The skimpiness of U.S. minimum wages

Would raising minimum wages really cause people to leave the job market, as many charge? Yes, a minimum wage of $80 or $100 an hour would certainly have that effect, but the federal minimum of $7.25 doesn’t seem dangerously high. The Canadian province of Ontario has a minimum of $10.25 and thousands of unemployed Canadians don’t sneak across the border to supplement their jobless pay by snaring a job in the U.S.

“Americans should face the truth: we pay poor people crap because we can, because they have few choices and nowhere else to go but jail.”

So writes Salvatore Babones on his Website Benchmarking America. He supports his case by citing the most recent OECD data, which puts the U.S. the federal minimum pay at the bottom of the rate paid by 10 rich countries.

“What’s more,” he adds, “people working minimum-wage jobs in all the other nine countries have some form of national health insurance coverage, so their true wages on a like-for-like basis are even higher than in America."

Babones is a senior lecturer in sociology and social policy at the University of Sydney in Australia. His current academic project evaluates U.S. performance over time and against other countries. The paragraphs above on minimum wages are a summary of one of dozens of his analyses, illustrated and salted with plain-speaking prose.

His book, “Benchmarking America,” will be published next year. Meantime, previews of some chapters are available on his Website of that name, as well as on Facebook. He speaks and leads a discussion on Monday, August 15, at the Economic Policy Institute (EPI) in Washington.
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Income growth now more lop-sided

It used to be that the bulk of income growth in America went to the bottom 90% of families. That’s no longer so. Over the seven-year period between 2000 and 2007, average income of the bottom 90% of households actually declined, while the richest 10% accounted for a full 100% of average income growth.

The new interactive St;ate of Working America Website, lets users look at any two years between 1917 and 2008 to see how much the top 10%, versus the bottom 90%, contributed to growth in income. Read more!

Goobye to EPI's ‘State of Working America’ in book form

The State of Working America, published by the Economic Policy Institute (EPI) in book form since 1988, is going all-electronic. The full Website will begin in early January 2011.

Like its predecessor publication, the new one will present comprehensive data from eight broad issue areas -- income, mobility, wages, jobs, wealth, poverty, health, and international comparisons – all designed to give readers a deep understanding of the effect of the economy on low- and middle-income American workers and their families.

The 2008-2009 edition, a book of 460 pages, is still available from EPI and still useful for its trenchant analysis.

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U.S. lagging behind – way behind – in child care funding

Most nations in the developed world do very much better than the United States in funding formal childcare for boys and girls under the age of three.

According to data gathered by the Economic Policy Institute, Denmark ranked highest in such expenditures, and the United States ranked 13th\, among 14 developed nations in comparisons computed using Purchasing Power Parity.

EPI released this information on November 10 as a “preview” from its forthcoming “State of Working America” Website, which will be published online in early January. Read more!

Gloomy jobs picture for U.S.

They are not on the U.S. payrolls of American multinationals, but they are employed in other countries by subsidiaries and affiliates of U.S. multinationals operating in China and elsewhere abroad.

In 2008 that employment stood at 11,900,000 -- an increase of 729,000 in two years – according to the August report of the U.S. Commerce Department, which tracks such employment data.

Our de facto global labor force is likely to increase, meaning that more and more U.S. jobs will continue to go “off shore.” A preview of that trend is evident from the number of Americans who get federal assistance because off-shoring cost them their jobs.

As I learned from an article by Don Lee of the Los Angeles Times:

“For the six months that ended September 30, workers at about 1,200 offices and plants nationwide were approved for federal Adjustment Assistance. That’s about 20% more approvals than in the same six-month period last year, according to the U.S. Labor Department.”

In an analysis of a Bureau of Labor Statistics September report on U.S. employment and unemployment, the Economic Policy Institute wrote: “The labor market is now 1l,500,000 jobs below the level needed to restore the pre-recession unemployment rate (5.0% in December 2007)."

The September jobless rate was 9.6%. See
http://www.epi.org/publications/entry/september_jobs_picture
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Soaring job losses, trade deficit: is it time to increase tariffs on China’s imports?

The U.S.-China economic relationship is so greatly unbalanced in China’s favor that the United States needs to initiate a system of tariffs against China’s export machine. So says Steven Pearlstein, business columnist of the Washington Posr.

“Getting this economic relationship back into balance,” Pearlstein writes in his June 30 column, “is the single biggest challenge to the global economy, not just because of its direct effects on China and the United States, but the indirect effects it has on the rest of the world.“

China received a free pass into the World Trade Organization without having in place the fundamentals of a market system, Pearlstein points out. “Its business sector continues to de dominated by state-owned companies financed by state-owned banks within the context of what remains largely a state-planned economy.”

The result, as Pearlstein describes it, is a business sector difficult if not impossible for foreigners to penetrate, and “those outsiders who manage to break through invariably find that they have few protections from a system that is larded with corruption and largely unconstrained by the rule of law.”

