Category: Jobs

WHITE RAGE IS NO FIX FOR DEEP PROBLEMS OF THE WORKING CLASS

The angry white power movement that helped propel Donald Trump’s ascendancy from provocateur to president rests on one truth and two lies. The truth is that the so-called forgotten and downtrodden middle class really has been seriously harmed and ignored. These are the lies: its travail was caused by non-whites, and Trump will make everything better.

Over the past decade, the “American Dream” that many of us grew up on has faded slowly into oblivion. Gone is the social compact by which hard work – with or without a college degree – delivered the good life, complete with home ownership, medical insurance, a retirement plan, and a spouse able to stay home to raise the kids and manage the household. There is a trove of economic data that paints a dismally bleak picture for middle America. Real wages keep falling. Good jobs are disappearing. Hope has morphed into anger.

Of course, this dream was always a white thing, at least in terms of attainability. Statistically, far more Caucasians got there than racial minorities, or women not married to a man. That explains the results of a recent poll that showed white men are far more angry about their economic plight than blacks, Hispanics, Latinos or women of any race. This, despite the fact that women and minorities are still at an economic disadvantage compared to white males. The idyllic middle-class life was built with decent paychecks issued mainly to guys who were white. When the jobs fueling this lifestyle started to disappear, the dream faded, leaving a thick residue of anger in its wake.

And along came Trump, the pied piper for angry white men. He wowed them with a simple two-note tune: America is overrun by people who don’t look like us; and, we need to bring back all the good jobs we lost. Here he is, waxing polemically with one-eighth of a run-on sentence during the campaign: “We’re going to bring back our jobs, and we’re going to save our jobs, and people are going to have great jobs again. . .” Unsurprisingly, he won the votes of white males without a college degree by a margin of 49 percentage points. And it’s been a love-and-anger fest ever since.

Those white supremacists who marched in Charlottesville may have been on the fringes of this movement, but they voiced the fears of many in their demographic by chanting, “You will not replace us.” In 1980, whites were 80% of the U.S. population. They are now at 63%, heading to under 50% by 2043. Of course, there is not a scintilla of economic evidence linking white economic malaise to an increase in diversity. But anger always breathes better with a bogeyman, particularly in authoritarian politics.

Still, Trump was on to something that most politicians ignored. The middle class’ economic pain was much more than aftershocks of the Great Recession. The lost jobs aren’t coming back. We are in the throes of a massive structural change, marked by an obscene income disparity, and a growing inability of ordinary folks to support themselves. The situation has gotten so bad that, for the first time in decades, the life expectancy of middle aged white Americans has started to drop. Earlier this year, Princeton University researchers attributed the trend to what they called “deaths of despair”. They identified four causes: stress of economic struggles, suicides, alcohol and drug overdoses.

Unfortunately for Trump’s base – and the rest of America – anger alone will not restore middle class vitality and viability, particularly misplaced anger. Nonwhites, whose economic woes are far worse than those of their Caucasian counterparts, are not to blame. Neither are trade agreements or globalization. Sure, NAFTA wreaked some havoc on our jobs, but that was more than 20 years ago. Most of that work is now performed by robots or other nonhuman technological processes.

Two Ball State professors examined manufacturing job losses between 2000 and 2010. They found that 13% were lost due to trade agreements and 87% through automation. The Bureau of Labor Statistics reports that the high-paying manufacturing sector accounted for 34.4% of the country’s jobs in 2000, but only 8.7% in 2015. Despite the dramatic loss of manufacturing jobs, productivity has remained relatively constant. That’s because more stuff gets made with fewer workers. The Brookings Institute says it now takes only six workers to generate $1 million in manufacturing output. The same level in 1980 would have taken 25 workers.

Simply put, the problem facing America’s working class is pervasive and systemic. The inertia of uncontrolled technology is redefining the world of work, and eliminating millions of good jobs. Tragically, nobody is doing anything about it. Plenty of people are thinking about it – economists, academicians, think tanks. Fixes like massive worker retraining, job creation, technology regulation and a guaranteed annual income are out there. But they haven’t gone beyond the pondering stage because most of our elected office holders have lacked the courage to seriously tackle this issue.

And that gave Trump an opening. Long fueled by anger himself, the Donald opportunistically saw what others wouldn’t: millions of outraged and forgotten people, fed up with negative balances and surrounded by folks who weren’t like them. Nobody seemed to give a damn about their plight. Then along came the star of “The Apprentice”, every bit as worked up, bitter and belligerent toward the ruling class as they were. Why wouldn’t they drink the Kool Aid?

