everyone benefits from the big economic boom

[Eaglebauer]

http://thinkprogress.org

New Census Report: Uninsured Up, Real Income Down For Men and Women, Poverty Unchanged

This morning, the Census Bureau released new figures about health insurance, income, and poverty. It’s not a pretty picture.

The number of Americans without health insurance continues to rise at an alarming rate, men and women are earning less money and there are as many people living in poverty as there have ever been. Some key stats:

– In 2005, 46.6 million people were without health insurance coverage, up from 45.3 million people in 2004.

– The percentage of people without health insurance coverage increased from 15.6 percent in 2004 to 15.9 percent in 2005.

– For full-tim, year round workers, the median earnings of men declined 1.8 percent to $41,386, and the median earnings of women declined 1.3 percent to $31,858.

– In 2005, 37.0 million people were in poverty, not statistically different from 2004.

This helps explain why just 32% of Americans approve of Bush’s handling of the economy. Just 22% believe the economy is getting better, “the lowest level of public confidence in the direction of the economy seen in five years.”

http://www.galluppoll.com/content/?ci=24100

August 14, 2006

Consumer Optimism Slumps Further
by Lydia Saad

A new Gallup poll finds Americans' already gloomy outlook on the economy souring further, with a six-point drop to 22% in the belief that the economy is getting better. This is the lowest level of public confidence in the direction of the economy seen in five years, although it came close to this level last fall.

http://www.americanprogressaction.org/

WORKING HARDER, EARNING LESS: "Wages and salaries now make up the lowest share of the nation’s gross domestic product since the government began recording the data in 1947." A majority of today's workers say the number one issue they face is that the wages they are paid are not keeping up with the cost of living. Aug. 20th marked 10 years since the last time the federal minimum wage has been raised. Frozen at an unlivable $5.15/hour, the minimum wage is at the lowest buying power it has been in 51 years. Workers earning above the minimum wage are struggling as well. According to AFL-CIO President John Sweeney, "Real median earnings for men working full-time and year-round were lower in 2005 than in 1973. In inflation-adjusted 2005 dollars, a typical man working full-time in 1973 earned $42,573. Thirty-six years later, this figure has fallen to $41,386." Yet, productivity -- as President Bush likes to frequently point out -- remains high. "What jumps out at you is the gaping hole between productivity growth and earnings," said Jared Bernstein, an economist at the Economic Policy Institute (EPI). People are "working harder and smarter but not really seeing remuneration that they ought to be seeing." The wage crunch isn't affecting the entire labor force, however. The top one percent of earners -- including many corporate CEOs -- received 11.2 percent of all wage income in 2004, up from 8.7 percent a decade earlier and less than six percent three decades ago.

SICK ABOUT HEALTH CARE: According to new Census data released this week, the number of people living in the United States without medical insurance rose 2.9 percent -- 1.3 million people -- to a record 46.6 million over the last year alone as health-care costs climbed three times as fast as wages. The statistics indicate 6.8 million people have lost coverage since 2001, and this total has climbed every year since Bush has been in office. The Census Bureau also reports the percentage of uninsured children rose from 10.8 percent in 2004 to 11.2 percent in 2005 due to state budget struggles. This reverses a trend that started in 1998 of declining uninsured rates for children. "Due to the rising cost of health care and health-care insurance, you see a continued decline in workers accepting coverage when it's offered and employers offering it," said Emory University Professor Ken Thorpe. Indeed, three million people have lost employer-based insurance, while the rate of uninsured, full-time workers has increased by 13 percent since 2000. The bottom line is sadly simple: "Uninsured workers can't afford to get sick." Ultimately, this is a moral question -- it is wrong for anyone who works hard and plays by the rules to go without health coverage. "People who don't have coverage, can't afford preventive care, and don't see a doctor until a disease has progressed often suffer needlessly, drive up the cost of care, and lower the nation's productivity."

The Christian Science Monitor

Opposite ends of the labor market face opposite problems

Rising efficiency and technology are adding work for highly paid professionals while taking it away from low-skill employees.

By Mark Trumbull | Staff writer of The Christian Science Monitor

As Americans head away for Labor Day weekend, two extremes of the labor force are crying out for help.

Millions, often among the economy's most successful professionals, say they feel overworked while millions more, particularly among low-skilled workers, are starved for a paycheck or more work hours.