Administration after administration in the United States has refused to challenge China’s mercantilism, in the hope that as the relationship deepened China would “make the inevitable transition to democratic capitalism.” But China’s view of business remains thoroughly mercantilist, and “to try to convince [it] otherwise is folly.”

Pearlstein contends it is urgent that the United States take the lead toward a solution by establishing a tariff regime that will increase the cost of imports not just from China, but also from ”other counties that keep their currencies artificially low, restrict the flow of capital or maintain significant barriers to imports of goods and services.”

How would such system work? Would it comply with WTO rules? Pearlstein declined to get into such details. “That’s why God created trade lawyers.”

Nor does he counter the arguments made against increasing tariffs. That would take a book. As it happens, the U.S. Business & Industry Council has just published a volume that buttresses Pearlstein’s position: “Free Trade Doesn’t Work: Why America Needs a Tariff.” Its author, Ian Fletcher, makes a strong case for “a flat tax on all imported good and services.”

Controversies over tariffs go back to the beginning of the nation. In a classic volume, “Opening America’s Market: U.S. Foreign Trade Policy since 1776,” Alfred. E Eckes Jr. describes how, at crucial times, “U.S. officials unilaterally opened the American market without gaining commensurate advantages in foreign markets for the products of American workers and American factories.”

Hence a merchandise trade deficit that this year in a single month, April, totaled $52,500,000,000, reaching $19,300,000,000 for China alone. According to a report earlier this year by the Economic Policy Institute, the growing overall trade deficit with China eliminated or displaced an estimated 2,400,000 U.S. jobs between 2001 and 2008.

A new EPI report illustrates how China’s export-driven policies work. Its paper and paper products industry is now the largest in the world, thanks to WTO-illegal government subsidies of more than $32,100,000,000 since 2002. Paper imports to the United States are now rising faster than those from any other country. According to industry sources, an estimated 400,000 jobs are at risk, even though the U.S. industry is highly competitive.


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Emergency care needed for U.S.’ sick trade deficit with China

How much more time will pass before the Obama administration takes action on our toxic trade with the People’s Republic of China?

As a result of our burgeoning trade deficit with China since 2001, when China joined the World Trade Organization:

-- About 2,400,000 jobs have been lost or displaced in the United States.
-- The computer, electronic equipment, and parts industries led, with 627,000 jobs displaced, more than in any other sector of the economy.
-- Every Congressional district, including the District of Columbia and Puerto Rico, has been affected, with California and Texas as the biggest losers among states.

Those are among the facts documented in a new report by the Economic Policy Institute (EPI) issued March 23 in conjunction with the Alliance for American Manufacturing (AAM).

The impact of the China trade deficit – which reached a record high of $270,000,000 in 2008 – is not limited to the hemorrhaging of jobs. Workers still employed are affected too, by decreased wages. A typical full-time, median wage earner lost an estimated $1,400 in 2006.

Currency manipulation is a major cause of the huge trade surplus enjoyed by China, according to the report’s author, Robert E. Scott of EPI. This intervention “makes the yuan artificially cheap and provides an effective subsidy on Chinese exports.”

As a result, China’s goods cost up to 40 percent less, according to the AAM, which brings together a select group of America’s leading manufacturers and the United Steelworkers.

The AAM supports the newly introduced Senate legislation designed to halt the misalignment of currencies by China and other countries. The group also urges the U.S. Treasury Department to list China as a currency manipulator in its semi-annual report on currency exchange, due by April 15.

Extensive background information can be found on the AAM Website at http://manufacturethis.org/

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GDP ‘Growth’: a tool to fool

Statistics on economic growth are misleading measures of a nation’s economic health, but they are widely used anyway.

The front page of today’s Washington Post hailed a “modest growth” in France and Germany as the “latest sign of a global comeback, and reported that “improving indicators” are pointing to an end of the recession in the United States, China, and even Japan.

Yet another story in today’s Post, this one on page 11, headlined: “Optimism Bypasses Consumers,” with this subhead “Retail Sales, Foreclosure Data Show Outlook Remains Bleak for Households.”

The difference between the two stories is that the optimistic one builds on a small climb in the Gross Domestic Product, the commonly used measure of how the economy is faring. But GDP is an unreliable indicator. It is one measure of the economy, but by itself “a deeply foolish one,” according to a long analysis in the August 10 New York Times.

The title, “GDP RIP,” overstates the article’s content and reality. GDP is not dead. In fact, the author, Professor Eric Zencey of Empire State College, bemoans “our habit of taking it as a measure of economic welfare,” and recommends that it be renamed “gross domestic transactions.”

Criticism of GDP is not new. The Organization for Economic Cooperation and Development (OECD) has analyzed its weaknesses, without dampening its use. (See “GDP = Grossly Distorted Picture” in the March 1, 2006, issue of my Website, Human Rights for Workers.)