Meanwhile, deaths of despair are now baked into the American Dream. Trump’s promise to bring all the great jobs back was nothing more than slick Willy Loman bravado. However, there is still time to rewrite the next act of this play. Are you listening, Democrats? It’s time to fill the Republican void with a smart, effective, Ted Kennedy-like program that will save the middle class. Mocking Trump’s failures is not sufficient. What we need is a sound legislative plan, an all-out campaign to replace despair with hope.

LET’S GUARANTEE AN ANNUAL INCOME FOR EVERY AMERICAN

Here is a radical notion that deserves serious attention: guarantee every adult citizen an annual income for life. This socialist-sounding plan has not exactly received a Palm Sunday reception from the mainstream political class. There are encouraging signs, however, that it will eventually reach the table of public policy, as soon as we admit that there is no magic bullet of a jobs program that will cure the cancer of income disparity.

As noted here earlier this week, our country’s employment problem is chronic and structural. It’s not about a lack of jobs; it’s about jobs that don’t pay enough to support the middle class. That’s why, according to the Federal Reserve Bank of New York, nearly half of recent college graduates are underemployed in jobs not requiring a degree and not paying much above minimum wage. A jobs program will do little to resolve this dilemma. Technology now allows companies to produce products and services with far fewer workers than in the past. Since capitalism is all about maximizing return on investment, this trend is not only unstoppable, it’s growth is a certainty.

The basic concept of a guaranteed annual income, or GAI, is simple. People would get a monthly allotment from the federal government, just like Social Security except that the payments start at 21 instead of 62. Like any public policy, the meat and the meaning of the program lie in the details. For example, some conservatives, including the American Enterprise Institute’s Charles Murray, have proposed replacing entitlements like Social Security and Medicare with a GAI starting on a citizen’s 21st birthday. Murray’s proposal, recently laid out in the Wall Street Journal, would give everyone $13,000 a year. They could earn up to $30,000 annually without a reduction in their GAI payments. That benefit would then be incrementally reduced until it reached $6,500 a year at the point of someone having an annual pay rate of $60,000 or more. Murray’s scheme would also eliminate every current social welfare program, including food stamps, housing subsidies and Medicaid, in exchange for lifetime cash payments.

As you might have guessed, the math of Murray’s plan is not all that progressive. The trade-off for a GAI, namely the elimination of every entitlement and welfare program, is a net loss for the middle class. A good counterproposal from the left might be to keep all current programs in place and give everyone making less than $60,000 a year an annual payment of, say, $30,000. And then look for middle ground. The significance of Murry’s piece in the Journal is that a leading thinker on the right acknowledged a truth still denied by most elected leaders, namely that our world has changed so much because of technology that we can no longer cling to the work ethic that has driven economic thought for the past 200 years. Wrote Murray, ”. . .it will need to be possible, within a few decades, for a life well lived in the U.S. not to involve a job as traditionally defined.”

That is precisely the lens we need to be looking through in search of a long-term solution to our employment problem. The concept of a GAI is not new. It was a popular issue in the early 1970s, supported by Democratic presidential candidate George McGovern and, to a limited extent the guy who beat him, Richard Nixon. The hurdle it could never clear was that such payments would be an incentive not to work and, therefore, an impairment to the country’s productivity. We are in a different place now. Productivity can be achieved by robots and software programs. Why not raise taxes on the billionaire investors profiting from this new paradigm and return a dividend of sorts in the form of a GAI to the folks adversely impacted by the change?

As radical as it may sound, it is not terribly different in form or substance from the ad hoc corporate socialism doled out under our current system. Existing federal welfare payments are making it possible for large corporations to employ low wage workers with no benefits. In just one example, identified by Forbes, Walmart employees receive $6.2 billion a year in federal public assistance through food stamps, Medicaid and subsidized housing. This is precisely the same policy transaction incorporated in the GAI; low-paid workers subsidized through federal funds. It’s a win for the worker, the employer and the economy.

It’s also the same concept used by Donald Trump and Mike Pence in persuading Indiana’s Carrier Corporation not to move 800 jobs to Mexico. In exchange for keeping those jobs in Indiana, Carrier got $7 million in tax credits and other incentives, another form of a government employment subsidy, and quite an expensive one at that. The epilogue of that story, by the way, shows how badly we need a comprehensive solution to this problem. Part of the agreement was that Carrier would invest another $16 million in its Indiana plant, supposedly earnest money showing its commitment to American jobs. A few days ago, company executives said a portion of that investment will be used to automate the plant so that more jobs can be eliminated.

