economics: capitalism

As the Wall Street Journal reports:

Four years into the economic recovery, U.S. workers’ pay still isn’t even keeping up with inflation. The average hourly pay for a nongovernment, non-supervisory worker, adjusted for price increases, declined to $8.77 last month from $8.85 at the end of the recession in June 2009, Labor Department data show.

In other words, as the chart below illustrates, the great majority of workers are experiencing real wage declines over this expansion”

Growth also remains sluggish, increasing “at a seasonally adjusted annual pace of less than 2% for three straight quarters — below the pre-recession average of 3.5%.”  But by intensifying the pace of work and reducing the pay of their employees, corporations have been able to boost their profits despite the slow growth.

The following chart from an Economic Policy Institute study shows the continuing and growing disconnect between productivity and private sector worker compensation (which includes wages and benefits) using two different measures of compensation.

As the Economic Policy Institute study explains, “there has been no sustained growth in average compensation since 2004. The stagnation began even earlier, in 2003, when considering wages alone. Since 2003, wages as measured by both the ECI and the ECEC (not shown) have not grown at all — a lost decade for wages.”

The point then is that we need a real jobs program, one that is designed to create new meaningful jobs and boost the well-being of those employed.  Government efforts to sustain the existing expansion have certainly been responsive to corporate interests.  It should now be obvious that such efforts offer workers very little.

Martin Hart-Landsberg is a professor of economics at Lewis and Clark College. You can follow him at Reports from the Economic Front.

Our favorite economist, Martin Hart-Landsberg, has written a detailed account of what is causing the rise of income inequality around the world.  Here I’d like to highlight just one of his really interesting observations.

While we usually think that rising income inequality is caused by the rich getting richer and the poor getting poorer, a more complex picture is emerging.  The graph below plots the hourly wages of the 90th percentile (Americans who make more than 89% of the population) relative to the wages of the 50th percentile (the purple line) and the wages of the 50th compared to the 10th percentile (the dotted blue line).

In English: it asks how quickly the richest people (90th) are pulling away from the average person (50th) and how quickly the average person is pulling away from the poorest (10th).  The answer?  Income inequality has been increasing since the 70s but, since the late ’80s, rich people have continued pulling ahead of the average American, but the average American has not been gaining on the poor.

Another indicator that the middle class is shrinking is changes in the share of jobs that are low-, middle-, or high-paid.  The next graph shows that, across a wide range of countries, high- and low-paying jobs are on the rise, but middle-paying jobs are on the decline.  So, middle income jobs are disappearing, but there are more of both high- and low-income jobs.

Hart-Landsberg suggests that the reason for this shift in the economy involves the globalization of production.  For more, visit Reports from the Economic Front.

Lisa Wade, PhD is an Associate Professor at Tulane University. She is the author of American Hookup, a book about college sexual culture; a textbook about gender; and a forthcoming introductory text: Terrible Magnificent Sociology. You can follow her on Twitter and Instagram.

The Trouble with Apple

Suicide at Foxconn. Poisoned workers. Colluding to inflate the price of e-books. Tax evasion (albeit, legal). Shady suppliers who can’t toe the line of labor or environmental laws in China. Apple’s reputation has taken a hit in recent years. Or, so it seems it should have. But, despite the fact that news reports on the company’s behavior and supplier relationships have been more negative than positive since 2012, Apple’s revenue has continued to climb and break records.

In fact, while the press has illuminated terrible labor conditions in the supply chains for iPhones and iPads (with the most recent revelations coming via China Labor Watch’s report on Pegatron sites where the “cheap iPhone” is in the works), sales of these products in particular have soared, and now account for the majority of the company’s revenue. Apple has jockeyed with ExxonMobil for the world’s most valuable company over the last few years, and currently stands second to the oil giant with $413.9 billion. Remarkably, Apple amassed $156 billion in revenue in 2012 without being the industry leader in any of its product sectors (in terms of unit sales), due to the very high profit margins on iPhones and iPads.

How does Apple maintain this economic dominance in light of negative press that should be bad for its bottom line? How do we, the highly educated consumer base of the company, remain invested in Apple products when work conditions in China and the clever skirting of tax liability grate against our progressive sensibilities? As a sociologist who focuses on consumer culture, I suspect that it is Apple’s brand power that keeps us eating its fruit, and the company afloat. With its iconic logo, sleek aesthetic, and promise of creativity, excitement, and greatness embedded in its products and message, Apple successfully obscures its bad behavior with its powerful brand.

