President Obama is off to a good start in his second term. “We, the people,” he pledged in his second inaugural, “still believe that every citizen deserves a basic measure of security and dignity.” Amen to that.
But as the economy continues its agonizingly slow recovery, his greatest challenge will be to reverse the economy’s widening inequality. Ordinary working families are falling further and further behind the cost of living.
The picture is especially brutal for young adults, who are likely to find themselves saddled with college debt, facing jobs that offer neither benefits nor career security.
Though the unemployment rate is coming down, the deeper trends in job markets only intensify the trend of the past three decades — the lion’s share of the gains going to the top.
Corporate profits are up over 60 percent since Obama took office. Average earnings are just about flat, despite productivity gains, but that average conceals widening inequality. A new report by the Economic Policy Institute finds that income for the top one percent is up by 8.2 percent since 2009, while earnings are down by 1.2 percent for the bottom 90 percent.
There is a lot of blather about why our income inequality continues to widen — it’s the educational system; it’s the skills gap.
But think about it. Our incomes were far more equal in the golden age of the blue-collar middle class during the post-World War II boom — when most Americans did not go to college. Even though most of our citizens had only basic skills, we managed a much more equally shared prosperity.
You want to talk about skills? The lion’s share of America’s earnings increases in the past 30 years went to financial engineers — people whose “skills” cost the rest of the economy trillions of dollars of lost assets and output.
How should we fairly compensate those financial engineers? By my reckoning, they owe the rest of us about ten trillion dollars. What sort of skill does it take to give toxic mortgage-backed securities triple-A ratings? The most notable skill of these people was staying out of prison. The link between skills and earnings, always somewhat arbitrary, has evaporated.
The latest hot trend is the proclaimed renaissance of American manufacturing. The press is full of stories about how companies such as General Electric are bringing jobs and factories home.
Why is manufacturing coming back? It’s a combination of multiple factors. Higher energy prices have raised shipping costs; engineers and designers want to be closer to the factory floor; retailers don’t like delays; robotics have made the manufacturing process so much more productive that less human labor is needed — and American workers have substantially cut their wages. G.E., the star of a recent feature in The Atlantic magazine, for “insourcing” jobs back from China, pays workers about $13.50 an hour (or a lot less than a room-cleaner in a unionized hotel.) (more…)