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Posts Tagged ‘Wage growth’

The Economic Policy Institute (EPI) reports that US wages grew in real terms (wage growth minus inflation) during 2016. While good news for the people who actually do the work of producing the goods and services necessary to keep the economy humming, this is also bad news.

EPI reports that income inequality continues to rise. “Rising inequality,” the report states, “means that although we are finally seeing broad-based wage growth, ordinary workers are just making up lost ground, rather than getting ahead. The way rising inequality has directly affected most Americans is through sluggish hourly wage growth in recent decades, despite an expanding and increasingly productive economy. For example, had all workers’ wages risen in line with productivity, as they did in the three decades following World War II, an American earning around $40,000 today would instead be making close to $61,000 (EPI 2017c).” That income difference has been redistributed to the very rich since 1981.

The report went on, “A hugely disproportionate share of economic gains from rising productivity is going to the top 1 percent and to corporate profits, instead of to ordinary workers—who are more productive and more educated than ever. This rising inequality is happening largely because big corporations and the wealthy have been rewriting the rules of the economy, particularly the job market, to stack the deck in their favor. This has prevented the benefits of productivity growth from “trickling down” to reach most households.” In other words, trickle down economics was a complete farce.

Now for the bad news. The economy is heading on a crash course with the worst and most prolonged recession since the Great Depression sometime around June of this year, give or take a month or two. The severity of this recession is due to the income and wealth inequality the US and the world has experienced since 1981, the year it pretty much began. I have been watching this current business expansion unravel since before November 2015. See The Coming Recession is Going to Be a Big One-JohnHively.wordpress.com There are always certain variables that precede a recession. Many of those began a year and a half ago.

Typically, the last variables to happen before an economy tanks is that wages rise and the Federal Reserve raises interest rates. Now those variables have officially happened. The Fed will likely raise interest rates again this month.

Somebody might point out that the economy is humming along with wage growth, low unemployment, etc…. How can we go into recession?

The growth of any business expansion has much in common with hiking up a mountain. Once you step on the highest point of any mountain, the next step is down. And so it is with any economic expansion; once it hits a peak, the very next step is down into recession. This month, March 2017, is the 93rd month of this economic expansion, making it the third longest in history. Compared to every economic expansion lasting six or more years, the current is the weakest by almost every measurement. So don’t expect it to go on much longer.

Click here for the entire EPI report on wage growth in 2016.

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A new study by the Economic Policy Institute (EPI), called Manufacturing Job Loss: Trade, Not Productivity, Is the Culprit, shows how the corporate propaganda machine has continued to lie to us. The not so free press continues to tell us that automation has cost the US jobs, and that’s the big reason why US job growth is so historically slow nowadays, and wages/benefits have gone down for the last thirty years.

As I’ve pointed out in the past, those claims are out and out lies, and the reporters and editors making these claims are liars. Check out the following links from this blog: Five Graphs that Will Make Your Blood Boiland JOBS: The Largest US Export Product.

According to the EPI study, “The United States lost 5 million manufacturing jobs between January 2000 and December 2014. There is a widespread misperception that rapid productivity growth is the primary cause of continuing manufacturing job losses over the past 15 years. Instead, as this report shows, job losses can be traced to growing trade deficits in manufacturing products prior to the Great Recession and then the massive output collapse during the Great Recession.

Specifically, between 2000 and 2007, growing trade deficits in manufactured goods led to the loss of 3.6 million manufacturing jobs in that period. Between 2007 and 2009, the massive collapse in overall U.S. output hit manufacturing particularly hard (real manufacturing output fell 10.3 percent between 2007 and 2009). This collapse was followed by the slowest recovery in domestic manufacturing output in more than 60 years. Reasonably strong GDP growth over the past five years has not been sufficient to counter these trends; only about 900,000 of the 2.3 million manufacturing jobs lost during the Great Recession have been recovered. In addition, resurgence of the U.S. trade deficit in manufactured goods since 2009 has hurt the recovery of manufacturing output and employment.

In short, the collapse in demand during the Great Recession and ensuing glacial recovery was responsible for most or all of the 1.4 million net manufacturing jobs lost between 2007 and 2014. Between 2007 and 2014, productivity growth slowed noticeably, and manufacturing output experienced no net, real growth.”

There are a few things the EPI study doesn’t mention.

  1. The report didn’t mention that US corporations are the biggest, and perhaps only, cause of the US trade deficit. When a US company ships jobs overseas, to say China, and then exports the products created overseas to the US, that adds to the trade deficit. Think of Apple Inc., Microsoft, Dell Computers, Nike, and thousands of other US corporations that produce their products in China, Pakistan, India, Indonesia, Mexico, etc…, and then export them into the US. When was the last time you purchased a Chinese smart phone. Along with US businesses, their chinese contractors and subcontractors manufacture them for US corporations.
  2. The EPI report also didn’t mention that international income redistribution scams, politely called international trade agreements, are also the primary, though not the only, conduit through which income is redistributed from the 99 to the 1 percent in the USA. When a job is created by a US company abroad, or exported from the US, the difference between the old wages and the new lower wages goes straight into the pockets of the super wealthy via higher corporate profits, roaring dividends and surging share prices.
  3. Largely because of trade agreements, the 1 percent steal 37 percent of all income created in the USA, compared to 8 percent in 1980.
  4. Notice in the graph above that this redistribution of income since 1980 has coincided with the loss of US manufacturing jobs. Duh!
  5. Those jobs supported millions of other jobs as well, such as local restaurant workers, accountants, auto salesmen, not to mention they provided the tax dollars for schools, infrastructure, police, fire, and social security nets. Those jobs don’t pay the taxes they used to because they’re not in the US anymore.
  6. The demand for goods and services by the 99 percent has been curtailed due to the exportation of jobs, so manufacturing employment, as well as employment throughout the US, is the worst since the Great Depression.
  7. The trade deficit hurts social security because when the rich are literally the only beneficiaries of trade scams and they don’t pay into the social security trust fund after the first $118,000 of yearly income. Meanwhile, the people who lost their jobs and whose incomes have been redistributed to the 1 percent are no longer paying into the system.
  8. Wages have dropped, in large part, because so many jobs have been exported overseas. According to the Federal Reserve, nearly 28 million jobs were exported from the US from 1990 to 2010.
  9. International income redistribution scams pave the legal way for jobs to be exported from the US to lesser paying nations, but they also pave the legal route for US corporations to create jobs overseas that they would otherwise have been created in the USA, meaning the job losses created by trade are understated by a hefty margin. When a job is exported to China by a US business, and the product of that job is sold in China, or exported to nations other than the USA, then it’s not statistically visible that this exported job has added to the trade deficit, even though US exports are lower than if the job still remained in the US. Under such circumstances, US exports are lower, which raises the trade deficit, increases income and wealth inequality, decimates our tax bases, and weakens social security, but it pushes the stock markets higher.
  10. The Chinese government requires US companies to partner with Chinese companies, and share technology to boot, in order to sell products in China. Boeing has exported thousands of jobs to China because of this partnership clause that otherwise would have been in the USA.

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