{"id":37885,"date":"2011-07-26T14:03:12","date_gmt":"2011-07-26T19:03:12","guid":{"rendered":"http:\/\/media.lclark.edu\/content\/hart-landsberg\/2011\/07\/26\/explaining-unemployment\/"},"modified":"2011-11-02T19:53:56","modified_gmt":"2011-11-03T00:53:56","slug":"fighting-unemployment-by-boosting-wages","status":"publish","type":"post","link":"https:\/\/thesocietypages.org\/socimages\/2011\/07\/26\/fighting-unemployment-by-boosting-wages\/","title":{"rendered":"Fighting Unemployment By Boosting Wages"},"content":{"rendered":"

<\/a><\/p>\n

<\/a>Cross-posted at Reports from the Economic Front<\/a>.<\/em><\/span><\/p>\n

The Wall Street Journal recently surveyed<\/a> more than 50 economists, asking them what they thought\u00a0was the main reason\u00a0U.S. firms were\u00a0not hiring more workers.\u00a0\u00a0Approximately 65% answered\u00a0that it was\u00a0a lack of demand for goods and services, 27% thought it was\u00a0uncertainty about government policy, and 8% said it was\u00a0the existence of more \u201cfavorable\u201d hiring conditions overseas. <\/span><\/p>\n

One might think that with so many economists citing\u00a0a lack of demand as the primary\u00a0reason for our continuing high rate of unemployment, those same economists would argue that getting more money into the pockets of working people would be a good strategy for recovery. But did the survey also reveal strong support by economists for a higher minimum wage, new\u00a0union-friendly labor laws, a single payer health plan, an increase in social security payments, an aggressive industrial policy? No.<\/span><\/p>\n

In fact, according to the Wall Street Journal, \u201cDespite their forecasts for slow growth and an elevated unemployment rate, the economists aren\u2019t in favor of futher action either by the Fed or the Federal government.\u201d\u00a0 In other words there was\u00a0no support for policies (micro or macro) that would dramatically change the economic environment. <\/span> <\/span><\/p>\n

There is good reason for rejecting\u00a0this preference for the status quo.\u00a0 Take a look at the chart below which comes\u00a0from an article in Investor\u2019s Business\u00a0Daily.\u00a0\u00a0Each point on the chart shows the change\u00a0in total wages (adjusted for inflation) over the previous\u00a0ten years. <\/span><\/p>\n


\n<\/span>\"wage-depression.png\"<\/a><\/span><\/p>\n

As the article <\/span>notes<\/a>: <\/span> <\/span> <\/span> <\/span><\/p>\n

The past decade of wage growth has been one for the record books \u2014 but not one to celebrate.<\/p>\n

The increase in total private-sector wages, adjusted for inflation, from the start of 2001 has fallen far short of any 10-year period since World War II, according to Commerce Department data. In fact, if the data are to be believed, economy-wide wage gains have even lagged those in the decade of the Great Depression (adjusted for deflation).<\/p>\n

Two years into the recovery, and 10 years after the nation fell into a post-dot-com bubble recession, this legacy of near-stagnant wages has helped ground the economy despite unprecedented fiscal and monetary stimulus \u2014 and even an impressive bull market.<\/p>\n

Over the past decade, real private-sector wage growth has scraped bottom at 4%, just below the 5% increase from 1929 to 1939, government data show.<\/p>\n

To put that in perspective, since the Great Depression, 10-year gains in real private wages had always exceeded 25% with one exception: the period ended in 1982-83, when the jobless rate spiked above 10% and wage gains briefly decelerated to 16%.<\/p><\/blockquote>\n

In other words, we are experiencing\u00a0a steady and long term decline in total real wages, one\u00a0that was worsened but not caused by\u00a0the Great Recession.\u00a0 Thus, there is little reason to believe that maintaining existing policies will lead to\u00a0any meaningful increase\u00a0in wages and, by extension, overall demand and employment.<\/p>\n

How did the economy grow over the last decade despite this decline in wages?\u00a0 As we known, the answer was a debt-driven housing bubble.\u00a0\u00a0How is the economy\u00a0growing now that the housing bubble has popped?\u00a0 Here is the answer given by Investor\u2019s Business Daily:<\/p>\n

So how has the economy managed to scale new GDP heights despite sagging real wages?<\/p>\n

Real disposable income is up 3.6% since December 2007, thanks to nearly $1 trillion in government support via higher social benefits (up $583 billion since the recession began); lower tax bills (down $255 billion); and higher government wages and benefits (up about $125 billion).<\/p>\n

Absent those sources of support, real disposable income would still be 5% below its prior peak.<\/p><\/blockquote>\n

What the article doesn\u2019t mention is that in contrast to the decline in total real wages, corporate profits and stock prices have been soaring.\u00a0 In fact, the\u00a0trends are related<\/a>:\u00a0the decline in wages is one of the main reasons for the growth in profits and stock prices.\u00a0 Economists at the Center for Labor Market Studies discuss these trends and their relationship in a recent study<\/a>, which includes the\u00a0following table:<\/p>\n

<\/a>\"sum_etal.png\"<\/p>\n

With these trends\u00a0in mind the professional consensus<\/a> for the status quo\u00a0becomes easier to understand.\u00a0 So does the need to actively oppose it.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

The Wall Street Journal recently surveyed\u00a0more than 50 economists, asking them what they thought\u00a0was the main reason\u00a0U.S. firms were\u00a0not hiring more workers.\u00a0\u00a0Approximately 65% answered\u00a0that it was\u00a0a lack of demand, 27% thought it was\u00a0uncertainty about government policy, and 8% said it was\u00a0the existence of more “favorable” hiring conditions overseas.\u00a0\u00a0
\nOne might think that with so many economists […]<\/p>\n","protected":false},"author":1853,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-37885","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/posts\/37885","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/users\/1853"}],"replies":[{"embeddable":true,"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/comments?post=37885"}],"version-history":[{"count":5,"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/posts\/37885\/revisions"}],"predecessor-version":[{"id":41356,"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/posts\/37885\/revisions\/41356"}],"wp:attachment":[{"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/media?parent=37885"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/categories?post=37885"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/tags?post=37885"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}