“Emotional Branding”

Marketing and branding experts describe a brand as a vision, a vocabulary, a story, and most importantly, a promise. A brand is infused throughout all facets of a corporation, its products, and services, and is the ethos upon which corporate culture, language, and communication are crafted. A brand connects the corporation to the outside world and the consumer, yet it’s intangible: it exists only in our minds, and results from experiences with ads and products.

To understand Apple’s brand and its significance in our contemporary world, I have embarked on a study of the company’s marketing campaigns. I started with a content analysis of television commercials, and with the help of Gabriela Hybel have analyzed over 200 unique television spots that have aired in the U.S. between 1984 and the present. One of the key findings to emerge is that Apple, and the ad firms it contracts with, are exceptionally talented at what the marketing industry calls emotional branding.

In his book named for this approach, Marc Gobé argues that understanding emotional needs and desires, particularly the desire for emotional fulfillment, is imperative for corporate success in today’s world. After studying Apple commercials, one thing that jumps out about them is their overwhelmingly positive nature. They inspire feelings of happiness and excitement with playful and whimsical depictions of products and their users. This trend can be traced to the early days of the iMac, as seen in this commercial from 1998.

An iPod Nano commercial that aired in 2008 takes a similar approach to combining playful imagery and song:

In a more recent commercial, actor and singer Zooey Deschanel, known for her “quirky” demeanor, performs a playful spin on the utility of Siri, the voice activated assistant that was introduced with the iPhone 4S in 2011.

Commercials like these — playful, whimsical, and backed by upbeat music — associate these same feelings with Apple products. They suggest that Apple products are connected to happiness, enjoyment, and a carefree approach to life. To tip the sociological hat to George Ritzer, one could say that these commercials “enchant a disenchanted world.” While Ritzer coined this phrase to refer to sites of consumption like theme parks and shopping malls, I see a similar form of enchantment offered by these ads. They open up a happy, carefree, playful world for us, removed from the troubles of our lives and the implications of our consumer choices.

Importantly, for Apple, the enchanting nature of these ads and the brand image cultivated by them act as a Marxian fetish: they obscure the social and economic relations, and the conditions of production that bring consumer goods to us. Now more than ever, Apple depends on the strength of its brand power to eclipse the mistreatment and exploitation of workers in its supply chain, and the injustice it has done to the American public by skirting the majority of its corporate taxes.

Next: Sentimental Consumerism, the Apple Way.

Nicki Lisa Cole, Ph.D. is a lecturer in sociology at Pomona College. She studies the connections between consumer culture, labor, and environmental issues in global supply chains. You can follwer her at 21 Century Nomad, visit her website, and learn more about her research into Apple here.

Any improvement in living and working conditions in the United States is going to require far more than tinkering at the margins.  The fact is that U.S. economic dynamics have undergone a major transformation.

Figure 1, taken from an article by Gerald Friedman, shows that profits and investment are no longer positively related.  Since the early 2000s, profits have soared as a percent of GDP and net private investment has plummeted.  Even during the 1990s, when high-technology was celebrated as the engine of never-ending growth, net investment as a share of GDP remained below 1970s and 1980s highs.

Our leading companies, the ones that shape government policy, are now able to make healthy profits without spending on plant and equipment much beyond replacement.  Their profits are now largely secured by globalizing manufacturing production, financialization, intensification of work, wage suppression, and government tax-breaks and subsidies.  Of course, that means that their quest for profits will continue to lead to policies likely to undermine progress in reversing negative trends in majority living and working conditions.

A case in point is their aggressive push, supported by the Obama administration, for new free trade agreements: the Trans-Pacific Partnership Free Trade Agreement and the Trans-Atlantic Free Trade Agreement. President Obama took the lead in securing passage of the Korea-U.S. Free Trade Agreement, arguing that it would improve our trade balance with Korea and by extension U.S. jobs.  Well, the returns are in, and in line with the record of past agreements, the outcome is the exact opposite.

The Eyes on Trade blog offers the following summary:

April [2013] was another record-breaking month for U.S. trade with Korea under the U.S.-Korea Free Trade Agreement (FTA).  The monthly U.S. trade deficit with Korea soared to its highest point in history, topping $2.5 billion for the month of April alone.

According to a ratio used by the Obama administration, the unprecedented deficit surge implies 13,500 U.S. jobs lost to trade with Korea in just thirty days.  April’s trade deficit with Korea was 30% higher than in April 2012 — the first full month of FTA implementation — and 90% higher than in April 2011, before the FTA took effect.

The deficit increase owes largely to a dramatic drop in U.S. exports to Korea since enactment of the FTA.  U.S. exports to Korea in April once again fell below the levels seen in any given month in the year before the FTA took effect.  The sorry track record defies the promise (FTA = more exports) that the Obama administration used to pass the FTA.  Undeterred by the facts, today the administration is using the same worn-out promise to sell the Trans-Pacific Partnership.

