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April 1, 2010

Pressure On Wages As Well As Jobs

-- by Dave Johnson

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

Our economy is not structured to produce enough jobs. Tomorrow's jobs report is expected to show as many as 200,000 jobs created in March, but a lot of that is temporary Census hires, and even 200,000 jobs created is still 2-300,000 fewer jobs than number of new entrants into the job market each month! So even a "good" report of 200,000 will be just another "economy still getting worse more slowly" story.

We need jobs, jobs, jobs and jobs, and we need them to pay people enough.

It's not just trade pressures that are keeping job growth from occurring, but trade pressures are a very big and very immediate part of the problem. Fixing the trade imbalances will be a great start and will give us a small bit of breathing room in which we will hopefully address larger structural problems.

Those trade pressures are not just destroying jobs, they are destroying wages and benefits, too. It's the way of the world; a business owner can't help but look at the legacy wages that built up and up and up during the competitive good times, and wonder why they're still paying those high wages during the bad times. If you have a company full of people making $80,000 or $100,000 and you see people accepting work in similar positions for $40,000 you are going to wonder how to reduce the amount you are paying people. One way is to make them work more for the same pay.

In yesterday's Washington Post, Holding back job growth? Workers' awesome output,

One of the great surprises of the economic downturn that began 27 months ago is this: Businesses are producing only 3 percent fewer goods and services than they were at the end of 2007, yet Americans are working nearly 10 percent fewer hours because of a mix of layoffs and cutbacks in the workweek.

That means high-level gains in productivity -- which in the long run is the key to a higher standard of living but in the short run contributes to sky-high unemployment. So long as employers can squeeze dramatically higher output from every worker, they won't need to hire again despite the growing economy.

[. . .] Fearful of losing their jobs, people seem to have become more willing to stretch themselves to the limit to get more done in any given hour of work. And they have been tolerant of furloughs and cutbacks in hours, which in better times would drive them to find a new employer. This has given companies the leeway to cut back without the fear of losing valuable employees for good.


It's not "awesome output" it is workers being squeezed to death. And it's the way our system is designed.

In Fixing Jobs: Normal Isn’t An Option I wrote that the way our current system is structured employers have every incentive to figure out how to eliminate your job or at least cut your pay,

The core of what needs to be restructured is that we have a system where people with power and wealth benefit when they figure out how to cause other people to receive lower pay and benefits -- or just lose their jobs. The incentives come down to this: if someone can figure out how to cut your pay and benefits or just get rid of you (“eliminate your position”) they get to pocket what you were making, and you get nothing. If you don't own the company you're out of luck.

Returning to "normal" is not an option now and it just isn't going to happen. We have hit the wall of the old economic paradigm. We need to start looking at new models for a sustainable, people-friendly economy that works for all of us, not just a lucky few.


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Posted by Dave Johnson at April 1, 2010 1:11 PM


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