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Tag: Dean Baker

Hints of Progress for Labor in the United States

Posted on by Dean Baker
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With Donald Trump sitting in the White House and right-wing Republicans controlling Congress, there is not much for labor to cheer about on the American national political scene. In addition, the overall prospect for union organizing does not look very good. Republicans are pursuing policies at both the national and state level to further erode union membership. But with all the bad news, there have been some important victories at the state and local levels that can perhaps lay the groundwork for gains nationally in future years.

The most important of these battles has been the drive for an increase in the minimum wage. The national minimum wage has been set at $7.25 an hour since 2009. In the intervening eight years, inflation has reduced its purchasing power by almost 17%. Measured by purchasing power, the current national minimum wage is more than 25% below its 1968 peak. That is a substantial decline in living standards for the country’s lowest-paid workers.

However, the situation is even worse if we compare the minimum wage to productivity. From 1938, when a national minimum wage was first put in place, until 1968, it was raised in step with the average wage, which in turn tracked economy-wide productivity growth. If the minimum wage had continued to track productivity growth in the years since 1968, it would be almost $20 an hour today, more than two and a half times its current level. That would put it near the current median wage for men and close to the 60th percentile wage for women. This is a striking statement on how unevenly the gains from growth have been shared over the last half century.

The Obama administration tried unsuccessfully to make up some of this lost ground during his presidency. While it may have been possible in his first two years when the Democrats controlled Congress, higher priority was given to the stimulus, health care reform and financial reform. Once the Republicans regained control in 2010, increases in the minimum wage were off the table. Needless to say, it is unlikely (although not impossible) that the Trump administration will take the lead in pushing for a higher minimum wage any time soon.

Although the situation looks bleak nationally, there have been many successful efforts to increase the minimum wage in states and cities across the country in recent years. This effort has been led by unions, most importantly the Service Employees International Union (SEIU), whose “Fight for $15” campaign is pushing to make $15 an hour the nationwide minimum. The drive gained momentum with its endorsement by Bernie Sanders in his remarkable campaign for the Democratic presidential nomination last year. While Sanders was of course defeated for the nomination, his push for a $15 an hour minimum wage won the support of many voters. It is now a mainstream position within the national Democratic Party.

However, the action for the near term is at the state and local levels, where there have been many successes. There are now 29 states that have a minimum wage higher than the national minimum. The leader in this effort is California, which is now scheduled to have a $15 an hour minimum wage as of January 2022. With over 12% of the US population living there, this is a big deal. Washington State is not far behind, with the minimum wage scheduled to reach $13.50 an hour in January 2020. New York State’s minimum wage will rise to $12.50 an hour at the end of 2020 and will be indexed to inflation in subsequent years.

Several cities have also jumped ahead with higher minimum wages. San Francisco and Seattle, two centers of the tech economy, both are set to reach $15 an hour for city minimums by 2020. Many other cities, including New York, Chicago and St. Louis have also set minimum wages considerably higher than the federal and state levels.

What has been most impressive about these efforts to secure higher minimum wages is the widespread support they enjoy. This is not just an issue that appeals to the dwindling number of union members and progressive sympathizers. Polls consistently show that higher minimum wages have the support of people across the political spectrum. Even Republicans support raising the minimum wage, and often by a large margin.

As a result of this support, minimum wage drives have generally succeeded in ballot initiatives when state legislatures or local city councils were not willing to support higher minimums. The last minimum wage increase in Florida was put in place by a ballot initiative that passed in 2004, even as the state voted for George W. Bush for president. Missouri, which has not voted for a Democratic presidential candidate in this century, approved a ballot initiative for a higher minimum wage in 2006. South Dakota, Nebraska and Arkansas, all solidly Republican states, approved ballot initiatives for higher minimum wages in 2014. In short, this is an issue where the public clearly supports the progressive position.

These increases in state and local minimum wages have meant substantial improvements in the living standards of the affected populations. In many cases, families are earning 20-30% more than they would if the minimum wage had been left at the federal minimum.

In addition, several states, including California, have also put in place measures to give workers some amount of paid family leave and sick days. While workers in Europe have long taken such benefits for granted, most workers in the United States cannot count on receiving paid time off. This is especially true for less-educated and lower-paid workers. In fact, employers in most states do not have to grant unpaid time off and can fire a worker for taking a sick day for themselves or to care for a sick child. So the movement towards requiring paid time off is quite significant for many workers.