Experts say the two ends of the labor market are in fact the Janus faces of the same economic force. A higher level of economic efficiency is playing differently at the furthest points of the labor spectrum. With the help of improved technology, employers have grown adept at coaxing the most from their workers by monitoring productivity, basing pay on performance, and keeping the BlackBerry crowd connected to the workplace around the clock. The forces of globalization and technology, however, have made it harder for many workers with less education to find good jobs.

"We are in a watershed time in our economy, where technology has transformed how we work, [and] globalization is changing the rules of the game for low-skilled, semiskilled workers," says John Challenger, an expert on workplace trends with the outplacement firm Challenger, Gray & Christmas in Chicago.

Labor market stress reveals inequality

The good news is that the ranks of the underemployed tend to drop as an economic expansion gathers momentum - and that's been the case for several years.

In fact, the unemployment rate is lower now than it was a decade ago - at a similar point during the long expansion of the 1990s. Many economists say that for all its strains and stresses, the US economy offers greater opportunities for workers now than ever.

But as Labor Day arrives, the pace of economic growth appears to be slowing. And some economists worry that, despite a low official unemployment rate, the share of the population that's employed remains lower than it ought to be.

In a labor force of 152 million, 7.2 million are officially unemployed and searching. Another 4.1 million are working shorter hours than they want. Still another 4.9 million would like to be working but aren't even counted in the labor force because they have stopped looking for a job.

"I've been turned down so much I hardly go looking now," says Shakeem Allah, a young black man who says his race is a major obstacle to employment.

It's midday in downtown Boston, and he's on a break from volunteer work trying to help African-American teens steer clear of gang activity. That goes on his résumé.

A few blocks away, Margaret Minister O'Keefe has a job that keeps her plenty busy. An attorney specializing in intellectual property rights, she's navigating a day of meetings in Boston after helping her two young children start a new year of school.

"Sometimes it can be overwhelming," says Ms. O'Keefe. That's a sentiment shared to some degree by nearly half of all workers, according to one new survey in which a representative sample of employed Americans were polled.

In the survey, conducted for human-resources firm Kronos Inc., 49 percent said work affects their personal life by making them "feel overtired and overwhelmed." Twenty-two percent said they had difficulty balancing work and personal responsibilities.

Meanwhile, for all their concerns, 71 percent say they are generally satisfied with their employer. Even though they would like to have higher pay or more help managing their workload, they often feel their jobs are rewarding.

For O'Keefe, the balancing act has improved a lot since she and her husband moved from Washington to Portland, Maine, several years ago. She left behind 70-hour workweeks. Now with a more family-friendly firm, she says the workload is still demanding but much more manageable.

Yet in juggling family life, she says she often works at home both early in the morning and at night after her son and daughter are in bed.

She's not sure if people are really working more than they used to. Indeed, some economic research suggests that people have as much leisure time as ever. But millions of Americans are clearly feeling the strains of an economy that puts a premium on worker productivity.

One symptom: The regular pay raise is giving way to more compensation in the form of bonuses and other merit-linked rewards.

"Pay for performance now dominates how people are paid," says Mr. Challenger, the labor expert. There's more weeding out of people who don't work as hard, he says, as companies focus on measuring ability "every which way."

Perspiration giving way to inspiration

All this adds to the long-term trend that an increasingly knowledge-based economy benefits those with more education.

The unemployment rate for those with a bachelor's degree is now 2.3 percent, versus 6.7 percent for those with less than a high school diploma.

Among the groups with the greatest challenges: African American males and former blue-collar workers whose jobs have shifted overseas.

Workers losing automotive assembly jobs, for instance, have a hard time finding work that replaces the middle-class wages that their union helped win.

Sometimes, they can afford to wait on the sidelines, relying on a spouse's income or personal savings. But economists say that many discouraged job seekers will eventually be forced back into the official labor market.

Both the "overworkers" and the "underworkers" are part of an economy that has seen productivity rise much faster than worker compensation.

"What jumps out at you is the gaping hole between productivity growth and earnings," says Jared Bernstein, an economist at the Economic Policy Institute in Washington. People are "working harder and smarter but not really seeing remuneration that they ought to be seeing."

Americans Without Health Benefits May Have Set Record in 2005

By Matthew Benjamin and Kerry Young

Aug. 29 (Bloomberg) -- The number of Americans without health insurance probably rose to a record in 2005 as medical costs increased three times as fast as wages, according to forecasts for a Census Bureau report today.

The total has climbed every year since President George W. Bush took office, a point Democrats are likely to seize on in this year's congressional election. In February Bush called the 45.8 million who didn't have insurance in 2004 ``unacceptable in our country.'' Emory University Professor Ken Thorpe in Atlanta says Bush has done little to help these people.

