Saturday, March 29, 2014

The Precariousization of Labor

The trends toward insecure employment relations -- or “flexible human resource management”, as they like to say over in the business school -- continues unabated. This has been a long-term strategy by capital to reduce labor costs, avoid long-term commitments to employees, dodge employee benefit responsibilities, and let workers absorb the costs of slack demand and seasonal downturns. This great “risk shift” has been well documented. Those who advocate free and unhindered labor markets, as a natural god-given form of freedom and liberty, should know that they do so in service to the interests of capital over labor. In the aggregate it is a form of class warfare disguised as a sound business practice – economically rational for the individual firm but collectively irrational in its larger destructive socio-economic consequences.

Some recent reports confirm the depth of this problem for workers. While the percent of the total seasonally adjusted nonfarm payroll positions accounted for by temporary services was only about 2%, the growth of employment in the temporary help services sector can be seem in the chart below.

A more widespread indication of the precarious labor situation can be found if one looks at the percent of the labor force that is made up of part-time workers. Today they account for about a fifth of the labor force, while accounting for much of the hiring gains since the onset of the Great Recession. It is also worth noting that fulltime employment is not yet back to pre-recession levels.

Clearly, US capitalism is incapable of generating sufficient employment and economic livelihood for a large portion of the working age population who seek jobs and income. The evidence on the reasons for the chronic inability of the US labor market to produce few fulltime and mostly part-time jobs would seem to support the Keynesian theory of insufficient demand. As the chief executive of the American Staffing Associations noted: “American businesses just have not had a sufficient increase in demand for products and services to add big numbers of workers.”

Whether this is now a permanent feature of US capitalism, or one that can be corrected with the traditional assortment of Keynesian fiscal remedies, remains to be seen. For the growing number of “stagnation” theorists, the problem may have deep structural roots that will require more radical action. More on that perspective in future posts.

Thursday, March 20, 2014

Fed Reveals the Truth About So-Called Recovery

The Federal Reserve has confirmed what the Obama administration has denied – we are still in an economic crisis. But it should be obvious to most observers of the US economy that we are far from experiencing any kind of  “recovery”.  The latest retail indication is the closing of 1,100 Radio Shack stores throughout the United States. Then there is the persistent labor misery reflected in the unemployment rate and stagnant wages.

This brings me to Tuesday’s Federal Reserve Bank announcement that they would no longer use the 6.5% unemployment rate threshold as the basis for discontinuing the near-zero interest rates and mortgage/government bond-buying binge. These were Fed policies designed to remedy an ailing economy. The decision to continue these policies is an acknowledgement that the economy is still ailing and the official unemployment rate is meaningless.

Despite the employment rate approaching 6.5%, the Fed is well aware this is hardly an accurate measure of the true state of the economy. This is because the official unemployment rate is a bogus measure of economic well-being. In the official calculation, designation of “unemployed” is based on whether one is unemployed and also currently seeking employment in the labor force.  If one is unemployed, but “discouraged” and, therefore, no longer looking for a job, they are not included as unemployed or in the labor force.

With the unemployment rate calculated as the percent of the labor force unemployed, there are two ways this rate can decrease. One is when the numerator (unemployed) decreases in relation to the denominator (number actively seeking work) due to a shift from unemployed to employed job status.  This would be the most positive sign for the economy.

The second way the unemployment rate can decrease is when the number of the unemployed decreases due to a decision to no longer seek work. This is the “discouraged worker” or “missing worker” problem that now plagues the US economy. The recently reported declining unemployment rates, which the Obama administration celebrates as a “recovery”, are largely a result of this missing worker phenomenon.

The Economic Policy Institute estimates that there are 5.6 million missing workers who, if actually included in the unemployment calculations, would raise the unemployment rate to 10.0%.

Further, contrary to those who claim that these missing workers are primarily those nearing retirement age, roughly half of these missing workers are of prime working age (25-54 years of age).

It is interesting that the unemployment reality check comes from the Fed. There was a time when the Federal Reserve was the more conservative institution, consistently pursuing contractionary monetary policy based on a fear of inflation. Now it is the federal government that is pursuing the more contractionary policy through fiscal austerity based on a fear of deficits.

Today it would seems the Federal Reserve has a better grasp of the dire economic reality.

Friday, March 7, 2014

Jax Biz Journal Embraces Criminal Enterprise

It is indicative of the low ethical standards of the business press and local economic boosters that they would celebrate the arrival of a criminal enterprise to the First Coast. That would be JP Morgan Chase. Chase recently announced that it intends to expand in the Jacksonville market and it just opened its newest branch in Ponte Vedra Beach. This is all interpreted as positive news from a community obviously desperate for any sign of economic life.

