FacebookTwitterGoogle+RedditEmail

Reversing Labor’s Losses

This Labor Day, the vast majority of Americans who need to work for a living still have a long way to go before they recover what they have lost over the past four decades. The real (inflation-adjusted) median wage is only about 10 percent above what it was in 1979.

As economist Dean Baker has noted, we can also see part of this transformation of the United States into a more shamefully unequal society if we look at the distribution of national income between profits and labor. If not for this redistribution from wages to profits from 2000 to 2016, the average worker would have an additional $4,000 per year in annual income.

This historic redistribution of income and wealth was the result of choices made by our political leaders and decision-makers. They chose to maintain higher interest rates ― and levels of unemployment ― than necessary. They subjected workers to increasingly harsh international competition while protecting highly paid professionals and CEOs. They increased protectionism for patent holders, including pharmaceutical companies who charge tens of thousands of dollars for cancer drugs that would sell for a small fraction of these prices in competitive markets. They changed labor law so that unions’ bargaining power would be reduced to levels not seen for most of the twentieth century.

The Trump administration claims that workers’ long night is over, as evidenced by the current headline unemployment rate of 3.9 percent; and that they are responsible for the historically low unemployment. But this reduction in unemployment is the continuation of an economic recovery that began under the Obama administration, and is overwhelmingly the result of the policy of the Federal Reserve, not of the president or Congress.

The Fed kept short-term interest rates near zero for seven years (from December 2008) and also created trillions of dollars during much of this period to push down long-term rates.

The Fed is the main determinant of the rate of unemployment; but what the Fed giveth, the Fed taketh way. The Fed began to reverse these policies in 2015; it has raised rates twice this year and is expected to raise them two more times before the year is over.

The Fed has had no valid reason for these interest rate hikes. The Fed targets an inflation rate of 2 percent, but its preferred measure of inflation is still at 1.9 percent. And inflation has been below target for almost all of the past nine years.

Most Americans don’t know this, but when the Fed raises interest rates it is intentionally slowing the rate of job creation, in order to make unemployment higher than it would otherwise be; and thereby putting downward pressure on wages. Since World War II, the Fed has caused all of the recessions in the US except for the last two (which were caused by the bursting of the stock market bubble in 2000, and then the housing bubble collapse in 2007).

Most immediately, the Fed threatens to reverse much of the gains in employment that we have made in the current economic expansion, even though real wages did not even grow over the past year. For the longer term, Trump and his congressional allies have moved to continue the march toward greater inequality: for example, with the tax give-away to corporations and the rich, Trump’s selection of anti-labor and right-wing judges for the federal courts, increasing inequality in education, and other policies.

Reversing labor’s losses over the past four decades will therefore require blocking the Fed from increasing unemployment (or worse, tipping the economy into recession) and then undoing some of the structural changes that have created such obscene levels of inequality.

This column originally appeared in La Crosse Tribune.

More articles by:

Mark Weisbrot is co-director of the Center for Economic and Policy Research, in Washington, D.C. and president of Just Foreign Policy. He is also the author of  Failed: What the “Experts” Got Wrong About the Global Economy (Oxford University Press, 2015).

November 14, 2018
Sam Bahour
Israel’s Mockery of Security: 101 Actions Israel Could Take
Cesar Chelala
How a Bad Environment Impacts Children’s Health
George Ochenski
What Tester’s Win Means
Louisa Willcox
Saving Romania’s Brown Bears, Sharing Lessons About Coxistence, Conservation
George Wuerthner
Alternatives to Wilderness?
Robert Fisk
Izzeldin Abuelaish’s Three Daughters were Killed in Gaza, But He Still Clings to Hope for the Middle East
Dennis Morgan
For What?
Dana E. Abizaid
The Government is Our Teacher
Bill Martin
The Trump Experiment: Liberals and Leftists Unhinged and Around the Bend
Rivera Sun
After the Vote: An Essay of the Man from the North
Jamie McConnell
Allowing Asbestos to Continue Killing
Thomas Knapp
Talkin’ Jim Acosta Hard Pass Blues: Is White House Press Access a Constitutional Right?
Bill Glahn
Snow Day
November 13, 2018
Patrick Cockburn
The Midterm Results are Challenging Racism in America in Unexpected Ways
Victor Grossman
Germany on a Political Seesaw
Cillian Doyle
Fictitious Assets, Hidden Losses and the Collapse of MDM Bank
Lauren Smith
Amnesia and Impunity Reign: Wall Street Celebrates Halliburton’s 100th Anniversary
Joe Emersberger
Moreno’s Neoliberal Restoration Proceeds in Ecuador
Carol Dansereau
Climate and the Infernal Blue Wave: Straight Talk About Saving Humanity
Dave Lindorff
Hey Right Wingers! Signatures Change over Time
Dan Corjescu
Poetry and Barbarism: Adorno’s Challenge
Patrick Bond
Mining Conflicts Multiply, as Critics of ‘Extractivism’ Gather in Johannesburg
Ed Meek
The Kavanaugh Hearings: Text and Subtext
Binoy Kampmark
Concepts of Nonsense: Australian Soft Power
November 12, 2018
Kerron Ó Luain
Poppy Fascism and the English Education System
Conn Hallinan
Nuclear Treaties: Unwrapping Armageddon
Robert Hunziker
Tropical Trump Declares War on Amazonia
John W. Whitehead
Badge of Shame: the Government’s War on Military Veterans
Will Griffin
Military “Service” Serves the Ruling Class
John Eskow
Harold Pinter’s America: Hard Truths and Easy Targets
Rob Okun
Activists Looking Beyond Midterm Elections
Binoy Kampmark
Mid-Term Divisions: The Trump Take
Dean Baker
Short-Term Health Insurance Plans Destroy Insurance Pools
George Wuerthner
Saving the Buffalohorn/Porcupine: the Lamar Valley of the Gallatin Range
Patrick Howlett-Martin
A Note on the Paris Peace Forum
Joseph G. Ramsey
Does America Have a “Gun Problem”…Or a White Supremacy Capitalist Empire Problem?
Weekend Edition
November 09, 2018
Friday - Sunday
Louis Proyect
Why Democrats Are So Okay With Losing
Andrew Levine
What Now?
Jeffrey St. Clair
Roaming Charges: Chuck and Nancy’s House of Cards
Brian Cloughley
The Malevolent Hypocrisy of Selective Sanctions
Marc Levy
Welcome, Class of ‘70
David Archuleta Jr.
Facebook Allows Governments to Decide What to Censor
Evaggelos Vallianatos
The Zika Scare: a Political and Commercial Maneuver of the Chemical Poisons Industry
Nick Pemberton
When It Comes To Stone Throwing, Democrats Live In A Glass House
Ron Jacobs
Impeach!
FacebookTwitterGoogle+RedditEmail