Robert Reich: America is Doomed!

My new BFF Robert Reich:
The only way many of today's jobless are likely to retain their jobs [???] or get new ones is by settling for much lower wages and benefits. The official unemployment numbers hide the extent to which American workers are already on this downward path. But if you look at income data you'll see the drop.

Among those with jobs, more and more have accepted lower pay and benefits as a condition for keeping them. Or they have lost higher-paying jobs and are now in new ones that pay less. Or new hires are paid far lower wages than the old. (In January, Ford Motor Co. announced that it would add 1,200 jobs at its Chicago assembly plant but didn't trumpet that the new workers will be paid half of what current workers were paid when they began.) Or they have become consultants or temporary workers whose pay is unsteady and benefits nonexistent.

This shift also helps explain why the unemployment rate for Americans with college degrees is now only 5%, while it is 10.5% for those with only a high-school degree, and 15.6% for Americans with less than a high-school diploma. The jobs of well-educated Americans, although hardly immune to foreign outsourcing and technological displacement, have been less vulnerable to these trends than the jobs of Americans with fewer years of education.

The likelihood, therefore, is that as the economy struggles to recover and today's jobless begin to find work, the median wage will continue to fall—as it did between 2001 and 2007, during the last so-called recovery.

More Americans will be working, but for pay they consider inadequate. The approaching recovery will be tepid because so many people will lack the money needed to buy all the goods and services the economy can produce.

Americans will once again be employed, but they will also be back on the downward escalator of declining pay they rode before the Great Recession.

Despite the oxymoron in the first sentence, Reich is right. There are far too many jobless and wages are still too high. Wage deflation is likely inevitable, but it would be a lot more tolerable if Obama and Bernanke weren't hell-bent on creating housing, food, and energy inflation.


angryfutureexpat said...

If you're going to do inflation, you need to do it the right way, otherwise it's just an economically ineffective jerk off and another way to transfer wealth from the middle class to the connected classes.

The dwarf speaks the truth.

W.C. Varones said...

How do you do it the right way, though?

How do you cause wage inflation without causing food and energy inflation?

I think it's impossible for the Dirty Fed to do. The Dirty Fed will only cause more asset bubbles and misery.

Perhaps the government should change the tax structure to penalize 2-income families. If you pressure 1/2 the population to drop out of the workforce, that would help with the excess labor supply.

Dean said...

I'm thinking that the first sentence is actually a condemnation of minimum wage laws, whether Reich realizes it or not.

FrackWit said...

...and remember, kids, that there's only inflation if you have to eat, drive anywhere, or use electricity or heating oil.

angryfutureexpat said...

A money financed tax cut, or tax credit.

Traditional monetary policy won't work in this type of environment because the "inflation" isn't being passed through in the form of wages (or small business profits - pretty much the same thing), which is what needs to happen if we're trying to inflate away debt. You need to simply give people money. Here are a couple post about inflation done right.



W.C. Varones said...

Good idea. Print a trillion dollars and send it out as tax refunds.

Much better idea than the $700+ billion porkulus bill that didn't reach the people and was borrowed, not printed.

You'd probably have to get rid of the Dirty Fed as they don't have the mechanism or the will to do it. Congress would actually have to go back to its Constitutional duty to control the money supply:

Section 8 - Powers of Congress

[...] To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

Now I don't see where it says to create a Dirty Fed and let them blow bubbles to enrich Goldman Sachs, but maybe that's one of those "penumbras."

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