Same as it ever was…
This weekend’s Labor Day celebrations in America mark a difficult time for workers. Having experienced a multi-year decline in their share of national income, they are now suffering the brunt of the current economic malaise; and there is little to suggest that the situation will improve any time soon. As a result, the country’s economic hardships risk morphing from pressuring specific segments of the population to undermining more general aspects of social justice.
The numbers are striking — and worrisome. Over the last 30 years, labor’s share of the national pie has declined to 44 percent from 52 percent, with profits growing at twice the annual rate for average wages.
This…monthly employment report adds to the concerns. Unemployment remains very high, whether measured by the most-quoted unemployment rate (9.1 percent), the less partial under- and un-employment rate, (16.2 percent) or, most comprehensively, the proportion of total adults who are not working (42 percent compared to 35 percent 10 years ago).
The duration and composition of joblessness is very troubling. The average unemployed American has been without a job for 40 weeks, a record level, and 44 percent of the unemployed have been out of a job for more than 26 weeks. The incidence of joblessness is severe among those lacking a college degree (11 percent compared to 4 percent for college graduates). For 16-19 year olds the unemployment rate is a horrible 25 percent.
Whichever number you look at, America’s labor market problems constitute a full-blown crisis with far reaching economic, social and political consequences. If current trends continue, joblessness will become stubbornly embedded in the system and, distressingly, some of the unemployed will become unemployable…
…Rather than reduce the challenges facing workers, current budgetary policies accentuate them through cuts in education, health care, emergency benefits and other social services. Meanwhile, active redistribution policies are off the table with our extremely divided Congress vehemently disagreeing on what constitutes appropriate policy responses. And the Federal Reserve is already in full policy experimentation mode, with limited durable impact on economic growth.
It is tempting to blame all this on what economists call an “exogenous factor” – a phenomenon that is outside direct societal control. The two most cited factors are globalization and technological advances.
Globalization has brought hundreds of millions of low paid workers into the global labor force, thus putting pressure on higher paid ones in advanced countries such as the US. Technological progress has allowed companies to raise productivity, helping them generate record profits with fewer employees…
It is not feasible to reverse either of those two phenomena (globalization and technological advances). It is neither desirable to do so either given that, overall, they have beneficial impact on global welfare…
Better off segments of the population may be tempted to dismiss all this as irrelevant to their particular reality. After all, they are doing well — in several cases, extremely well. But such an attitude is short-sighted. It is not just about fairness; the rich have genuine self-interest in reversing the country’s economic malaise and the worsening of income and wealth inequalities.
Whichever way you look at it, the outlook for the wealthier cannot be divorced from society as a whole. Such considerations have already led some American billionaires to react in dramatic fashion.
Warren Buffet and Bill Gates are among those leading the way, through both actions and words. Howard Schultz, the CEO of Starbucks, has urged companies not to wait for government policy but instead to move more aggressively to employ and produce more. Many others are doing their part, albeit in a less public fashion. They know that national prosperity cannot, and should not, be sustained without social justice…
This weekend, American workers will understandably temper their celebrations. Their malaise is about more than the challenging economic headwinds. It is about fundamental social issues.
America is now on the growing list of advanced countries where social cohesion is coming under increasing pressure. If left to fester through inadequate public and private sector responses, this phenomenon will damage the welfare of current and future generations. Loud alarm bells should be ringing everywhere.
Mohamed Mondays is always worth reading. Mohamed El-Erian is not only one of the most successful economists in the world – like the best of class, he has not left his conscience or his understanding of the dialectics of a whole society behind to be forgotten like a student’s early studies. Just how interconnected the parts of a society have become shouldn’t have to wait for the depths of crisis to be remembered.
Other nations have already confronted the tasks before our leadership in Washington, DC. Many failed their people. What history recognizes as the leftovers of the British Empire could be a prime example.
I think the alternatives demonstrated by Germany – going from failed fascist state to the leading export economy in the West – demonstrates what is possible. The land of Mercedes is also the land of “acceptable” higher unemployment rates than the United States most decades. But, they decided long ago to fabricate governmental systems which not only provide an economic network to support working people and their families, re-educating, re-qualification for new jobs is a serious task – wholly unlike the lip service of our own politicians.
The portion of social responsibility assumed by individuals and corporations in many nations – other than the United States – is greater because it has proven to bring better opportunities for the whole nation. Americans and American political leaders still tend to look out for much narrower interests – to put it politely. The number of those at the head of the pack who consider anyone trudging along in the dust to be important is negligible. Unlike Dr. El-Erian.