In his analysis, Zencey has numerous examples of GDP’s basic flaw: it adds up all economic activities (for example, rebuilding New Orleans after Hurricane Katrina is a plus in GDP, but the $82,000,000,000 in damages is not an activity and thus not subtracted). Zencey offers this enlightening parallel:

“If you kept your checkbook the way GDP measures the national accounts, you’d record all the money deposited into your account, make entries for every check you write, and then add all the numbers together. The resulting bottom line might tell you something useful about the total cash flow of your household, but it’s not going to tell you whether you’re better off this month than last or, indeed, whether you’re solvent or going broke.”

A much better measure of the economy, to my mind, is the level of employment and unemployment. Using this measure is enlightening, and sobering. Take this U.S. “job picture” painted by the Economic Policy Institute on August 7:

“The 6,700,000 jobs lost since the start of the recession understates the magnitude of the hole in the labor market. To keep up with population growth, the economy needs to add approximately 127,000 jobs every month, or, across the full 19 months of recession, 2,400,000 jobs. This means the labor market is currently 9,100,000 jobs below pre-recession employment levels.”

Yet, as the EPI points out, without the boost added by the American Recovery and Reinvestment Act, the job picture would be even worse. Thanks to the stimulus, the economy created or saved an estimated 720,000 jobs in the second quarter of this year alone.

Bottom line: effective recovery policies require restoring employment, not saving bankers’ bonusus.

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Why the fixation on the Dow?

One out of nine workers in the United States is either employed or underemployed. Together, they number 17,136,000 men and women.

Did you see that number flash on your TV screen? And how often, if ever, have you seen a TV chart on how the real median income of American families dwindled in the past eight years while CEO compensation soared?

But you can hardly turn on a TV without learning the latest movement of the stock market. You see repeated shots of the Dow’s fluctuations in real time, as though the board on Wall Street were monitoring the nation’s health.

Even as an indicator of the economy’s health, the Dow index is very imperfect. The media obsession with it is a distraction that obscures how the economy is hurting ordinary American workers.

Remember, most people (51.4 percent of American households) don’t own stock in any form, and two-thirds of those with stock own less than $5,000 worth. The media track their interests superbly well. But what about the 66 percent of the country’s civilian population 16 and over who are in the labor force? That adds up to 154,000,000 men and women. Yes, many own some stock, but all of them, including the workers who own stock, depend on their jobs for their earnings, not on Wall Street.

The Economic Policy Institute regularly issues analytical reports based on labor data collected by the U.S. Bureau of Labor Statistics and other sources. The information in the first paragraph is drawn from an October 15 EPI “snapshot” report.

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You Are Not An Auto Worker, Or...

...a garment worker, or a steelworker, and so you’re not all that worried about globalization, except for its effect on others. That’s because you’re a school teacher or a nurse, or a roofer, and so you personally feel safe – after all, your job can’t be moved overseas, and you think foreign trade is no threat to you.

Don’t be so sure. Remember: you, too, are living in the global economy. You may think you are remote from its human impact, but you aren’t. Few people are.

That’s a fact. And it’s a fact that many millions of us Americans don’t quite understand. Douglas J. McCarron, president of the United Brotherhood of Carpenters, wants to make sure that his 520,000 union members are not among those uninformed millions. He wants carpenters, millers, piledrivers, and other workers in the building trades to know how they, too, are exposed to globalization’s repercussions.

So the Carpenters’ Brotherhood has joined with the Economic Policy Institute (EPI) to produce a multimedia education project in the form of a 13-minute Web presentation titled “Globalization: How Carpenters are being hurt by global trade.” For the presentation, click on the Carpenters Website: http://www.carpenters.org.

“You can’t build an office tower in China and ship it to New York or Las Vegas, but that doesn’t mean our jobs are safe,” McCarron says in the opening segment. His point is developed in detail by Jeff Faux, founder of EPI and author of The Global Class War.

Fortuitously, the same subject is treated in a recent EPI brief, “Trade, Jobs, and Wages,” by EPI staff economist L. Josh Bivens. He answers the brief’s subtitle, “Are the public’s worries about globalization justified?” with a firm Yes. His five-page paper is full of insights ignored in the current economic debate.

One is contained in these paragraphs on how job losses caused by trade deficits impact even the wages (to say nothing about working conditions) of workers in non-traded sectors:

“While job-loss caused by rising trade deficits is the most visible effect of globalization, its impact on workers is a concern to an even much larger group of workers. Even if trade flows begin to balance and there is less job loss in the future, the integration of the U.S. economy with those of its low-wage trading partners will pull down wages for many American workers, and will contribute to the ever-rising inequality of incomes in the U.S. economy.

“While global integration is usually ‘win-win’ between countries, it can still translate into steep losses for tens of millions of workers in the U.S. economy. Crucially, this wage loss is not restricted to just workers in sectors exposed to trade, but is experienced by all workers who resemble those displaced by imports in terms of education, skills, and experience…Landscapers may not get displaced by imports, but their wages do indeed suffer from job competition with import-displaced apparel workers.”

Bivens brief is a primer that should be read by national lawmakers and especially by the Presidential candidates being fed simplistic (and wrong) economic advice.


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