This progress should be noted when thinking about the political situation and the plight of working people in the United States, but there are also two important qualifications that need to be added. The first is that there are clearly limits to how far it is possible to go with minimum wage increases before the job losses offset the benefits. Recent research has shown that modest increases can be put in place with few or no job losses, but everyone recognizes that at some point higher minimum wages will lead to substantial job loss. A higher minimum wage relative to economy-wide productivity was feasible in the past because the US had a whole range of more labor-friendly policies in place. In the absence of these supporting policies, we cannot expect the lowest-paid workers to get the same share of the pie as they did half a century ago.

The other important qualification is the obvious one: higher minimum wages do not increase union membership. The SEIU, the AFL-CIO and the member unions that have supported the drive for a higher minimum wage have done so in the best tradition of enlightened unionism. They recognize that a higher minimum wage can benefit a substantial portion of their membership, since it sets a higher base from which they can negotiate upward. Of course, it is also a policy that benefits the working class as a whole. For this reason, unions collectively have devoted considerable resources to advancing the drive to raise the minimum wage.

However, this has put a real strain on their budgets at a time when anti-union efforts are reducing the number of dues-paying members in both the public and private sectors. This will make it more difficult to sustain the momentum for raising minimum wages and mandating employer benefits. For this reason, the good news on the minimum wage must be tempered. It is a rare bright spot for labor in the United States in the last decade, but it will be a struggle to sustain the momentum in the years ahead.

This blog was originally published at CEPR.net on June 7, 2017. Reprinted with permission.

About the Author:  Dean Baker co-founded CEPR in 1999. His areas of research include housing and macroeconomics, intellectual property, Social Security, Medicare and European labor markets. He is the author of several books, including Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. His blog, “Beat the Press,” provides commentary on economic reporting. He received his B.A. from Swarthmore College and his Ph.D. in Economics from the University of Michigan


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Reducing Unemployment with Work-Sharing

Posted on by Nicole Woo
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CEPR LogoWith news that jobless claims are up, Dean Baker points out that “employers are already hiring more than 4 million workers a month. The problem is that roughly 4 million workers a month are also leaving their jobs, half voluntarily and half involuntarily.”

So while it’s important to reduce jobless claims, the unemployment rate would also be lowered by working on the other side of the jobs equation — by preventing some of the 2 million layoffs that happening every month.

This is where the idea of work-sharing comes in.  As the NY Times noted in a recent article on Germany’s quick rebound from the recession,”A vast expansion of a program paying to keep workers employed, rather than dealing with them once they lost their jobs, was the most direct step taken in the heat of the crisis,”

Ezra Klein picked up the article earlier this week, saying that “saving jobs makes a lot of sense, and that’s why it’s so crazy that we’re going to allows states to fire hundreds of thousands of public-sector workers.”  He noted that Tyler Cowen also approves of Germany’s successful strategy: “In a highly specialized modern economy, it is much easier to prevent jobs from being destroyed than to create them again.”

As it turns out, the bipartisan duo of Dean Baker of CEPR and Kevin Hassett of AEI have been promoting similar work-sharing concepts here the U.S.  In this joint op-ed in the LA Times, they explain the good reasons to use work-sharing to create jobs and avoid layoffs.

In a nutshell, Dean’s work-sharing tax credit proposal would pay employers to keep workers’ pay constant while reducing hours, which would reduce layoffs as well as incentivize new hiring.  So, for example, rather than laying off 10% of her employees, an employer would reduce all of her workers’ hours by 10% and get a tax credit to keep their pay whole.  Dean ‘s rough estimate is that this tax credit would create a net total of 1.3 and 2.7 million jobs.

It would also help state and local governments, since the credit is available to any employer, whether it operates in the private, public, or non-profit spheres.  In this way, the widespread adoption of the credit could go a long way towards helping cash-strapped states and localities limit their public sector employee layoffs and furloughs.

And if Baker, Hassett, Klein and Cowan aren’t enough to convince you, last fall in the NY Times both Paul Krugman and Mark Zandi wrote that work-sharing is deserving of consideration.

