Recovery or Re-Set

Let’s start with the underlying truth that defines this “recovery.” The average American worker has lost real buying power, year after year without any increases at all, since 2002. But the market is flying high. 90% of the earnings increases since the Great Recession have gone to the top 10% income bracket. 2012 and 2013 are no exception. “The manufacturing sector has experienced a modest renaissance since it hit bottom during the Great Recession. The number of manufacturing jobs is set to rise this year, as it has every year since 2010. Profits are soaring — in 2012, after-tax profits of manufacturing firms hit a record high of $289 billion. Share values have soared with them. The Standard & Poor’s 500 Industrials Index has risen 59 percent more than the overall 500-stock index since 2009, Bloomberg reported last month.

“Wages, however, are falling. Although the average wage for all workers, adjusted for inflation, has declined by about 1 percent since May 2009, Bloomberg reported, it has declined by 3 percent for workers in the more-profitable-than- ever manufacturing sector.” Harold Meyerson writing for the Washington Post, December 12^th. As robotic machines replace workers, the margins that used to go to labor now go to the owners of the machines… the companies, the shareholders and the managers who have incentive pay. It’s that way all around the nation.

I’ve blogged that for those seeking entry-level jobs, the PhD-barista syndrome is all-too-common, and for the displaced older worker, forced retirement is increasingly their lot in life. Unemployment rates in those critical early years entering the job market are double the overall rate, a little statistic that will impact lifetime earnings in a very big way. For many, reflecting years with a low-level job as their resume reality, employers seeking more will be reluctant to hire these workers instead of the freshest batch as those educated with state-of-the-art skills are available directly from college.

Not practicing your educational skill-set is often perceived as creating staleness and reflecting a less-than-stellar value in the job market (if they are really that good, why didn’t they…). It’s the same story for the long-term unemployed. Further, starting at lower pay means that annual pay increases are based on a percentage of current compensation creates a lifetime ripple effect that never quite catches up to “the way it used to be.”

What you can see throughout the country is the seething anger of this growing segment of wage-earners getting less every year, reflected by the rise of left and right wing extremism that has paralyzed our Congress. While the right just wants to get rid of government as an ineffective and expensive tool that really can’t fix anything, the left is beginning to believe that the private sector has virtually no stake in improving the lot of the average worker and is looking to government to enforce a solution.

“[T]here is wide, and growing, support for raising the minimum wage. It takes no great imaginative leap to see a time in the not-too-distant future when the incomes of all but a fortunate, talented tenth of the U.S. workforce are reduced or held stagnant. Indeed, the median inflation-adjusted salary for American men is already lower today than it was in 1969. Tyler Cowen, a heterodox libertarian economist, has written that the U.S. economy is morphing into one in which 10 to 15 percent of the workforce will be wealthy and the remainder will resign themselves to making do with less. He foresees little likelihood that the eradication of the broad middle class will lead to a United States ‘torn by unrest.’

“I am not sure that the docility of the American people can be so readily assumed. The adoption of minimum-wage increases and living-wage ordinances throughout increasingly liberal cities and blue states suggests that where workers have the capacity to re-balance the economy through legislation, they’ll do just that. With the near-elimination of unions from the private-sector economy, legislation remains the sole means available for workers to bargain for their fair share of their company’s revenue, particularly in sectors, such as retail, that can’t really relocate. That’s why the victories of those workers demonstrating at Wal-Mart and fast-food outlets have taken the form of legislated increases in local minimum wages, rather than resulting in union contracts.” Harold Meyerson.

This is the kinder, gentler reaction of American workers, pushing their elected representatives to find an answer through legislation. If the American worker is then view as “overpaid” in the global marketplace, the dollar will simply fall, making buying imports and commodities (which are priced by the global marketplace) more expensive. Better education and skill-sets can improve the overall value of American labor, but if anything, our falling relative academic standards reflect movement in the opposite direction, and rising tuition for that mediocrity is pricing college out of the affordability range for too many Americans. Add the eventual cost of replacing (or not replacing) a crumbling infrastructure of bridges, tunnels and highways, vulnerable and inadequate power grids, and an exponentially expanding prison population. Consider as well dwindling fresh ground water supplies for consumption, let alone grossly inefficient, federally subsidized food production, as well as the unpredictable costs of natural disasters generated by inattention to global climate change, and you now have the seeds for a much more fractious, perhaps even violent (remember that Second Amendment reality that we have move private guns per capita than any other country in the world), future for the United States of America.

There is probably no greater political danger to the survival of a nation-state than a massive population, well-armed at that, mired in hopelessness and a plunging standard of living. The country could easily separate into sections of the nation that see government minimalism as the answer and those that believe government might be the only way to restore life as we once knew it. New little countries where once we stood united. We need to level the playing field… or risk losing it.

I’m Peter Dekom, and waiting to react as losses and disasters at every level challenge us is not a good plan for the future.