``We've had absolutely no federal effort or interest in insuring the uninsured since 2000,'' said Thorpe, who was deputy assistant secretary for policy at the Department of Health and Human Services from 1993 to 1995. ``This has not been a priority of the Bush administration.''

The government also will probably report that the percentage of Americans living in poverty dropped after reaching a six-year high in 2004, said Bob Greenstein, executive director of the Center for Budget and Policy Priorities in Washington.

Median household income probably rose from 2004's $44,389, Greenstein said. The news on income and poverty reflects economic growth, economists say. The U.S. economy expanded 3.2 percent and added 2 million jobs in 2005.

``Every year as you move away from a recession, you expect the growth of the poverty rate to slow and eventually reverse,'' says Austin Nichols, an expert on child poverty at the Urban Institute in Washington.

Hubbard's Challenge

Al Hubbard, Bush's top economic adviser, in March called misleading the Census Bureau's 2004 estimate of the number of people without insurance. Of the almost 46 million, about 8 million don't have access to insurance, he said, while 15 million others would qualify for the state-federal Medicaid insurance program for the poor, and others are illegal immigrants.

Without having seen the 2005 numbers, Hubbard stands by his statement on the 2004 figures, White House spokeswoman Emily Lawrimore said yesterday.

Harvard University researcher Robert Blendon and Uwe Reinhardt, a professor of health economics at Princeton University, said the number of people without health insurance probably rose. The 2004 total was almost one in six Americans. Surging costs are keeping the number from falling as the economy expands, health-policy researchers say.

The average expense of providing medical care for a family of four rose 9.6 percent to $13,382 this year, according to a survey by the Seattle-based Milliman consulting group. The cost of insurance bought through an employer increased 9.2 percent in 2005, according to the Henry J. Kaiser Family Foundation in Menlo Park, California, as average hourly earnings climbed 3.2 percent.

``Due to the rising cost of health care and health-care insurance, you see a continued decline in workers accepting coverage when it's offered and employers offering it,'' Emory's Thorpe says.

Health Savings Accounts

Bush's attempt to expand coverage through tax-advantaged health-savings accounts helped the middle class more than the poor, researchers say. The number of uninsured Americans fell by 5.6 million during the final two years of the Clinton administration to 38.7 million in 2000.

``The media and Democrats are waiting for this kind of information, and they'll use it'' in the elections, says David Mayhew, a congressional scholar at Yale University in New Haven, Connecticut.

The Republicans now hold 231 seats in the House of Representatives, where all 435 seats are up for election this year. Republicans have 55 seats in the Senate, where a third of the 100 seats are being contested.

Massachusetts Plan

Frustrated by the lack of federal leadership on health care, states have jumped ahead and moved toward making sure all citizens have health insurance, said Marty Sellers, a Philadelphia-based consultant who advised Massachusetts Governor Mitt Romney in designing his state's program.

Massachusetts passed the nation's first law requiring all adults to have health insurance by July 1, 2007. Vermont, Illinois and Rhode Island are considering similar plans.

The fight to get more Americans insured this year united the U.S. Chamber of Commerce, representing 3 million businesses, with some of the biggest unions, the AFL-CIO and the Service Employees International Union. The organizations joined the American Medical Association and dozens of religious and nonprofit groups in a May ``Cover the Uninsured Week'' campaign.

Susan Squire of Warren, Michigan, was among the thousands of people who participated in events staged across the U.S. Squire filed for bankruptcy in October because of $91,000 in medical bills from a January 2005 heart attack and subsequent surgery.

`Daily Threats'

``I paid some off. I paid some down. I was trying to pay them off one by one,'' Squire said in an interview. ``Some went along with me, but the bulk of them did not. They started with the daily calls, the daily notices, the daily threats.''

Squire, who was making about $21,000 a year with part-time bookkeeping work, has less clout to negotiate discounts as an individual. More than half of Americans get medical coverage through plans bought by employers, which contract with insurance companies to work out prices with hospitals and doctors.