There are work-sharing bills in Congress now, with Rep. Conyers sponsoring Dean’s employer tax credit idea, and Sen. Reed and Rep. DeLauro proposing an expansion of current state-level work-sharing unemployment programs nationwide (currently only 17 states have such programs).

This article was originally posted on CEPR Blog.

About The Author: Nicole Woo has worked on domestic hunger policy as the Associate Director of the New York City Coalition Against Hunger and as a Senior Policy Analyst at the Food Research and Action Center. She also has worked as a fundraiser and director of administration for several non-profit organizations in New York City and Washington, DC. She received her B.A. from Harvard University, where she concentrated in Government.


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Target Wall Street Greed, Not Public Employees

Posted on by Tula Connell
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Credit: Joe Kekeris
Credit: Joe Kekeris

Too often when economic times get tough, scapegoats are found in the wrong places. Wall Street greed and double-dealing sparked much of the nation’s recent near-financial collapse, yet many in the chattering classes instead are attacking public employees for this rolling recession.

Economist Dean Baker puts the situation in perspective:

Fifteen million people are not out of work because of generous public employee pensions. Nor is this the reason that millions of homeowners are underwater in their mortgages and facing the loss of their home. In fact, if we cut all public employee pensions in half tomorrow, it would not create a single job or save anyone’s house. The reason that millions of people are suffering is a combination of Wall Street greed and incredible economic mismanagement.

Even as a consensus is emerging among economists that the United States should put job growth ahead of deficit cuts, a new study focused on New England finds that the region no longer can afford to spend scarce resources on tax credits and other business giveaways. Instead, it needs to channel economic development efforts to rebuilding neglected infrastructure and improving education for people at all levels. “Prioritizing Approaches to Economic Development in New England” provides

ample evidence that infrastructure (roads, bridges, dams, energy transmission systems, drinking water, and the like) and education are effective approaches for creating jobs and generating economic growth.

The study, by the Political Economy Research Institute at the University of Massachusetts-Amherst, finds the New England states have too long viewed funding for public services and economic development as competing interests—and that’s a false dichotomy. Sounds like the study can apply to the rest of the country as well.

Demonizing the public sector harms the U.S. middle class, writes Drum Major Institute for Public Policy (DMI) Research Director Amy Traub, who reminds us how fundamental the jobs they do are to our everyday lives:

It’s easy to lose sight of the other ways that a strong public sector supports our economy. Middle-class Americans and the businesses they work for rely on good schools, clean and safe streets, and high quality public services and infrastructure. In so doing, they depend on the dedicated teachers, police, firefighters, librarians, sanitation workers, parks employees, and support staff that keep states and cities running.

States and cities face very real fiscal challenges, but the cause is falling tax revenue due to the deepest recession in decades—not excessive spending or lavish compensation for public workers.

Further, Traub has a recommendation for Congress, some Democrats included:

Trashing our middle class in an effort to cut costs is short sighted. Downgrading the middle-class pay and benefits of public workers only speeds their erosion in the private sector, undermining everyone who works for a living….Rather than attacking public pensions that afford retirees a middle-class standard of living, [lawmakers] should be thinking about how to increase retirement security for millions of private-sector employees with meager savings.

As Progressive States Network points out, extremist anti-worker organizations like the American Legislative Exchange Council have been trying to gut public employee pensions for years—and they are using the recession as a public relations platform.

There is no crisis in most state retirement systems, even according to the numbers of the researchers demanding state leaders take unneeded action to cut the incomes of retirees.  And despite the hype from a few carefully selected anecdotes of retirees gaming pension systems, the reality is that the overwhelming number of public employees receive pretty bare-bones benefits, in some cases not enough even to keep them out of poverty.

Corporate backed anti-worker groups are the winners when the public taps into public-employee blame game. Wall Street is another big winner. The CEOs of Big Banks and the financial industry are happy to see the finger pointed at public employees. It means America’s workers are fighting each other and not united in targeting the real culprit of our economic misfortunes.

This article was originally posted on AFL-CIO NOW Blog.

