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Posts Tagged ‘wages’

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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President Donald Trump has attacked the H1B Visa program, and high tech executives are after his hide for it.

The H1-B visa is supposed to allow US companies to import foreign workers for up to three years if there are insufficient US workers to fill positions. However, that’s not how it has worked.

US corporations regularly import guest workers via the H1-B program to replace their US workers, and they pay their foreign workers less than their US workers. In effect, the US government is allowing the H1-B program to lower US wages, which increases profits and share prices. We all know Wall Street and several billionaires call the shots of both major political parties.

The US high tech workers at Southern Edison, Toys R Us, Disneyland, Intel, the University of California and hundreds of other companies have seen their jobs vanish as foreigners have taken their place. Click Computerworld for another article on this. In many cases, the US workers have been forced to train their replacements.

Once Trump declared his opposition to the H1-B Visa program, high tech spokespeople all over the US declared there was a shortage of US high tech workers. This, of course, was a lie. But the US news media, both conservative and liberal, gleefully went along with the lie.

According to the Economic Policy Institute,

1 “The flow of U.S. students (citizens and permanent residents) into STEM fields has been strong over the past decade, and the number of U.S. graduates with STEM majors appears to be responsive to changes in employment levels and wages.
2 For every two students that U.S. colleges graduate with STEM degrees, only one is hired into a STEM job.
3. In computer and information science and in engineering, U.S. colleges graduate 50 percent more students than are hired into those fields each year; of the computer science graduates not entering the IT workforce, 32 percent say it is because IT jobs are unavailable, and 53 percent say they found better job opportunities outside of IT occupations. These responses suggest that the supply of graduates is substantially larger than the demand for them in industry.” Economic Policy Institute–Guest Workers high skill labor market analysis

The H1-B visa program has been used to keep US high tech workers unemployed and high tech wages down. They’ve been kept down since the “inception of the program.” The program is likely why wages for US high tech workers have been stagnant in real terms since 1990.

Even if you don’t side with President Trump on any other issue, even if you absolutely hate his guts, side with him on this issue.

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labor unions

The U.S. Census Bureau released new numbers on Tuesday showing that, after a brutal economic recession and years of stagnation, real median household incomes rose from $53,718 in 2014 to $56,516 last year. That’s a 5.2 percent rise — the first statistically significant increase since 2007.

But, as NPR’s Pam Fessler notes, “the median household income was still lower than it was in 2007.”

The official poverty rate decreased to 13.5 percent for last year, a drop of 1.2 percentage points. That represents 3.5 million people who are no longer in poverty and is the largest annual percentage point drop since 1999, the Census Bureau says.

The supplemental poverty measure — an alternate way of gauging poverty, which takes more factors into account — also dropped significantly, falling by 1 percentage point to 14.3 percent.

“Poverty dropped for whites, blacks and Hispanics, as well as for children and seniors,” Pam reports.

Across the board, the Census Bureau’s 2015 numbers show significant signs of progress and reflect a recovering economy.

The 5.2 percent increase in median household income, in particular, was impressive — “one of the largest year-to-year increases that we’ve ever had,” Trudi Renwick of the Census Bureau said.

The income gains for most Americans are tied to growth in employment, as The Associated Press reports:

“The income gains and drop in poverty reflect ongoing gains in the job market, Renwick said. About 2.4 million more Americans found full-time, year-round jobs in 2015.

“Americans are also likely benefiting from an increase in middle-income jobs. Many of the jobs created in the early years of the recovery have been in low-paying sectors, such as fast food restaurants and retail.

“But according to a report from the Federal Reserve Bank of New York, in 2014 and 2015 the growth of middle-income jobs in sectors such as shipping and construction outpaced the gains in lower-paying and higher-paying work.”

Income rose in every region of the country, for every age group of household head, with statistically significant increases for almost every racial group.

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tooo-much-pie

President Barack Obama is making one last push for passage of the Trans-Pacific Partnership agreement in order to please his corporate and Wall Street benefactors. “However,” according to the Economic Policy Institute,
“growing imports of goods from low-wage, less-developed countries (which are produced by US corporations such as Nike and Apple), which nearly tripled from 2.9 percent of GDP in 1989 to 8.4 percent in 2011, reduced the wages of the typical non-college educated worker in 2011 by “5.5 percent, or by roughly $1,800—for a full-time, full year worker earning the average wage for workers without a four-year college degree.”

Overall, there are nearly 100 million American workers without a 4-year degree. The wage losses suffered by this group amount to roughly a full percentage point of GDP—about $180 billion per year. Workers without a 4-year degree constitute a bit less than 70 percent of the overall workforce, but three-quarters of African-American workers (75.5 percent) and more than four-fifths (85.0 percent) of Hispanic workers do not have a 4-year degree. While educational attainment levels for African-Americans and Hispanics are rising, differences remain.

$180 billion a year is only a little bit of how much money is being redistributed from the 99 to the 1 percent, and that’s after tens of millions of US jobs have been exported and the trillions of dollars of income from those jobs have been redistributed from the 99 to the 1 percent. The Trans Pacific Partnership has been negotiated with an eye to export more income and wealth from the 99 to the 1 percent. This will keep stock prices soaring, while weakening the demand for goods and services.

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Let’s look at what the EU commissioners call the sacred “four freedoms”: the free movement of goods, capital, services and people. Notice something strange about the list? Goods are manufactured things, capital is money, services are transactions, but people are of a different category, are they not?

Human beings have cultural ties, feelings, attitudes, patterns of behaviour, social assumptions and… add all the other obvious words you can think of. But to CEO’s of corporations, or hedge fund managers, they’re all inputs into the production process.

