An Economy That Turns American Values Upside Down

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September 6, 2004

OP-ED COLUMNIST

 

An Economy That Turns American Values Upside Down

By BOB HERBERT

 

The Labor Department reported last week that 144,000

payroll jobs were created in August. Let's put that in

perspective.

 

The number was below market forecasts. It was also

below the number of jobs needed to accommodate the

growth in the employment-aged population. In short,

this was not good news. It's only by the diminished

job-creation standards that have prevailed since the

last recession that any positive spin could be put on

last month's performance.

 

As the Economic Policy Institute tells us, in a

book-length report it is releasing today: " The United

States has been tracking employment statistics since

1939, and never in history has it taken this long to

regain the jobs lost over a downturn. "

 

In " The State of Working America 2004/2005, " the

institute shows in tremendous detail how those lost

jobs and other disappointing aspects of the recovery

are taking a severe economic toll on working families.

 

According to the institute:

 

" After almost three years of recovery, our job market

is still too weak to broadly distribute the benefits

of the growing economy. Unemployment is essentially

unchanged, job growth has stalled, and real wages have

started to fall behind inflation. Today's picture is a

stark contrast to the full employment period before

the recession, when the tight labor market ensured

that the benefits of growth were broadly shared.

 

" Prolonged weakness in the labor market has left the

nation with over a million fewer jobs than when the

recession began. This is a worse position, in terms of

recouping lost jobs, than any business cycle since the

1930's. "

 

What is happening is nothing less than a deterioration

in the standard of living in the United States.

Despite the statistical growth in the economy, the

continued slack in the labor market has resulted in

declining real wages for anxious American workers and

a marked deterioration in job quality.

 

From 2000 through 2003 the median household income

fell by $1,500 (in 2003 dollars) - a significant 3.4

percent decrease. That information becomes startling

when you consider that during the same period there

was a strong 12 percent increase in productivity among

U.S. workers. Economists will tell you that

productivity increases go hand-in-hand with increases

in the standard of living. But not this time. Here we

have a 3.4 percent loss in real income juxtaposed with

a big jump in productivity.

 

" So the economic pie is growing gangbusters and the

typical household is falling behind, " said Jared

Bernstein, the institute's senior economist and a

co-author of the new book.

 

This is the part of the story that spotlights the

unfairness at the heart of the current economic setup

in the U.S. While workers have been remarkably

productive in recent years, they have not participated

in the benefits of their own increased productivity.

That doesn't sound very much like the American way.

 

According to the institute, " Between 1947 and 1973

productivity and real median family income both grew

104 percent, a golden age of growth for both

variables. " That parallel relationship began to break

down in the 1970's, but it is only recently that it

fell apart altogether, leaving us with the following

evidence of unrestrained inequity:

 

" In the 2000-03 period income shifted extremely

rapidly and extensively from labor compensation to

capital income (profits and interest), " so that the

" benefits of faster productivity growth " went

overwhelmingly to capital.

 

American workers are in an increasingly defensive

position. In a tight labor market, when jobs are

plentiful, workers have leverage and can demand

increased wages and benefits. But today's workers have

lost power in many different ways - through the slack

labor market, government policies that favor corporate

interests, the weakening of unions, the growth of

lower-paying service industries, global trade, capital

mobility, the declining real value of the minimum

wage, immigration and so on.

 

The end result of all this is a portrait of American

families struggling just to hang on, rather than to

get ahead. The benefits of productivity gains and

economic growth are flowing to profits, not worker

compensation. The fat cats are getting fatter, while

workers, at least for the time being, are watching the

curtain come down on the heralded American dream.

 

Copyright 2004 The New York Times Company