Structural problems need structural solutions, not sloppy patchwork fixes. It’s time for policy makers to accept the fact that employment alone is no longer a sufficient engine to drive our economy. It’s also time for all of us to rethink just what it means to lead a good life, recognizing that self-worth is not tied to a paycheck. The most direct route to that destination is a guaranteed annual income.

THE EMPLOYMENT PROBLEM: IT’S ABOUT THE PAY, NOT THE NUMBER OF JOBS

My New Year’s wish for serious policy makers is that they abandon the illusion that the economic problems of the middle class can be fixed by the right jobs program. The simple truth is that technology has wiped out millions of good-paying jobs, and millions more are on the chopping block. Most are not coming back, and those that do will be at a much lower pay rate. The result has been a severe widening of the income gap between workers and investors, between capital and labor. In the space that follows, I will outline the current employment problem and show how it resulted from deep structural economic changes, as opposed to cyclical alterations that might well be modified by a federal job creation effort. Later this week, I will take up the matter of what to do about it.

Our elected leaders are still in deep denial over the seismic structural shift that has profoundly altered the nature of employment in this country. In their view, the job market took a severe jolt from the 2008 recession and a couple bad trade agreements. They see that unemployment is down now and pretend that everything will be fine once we bring those lost jobs back to our shores. As hopeful as the premise is, there is absolutely no evidence to support it.

The Wall Street Journal reported Sunday that manufacturing output is now close to the prerecession level, but 1.5 million factory jobs appear to be lost for good. Compounding the problem is the fact that a large number of the jobs that did come back pay significantly less than they once did. As the Journal put it, automation technology now allows manufacturers to “function, and even thrive with fewer employees than ever before.”

Here is just one example of how this playing out, as reported by the Los Angeles Times: A Michigan company called Ranir moved its electric toothbrush manufacturing plant to China. A few years later, in an attempt to lower labor costs even further, it retuned one-fifth of that production to Grand Rapids. This is precisely the kind of move that Donald Trump has made the cornerstone of his job creation pledge in his effort to make America Great Again. In fact, Ranir is cranking out 13,000 American made toothbrush heads a day for Wal-Mart and other retailers. The work, however, entails only four actual humans whose jobs involve monitoring the computers that control the robots that are doing the actual work. This is the new industrial food chain: from well-paid American workers, to low-paid Chinese workers, to no-pay robots. Clearly, the days of $25-an-hour manufacturing jobs as a mainstay of our economy have ended. The plants may return from off-shore, but the jobs aren’t coming with them.

The nation’s 1.7 million truck drivers, many making $70,000 a year or more with full medical benefits, will likely be the next large group to be replaced by technology. In another decade, perhaps sooner, the trucking industry is banking on having employee-free fleets of driverless vehicles. High on the Bureau of Labor Statistics’ list of jobs endangered by technology is that of mail carrier, once a highly sought lifetime guarantee of economic security. Also vulnerable, says the BLS, are radio announcers and disc jockeys who are being replaced by automated playlists. Same goes for newspaper reporters, a job class already reduced by more than 30% due to the product’s digital platform. The BLS sees further reductions as a result of the ability of computers to generate stories, a process currently in limited use by the Associated Press. Even insurance underwriters are going the way of the dinosaur, replaced by software programs. These, and many more good middle class jobs like them, are heading for extinction, with no apparent successor in sight.

What does that mean for our economy? Try wrapping your head around this statistic: The average annual pre-tax salary for the bottom half of American workers (by income) is $16,197. That’s only $1,000 a year above what a teenager working 40 hours a week at McDonalds makes, based on the current federal minimum wage of $7.25 an hour. In other words, our problem is not an absence of jobs; it’s the lack of jobs that pay well. Unrestrained, free market capitalism has run amok. Corporations are making gigantic profits with minimal labor costs, thanks to mechanized, non-human production.

Statistically, we are now approaching full employment. Yet, the average worker on the bottom half of the income range is paid close to the poverty level, an amount almost identical to what it was 40 years ago. Meanwhile, those in the top 10% of that pay range saw their income increase by 231% over the same period. There isn’t a jobs program proposed by Donald Trump or anyone else that even pretends to close that gap. On Wednesday, I will discuss a potential solution for this dilemma. Please stay tuned.