"Not Really Labor’s Day"

Economist Nancy Folbre @ NYT's Economix:

The annual holiday supposedly celebrating labor has long lacked much celebratory feel. Over the last 30 years, employment has become more precarious and real wages for most workers have stagnated. Since 2008, in particular, the corrosive impact of persistent unemployment and declining wages on American workers has been felt at holiday picnics and parades.

The seasonally adjusted July unemployment rate of 7.4 percent showed a slight decline from last year’s 8.2 percent, but the gains came largely as a result of declining labor force participation rather than job creation.

The larger measure of underemployment (known as U-6) that includes people working part time because they cannot find full-time work, and those who want a job and have looked for one in the last 12 months but have given up currently looking, was a seasonally adjusted 14 percent in July, compared with 14.9 percent a year earlier.

Public policies could help. As Jared Bernstein explained in an earlier Economix post, the federal government could become an employer of last resort. A new report from the Urban Institute outlines several specific strategies to lower long-term unemployment in particular.

Why is there so little political will to put such policies in place?

Republicans in the House of Representatives continue to staunchly oppose public efforts to reduce unemployment, repeating their assertion that government policies themselves are the primary cause of the problem. Earlier this summer 30 of them even co-sponsored a bill that would strike the goal of encouraging “maximum employment” from the mission of the Board of Governors of the Federal Reserve.

It may not seem like a winning strategy for a party that hopes to gain the votes of the white working-class voters who have registered increased dissatisfaction with the Obama administration. Less-educated workers have been particularly hard hit by persistently high unemployment and declining wages. The hands-off approach should also concern many businesses hurt by the slow growth of consumer demand, a direct result of unemployment and wage stagnation.

But Republicans seem to have immunized themselves against political pressure to reduce unemployment in a variety of ways. They have used concern about a rise in government debt largely caused by conservative economic policies as a bludgeon to pursue their longstanding goal of drastically reducing government social spending. They have perfected a partisan strategy of political stalemate to create a self-fulfilling prophecy of legislative dysfunction. They have deployed a divide-and-conquer strategy aimed at portraying both unionized and public sector workers as enemies of all other wage earners. They have blamed the unemployed for their own joblessness.

They may also have benefited from an unemployment rate high enough to cause tremendous, concentrated pain but not quite high enough to anger a significant share of the electorate. With increased economic vulnerability, voters become anxious, frustrated and defensive, more worried that taxpayer money spent to help reduce unemployment will simply reduce their own disposable income.

Most important, however, major campaign contributors for both Republicans and Democrats have benefited from a sharp increase in profits as a share of corporate income, which is partly a result of high unemployment rates.

In the classical terminology of Marx, a large reserve army of labor reduces both the individual and the collective bargaining power of workers, enabling capital to take a bigger piece of the economic pie. The Economic Policy Institute estimates that between 2007 and 2012, wages fell for the lowest 70 percent of all wage earners, despite productivity growth of 7.7 percent.

Those at the top of the income distribution have captured the gains of so-called economic recovery. In an article published in the latest Journal of Economic Perspectives, Josh Bivens and Lawrence Mishel assert persuasively that this shift reflects the successful “rent-seeking” or economic bargaining power of corporate executives and financial professionals.

The lack of any fiscal stimulus aimed at lowering unemployment has contributed to this trend. Ironically, the Federal Reserve’s policy of quantitative easing to stimulate the economy and lower unemployment – which some Republicans tried unsuccessfully to outlaw — has probably also benefited those at the top more than those at the bottom.

Lower interest rates have driven up the price of stocks, but left those dependent on less risky sources of investment income (such as savings accounts and bonds) stranded with low returns.

Today is officially Labor Day. But all the days in the year are now, unofficially, Capital Days.