JP Morgan Chase is a financial institution that has been cited for serial criminal violations and recidivism related to rigging bids on Municipal Bonds, the packaging of bad mortgage loans as collateralized debt obligations, association with Bernie Madoff Securities, and assisting Enron in manipulating their financial performance. This is the short list.

Since Jacksonville likes to think of itself as a “military-friendly” community, local residents might be particularly interested in JP Morgan Chase’s violation of the Servicemembers Civil Relief Act (SCRA) that involved charging higher-than-allowed interest on thousands of active-duty service members’ mortgages, and foreclosing on the homes of service members during their deployment.

Yes, it is a long and glorious record of “malfeasance”, to use the innocuous terminology preferred by the defenders of corporate crime. For each of these acts, Chase has paid hefty fines, including $13 billion on the mortgage-backed securities debacle. But no individuals have served prison time or been prosecuted. And JP Morgan Chase remains a highly profitable financial entity.

But to the point of community economic development -- do we really need more global bank branches in Jacksonville? The only neighborhoods in Jacksonville that need bank branches are those that currently have none, and in which Chase will have little interest in investing.

If the Jacksonville Business Journal (JBJ) wants to celebrate banking they might devote their energy toward encouraging and supporting local community-based credit unions rather than the global banking giants who base decisions entirely on profitability rather than community needs. There is no reason to ever assume that pursuit of the former will advance the latter.

This is a firm that earned $18 billion last year but recently announced that it would have to layoff 8000 employees.

One local bank executive, in response to the news about local Chase expansion, was quoted in the JBJ as saying “Competition makes everybody a little sharper so that’s good for everyone”. Does anyone really believe competition in the financial sector is "good for everyone"? The recent historical record would indicate otherwise with financial institutions responding to competition by devising methods and techniques for more effectively bilking customers with fees and penalties, and engaging in shady and illegal banking/investment practices for which they are occasionally held responsible.

Friday, February 14, 2014

A New Twist On Anti-Union Extremism

Usually right-wing free market conservatives are more than happy to pander to the wishes of their corporate sponsors when they desire low taxes, less regulation, and cheap unorganized labor. But what happens, for instance, when a corporation decides that having a cooperative and constructive relationship with organized labor might be mutually beneficial for workers and management, and improve the efficiency and productivity of the firm. Then, suddenly, the mantra of “business knows best” is abandoned in favor of a very non-libertarian paternalism opposing the private sector corporation’s intentions.

This remarkable drama is playing out in Tennessee where Volkswagen has proposed a cooperative management-labor arrangement for their Chattanooga plant modeled after the German work councils that gives workers more democratic decision-making power to shape and improve the production process and conditions of work. This is a model that has proven highly effective, efficient, and profitable at most VW plants around the world. In order to establish the work councils the workers must be represented by a union – in this case the United Auto Workers -- so the employees in this facility will be voting on UAW representation.

What is unique about this development is that VW is not trying to prevent or break a union, but instead is giving the workers the freedom to decide for themselves without the typical heavy-handed interference or intimidation.

But the right-wing ideologues and the political officials in Tennessee – largely Republicans – are opposed to this process and arrangement, and are threatening to withdraw the state incentives and subsidies provided to VW.

Why would they be taking such a position? The most obvious reason is that they are worried the idea of cooperative labor-management relations might catch on at other auto plants in Tennessee and beyond. While this would be good for workers and might finally bring some balance to the labor-capital struggle that has found workers consistently on the losing end for the past thirty years, it does not conform to the neo-liberal model on which their state economic development policies have been based.

The presence of labor unions also extends beyond simply raising compensation and providing workers with greater democratic rights in a particular workplace. As the research by sociologists Bruce Western and Jake Rosenfeld suggest:

Union effects on nonunion workers can work in several ways. Nonunion employers may raise wages to avert the threat of union organization…We argue that unions also contribute to a moral economy that institutionalizes norms for fair pay, even for nonunion workers. In the early 1970s, when 1 in 3 male workers were organized, unions were often prominent voices for equity, not just for their members, but for all workers…
Politically, U.S. unions have been frequent advocates for redistributive public policy. Highly unionized states have higher minimum wages, and their congressional repre- sentatives are more likely to support minimum wage increases.

