Nobel Prize winning economist Paul Krugman writes:
...we have a severely depressed economy — and that depressed economy is inflicting long-run damage. Every year that goes by with extremely high unemployment increases the chance that many of the long-term unemployed will never come back to the work force, and become a permanent underclass. Every year that there are five times as many people seeking work as there are job openings means that hundreds of thousands of Americans graduating from school are denied the chance to get started on their working lives. And with each passing month we drift closer to a Japanese-style deflationary trap.
Penny-pinching at a time like this isn’t just cruel; it endangers the nation’s future. And it doesn’t even do much to reduce our future debt burden, because stinting on spending now threatens the economic recovery, and with it the hope for rising revenues.
So now is not the time for fiscal austerity.
The rest of the article is linked.
Showing posts with label economic recovery. Show all posts
Showing posts with label economic recovery. Show all posts
Monday, June 21, 2010
Wednesday, November 4, 2009
Declining wages threaten economic recovery
Global growth in real wages slowed dramatically in 2008 as a result of the economic crisis.
Wages are expected to drop even further this year despite some signs of an economic recovery, the International Labour Organization (ILO) reports.
“The continued deterioration of real wages worldwide raises serious questions about the true extent of an economic recovery, especially if government rescue packages are phased out too early. Wage deflation deprives national economies of much needed demand and seriously affects confidence”, said Manuela Tomei, Director, ILO Conditions of Work and Employment Programme and lead author of the study.
Consumption accounts for seventy percent of the U.S. economy and has been the engine of growth for almost thirty years. A continued decline in real wages will further depress consumption at a time when U.S. consumers are already tapped out on credit, business investment is stagnate, unemployment is expected to rise to over 10% and banks remain reluctant to make loans.
If real wages continue to decline economists worry that the 3.5% increase in GDP last quarter, driven by federal stimulus spending including the cash for clunkers program and the homeowners tax credit, will not be sustainable.
In this context Milwaukee County Executive and Republican candidate for Governor Scott Walker's pledge to cut wages if elected would undermine any possibility of economic recovery in Wisconsin.
The ILO adopted a Global Jobs Pact at the International Labour Conference in June that calls for measures to maintain employment and avoid the damaging consequences of deflationary wage spirals and worsening working conditions.
The update of the Global Wage Report says “the picture on wages is likely to get worse in 2009” regardless of other economic indicators suggesting an economic rebound. The report notes that in half of the 35 countries for which figures are available, real monthly wages fell in the first quarter of 2009 compared to their average of 2008, often due to cuts in hours worked.
The current deterioration in wages follows a decade of wage moderation before the global economic crisis. The report says that years of stagnating wages relative to productivity gains – together with growing inequalities – have contributed to the crisis by limiting the ability of many households to increase consumption other than through debt.
“In the future, restoring the link between productivity growth and wage increases is essential for economic and social sustainability. Companies should be able to achieve competitiveness through rising productivity rather than by cutting labour costs, and workers should have sufficient bargaining position to defend their wages. This will go a long way towards addressing income inequalities”, Ms. Tomei said.
The report also concludes that excessive bonuses, unrelated to actual performance, contributed to the crisis by distorting incentives in the financial sector and promoting short-term risk taking.
Wages are expected to drop even further this year despite some signs of an economic recovery, the International Labour Organization (ILO) reports.
“The continued deterioration of real wages worldwide raises serious questions about the true extent of an economic recovery, especially if government rescue packages are phased out too early. Wage deflation deprives national economies of much needed demand and seriously affects confidence”, said Manuela Tomei, Director, ILO Conditions of Work and Employment Programme and lead author of the study.
Consumption accounts for seventy percent of the U.S. economy and has been the engine of growth for almost thirty years. A continued decline in real wages will further depress consumption at a time when U.S. consumers are already tapped out on credit, business investment is stagnate, unemployment is expected to rise to over 10% and banks remain reluctant to make loans.
If real wages continue to decline economists worry that the 3.5% increase in GDP last quarter, driven by federal stimulus spending including the cash for clunkers program and the homeowners tax credit, will not be sustainable.
In this context Milwaukee County Executive and Republican candidate for Governor Scott Walker's pledge to cut wages if elected would undermine any possibility of economic recovery in Wisconsin.
The ILO adopted a Global Jobs Pact at the International Labour Conference in June that calls for measures to maintain employment and avoid the damaging consequences of deflationary wage spirals and worsening working conditions.
The update of the Global Wage Report says “the picture on wages is likely to get worse in 2009” regardless of other economic indicators suggesting an economic rebound. The report notes that in half of the 35 countries for which figures are available, real monthly wages fell in the first quarter of 2009 compared to their average of 2008, often due to cuts in hours worked.
The current deterioration in wages follows a decade of wage moderation before the global economic crisis. The report says that years of stagnating wages relative to productivity gains – together with growing inequalities – have contributed to the crisis by limiting the ability of many households to increase consumption other than through debt.
“In the future, restoring the link between productivity growth and wage increases is essential for economic and social sustainability. Companies should be able to achieve competitiveness through rising productivity rather than by cutting labour costs, and workers should have sufficient bargaining position to defend their wages. This will go a long way towards addressing income inequalities”, Ms. Tomei said.
The report also concludes that excessive bonuses, unrelated to actual performance, contributed to the crisis by distorting incentives in the financial sector and promoting short-term risk taking.
Sunday, September 6, 2009
Economic recovery requires jobs recovery
In an editorial Saturday The New York Times writes that until the economy begins creating jobs (it lost another 216,000 last month) hopes for a recovery will remain little more than hope:
...the only good thing to say about the August jobs report is that it could have been worse. Employers shed another 216,000 jobs last month, a smaller loss than expected and the lowest monthly loss total in a year.
