Shared Prosperity?

By Bill Spriggs

The AFL-CIO recently held its quadrennial constitutional convention in Los Angeles. The convention had committees that included many nonunion partners to create an agenda directing the AFL-CIO toward a movement that can include the voices of all working people-those covered by collective bargaining agreements, those who are retired, those who are unemployed and those who work without the benefit of a union contract. Shared prosperity, the goal of the AFL-CIO, must be inclusive.

The challenge is huge. The U.S. Bureau of Labor Statistics (BLS) shows a labor market that isn’t growing fast enough to provide shared prosperity. The payroll numbers that are released at the beginning of the month are preliminary. Additional data becomes available later. So, the payroll numbers are adjusted later. Recently, the preliminary numbers for June and July were both adjusted-downward. June was knocked down from 188,000 to 172,000, and July went from 162,000 to 104,000. That means the preliminary number for August of 169,000 needs to be interpreted with some caution. So, despite promising news of accelerating job growth that even reached 332,000 jobs in February; since April job growth is decelerating.

Slow job creation has continued the trend that started in the spring of 2009 of unemployed workers being more likely to exit unemployment by dropping out of the labor force than finding a job. And, that was clear in the household survey released by the BLS showing the unemployment rate fell because of a drop in the size of the labor force-those people who are employed or actively searching for work. And, among the employed, a discouraging sign is the growth of workers who could only find part-time work. In August, 2.7 million workers were in part-time jobs because they could not find full-time work, up from 1.1 million back during the labor market’s last peak in January 2008.

The frustration of workers can be found in their declining job mobility. The BLS recently reported that the median tenure of workers with their employer continues to trend up and is now at 4.6 years. In part, this reflects the aging of the workforce-older workers tend to stay put with their employer, but it also reflects data in the BLS Job Opening and Labor Turnover Survey (JOLTS) showing that employed workers are not switching jobs. Those shifts also help create openings for other workers to fill; fewer shifts mean fewer job openings for unemployed workers to fill. In July there were 3.1 unemployed workers to each job opening, a slight uptick from June. Movement among employed workers shows a heated labor market, it helps workers shift to higher paying jobs, and it shows that firms are actively expanding trying to find highly productive workers. So, this helps to explain the low pressure on wage growth in the economy now.

And the quality of the jobs created has also been discouraging. Manufacturing, which helped to get the growth in jobs launched, has added only a net of 20,000 jobs of the 2.2 million created since August. On the other hand, retail trade has added 392,000 jobs and fast-food and restaurants has added 353,000 jobs. These are industries with lots of part-time and low-wage positions. The realization that these jobs may signify the new normal has made workers in these industries start to fight back. On Aug. 29, they staged walk outs demanding decent pay. Roughly 30 million workers languish at low pay while Congress fails to act on legislation that would raise the minimum wage to $10.10 an hour.

The AFL-CIO Convention heard from Economics Nobel Laureate Joseph Stiglitz that the problem the U.S. economy faces is simple: low aggregate demand. He said we could boost demand by raising wages and government investment. The current fixation of Washington on debt and deficits is a harmful divergence of time and political space from getting job growth back up and wages up. The gap between what the nation could produce at full-employment and where we are now with 58.6 percent of Americans employed, below the 62.9 percent during the peak in January 2008 and the 64.7 percent of April 2000, is the deficit policy must focus on closing.

The AFL-CIO Convention passed resolutions to create a new set of actions so the labor movement can respond to this environment where all workers are under attack-from negligence of their key issues of more jobs and higher pay to their rights at work and their rights to organize. Clearly the movement has to broaden itself to include the un-organized because only if workers are united can new policies be put in place to change the situation.

Americans are not suffering from the laws of economics; American inequality is exceptional. It is not possible to explain the level of American inequality using the theories of market supply and demand; the same forces of globalization and technological change affect all countries. But, American policies are unique. Low minimum wages, the lack of collective bargaining in wage setting and corporate governance that lets corporate CEO pay skyrocket are uniquely American.

The current level of inequality in the U.S. is bad economics. It is the creation of raw greed-market power, not market forces. The shrinking share of income for the bottom 99 percent is not a system that is healthy. And, it is not sustainable. Unless the deficit of jobs and wage incomes is addressed, it will fuel another downturn in the economy. If we understand the cause was inequality we can fix this economy, but if we continue to create more inequality we will break the economy. Shared prosperity, not this weak recovery, is what will get us to sustainable growth.

Follow Spriggs on Twitter: @WSpriggs.

Contact: Amaya Smith-Tune Acting Director, Media Outreach AFL-CIO 202-637-5142.