So the opposition to this unionization and labor-management arrangement is about much more than a VW plant. It is about ensuring that there are no spillover effects for other workers in Tennessee and beyond, and no political mobilization of workers for more progressive and equitable political economic policies.

The class war continues.

Sunday, January 26, 2014

Blaming the Unemployed: The Skills Gap

Blaming unemployed workers for their situation is the great American political-economic pastime. This was seen most recently in the debate over the extension of unemployment benefits (an issue covered in a previous blog posting). Another way to blame the unemployed is to argue that joblessness is due to a “skills gap”. This suggests that if workers just had the right skill set they would find a job. Like the argument that unemployment benefits are keeping people unemployed, this argument is also bogus.

Conservative arguments tend to focus primarily on the "supply-side" of the labor market. That is, outcomes for workers (in this case unemployment) are the result of the individual characteristics (skills) or personal decisions (collecting benefits rather than getting a job) of those that would "supply" labor to the market. The "demand-side" -- the behavior and decisions of employers (not hiring because aggregate demand is depressed) -- is often ignored.

Heidi Shierholz of the Economic Policy Institute has a nice piece with some interesting data debunking the skills gap thesis. As she notes:

Despite the clear consensus among researchers that the unambiguous problem is a shortfall of aggregate demand, there is a strong public narrative that today’s jobs recovery is weak because workers don’t have the right skills. Why? One reason may be psychological – it’s easier to blame workers for lack of skills rather than face the fact that millions cannot find work no matter what they do because the jobs simply are not there. That in turn makes it easy for stories and anecdotes about employers who cannot find workers with the skills they need to circulate unscrutinized.

Another reason is political, since the cause of high unemployment is vitally important for policy. If high unemployment is due to workers not having the right skills, then the correct policy prescription is to focus on education and training, and macroeconomic policy to boost aggregate demand will not reduce unemployment. Policymakers and commentators who are against fiscal stimulus have a strong incentive to accept and propagate the myth that today’s high unemployment is because workers lack the right skills.

One of the several types of evidence presented is the table below showing unemplyment rates across all occupational categories:

Sunday, January 19, 2014

The Now Invisible Legacy of Martin Luther King

As we once again celebrate the birthday of Martin Luther King, we will inevitably be subjected to the standard narrative about nonviolent racial harmony and treated to the now-iconic “I Have A Dream” speech. While these messages are inspiring and important, it is unfortunate that Americans are denied information about King’s wider biographical narrative and the activities, concerns, and public addresses made by King throughout his entire lifetime.

Instead we are treated to the sanitized, or maybe more accurately “white-washed”, version of his legacy that is now acceptable to the mainstream elite and media.

Students may be surprised to learn that after the “I Have a Dream Speech” the response was not all sweetness and light. Rather, many within the US government viewed King as a dangerous threat.

It is well known that the Director of the FBI, J. Edgar Hoover, was obsessed with derailing King’s civil rights agenda with one of Hoover’s closest aide’s writing: “We must mark him now, if we have not done so before, as the most dangerous Negro of the future in this Nation from the standpoint of communism, the Negro, and national security.”

It is also important to recognize King’s broader critique of American society that extends beyond the carefully crafted and stylized narrative of civil rights, tolerance, and diversity. This includes the following from speeches during the last years of his short life:

“We as a nation must undergo a radical revolution of values…when machines and computers, profit motives and property rights, are considered more important than people, the giant triplets of racism, materialism and militarism are incapable of being conquered.”

“You can’t talk about ending slums without first saying profit must be taken out of slums. You’re really tampering and getting on dangerous ground because you are messing with folk then. You are messing with the captains of industry….Now this means that we are treading in difficult waters, because it really means that we are saying that something is wrong…with capitalism…there must be a better distribution of wealth and maybe America must move toward a Democratic Socialism.”

Few if any Americans are aware of this side of King’s message. Is it just an oversight, or is it part of a deliberate misrepresentation of King’s legacy? You decide.

How the 1% Protects Their Property

Are the rich becoming paranoid regarding the potential threat to their riches and property? Forbes reports on the obscene investment the super wealthy are making in home security systems.

Chris Pollack, president of Pollack+Partners, a design and construction advisor based in Purchase, New York, says that while security has always been a given in building homes for his ultra-high-net-worth clients, the spending for home defence has increased markedly over the last five years.

Perhaps the Third World levels of inequality that now characterize the US society, the persistence of the capitalist crisis, and the growing awareness and demands for action are making the 1% nervous.

This is how they respond.