“With the perception growing that the economy has turned a corner and is headed due north again, Democrats seem to be losing that issue as well. But there is a worm in the apple of prosperity, and the New York Times has spotted it.
“Hourly Pay in U.S. Not Keeping Pace with Price Rises,” ran the headline over July 18’s lead story: “Drop in Spending Power May Gain Prominence as a Campaign Issue.” (The subhead to that might have read, “At Least We Hope So.”)
The story, however, frames the decisive issue of 2004. Will news of rising profits and new jobs eclipse the dark side of this recovery? For scores of millions of U.S. workers, things are getting worse. “The amount of money workers receive in their paychecks is failing to keep up with inflation,” said the Times.
“On Friday, the Bureau of Labor Statistics reported that hourly earnings of production workers—non-management workers ranging from nurses to teachers to hamburger flippers to assembly line workers—fell 1.1 percent in June, after accounting for inflation. The June drop, the steepest since the depths of recession in 1991, came after a 0.8 percent fall in real hourly earnings in May.”
What appears to have returned is a phenomenon Americans first came to experience between 1972 and 1994. In those two decades, despite the seven fat years of the Reagan era where U.S. workers were making impressive strides, real wages fell 19 percent.
Now the cancer has recurred. “In June, production workers took home $525.84 a week, on average. After accounting for inflation, this is about $8 less than they were pocketing last January and is the lowest level of weekly pay since October 1991.”
But why, when productivity is up and corporations are flush, are workers not demanding and getting pay raises to compensate for inflation and to share in the prosperity?
The answer lies in the law of supply and demand. U.S. workers are in no position to bargain because, in both the U.S. and the global economy, there is a vast surplus of labor for hire—at wages lower than Americans are able or willing to work.
The numbers tell the story. From the peak of employment in 2001 to the trough in 2003, 2.4 million U.S. jobs disappeared. Since recovery began, over a million jobs have been created. But that still leaves over a million jobs lost, plus millions of workers added in three years through immigration and natural population growth. “[W]ith the lowest number of people employed as a share of the population since 1994, there is still a plentiful supply of unused labor looking for jobs,” writes the Times. “When Castle Harlan advertised … to fill 70 to 80 positions at a Morton’s restaurant it opened in early July in White Plains, 600 to 700 people showed up.”
These numbers frame the issue for Bush vs. Kerry. Is it morning in America again? Or are we breaking up into the “two Americas”? And the deeper crisis remains unaddressed by either party.
In a global economy, how do U.S. workers win steady pay hikes, when hundreds of millions of foreign workers are able and willing to take their jobs at far less pay and to work longer hours with fewer benefits?
Does either party have a plan for dealing with the four forces driving down American wages, permanently?
The first is deindustrialization, the closing of U.S. factories to transfer production abroad. Some 2.6 million U.S. manufacturing jobs have disappeared in three years. While most of these workers found new jobs in the service economy, they are earning less.
The second is outsourcing via the Internet of white-collar jobs to Asia. These are not just call-center jobs, but are in accounting, medicine, computer programming, engineering, architecture.
Third, U.S. corporations are now importing workers to take jobs of Americans at wages below what an American family needs to maintain its standard of living.
Finally, mass immigration, legal and illegal, from the Third World is a permanent depressant on the wages of our unskilled and semi-skilled. Why hire a Hispanic-American who needs $12 an hour to support his family when an unmarried Hispanic illegal will work for $8 an hour?
“Joe Six-Pack is under a lot of pressure,” says Ethan Harris, chief economist at Lehman Brothers, “He got a lousy raise; he’s paying more for gasoline and milk. He’s not doing that great. But proprietors’ income is up. Profits are up. Home values are up. Middle and upper-income people are looking pretty good.”If neither party comes up soon with a solution to this crisis of one America steadily rising as the other America slowly sinks, this nation is headed for a time of trouble.