More Americans without health insurance in 2005
'
Census Bureau: More than 46 million lack coverage as employers cut back

By Kristen Gerencher, MarketWatch
Aug 29, 2006


SAN FRANCISCO (MarketWatch) -- Even though the number of Americans living in poverty leveled off last year, the number of those without health insurance rose to more than 46 million in 2005, the U.S. Census Bureau said Tuesday.
Because of population growth, both the number of people without health insurance and the number of those with coverage grew between 2004 and 2005.
The number of Americans without health insurance for those full 12 months rose by 1.3 million to 46.6 million, according to the survey of 100,000 households. The percentage of people without it increased to 15.9% last year from 15.6% in 2004.
At the same time, the number who had coverage for the entire year increased by 1.4 million to 247.3 million in 2005. But the rise wasn't enough to keep the percentage with insurance from falling to 84.1% from 84.4% during that period. The nation's population expanded to 293.8 million last year from 291.2 million in 2004, according to Census estimates.
Of particular concern is the continued erosion of employer-sponsored insurance and an uptick in the number of uninsured children, some health-care analysts said. The portion of Americans covered by job-based coverage slipped to 59.5% from 59.8% in 2004. Employer-based insurance makes up the largest share, covering 174.8 million people.
Strained government programs such as Medicaid and the State Children's Health Insurance Program (S-CHIP) and fewer job-based benefits that include family dependents contributed to a rise in the number of uninsured children, said Kathleen Stoll, health policy director for Families USA, a health-care advocacy group in Washington.
"The problem is employer-based programs are becoming harder to come by and the public programs aren't filling in those gaps," Stoll said.
Financing for Medicaid and S-CHIP has grown more difficult, and eligibility standards and paperwork burdens on enrollees vary from state to state, she said.
"As states struggle with their budgets, they're implementing policies that make it harder for kids to get and stay enrolled," Stoll said. "That's a big concern."
The portion of people with public health insurance held steady at 27.3%, though the number in government programs increased to 80.2 million last year from 79.4 million, according to the survey. There was no statistical difference in the number or percentage of people covered by Medicaid -- 38.1 million or 13% -- between 2004 and 2005.
Separately, the number of uninsured children increased to 8.3 million from 7.9 million, or to 11.2% from 10.8%.
Tracking trends
"It's clear to me that this growing number of uninsured Americans is bankrupting America, both in the pocketbook and in health," said Dr. Georges Benjamin, executive director of the American Public Health Association, a nonprofit advocacy group in Washington.
People who don't have coverage, can't afford preventive care and don't see a doctor until a disease has progressed often suffer needlessly, drive up the cost of care and lower the nation's productivity, he said.
"If you consider health to be a currency, people are not getting enough of it," Benjamin said. "We're letting people get sick because we're not taking care of them when we can do something for them, and do something for them in an economical manner."
The number of uninsured has risen every year but one since 2001, according to Census data.
Beginning in 1987 when the uninsured rate was 12.9%, the rate had a 12-year run of either increasing or not registering a statistically significant change. It peaked at 16.3% in 1998 before falling for two years in a row to 14.2% in 2000, when the job market was booming. The uninsured rate then rose until 2003-2004, where it remained at 15.6% before rising to 15.9% last year.
Generally, the uninsured were more likely to be non-white and immigrants. About 72% of the uninsured age 18 to 64 worked either full or part time, according to the survey.
There were geographic differences as well. The Midwest and Northeast had the lowest uninsured rates in 2005, at 11.9% and 12.3% respectively. The rate for those in the South was 18.6% last year and it was 18.1% in the West. Using a three-year average, the survey found that Texas had the highest percentage of uninsured at 24.6%, while Minnesota had the lowest at 8.7%.
The problem of finding and keeping health coverage isn't just an issue for the 46.6 million uninsured but for everyone who has health insurance and watches the costs of uncompensated care get passed onto them, Stoll said.
"When people are uninsured they do still get sick and go to the hospital," she said. "The cost of that care for the uninsured is shifted by the hospital to what they charge insurance companies and the insurance companies shift it to us."
The uninsured rate and more middle and lower-income workers' growing inability to afford coverage are themes likely to resonate with voters, Benjamin said. "Maybe it won't happen by November of this year but it very well could happen...by the presidential election."

Real Wages Fail to Match a Rise in Productivity


By STEVEN GREENHOUSE and DAVID LEONHARDT
August 28, 2006

With the economy beginning to slow, the current expansion has a chance to become the first sustained period of economic growth since World War II that fails to offer a prolonged increase in real wages for most workers.


Chart: Not Sharing in the Gains That situation is adding to fears among Republicans that the economy will hurt vulnerable incumbents in this year’s midterm elections even though overall growth has been healthy for much of the last five years.

The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity — the amount that an average worker produces in an hour and the basic wellspring of a nation’s living standards — has risen steadily over the same period.

As a result, wages and salaries now make up the lowest share of the nation’s gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960’s. UBS, the investment bank, recently described the current period as “the golden era of profitability.”