Unwilling to pursue policies that directly threaten corporate interests, the Obama administration has relied on monetary policy, or more specifically lower interest rates, to boost investment and employment.  As Figure 2 from Friedman’s article makes clear, while lower rates generally boost investment, data points for 2009, 2010, and 2011 strongly suggest that monetary policy has lost its effectiveness.

President Obama can talk all he wants about the need for more investment and better jobs, but unless he is pushed to pursue dramatically different policies, it is hard to see any real gains for working people over the next decades.

Martin Hart-Landsberg is a professor of economics at Lewis and Clark College. You can follow him at Reports from the Economic Front.

Cross-posted at Montclair SocioBlog.

According to an op-ed in the Times, America is the global leader in broadband, with high speeds and great service. And it’s all because the government restrained “onerous” regulation and let companies like Verizon do what they want and charge what they want.

It was written by the CEO of Verizon, Lowell McAdam.

I pay Mr. McAdam’s company about $115 each month for my land line, wi-fi, and cable (all FIOS).  Mr. McAdam compares the U.S. favorably with Europe, “where innovation and investment in advanced networks have stagnated under an onerous regulatory regime.”  I asked a friend who lives in Paris what he pays for his FIOS phone, wi-fi, and cable.  The monthly bill:  39.90€ ($52) or half of what I pay Verizon.  Maybe there’s an upside to stagnant and onerous.

There’s nothing wrong with getting what you can afford, and it occurred to me that U.S. broadband is the best because we can afford more.  Onerous regulations or no, most other countries are not as rich as the U.S.  What if you looked at broadband and per capita GDP?

The OECD did just that with data from June 2012 (their several spreadsheets on this are here). The purple bars are broadband penetration and the bumpy red line is GDP per capita. Do you see a correlation?

Consider France: As of a year ago, the country had greater broadband penetration despite a lower per capita GDP than the U.S. ($35,133 vs. $46,588); that’s 25% more broadband on 33% less income and at half the cost to consumers.

If you re-rank the OECD countries factoring in per capita GDP, the line-up changes.  Notably, the U.S. and Luxembourg drop well below the OECD average, despite being among the wealthiest countries.

Of course, not all broadbands are equally broad.  Verizon sold me on fiber-optic with their assurance that it was dazzlingly faster than their DSL that I had been clunking along on. This graph breaks down broadband into its various incarnations.

The U.S. is slightly above average on all broadband, but when it comes to a high fibre diet, we are ahead of several other countries that have greater total penetration.  On the other hand, the Scandinavian countries are ahead of us, as are, impressively, the Asian countries.

This is not to deny U.S. advances.  TechCrunch summarizes more recent data from Akamai on these changes:

the U.S. is currently second in the price of broadband for entry-level users. The nation is also third in network-based competition, second in the fiber-optic installation rate, first in the adoption of next-generation LTE, ahead of Europe in broadband adoption, and doing quite well in Internet-based services.

Still, the U.S. lags behind other, less wealthy countries.  InnovationFiles, using Akamai data for different variables, has a less congratulatory view.

• The U. S. has picked up one place in the “Average Peak Connection Speed” that’s the best measurement of network capacity, rising from 14th to 13th as the measured peak connection speed increased from 29.6 Mbps to 31.5 Mbps.
• In terms of the “Average Connection Speed,” widely cited by analysts who don’t know what it means, the U. S. remains in 8th place world-wide. but we’re no longer tied for it as we were in the previous quarter; Sweden is right behind us on this one.
• In terms of “High Speed Broadband Adoption”, the proportion of IP addresses with an Average Connection Speed greater than 10 Mbps, we remain in 7th place, but now we’re tied with  Sweden.

The title of CEO McAdam’s op-ed is “How the US Got Broadband Right.”  Given the content, I  guess “We’re Number 13!” wouldn’t have been appropriate.  Even “We’re Number Seven (Tied With Socialist Sweden)!” doesn’t quite have that affirmative zing.

Jay Livingston is the chair of the Sociology Department at Montclair State University. You can follow him at Montclair SocioBlog or on Twitter.

While the stereotype of the college professor might still be an elbow-patched intellectual cozied up in an office, it might be more accurate to place him in his car.  A new report from the American Association of University Professors finds that more than 40% of college instructors are part-time, often driving from campus to campus to cobble together enough classes to enable them to pay rent.  These types of employees far outnumber tenured and tenure-track faculty, who make up less than a quarter.