The losses would have been worse had it not been for federal stimulus spending — proof that the government is indeed helping to ease the downturn in its role as the spender of last resort.
Still, the damage to the work force caused by the recession is deep, wide and ongoing. The economy is now coming up short by 9.4 million jobs, including 6.9 million positions that employers have eliminated and 2.5 million jobs that were needed to absorb new workers but were never created.
And unemployment is on the rise, jumping from 9.4 percent in July to 9.7 percent in August. For several demographic groups, the unemployment rate is already in double digits, including men (10.1 percent), Hispanics (13 percent), African-Americans (15.1 percent) and teenagers (25.5 percent). In all, 14.9 million workers are now jobless, of which fully one-third have been out of work for more than six months, the highest level of long-term unemployment by far in any post World War II recession. There are now nearly six workers available for every job opening, up from 1.7 workers per opening when the recession began in December 2007.
Worse, hiring is not expected to rebound anytime soon, even if overall economic growth resumes this year. Employers are likely to fill any additional workloads by adding hours to truncated workweeks and ending worker furloughs. Wage gains, which are always repressed when jobs are scarce and unemployment is high, will be an even longer time coming as employers restore pay cuts put in place during the recession before giving raises.
Without job growth and pay raises, consumer spending will not revive substantially because alternative sources of spending power — home equity and credit cards — are largely tapped out. And without an upsurge in spending, businesses will not add workers, and so on, in a decidedly unvirtuous cycle.
It has become commonplace to explain each dismal job report by saying that a resurgence in employment always lags general economic recovery. But with the job market severely wounded, and with consumer spending expected to be weak for a very long time, it could easily take until 2014 for employment to recover. It’s safe to say that five years or more of subpar job growth is not what most people have in mind when they think of a “lag.”
The question, then, is how bad does it have to get before the Obama administration and Congress make job creation a priority.
Will administration officials and lawmakers fight for new laws to make it easier to form unions, which are especially important in elevating and protecting the jobs of low-income workers? How will professed support for green jobs be translated into a manufacturing policy that promotes good jobs? Will efforts to improve the educational system also include serious efforts to train and retrain people for new jobs?
Help is wanted for out of work Americans.
...the only good thing to say about the August jobs report is that it could have been worse. Employers shed another 216,000 jobs last month, a smaller loss than expected and the lowest monthly loss total in a year.
The losses would have been worse had it not been for federal stimulus spending — proof that the government is indeed helping to ease the downturn in its role as the spender of last resort.
Still, the damage to the work force caused by the recession is deep, wide and ongoing. The economy is now coming up short by 9.4 million jobs, including 6.9 million positions that employers have eliminated and 2.5 million jobs that were needed to absorb new workers but were never created.
And unemployment is on the rise, jumping from 9.4 percent in July to 9.7 percent in August. For several demographic groups, the unemployment rate is already in double digits, including men (10.1 percent), Hispanics (13 percent), African-Americans (15.1 percent) and teenagers (25.5 percent). In all, 14.9 million workers are now jobless, of which fully one-third have been out of work for more than six months, the highest level of long-term unemployment by far in any post World War II recession. There are now nearly six workers available for every job opening, up from 1.7 workers per opening when the recession began in December 2007.
Worse, hiring is not expected to rebound anytime soon, even if overall economic growth resumes this year. Employers are likely to fill any additional workloads by adding hours to truncated workweeks and ending worker furloughs. Wage gains, which are always repressed when jobs are scarce and unemployment is high, will be an even longer time coming as employers restore pay cuts put in place during the recession before giving raises.
Without job growth and pay raises, consumer spending will not revive substantially because alternative sources of spending power — home equity and credit cards — are largely tapped out. And without an upsurge in spending, businesses will not add workers, and so on, in a decidedly unvirtuous cycle.
It has become commonplace to explain each dismal job report by saying that a resurgence in employment always lags general economic recovery. But with the job market severely wounded, and with consumer spending expected to be weak for a very long time, it could easily take until 2014 for employment to recover. It’s safe to say that five years or more of subpar job growth is not what most people have in mind when they think of a “lag.”
The question, then, is how bad does it have to get before the Obama administration and Congress make job creation a priority.
Will administration officials and lawmakers fight for new laws to make it easier to form unions, which are especially important in elevating and protecting the jobs of low-income workers? How will professed support for green jobs be translated into a manufacturing policy that promotes good jobs? Will efforts to improve the educational system also include serious efforts to train and retrain people for new jobs?
Help is wanted for out of work Americans.
Tuesday, April 7, 2009
Building a sustainable economic recovery
On Sunday, the Milwaukee Journal Sentinel ran a piece that I coauthored with Drs. Levine (UWM) and Maranto (Marquette) on how the Employee Free Choice Act will help build a sustainable recovery. It begins:
Judging from the recent competing editorials in The Wall Street Journal, the Milwaukee Journal Sentinel and other leading newspapers, and from the escalating rhetoric of business and labor, the nation is about to be put through another destructive, ideologically based battle over a labor law reform bill known as the Employee Free Choice Act. The Chamber of Commerce describes the coming battle as "Armageddon." This couldn't come at a worse time for the country. The deepening economic crisis needs business and labor working together with the new administration to build a sustainable economic recovery.
The rest of the piece is linked here.
Judging from the recent competing editorials in The Wall Street Journal, the Milwaukee Journal Sentinel and other leading newspapers, and from the escalating rhetoric of business and labor, the nation is about to be put through another destructive, ideologically based battle over a labor law reform bill known as the Employee Free Choice Act. The Chamber of Commerce describes the coming battle as "Armageddon." This couldn't come at a worse time for the country. The deepening economic crisis needs business and labor working together with the new administration to build a sustainable economic recovery.
The rest of the piece is linked here.
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