Until the last year, stagnating wages were somewhat offset by the rising value of benefits, especially health insurance, which caused overall compensation for most Americans to continue increasing. Since last summer, however, the value of workers’ benefits has also failed to keep pace with inflation, according to government data.

At the very top of the income spectrum, many workers have continued to receive raises that outpace inflation, and the gains have been large enough to keep average income and consumer spending rising.

In a speech on Friday, Ben S. Bernanke, the Federal Reserve chairman, did not specifically discuss wages, but he warned that the unequal distribution of the economy’s spoils could derail the trade liberalization of recent decades. Because recent economic changes “threaten the livelihoods of some workers and the profits of some firms,” Mr. Bernanke said, policy makers must try “to ensure that the benefits of global economic integration are sufficiently widely shared.”

Political analysts are divided over how much the wage trends will help Democrats this fall in their effort to take control of the House and, in a bigger stretch, the Senate. Some see parallels to watershed political years like 1980, 1992 and 1994, when wage growth fell behind inflation, party alignments shifted and dozens of incumbents were thrown out of office.

“It’s a dangerous time for any party to have control of the federal government — the presidency, the Senate and the House,” said Charles Cook, who publishes a nonpartisan political newsletter. “It all feeds into ‘it’s a time for a change’ sentiment. It’s a highly combustible mixture.”

But others say that war in Iraq and terrorism, not the economy, will dominate the campaign and that Democrats have yet to offer an economic vision that appeals to voters.

“National economic policies are more clearly in focus in presidential campaigns,” said Richard T. Curtin, director of the University of Michigan’s consumer surveys. “When you’re electing your local House members, you don’t debate that on those issues as much.”

Moreover, polls show that Americans are less dissatisfied with the economy than they were in the early 1980’s or early 90’s. Rising house and stock values have lifted the net worth of many families over the last few years, and interest rates remain fairly low.

But polls show that Americans disapprove of President Bush’s handling of the economy by wide margins and that anxiety about the future is growing. Earlier this month, the University of Michigan reported that consumer confidence had fallen sharply in recent months, with people’s expectations for the future now as downbeat as they were in 1992 and 1993, when the job market had not yet recovered from a recession.

“Some people who aren’t partisans say, ‘Yes, the economy’s pretty good, so why are people so agitated and anxious?’ ” said Frank Luntz, a Republican campaign consultant. “The answer is they don’t feel it in their weekly paychecks.”

But Mr. Luntz predicted that the economic mood would not do significant damage to Republicans this fall because voters blamed corporate America, not the government, for their problems.

Economists offer various reasons for the stagnation of wages. Although the economy continues to add jobs, global trade, immigration, layoffs and technology — as well as the insecurity caused by them — appear to have eroded workers’ bargaining power.

Trade unions are much weaker than they once were, while the buying power of the minimum wage is at a 50-year low. And health care is far more expensive than it was a decade ago, causing companies to spend more on benefits at the expense of wages.


Together, these forces have caused a growing share of the economy to go to companies instead of workers’ paychecks. In the first quarter of 2006, wages and salaries represented 45 percent of gross domestic product, down from almost 50 percent in the first quarter of 2001 and a record 53.6 percent in the first quarter of 1970, according to the Commerce Department. Each percentage point now equals about $132 billion.

Over the last year, the value of employee benefits has risen only 3.4 percent, while inflation has exceeded 4 percent, according to the Labor Department.

In Europe and Japan, the profit share of economic output is also at or near record levels, noted Larry Hatheway, chief economist for UBS Investment Bank, who said that this highlighted the pressures of globalization on wages. Many Americans, be they apparel workers or software programmers, are facing more comptition from China and India.

In another recent report on the boom in profits, economists at Goldman Sachs wrote, “The most important contributor to higher profit margins over the past five years has been a decline in labor’s share of national income.” Low interest rates and the moderate cost of capital goods, like computers, have also played a role, though economists note that an economic slowdown could hurt profits in coming months.

For most of the last century, wages and productivity — the key measure of the economy’s efficiency — have risen together, increasing rapidly through the 1950’s and 60’s and far more slowly in the 1970’s and 80’s.

But in recent years, the productivity gains have continued while the pay increases have not kept up. Worker productivity rose 16.6 percent from 2000 to 2005, while total compensation for the median worker rose 7.2 percent, according to Labor Department statistics analyzed by the Economic Policy Institute, a liberal research group. Benefits accounted for most of the increase.

