Bye-bye American Economic Pie
Robert B. Reich
First, the good news. The economic pie is growing again. Growth in the fourth quarter last year hit 3 percent on an annualized rate. February's 227,000 net new job marks the third month in a row of job gains well in excess of 200,000.
Here's the bad news. The share of growth going to American workers is at a record low.
Although the nation is now producing more goods and services than it did before the slump began in 2007, we're doing it with 6 million fewer people.
Companies have been able to boost profits mainly by slashing costs. Payrolls are their biggest cost. They've been cutting payrolls not only by outsourcing abroad but by replacing people with computers, software applications and the Internet.
In theory this should be a huge plus. We can produce more and have more time off. But as Tonto asked the Lone Ranger, "Who's 'we,' Kemosabe?"
True, some of the productivity gains have been widely spread in the form of lower prices and higher value. (My 3-year-old granddaughter gets more out of an iPhone in five minutes than my 98-year-old father ever got out of reading the daily paper.) But most of the gains are distributed narrowly in the form of higher profits to owners and fat compensation packages to the "talent."
The share going to everyone else in the form of wages and salaries is now the smallest since the government began keeping track in 1947. If the trend continues, inequality will become ever more extreme.
We'll also face chronically insufficient demand for what the economy can now produce. The rich save more of their earnings than everyone else. And middle- and lower-income families -- with fewer jobs or lower wages -- don't have the purchasing power to keep the economy going at full tilt.
A far smaller share of working-age Americans is now employed (58.6 percent) than was employed five years ago (63.3 percent). Today's employment-to-population ratio isn't much higher than it was at its lowest point last summer when it dropped to 58.2 percent.
The major driver of the U.S. economy hasn't been consumer spending. It's been businesses buying technology and rebuilding depleted inventories. But businesses won't continue to spend and invest unless consumers start buying, big-time. Yet how can consumers do this when so few of the economic gains are going to them?
This is the central paradox at the heart of the American economy today. If it's not resolved, the jobs recovery will stall, as it did last spring.
A year ago, remember, we had another three-month run of good job numbers. Last February, March and April saw net gains of more than 200,000 jobs a month. But that job boomlet abruptly ended.
At the time, most observers blamed the stall on external events -- the Japanese earthquake,
While productivity gains are indubitably good, the real challenge ahead is to distribute those gains more widely.
One possibility: higher taxes on the rich that go into wage subsidies for lower-income workers, combined with job sharing.
We also need better schools (from early childhood through young adulthood, followed by systems of lifelong learning) so everyone has a fair shot at a larger share of the gains.
Finally, the benefits of the productivity revolution should be turned into more abundant public goods -- cleaner air and water, better parks and recreation, improved public health, and better public transit.
Regressive right-wingers want Americans to believe we've been living beyond our means and can no longer afford to do any of these things.
The truth is just the reverse. Most Americans' means haven't kept up with what the economy could provide if productivity gains were more widely shared.
Regressives growl about America's borrowing and tut-tut about future federal budget deficits. The reality is that the world is willing to lend us vast amounts of money because we're so productive. And productivity gains are making us ever more so.
Get it? The American pie is growing again, but most Americans aren't getting much of a slice. Nothing imperils our economic future as much as this lopsidedness.
- CEOs Bullish on Economy but Will Wait and See on Jobs
- No Magic Bullet for the Price of Gas
- Bye-bye American Economic Pie
- America's Day of Reckoning is Here
- What's Good for the CEO May Be Bad for Business
- Could the Rosy Jobs Numbers Be a False Spring?
- Three Ways to Revive Our Sluggish Economy
- Consumers Still Buried In Credit Card Debt
- Job-Killing Tax Breaks
- Pumping Gas Prices for All They're Worth
- Extra Dollars You're Paying At Pump Going To Wall Street Speculators
- Why Americans Are Paying More At the Pump
- Lack of 'Rainy Day Funds' Bringing Consumers Down
- 2012 Job Gains: This Time, It's Different
- The Manufacturing Myth
- Deja View: Consumer Confidence Back Where it Was a Year Ago
- Starving Public Universities Shrinks the Middle Class
- A Farewell to Fossil Fuels
- United States Can't Control the World Oil Market
- Tensions in Middle East Fan Fears of Sharp Gas Price Hikes
- Inflation Outpacing Compensation for U.S. Workers
- The Myth of Economic Inequality
- Occupy Wall Street Must Learn That We Are What We Buy
- Six Unusual Economic Indicators
- Housing Market Improves, but Growth Years Away
- Could Strong Chinese Currency Boost U.S. Economy?
- The Downward Mobility of the American Middle Class
- Unemployment: Fudging the Numbers
- Why the Fed is Lukewarm on the Economic Recovery
- Are Student Loans the Next Debt Bomb?
Bye-bye American Economic Pie | Politics
Copyright © 2012 Tribune Media Services