or going from one short-term part or full-time job after another. Keep in mind, that most of the U.S. economy is service oriented, and many people work in retail and consumer service industries.
The traditional unemployment numbers count only those actively looking for work, as those who stop looking entirely are counted as dropouts, not “unemployed,” as is the case for those holding one or more part-time jobs, and barely surviving. Many of these millions of American workers are unable to pay their bills, as jobs are temporary, paychecks fluctuate with seasonal or part-time work, or may simply be based on the size of an infrequent commission.
According to a Federal Reserve national study, household income has become, for many, more volatile, not less, as the economy recovered. Low pay is not only unequal, but unsteady and more than three-quarters of those surveyed said financial stability is more important than upward mobility. Across the country, nearly seven million people working part-time prefer full-time jobs, but can’t find them.
The “reset” has unfortunately created a situation where fewer Americans have quality full-time jobs with benefits; and more people have part-time, low paying unstable jobs, reducing the amount of workers paying taxes and buying things. Because it is now taking more workers to support older people on Medicare, social security and disability, those who make less spend less and limit economic growth.
Couple this with the fact that corporations instead of spending money on improving the quality of the workforce, are hoarding capital to buy back their own stock to enrich their managers and owners and respond to “the call to improve shareholder value,” which is corporate management’s mantra of fiduciary duty to placate shareholders. So instead of more workers being more secure in their jobs, joining the middle class and being able to buy the products of corporations, they are challenged by a life-time of low wages, unstable jobs, and an economy of not only unsustainable job growth, but low economic growth.
Finally, as productivity goes up due to automation, jobs are lost, fewer people are paying taxes and buying things (consumption is two-thirds of GDP), as more people are unemployed and underemployed, and fewer have employment stability and security, and even less are able to save for retirement.
Increasing productivity, another mantra of corporate management, is a product of increased technology, which produces efficiency and economic gains for manufacturers, benefits a highly skilled work force and provides cheaper products, but on the other hand, has the major down-side of cutting lots of jobs even across the largest part of the American economy; the service sector. In retailing, price scanners for automatic checkout destroy jobs, as does healthcare automation, rapid expansion of technology for back office financial services, online banking, real estate, travel, education and government services; all leading to reduction of higher paid employment.
With increasing productivity comes increasing capital intensive, skilled-based investing. This inevitably leads to continuing the sad saga of income, education, and wealth inequality; and with increasing inequality may come global civil, economic and political instability.
Such instability creates market volatility which in turn, exacerbates uncertainty and insecurity. In an already overpriced and volatile market, and projected slow economic growth worldwide, it may be time for our divided government to acknowledge a greater need for political compromise to enact a budget to reinvest in not only our U.S. infrastructure, but in a manner that will create an economic environment for domestic labor strength, higher incomes and job security.
For the longer term, government must exercise control over corporations, America’s largest and most powerful state-created social institutions, by demanding that they invest in their stakeholders, most importantly, their employees and in their country’s infrastructure. Public corporations have an obligation to serve public as well as private interests. Otherwise, as Justices Byron White, William Brennan and Thurgood Marshal warned in a 1978 U.S. Supreme Court ruling that:
Corporations are artificial entities created by law for the purpose of furthering certain economic goals . . . It has long been recognized, however, that the special status of corporations has placed them in a position to control vast amounts of economic power that may, if not regulated, dominate not only the economy but also the very heart of democracy, the electoral process, . . . The State need not permit its own creation to consume it.