Tag Archives: income

The Future of Work

20 Jun

TCM editor, Alex Gourevitch, will be speaking with Kathi Weeks, author of The Problem With Work, about ‘The Future of Work‘ this Sunday at PS1. It is part of Triple Canopy’s ‘Speculations on the Future‘ program. In advance of this event, we thought it worth laying out a few facts relevant to the discussion. While we have spoken about some of the political questions at stake in the work/anti work debate (here, here, and here), those were relatively fact free speculations. And necessarily so. The issue at stake was hopes and desires for the future, and the organizing aspirations for a possible left. These discussions, however, can always do with a small dose of vulgar empiricism. A brief look at some relevant facts suggests that the most likely, if not most desirable, future of work is roughly that of increasing dependence on the labor market and lower quality work for most people. One word of caution: the data is limited to the US and Europe, entirely because that is our area of expertise and where the data is most readily available.

Although every so often there are breathless declarations of the end of workthe collapse of work, and that technology is leading to a world without work, the historical trend is the opposite. Ever since the 1970s, an increasing share of the population has been working. For instance, the graph below shows the employment to population ratio in the United States. Notably, even after the dramatic post-2008 decline, a higher percentage of Americans still work in the formal labor market than anytime before the mid 1970s. Slide1Similar survey data from Eurostat of all people between ages 15 and 64 shows, wherever data is available, that there have been dramatic or gradual declines in ‘inactivity‘ or non-participation in the labor market. In Germany, 35.9% of 15 to 64 year olds were inactive in 1983 while in 2012 that number had sunk to 22.9%. In Spain the drop was from 44.1% in 1986 to 25.9% in 2012. For France, 31.6% (1983) to 29% (2012), and the UK 29.1% (1983) to 23.7% (2012). The Netherlands saw the largest decline from 1983 to 2012, from 41.4% to 20.7%. The most likely future of work in the US and Europe is that more people will be working for wages or salaries than ever before, as absolute numbers and as a percentage of the population.

Three recent changes to the political economy suggest not only increased participation in, but greater dependence on, wage-labor, especially by those on the bottom end of the labor market. These are a) stagnation or reduction of welfare benefits, b) stagnation or decline of wealth and c) stagnant wages and precarious employment. Welfare and wealth are alternatives to wages as sources of consumption; lower wages and precarious employment increases insecurity of and need for employment.

For instance, in the case of welfare, the stagnation or reduction of welfare benefits means that states offer the same or worse benefits to those who cannot find or live off a job. This is consistent with increased numbers taking advantage of these benefits. For instance, recent reports made much of the 70% increase in Americans using food stamps, which represents a doubling of the amount spent on food stamps, since 2008. But food stamps alone are hardly enough to live off, and their increased use reflects the increase in unemployment. More broadly, American welfare benefits are not enough for most people to live off, many states recently cut benefits, and the welfare system is famously designed to spur labor market participation, not provide an alternative to it. Moreover, in Europe, where welfare benefits are more generous and less conditional, the consequence of austerity policies is, at best, to limit the growth of any such programs and in various countries to reduce or even eliminate them. Cuts to public employment and hiring freezes, increases in retirement age, and other measures mean the reserve army of labor will be larger, and most people will have fewer/poorer state provided alternatives to finding a job.

Finally, the increase in part-time, low-wage work, alongside stagnant or declining wealth at the bottom, further entrenches labor market dependence. We were unable to find longitudinal wealth data on Europe, but in the United States we have seen net declines in wealth for the bottom 60% of the population.

Share Total Wealth 1983-2009

Since wealth assets are not only an alternative source of income, but also, in the US especially a source of retirement income, this means greater dependence on the labor market for the working age population, as well as postponement of retirement, further swelling the ranks of the labor market. On top of which, wages remain stagnant and full-time work harder to find. Jobs are low-paying, part-time, and insecure and once one starts looking not at median but bottom quintiles, the situation is only worse. These trends are equally evident in Europe, where part-time, less secure employment has increased in places like the UK and Netherlands, alongside the more often commented increases in unemployment in places like Greece, Spain and Portugal.