Not only does the free movement of labor in unlimited numbers in the European Union present a much more complex and potentially delicate problem, but it seems quite wrong to lump people in with manufactured goods and commercial services. Is this the dream of conservative and liberal politicians of Europe: to build an economic and political system that shunts people around a continent to fill whatever quotas big business requires at any given moment?

The answer is yes. And so British corporations have exported jobs to lower wage EU nations, like Hungary. In turn, Eastern European labor has been given unrestricted access to immigrate anywhere in the EU they desire, and for many, that means higher wage nations, which includes Great Britain.

As jobs leave Britain for lower wages elsewhere, hundreds of thousands of immigrants have entered Great Britain and placed downward pressure on wages and benefits there. That puts upward pressure on corporate earnings, stocks prices and dividends, which go mostly to the rich.

The EU is politically constructed so as to ensure the rich get wealthier by redistributing income from the 99 percent to themselves.

That’s precisely what globalization is all about.

The United States has followed this pattern with hyper-immigration over the last thirty-five years, and with massive international income redistribution scams falsely marketed as international trade agreements, which have lead to the exportation of tens of millions of US jobs. Notice real US wages have stagnated during these years while the stock markets have exploded, and the rich have gone from stealing 8 percent of all income produced in the US to 37+ percent today. That’s precisely what globalization has brought us.

In the meantime, the corporate press of both the US and Great Britain cry out against the success of Brexit on behalf of their fellow corporations and advertisers. However, the people of Great Britain knew what they were doing.

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In other news about Brexit from the June 27, 2016 Investor’s Business Daily, winner of the Pulitzer Prize in journalism in 2009, the editors laid out the case for Brexit.

British citizens will enjoy “higher wages.”The editors didn’t explain why wages would rise, but reduced immigration means fewer workers to compete with British workers, which means a lower labor supply, which typically translates into higher wages.  That means corporate profits will decline, or not grow as briskly. That means three things; dividends, stock prices, and income inequality will all slow or decline in Britain.

The editors also claim British citizens will have “lower food costs” with Brexit. That’s good for working people, and bad for rich shareholders.

In addition, European Union regulations cost “5% of the UK’s GDP. That’s to say nothing of the loss of control that the country faces to increasingly arrogant bureaucrats in Brussels.”

The editors didn’t mention that the lower value of the British pound vis-a-vis other currencies will lower the profits of British companies that have exported British jobs overseas to lower wage nations, and then export these goods into the UK. This may force some jobs exporters to bring jobs back to Britain.

Finally, the fall of the British pound acts as an incentive for British corporations to not export any more jobs.

All of these things are bad for rich investors, but they are good for the 99 percent of Britain. Perhaps this is why British politicians and mega investors weren’t happy with Brexit.

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H1B

The US government regulates the wages, salaries and benefits of US citizens in virtually all sectors of society in any number of ways, and the government has regulated wages, salaries and benefits downward for the last thirty-five years.

Sign a treaty, call it a trade agreement, and watch millions of jobs get exported overseas. The job losers contend for the remaining jobs, putting downward pressure on wages. The rich benefit because exporting jobs expands profits, dividends and share prices. The government also uses immigration to regulate US wages, salaries and benefits.

As you read this, US businesses are pushing congress and the white house to expand the H-2B program so that they can import more semi-skilled and low skilled foreign labor to replace US citizens. This is another case of the US government enacting a program to bring downward pressure on wages, and increasing unemployment among US citizens.

According to the Economic Policy Institute;

“…employment and wage data show no labor shortages in industries that employ H-2B workers. Many business groups have advocated for expanding the H-2B visa program to fill so-called labor shortages with low-skilled temporary guest workers. The report suggests that businesses support expanding the H-2B program because they can pay H-2B workers less than comparable U.S. workers. “It’s clear that there are not national-level labor shortages in H-2B jobs that would justify expanding the H-2B program or watering down rules requiring that employers first recruit U.S. workers before hiring an H-2B worker,” said Daniel Costa, the report’s author.

Costa reports, “Wages were stagnant or declining for workers in all of the top 15 H-2B occupations in 2014.” Many of these industries have been experiencing declining wages for a decade or more.

Hopefully, given the current US political climate, an expansion of the H-2B visa will not come about. That would be devastating to the 99 percent, but the rich would reap the benefits of lower wages.

The H1-B guest worker visa has been used to keep the wages of US high tech workers down for nearly thirty years. Wages in the high tech industry have been in the doghouse since the inception of the program, and three out of four US high tech workers are unemployed in their fields.

If the government was truly serious about raising US wages, and that time is nearing, both the H-1B and the H-2B programs would be curtailed or eliminated. The Trans Pacific Partnership would not become a fact of law. In addition, immigration would be curtailed until long-term wage growth became a reality, and the income and wealth gaps closed significantly.

During the last three decades and a half, immigration into the US has been explosive. That’s because the US government has been regulating wages downward. The folks at the Pew Research Institute call this hyper-immigration. According to some estimates, 90-95 percent of all US population growth since 1981 is due directly or indirectly to immigration.

Now I’m not suggesting immigration is a bad thing most of the time, especially if worker compensation is going up. But it does become a problem for the 99 percent, and a treasure chest for the 1 percent, if compensation is going down. When this occurs, such a process redistributes income to the super rich from the 99 percent. Let’s face it. Average real US wages have declined in real terms during this period of hyper-immigration while the US stock markets have exploded. Much, and perhaps most, of this is due to shipping jobs overseas, but a fair amount is due to hyper-immigration. Just look at wages in the US high tech sector.

 

To read the EPI report click here.

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