“If I had to sum it up,” said Jared Bernstein, a senior economist at the institute, “it comes down to bargaining power and the lack of ability of many in the work force to claim their fair share of growth.”

Nominal wages have accelerated in the last year, but the spike in oil costs has eaten up the gains. Now the job market appears to be weakening, after a protracted series of interest-rate increases by the Federal Reserve.

Unless these trends reverse, the current expansion may lack even an extended period of modest wage growth like one that occurred in the mid-1980’s.

The most recent recession ended in late 2001. Hourly wages continued to rise in 2002 and peaked in early 2003, largely on the lingering strength of the 1990’s boom.

Average family income, adjusted for inflation, has continued to advance at a good clip, a fact Mr. Bush has cited when speaking about the economy. But these gains are a result mainly of increases at the top of the income spectrum that pull up the overall numbers. Even for workers at the 90th percentile of earners — making about $80,000 a year — inflation has outpaced their pay increases over the last three years, according to the Labor Department.

“There are two economies out there,” Mr. Cook, the political analyst, said. “One has been just white hot, going great guns. Those are the people who have benefited from globalization, technology, greater productivity and higher corporate earnings.

“And then there’s the working stiffs,’’ he added, “who just don’t feel like they’re getting ahead despite the fact that they’re working very hard. And there are a lot more people in that group than the other group.”

In 2004, the top 1 percent of earners — a group that includes many chief executives — received 11.2 percent of all wage income, up from 8.7 percent a decade earlier and less than 6 percent three decades ago, according to Emmanuel Saez and Thomas Piketty, economists who analyzed the tax data.

With the midterm campaign expected to heat up after Labor Day, Democrats are saying that they will help workers by making health care more affordable and lifting the minimum wage. Democrats have criticized Republicans for passing tax cuts mainly benefiting high-income families at a time when most families are failing to keep up.

Republicans counter that the tax cuts passed during Mr. Bush’s first term helped lifted the economy out of recession. Unless the cuts are extended, a move many Democrats oppose, the economy will suffer, and so will wages, Republicans say.

But in a sign that Republicans may be growing concerned about the public’s mood, the new Treasury secretary, Henry M. Paulson Jr., adopted a somewhat different tone from Mr. Bush in his first major speech, delivered early this month.

“Many aren’t seeing significant increases in their take-home pay,” Mr. Paulson said. “Their increases in wages are being eaten up by high energy prices and rising health care costs, among others.”

At the same time, he said that the Bush administration was not responsible for the situation, pointing out that inequality had been increasing for many years. “It is neither fair nor useful,” Mr. Paulson said, “to blame any political party.”

http://ezraklein.typepad.com/blog/2006/08/objectively_ant.html

My boss Bob Kuttner has some good things to say on the subject:

The system is now essentially rigged so that workers' productivity can rise, but workers' incomes can't. A study prepared last month for Democrats on the House Financial Services Committee and released by Representative Barney Frank of Newton showed that since 2002 annual productivity growth has averaged more than 3 percent, while real wage increases have been under half of 1 percent. Corporate profits, meanwhile, have risen from 8.5 percent to 14.4 percent of national income.

Whenever wages show signs of rising with productivity, the Federal Reserve whacks them back down. It shows no such concern about corporate profits being excessive. Until this month, when the Federal Reserve announced a "pause" in rate hikes, our central bank had hiked interest rates 17 times since June 2004, citing fears of inflation, mainly in rising labor costs. But note the sleight of hand. If workers' wages are lagging well behind workers' increased productivity, then rising wages are not a source of inflation.

As the kids say: Word. The Fed's abject terror of wage growth is a rather unhelpful hangover from the stagflation era. But, in the same way that economists kept trying to deal with the problems of yesteryear then, they're missing the relevant economic issues now. This society is in no danger of paying its workers too much, or seeing their salaries increase too rapidly. Quite the opposite, in fact. We're facing down unheralded inequality, and the Federal Reserve can't pull its head out of 1978 for long enough to realize the middle class is evaporating, profits are amassing in a grotesquely disproportionate fashion, and America's workers -- particularly in a labor market this tight -- need a serious raise that isn't cut apart by rate hikes.

http://www.epi.org

June 12, 2006

What's wrong with the economy?