In all, then, we can say that alternatives to employment have gotten worse or disappeared for the majority of people in the US and Europe, while the available jobs pay, on average, less than they used to and offer less security. There is every reason to think that the most likely near future of work will give us strong reasons to think about a different way of organizing work – about a better, if less likely, future.

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What Middle Class?

11 May

Is the middle class doing worse or better since the 1970s? Depends, but if so, just barely. Is this the right question to ask? No. Let us explain.

Recently, a number of commentators have begun pushing back against the claim that the past thirty years have seen stagnating fortunes for the middle class. The claim comes from a variety of sources, perhaps most prominently from Piketty and Saez’s work on inequality. They have argued that median incomes have stagnated and that, from 1979-2007, the median income is up just 3% in real terms. But other mainstream economists think the data answers a poorly framed question. Meyer and Sullivan, two mainstream economsits, argue that “material well-being” for poor and middle income households has increased. Burkhauser et al. claim that if we look at post-tax and transfer household income, rather than pre-tax and transfer individual tax unit income, then the median household had seen a gain of 36.7% in their overall income.

Can everyone be right? Oddly, yes. The reason is that the difference here is not about the data – which we for the moment assume is more or less accurate – but the interpretation of the data. It is true that, as P-S say, the median, pre-tax and transfer individual median income is up just 3%. It is also true that, as Burkhauser et al. say, the median household post-tax and transfer income is up 37%, and that it is also true, as Meyer and Sullivan argue, that the material well-being of the poor is better than it was thirty years ago. That everyone can be right is only the beginning of the story.

Let’s take Meyer and Sullivan first. Note that material well-being or ‘standard of living’ can improve even as the poor take home a decreasing share of the overall social product. It is perfectly reasonable for Meyer and Sullivan to point out that economic growth over the past thirty years has made more high quality goods and certain amenities (like air conditioning) cheaper, and thus available to those who couldn’t afford them. It would be hard to imagine capitalism surviving if it did not improve material conditions. But this improvement in the standard of living is perfectly compatible with increasing exploitation of workers. At least since Marx we have known that immiseration is not an absolute but relative process. We can have increasing living standards for many, while those same many control less of their time than before. If $100 used to buy a black and white TV and now it buys an HDTV, then that qualitative improvement in material human well-being is perfectly consistent with stagnating compensation, declining bargaining power and more injustice. It might take only three hours for society to produce all the things I can buy with $100 rather than the four hours it used to. And so, if all I have is $100, my overall claims on society have been reduced, even if the quality of my goods have improved. Put another way, if originally I had $100 and GDP was $10000, and now I have $100 but GDP is $20000, then just because I have higher quality goods doesn’t mean that my fortunes are increasing.

It would of course be wonderful if we organized production for the sake of human needs, not profits. But it is pretty clear that is not Meyer and Sullivan’s interest in offering material human well-being rather than income and wealth as the measure of growth. Terry Eagleton once said that ideology works by being true in what it affirms but false in what it denies. It is true that standards of living have improved since 1970s, but it is false to think that refutes the concerns people have regarding inequality and growth.

Burkhauser et al. are taking a different tack. They argue that, if we want to know how the poor and middle class (whatever exactly the ‘middle class’ is) are doing, then we need to look at “real compensation.” We have to factor in not just pre-tax and transfer ‘market income’ but all the sources of compensation. After all, why should we care about what people take home before they pay taxes and claim benefits? Surely we care what households take home all things considered. And the real compensation by household has grown over the past 30 years, by about 37%. In fact, even in the worse period, from 2000-2007, while individual market income (pre-tax and transfer) declined by 5.5%, real compensation still grew by 4.8% because of elements of the tax code and public benefits, like welfare, earned income tax credit, unemployment benefits, and so on. Burkhauser supplies the following graph to illustrate his point:

Again, his own terms, Burkhauser is right. Real compensation has grown. Though note, two things. First, real compensation has grown very slowly: 1% per year, and has slowed to a near stop in the past decade. Further, “real compensation” has grown mainly because redistributive state measures have been large enough to cancel out declining individual wages and stagnating household wages. In other words, the market has been unable to produce jobs at the median level that compensate any better than they did thirty years ago (and below the median, real wages are decidedly worse.) Without progressive taxation and redistribution, real compensation would be down. In fact, the implication of Burkhauser’s data is that, for most people, the market has not created better jobs than thirty years ago. The bottom end is hanging on through transfers, not bargaining power and quality work. So when Burkhauser says “the notion that we as a society are not doing as well as we were 30 years ago, I think by virtually any reasonable measure, is just false,” this is not even true by his own measures. It’s certainly not true by the conventional conservative standard that people not be dependent on the state.

So far, we have just been considering the arguments on their own terms. In both cases, the authors do not prove that the economic situation over the past thirty years has been desirable or improving, which was their central intent. But that does not mean that the mainstream, default focus on median market income is still the right way to evaluate economic development. The median unit, whether it is an individual or household, is a narrow concern. It says nothing about class structure, how the worst off are doing, nor about economic possibilities and alternatives. For one, changes in wealth, not just compensation, are better indicators of class structure and advantage. In our society, it is wealth, especially financial wealth, more than income that confers security, greater bargaining power, and overall social power. And by that measure, our society is more unjust and exploitative. Recall this graph, showing decline in wealth for the lowest 60% of the population:

When we combine this graph, with some data on the actual distribution of financial (non-real estate) wealth, we are reminded why ‘median’ and ‘middle class’ are more ideological than they are analytical concepts.

Those who have no reasonable alternative but to sell their labor, as diverse a group as they are, still constitute roughly 80% of the population. These statistics suggest that behind ‘median’ income and compensation there is a much different distribution of wealth, and thus a different class structure than concepts like ‘middle class’ can make sense of.

We can ask even further questions – what kinds of jobs are being created, or could be created? Who controls job creation? Who has the freedom to ‘innovate’ and ‘create,’ and who serves the creators? An economy, after all, is never just about making new things, it is always about making new things under specific social conditions. Those social relationships always have to be reproduced, along with the goods and services that get produced. These are concerns about class structure and social power that mainstream economists are rarely interested in, but which cannot be dismissed by gesturing at living standards and compensation.

The Jobs Problem

6 Sep

In his wind-up for Thursday’s speech, Obama has made unemployment his theme. “Let’s put America back to work,” Obama said to union leaders. Ever the careful politician, Obama has not released details of what he will say, though it is hard to see how he can propose much given the budgetary concessions he has already made. It is tempting to prepare in advance a critique of the inevitable half-measures and technocratic manipulations that have been part-and-parcel of mainstream Democratic strategy for decades now.

However, there is a deeper problem. The problem is not with the inevitable inadequacy of what Obama will propose, but with how Obama wants to define the problem that needs to be addressed. The problem, as Obama wants to define it, is unemployment – ‘put America back to work.’ And of course, unemployment is a big problem. More specifically, persistently high levels of unemployment next to anemic job growth. (See Konczal at Rortybomb for a discussion of the recent unemployment numbers.) But so too is underemployment, crappy jobs, stagnating wages, and declining compensation figures. That is to say, what needs to be rejected is the attempt to present unemployment in isolation, as a distinct problem that can and should be addressed independent of these other economic problems.

The exclusive emphasis on unemployment lets the financial crisis, and the background growth model that produced it, off the hook. Indeed, it is a way of trying to address unemployment while leaving the background structure of society relatively untouched. Obama’s strategy also misrepresents the groups of people that have an interest in a new way of organizing the economy. It is therefore not just analytically but politically problematic, as it carves up the unemployed, the underemployed, the working poor, and everyone else struggling to get by, into different interest groups. This might make problems appear manageable, but it undermines the formation of effective and powerful political coalitions that might actually be able to change things.

