Left to itself, the U.S. economy may not return to its pre-recession rate of unemployment until 2021, says a new study from the Center for Economic and Policy Research. Even under the more optimistic growth assumptions of the Congressional Budget Office, we’ve got five more years of high unemployment coming, as CEPR notes.
If that’s not troubling enough, consider this: millions of jobless Americans means lower wages for those lucky enough to be employed. Median wages rose just 0.8% over the last year, according to the Bureau of Labor Statistics, failing to keep up with even the low 1.8% rate of inflation. In real (inflation adjusted) terms, that’s a wage drop. “Excess supply in the labor market — 14.6 million Americans were unemployed as of June — has helped keep wage growth in check,” the Wall Street Journal explains. Or, in the more gleeful terms used by a financial analyst quoted by Bloomberg news last month:
“Companies are getting higher-productivity employees for the same or lower wage rate they were paying a marginal employee. Not only are employees higher skilled, you have a better skill match. You have a more productive and more adaptive labor force.”
That’s great for business – and helps explain the 44% increase in corporate profits this year – but considerably worse news for anyone trying to work for a living. Without more job creation or growing wages, economic recovery doesn’t translate into anything that benefits the vast majority of Americans.
So what’s to be done? It would be easy to move from economic despondency to political despair: although smart job creation measures from Congress could brighten the economic picture considerably, the tremendous difficulty of passing even a six-month extension in bare bones unemployment insurance has convinced many analysts that additional federal job creation measures are off the table. Ezra Klein, however, suggests a glimmer of hope: if the Senate is unwilling to pass a job creation bill based on deficit spending, why not call Republicans’ bluff and try to fund specific job creation measures with tax increases the American people support? It all reminds me of the American Jobs Plan the Economic Policy Institute unveiled last year, which proposes a stock transfer tax to fund a local-level public jobs program, budget relief for city and state governments, and investments in school facilities and transportation infrastructure. Just seeing the fight to pass a visionary plan like that would be enough to dispel some gloom.
About the Author: Amy Traub is the Director of Research at the Drum Major Institute. A native of the Cleveland area, Amy is a Phi Beta Kappa graduate of the University of Chicago. She received a graduate fellowship to study political science at Columbia University, where she earned her Masters degree in 2001 and completed coursework towards a Ph.D. Funded by a field research grant from the Tinker Foundation, Amy conducted original research in Mexico City, exploring the development of the Mexican student movement. Before coming to the Drum Major Institute, Amy headed the research department of a major New York City labor union, where her efforts contributed to the resolution of strikes and successful union organizing campaigns by hundreds of working New Yorkers.