This data suggest that the term “precariat” applies well to a significant proportion of college and university professors. Coined by economist Guy Standing, the term is meant to draw attention to the economic fragility of many lower wage workers in today’s labor market.  It’s a combination of the word “precarious” and “proletarian,” a word that is used to refer to the working class under capitalism.

Part-time faculty count as part of the precariat because their jobs are contingent (renewed semester to semester), low paid, and bring little or no benefits.  Let me put it this way.  I just finished my first year as a tenured professor after six years on the tenure track.  I teach five classes.  An adjunct at a public research university would have to teach more than twenty-three classes to earn my salary (average pay is $3,200/class); someone teaching at community colleges would have to teach more than thirty-three (at $2,250/class).  Of course, my salary also reflects research and institutional service, but my hourly wage is obviously far out-of-proportion to that of part-time faculty.  Plus I get a wide range of benefits; adjuncts usually get nothing.

When government funding of higher education shrinks, colleges and universities respond by cutting corners where they can.  Hiring adjuncts is one way to do that.  It’s important to remember, then, that funding cuts hurt not only students; they also hurt jobs.

See also How Many PhDs are Professors?

Via Jordan Weissman at The Atlantic. Cross-posted at Pacific Standard.

Lisa Wade, PhD is an Associate Professor at Tulane University. She is the author of American Hookup, a book about college sexual culture; a textbook about gender; and a forthcoming introductory text: Terrible Magnificent Sociology. You can follow her on Twitter and Instagram.

American companies that once looked to places like Mexico and China for cheap labor are bringing those jobs back to the U.S.  Why? Because prison labor is much, much cheaper.  Paid between 93¢ and $4.73 per day, and collecting no benefits, prisoners are a cheap labor source for about 100 companies (source).

What does this have to do with you?

If you have insurance, invest, use utilities, have a bank, drive a car, send a child to school, go to a dentist, call service centers, fly on planes, take prescription drugs, or use paper, you might be benefiting from prison labor.

If you’ve bought products by or from Starbucks, Nintendo, Victoria’s Secret, JC Penney, Sears, Wal-Mart, K-Mart, Eddie Bauer, Wendy’s, Proctor & Gamble, Johnson & Johnson, Fruit of the Loom, Motorola, Caterpiller, Sara Lee, Quaker Oats, Mary Kay, or Microsoft, you are part of this system.

When prisoners are in state and federal prisons, the U.S. taxpayer is subsidizing low wages and corporate profits, since they are paying for prisoners’ room, board, and health care.  When prisoners are in private prisons, prison labor is a way to make more money off of the human beings caught in the corrections industry.  In other words, prison labor is an efficient way for corporations to continue to increase their profits without sharing those gains with their employees.

For an extensive list of the companies contracting prison labor, click here.  You might also find interesting the video clips, embedded in this news story, of promotional videos by prison corporations that attempt to sell the idea of prison labor to companies:

Lisa Wade, PhD is an Associate Professor at Tulane University. She is the author of American Hookup, a book about college sexual culture; a textbook about gender; and a forthcoming introductory text: Terrible Magnificent Sociology. You can follow her on Twitter and Instagram.

Cross-posted at Montclair SocioBlog.

The Washington Post has provided some data on medical costs across a selection of countries (Argentina, Canada, Chile, and India in grey; France, Germany, Switzerland, and Spain in blue; and the U.S. in red). The data reveal that American health care is very expensive compared to other countries.

No wonder the US spends twice as much as France on health care.  In 2009, the U.S. average was $8000 per person; in France, $4000.  (Canada came in at $4800).  Why do we spend so much?  Ezra Klein quotes the title of a 2003 paper by four health-care economists:  “it’s the prices, stupid.”

And why are US prices higher?  Prices in the other OECD countries are lower partly because of what U.S. conservatives would call socialism – the active participation of the government.  In the U.K. and Canada, the government sets prices.  In other countries, the government uses its Wal-Mart-like power as a huge buyer to negotiate lower prices from providers.  (If it’s a good thing for Wal-Mart to bring lower prices for people who need to buy clothes, why is it a bad thing for the government to bring lower prices to people who need to buy, say, an appendectomy? I could never figure that out.)

There may also be cultural differences between the U.S. and other wealthy countries, differences about whether greed, for lack of a better word, is good.  How much greed is good, and in what realms is it good?  Klein quotes a man who served in the Thatcher government:

Health is a business in the United States in quite a different way than it is elsewhere.  It’s very much something people make money out of. There isn’t too much embarrassment about that compared to Europe and elsewhere.

So we Americans roll along, paying several times what others pay for medical procedures, doctor visits, and drugs.

Jay Livingston is the chair of the Sociology Department at Montclair State University. You can follow him at Montclair SocioBlog or on Twitter.