Income and wages are down, debt is way up, and poverty is on the rise to name a few things.

by EPI President Lawrence Mishel and Policy Director Ross Eisenbrey

1. Profits are up, but the wages and incomes of average Americans are down.

Inflation-adjusted hourly and weekly wages are below where they were at the start of the recovery in November 2001. Yet, productivity—the growth of the economic pie—is up by 14.7%.1 (Figure A)

Wage growth has been shortchanged because 46% of the growth of total income in the corporate sector has been distributed as corporate profits, far more than the 20% in previous periods.2

Consequently, median household income (inflation-adjusted) has fallen five years in a row and was 4% lower in 2004 than in 1999, falling from $46,129 to $44,389.3




2. More and more people are deeper and deeper in debt.

The indebtedness of U.S. households, after adjusting for inflation, has risen 42.0% over the last five years. 4

The level of debt as a percent of after-tax income is the highest ever measured in our history. Mortgage and consumer debt is now 120% of after-tax income, more than twice the level of 30 years ago.5

The debt-service ratio (the percent of after-tax income that goes to pay off debts) is at an all-time high of 13.9%.6

The personal savings rate is negative for the first time since the Depression.7

3. Job creation has not kept up with population growth, and the employment rate has fallen sharply.

The United States has only 1.9% more jobs today than in March 2001 (the start of the last recession). Private sector jobs are up only 1.5%. At this stage of previous business cycles, jobs had grown by an average of 8.8% and never less than 6.0%.8

The unemployment rate is relatively low at 4.6%. But the percent of the population that has a job has never recovered since the recession and is still 1.3% lower than in March 2001. If the employment rate had returned to pre-recession levels, almost 4 million more people would be employed.9

More than 3 million manufacturing jobs have been lost since 2000.10

4. Poverty is on the rise.

The poverty rate rose from 11.3% in 2000 to 12.7% in 2004.11
The number of people living in poverty has increased by 5.4 million since 2000.12

More children are living in poverty: the child poverty rate increased from 16.2% in 2000 to 17.8% in 2004.13

5. Rising health care costs are eroding families' already declining income.

Households are spending more on health care. Family health costs rose 43-45% for married couples with children, single mothers, and young singles from 2000 to 2003.14

Employers are cutting back on health insurance. Last year, the percent of people with employer-provided health insurance fell for the fourth year in a row. Nearly 3.7 million fewer people had employer-provided insurance in 2004 than in 2000. Taking population growth into account, 11 million more people would have had employer-provided health insurance in 2004 if the coverage rate had remained at the 2000 level.15


SOURCES

1. Bureau of Labor Statistics, Current Employment Statistics Survey. 2006 http://www.bls.gov/ces/home.htm. BLS, Labor Productivity and Costs. 2006. http://www.bls.gov/lpc/home.htm. Productivity is non-farm business output per hour.

2. Bureau of Economic Analysis. 2006. NIPA Table 1.14. http://www.bea.gov/bea/dn/nipaweb/index.asp.

3. U.S. Census Bureau. Income, Poverty, and Health Insurance Coverage in the United States. 2004. http://www.census.gov/hhes/www/income/income.html.

4. Federal Reserve. 2006. Flow of Funds Accounts, balance sheet tables: total household liabilities. http://www.federalreserve.gov/releases/z1/. Deflated using CPI-U from the Bureau of Labor Statistics.

5. For disposable income: Bureau of Economic Analysis, NIPA Table 2.1. 2006. For mortgage and consumer debt: Federal Reserve Flow of Funds Accounts, balance sheet tables. 2006. http://www.federalreserve.gov/releases/z1/.

6. Federal Reserve. 2006. http://www.federalreserve.gov/releases/ ... efault.htm.

7. Bureau of Economic Analysis. 2006. NIPA Table 2.1. http://www.bea.gov/bea/dn/nipaweb/index.asp.

8. Bureau of Labor Statistics, Current Employment Statistics Survey. 2006. (total nonfarm employees and total private employees data.) See also Price, Lee. 2005. The Boom That Wasn't. EPI Briefing Paper #168. http://www.epi.org/content.cfm/bp168.

9. Analysis of Bureau of Labor Statistics data. See also Bernstein, Jared and Lee Price. 2005. An Off-Kilter Expansion. EPI Briefing Paper #164. http://www.epi.org/content.cfm/bp164.

10. Bureau of Labor Statistics, Current Employment Statistics Survey. 2006. http://www.bls.gov/ces/home.htm. See also Bivens, Josh. 2005. "Trade deficits and manufacturing employment." Economic Snapshot. Nov. 20. http://www.epi.org/content.cfm/webfeatu ... s_20051130.

11. U.S. Census Bureau. Income, Poverty, and Health Insurance Coverage in the United States: 2004. http://www.census.gov/hhes/www/income/income.html.

