Tuesday, May 21, 2013

Recovery For The Few

[Update: Appeared in Jacksonville Business Journal, June 7, 2013]

Much of the business media and pundits continually proclaim that the US economy is on the road to recovery.  This is faith-based media coverage built on wishful thinking rather than empirical reality.  In fact, for most Americans the economy remains mired in recession and there is little indication that we are on the road to sustained growth and expansion.

Of course, as is typically the case in economics, finding a recovery depends where you look; or, as we like to say in sociology, a recovery “for who”.  After thirty years of unshared prosperity and widening income inequality, we can no longer assume a recovery in one place or for one social class will “trickle down” or “raise all boats”.  That cornerstone of neo-liberal economic ideology has been thoroughly discredited.

Yes, it is true that the stock market has regained and exceeded its pre-crisis levels.  Banks are also back where they were before the crisis. In fact, they are now even “too bigger to fail” (or prosecute). Further, corporate profits have reached record heights with earnings rising at an annual rate of 20.1 % since 2008.

But for working Americans, the picture could not be more different. Over the same period disposable income inched up by just 1.4% adjusting for inflation. Average income has fallen 7.3% since 2007.

Net worth for the wealthiest 7% percent rose 28%, while it dropped 4% for the other 93% of the population. Thus, income inequality – which contributed to the crisis -- has actually increased since 2007.
While unemployment rates have started to decline, this is largely due to the mass exodus of still productive, but discouraged, workers from the labor force.  The labor participation rate -- the percentage of working-age adults in the labor force — has fallen to 63.3% which is the lowest level since 1979.

For those fortunate enough to find employment, large proportions of returning workers report significantly lower incomes in jobs that represent unmistakable downward mobility. According to the National Employment Law Project, lower-wage occupations constitute 58 percent of the employment growth during the “recovery”.  

Workers are hampered in their effort to bargain and organize for higher pay and better working conditions due not only to high joblessness, but also through corporate-sponsored anti-labor legislation moving through many state houses, including Florida. 

Finally, current fiscal policy – based on a misplaced obsession with deficits – will ensure that any nascent recovery is short-lived.  “Fiscal cliffs” and “sequesters” are simply euphemisms to disguise economic austerity measures. The resulting reinstatement of the payroll tax, and cuts in government employment and spending, have already taken their toll on growth rates.
As long as all these conditions persist, there will be no real economic recovery.

This is because we are in a “demand-side” crisis that can only be resolved when a majority of Americans see an increase in their disposable income. Mass consumption capitalism requires a mass of consumers receiving sufficient compensation to spend on the goods and services offered by the retail sector. 

In the lead-up to the Great Recession, consumer debt and the housing bubble were able to prop up an increasingly inequitable economic system. Those are no longer viable options. Today we need to establish an economy that provides workers with higher levels of earned income and purchasing power. Under the current demand-side crisis, low unemployment and higher wages are not indicators of, but rather necessary conditions for, an economic recovery.

But given the oppressive labor market conditions, and the continued implementation of austerity, the prospects for sustained growth are dim indeed.

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