Consider, for instance, the way focusing on unemployment lets the financial crisis, and the background, highly financialized, growth model of the last four decades, off the hook. One effect of this economic model was to produce a series of asset-bubbles and debt-financed consumption that, when it all burst, produced persistent and deep unemployment at all levels of society. As an EPI briefing paper points out, unemployment has risen for every skills class, and the ratio of jobs to workers seeking jobs is about 4:1 – this isn’t just some structural unemployment, or mismatch between skills and available jobs, working itself out. The following chart is clear:

The jobs problem is deep and structural. It springs from the structure of ownership, the post-bubble indebtedness, the flight to T-bills instead of productive investment. A real jobs program would have to address these issues, not just send some surplus construction works out to fix schools and highways. But connecting the current jobs problem with the financial crisis, financialization, and the structure of ownership is unimaginable to current leadership.

Moreover, any serious thinking about the economic development preceding and following the crisis, would have to admit that persistent unemployment was not the only consequence. A lot of the jobs have been pretty crappy, and nearly all of the benefits of the past decades of growth have gone to small segments of society. The EPI briefing paper is a rich source of information on these familiar trends (h/t Art Goldhammer). Consider income first. In the last ten years, real median income has declined by about $5,000:

Wage growth has been slower in the past two years than the previous thirty, and, as we have pointed out before, the previous thirty years have been pretty stagnant. If one adds in other forms of compensation, things have not been dramatically better. According to EPI, since the crahs 38% of families have been directly affected by wage, benefit, or hours reduction and 24% by loss of health insurance.

As for wealth, the top 5% took home 81.8% of all the wealth gains between 1983 and 2009, and the bottom 60% saw net declines in wealth:

A -1.7% decline in wealth for the bottom 80% of all Americans. Clearly, the problem in the United States with the economic development of the past decades, and with the post-crisis ‘recovery,’ is not just persistently high levels of unemployment. It is with the broader structure of the jobs created, their associated levels of income, overall compensation, and wealth. The jobs problem is one amongst a series of problematic features with the way jobs are and are not created. But these are not even issues Obama has wanted to mention, let alone address, in any consistent way.

Focusing on what has happened to the employed, not just the unemployed, matters not just in ‘policy’ but also ‘political’ terms. As a matter of policy, it suggests that more expansive thinking is needed than just a works program that might mop up some of the worst excess of recent events. But as a matter of politics it matters because presents a decidedly different way of thinking about the interests at stake than Obama’s focus on the unemployed. At the moment, Obama seems to be reproducing the political failure of the health care debate – where he focused on the 20% uninsured rather than the majority of the population who could benefit from a different system altogether. The more Obama appealed to the worst off, the more the rest believed – not so illegitimately – that their interests were not seriously under consideration. One just cannot build adequately strong political support for significant economic policies that way. In one sense folding a jobs program into a broader argument for improving the conditions of the already working classes might seem more of stretch, because it is more radical as an appeal. On the other hand, it appeals to shared interests of a majority of citizens – indeed, by some measures, to roughly 80% who have seen stagnating incomes and declining wealth. In that sense, it is just as viable a political strategy.

Policy and politics, interest and action, go together. One kind of politics – the appeal to the interests of unemployed and employed alike – implies a different set of policies. It is a more transformative approach. Another kind of politics, the one Obama prefers, is the strategy of division, isolation and containment. Deal with the unemployed separately from the underemployed, the uninsured separately from the underinsured, the poor separate from the middle, and so on and so forth. This suits a technocratic mindset – one lacking both a program and political imagination. It should be resisted all the more for that. The problem, in other words, is not just the ways Obama’s jobs program won’t work, but also with the ways it very well might work. It might work to even more deeply divide an already fragmented and confused body of citizens – a body whose shared interests are usually sacrificed at the altar of moderation and technocracy.

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