12. U.S. Census Bureau. Income, Poverty, and Health Insurance Coverage in the United States: 2004. http://www.census.gov/hhes/www/income/income.html.

13. U.S. Census Bureau. Income, Poverty, and Health Insurance Coverage in the United States: 2004. http://www.census.gov/hhes/www/income/income.html.

14. Mishel, Lawrence et al. 2004. Less Cash in Their Pockets. EPI Briefing Paper #154. http://www.epi.org/content.cfm/bp154.

15. Mishel, Lawrence et al. 2004. Less Cash in Their Pockets. EPI Briefing Paper #154. http://www.epi.org/content.cfm/bp154.

Rising economic tide fails to lift poor, middle class
Wed Aug 30, 7:33 AM ET



There's an old saying that "a rising tide lifts all boats." Popularized by President John F. Kennedy, it generally refers to how a growing economy benefits everyone.


These days, however, it might need to be revised to say: "A rising tide lifts all yachts." Or perhaps it should be retired entirely, because it no longer appears to be accurate.


That's the inescapable conclusion from Tuesday's Census Bureau report on poverty. Some 37 million Americans lived below the poverty line ($19,971 for a family of four) in 2005 - that's 4 million more than at the height of the last recession, in 2001.


The same report showed that the median annual income of $46,326 was essentially unchanged from where it was in 2001, and that the ranks of those without health insurance, now at 46.6 million, continue to grow.


What makes the numbers so troubling is that they come four years into an economic recovery that by other measures has been robust. From 2001 to 2005, the gross output of the economy increased by about 12% above the rate of inflation, worker productivity surged and corporate profits doubled.


Traditionally, those trends have been the key to lifting living standards for everyone - the cornerstone of a stable, successful society. But not this time. Technological innovation and global competition have hurt wages for low-skilled workers while creating new opportunities for skilled workers.


Indeed, while poverty has been rising, so has the percentage of households making more than $100,000 a year. In 2005, 17.2% of households made six figures. In 1990, just 12% made the inflation-adjusted equivalent.


The poverty numbers and rising income inequality pose troubling political issues. Large segments of society might see little reason to support policies - notably free trade - that promote economic growth. Instead, they could turn to protectionism and to demagogic political leaders more interested in promoting class warfare than in economic expansion. (Me: What politicians has ever promotee class warfare rather than economic expansion?)


So what can be done? Most immediately, the nation needs sweeping health reforms that arrest runaway costs and assure coverage for all, particularly workers forced to choose between health care and other life necessities.


More broadly, the numbers show what a horrible job the nation is doing in providing the education and job skills its citizens need to compete. The principal problem is not that the economy is producing too few good jobs. It is that society is producing too many unskilled workers.


Government is very good at spending money on programs that support key constituencies. Benefit programs, led by Social Security and Medicare, make up more than half of all federal spending.


But government is not very good at investing in the future. If society cannot figure a way for everyone to share in the nation's economic growth, future tides could be shallow indeed.

[Ang]

Any ideas on how to connect all that to the fact that we have millions of undocumented workers in this country? It's real easy to say that the illegal population is taking jobs that Americans don't want, but the fact remains that entry jobs lead to higher pay...and if our legal population doesn't have access to entry jobs, then they don't have access to what comes after with bigger money after experience on the job. But that's just a part of the problem.

We as a nation are going through an era where we buy everything from everywhere else because it is cheaper, and sometimes of higher quality. Our manufacturing base is a total joke and the service industry will not keep up higher wages in this country unless we DO something of value here. We have shipped off many of the middle industries...for example, lumber. We have the raw wood here, send it off to Japan and buy it back as finished wood. We ship off oil, and buy it back after it's refined. We ship off cotton and buy it back after someone in China makes it into a garment that we buy. We assemble car parts from other places into a car, because our steel industry can't compete globally. This has been going on for years, and in some way it's a natural extension of having a global market for finished products, but it is now coming home to roost big time in the fact that the only significant areas that our country is producing new jobs is in the lower end of the salary range or the higher. The middle gets screwed. I have never been a real fan of trade protection, but we have been giving away the farm for so long in this country, and losing ground to other countries that protect their trade, that I'm starting to think it may be a good idea.

And even though our President right now didn't start it all...he damn sure hasn't helped it a bit. If anything, he has helped make it worse.

[BSmack]

And even though our President right now didn't start it all...he damn sure hasn't helped it a bit. If anything, he has helped make it worse.

Of course he hasn't His base wants it that way.