The Long Road to a Decent Economy
To underscore a weeklong initiative by President Obama on behalf of rebuilding the middle class, the latest figures on GDP growth, released Thursday, and on job growth, made public Friday, show just how far from a healthy middle class economy we are.
Revised figures show that GDP growth fell to a rate of just 1.4 percent in the first six months of 2013, even less than last year’s dismal rate of 2.2 percent. These numbers are not enough to create an adequate supply of jobs, much less good jobs, much less wage growth.
And sure enough, when the employment numbers for July were released on Friday, the grim trend was confirmed.
Just 162,000 jobs were added in July, and most of them were relatively low-wage jobs. Average earnings actually fell. At this rate it will take another six years to get unemployment back to pre-2008 levels according to the Economic Policy Institute, and more than a decade according to the Hamilton Project.
The official unemployment rate dropped slightly, from 7.6 to 7.4 percent, but the fine print showed that this nominal gain was the result of more people giving up finding jobs and dropping out of the labor force. The rate of labor force participation fell again. The Labor Department calculates that if these people were part of the official labor force, the true unemployment rate would be 9.4 percent.
Much of the job creation came in a category—“self-employed”—that is often a polite euphemism for unemployed or under-employed. Job creation was concentrated in sectors that most people don’t want to work in—low wage retail, fast food, and leisure/hospitality. Over 60 percent of newly hired women were in these sectors. Average weekly wages declined by just over $3.
President Obama’s proposals for more infrastructure spending, and a “grand bargain” on tax reform to close loopholes and cut rates (which Republicans pronounced dead on arrival) range from benign to dubious. His rhetoric, at least, has undergone an improvement since last year when he was still promoting deficit reduction as a necessary cure.
But we need far more fundamental changes if the economy is to avoid a fate of slow recovery and bad jobs.
The poor rate of recovery can be partly blamed on the sequester—the Congressional Budget Office last year warned that it would cut the growth rate in half, a projection that was right on the money. But it also the result of Obama’s own embrace of premature deficit reduction and the administration’s failure to provide serious debt relief to underwater homeowners or students, or to use the president’s executive power to make sure that any job created by government contracting pays a decent wage.
On the middle class jobs front, the most exciting new trend that in recent weeks is not the President’s Middle-Out tour. It’s the one-day strikes by fast food workers and other workers at government facilities like Union Station and the Reagan World Trade Center, places where government uses independent contractors to pay workers lousy wages.
Notably, the fast food workers who demonstrated for better pay, chanting that nobody can live on $7.25 an hour, were not fired. That itself is a breakthrough. There will be more such strikes and demonstrations.
If we get back to an economy of broadly distributed prosperity, it will be more the result of mobilization on the ground than presidential grand tours. Obama’s backing away from austerity economics helps. It would help even more if his administration enforced the right to unionize and embraced the courage of the workers picketing low wage employers.
Face it; the factory economy of the mid-20th century did not pay good wages because these were inherently high wage jobs. The work paid a living wage because of the efforts of workers to organize unions and government’s enforcement of labor laws.
The economy today is three times as rich, but the riches go to the wrong people. Wall Street’s reward for crashing the entire economy is to take home a larger share of our national wealth than ever. Until government gets back on the side of working people, we can anticipate year after year of weak reports on economic performance.
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