About the Author: Tula Connell got her first union card while she worked her way through college as a banquet bartender for the Pfister Hotel in Milwaukee (they were represented by a hotel and restaurant local union—the names of the national unions were different then than they are now). With a background in journalism—covering bull roping in Texas and school boards in Virginia—she started working in the labor movement in 1991. Beginning as a writer for SEIU (and OPEIU member), she now blogs under the title of AFL-CIO managing editor.


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White House Boosts â€Flexible’ Workplace, As 15 Million Still Seek ANY Workplace

Posted on by Art Levine
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The White House on Wednesday took time out to promote the value of a flexible workplace that can accomodate two-paycheck families. With 15 million people officially unemployed, it made one nostalgic for a time before the recession, when people worried about the quality of their work lives rather than about just finding a job.

But allowing workers flexible schedules so they can balance their work and family lives isnt just a luxury that should be reserved for flush economic times. As Michelle Obama pointed out at the event that included business and family advocates, “So it’s something that many of the companies here today have discovered, very fortunately, that flexible policies actually make employees more, not less, productive.”

To underscore that point, the White House Council of Economic Advisers released a report that, the White House noted, “discusses the economic benefits of workplace flexibility—such as reduced absenteeism, lower turnover, improved health of workers, and increased productivity.”

Still, there might be a way to combine workplace flexibility with job creation — by adopting the proposal of Dean Baker and others to use unemployment insurance or other funds to help keep people on the job but working fewer hours.

Unfortunately, that sort of approach responding to the clamor for work didn’t get as much attention as innovative ways to promote flexible hours for employees so they can juggle personal and work obligations.  As the Huffington Post’s Dan Froomkin reported:

Two out of three American families are so-called “juggler families,” in which parents are forever trying to balance the needs of their job with the needs of their children.

But many workplaces — and government policies — are still stuck in the distant past, operating as if most families still had a single breadwinner, and someone else to mind the kids when they’re out of school, or the grandparents when they need care.

Once you realize that, there are a bunch of employer practices and policy proposals that suddenly make a lot of sense: Encouraging telecommuting, giving people time off for family emergencies, enabling flexible schedules, allowing employees to swap shifts, and so on…

As part of his push, Obama cited a new White House report which concludes that flexible workplace rules could increase productivity.

But he also cast the need for more humane workplaces in moral terms. “[U]ltimately, it reflects our priorities as a society — our belief that no matter what each of us does for a living, caring for our loved ones and raising the next generation is the single most important job that we have. I think it’s time we started making that job a little easier for folks,” he said.

Even so, feminists and others who have promoted these concepts for years are now sharpening their arguments about the need for making such reforms in hard times. As Ellen Galinsky, president of the Families and Work Institute pointed out, in advance of the conference:

We had a preview of the Forum last week in DC at the Work Life Conference, co-convened by the Families and Work Institute and The Conference Board. Speaking at the conference, Martha Coven of the White House Domestic Policy Council said that some might argue that employees are lucky just to have jobs, that companies have to focus on meeting their payrolls, and that the government needs to get the economy back on track and stabilizing it. They ask, “why workplace flexibility; why now?”

That is a false choice, she countered. Workplace flexibility is something that we have to do not only when times are good, but when times are bad. Workplace flexibility will help our businesses AND our families thrive.

While promoting “flexible workplaces” won’t do anything to stop the distorted GOP onslaught targeting Obama over jobs, he stood up for the imporance of the issue—and made clear its broader benefits.

“Workplace flexibility isn’t just a women’s issue. It’s an issue that affects the well-being of our families and the success of our businesses,” said  Obama. “It affects the strength of our economy – whether we’ll create the workplaces and jobs of the future that we need to compete in today’s global economy.”

As a White House press released noted, Obama has taken the issue seriously enough to place it alongside other intiatives that aim to level the playing field for women — and strengthen out economy by promoting full and fair participation in the workplace:

“Employers, including the federal government, will have to implement flexible work policies if they want to attract the best and the brightest,” said Valerie Jarrett, Senior Adviser to the President and Chair of the White House Council on Women and Girls. ” The President is committed to making sure that the federal government can compete for talent because he knows that good people produce better work, which in turn, leads to better service for the American people.”

*This post originally appeared in Working In These Times on April 1, 2010. Reprinted with permission.

About the Author Art Levine is a contributing editor of The Washington Monthly, and a former Fellow with the Progressive Policy Insititute. He has also written for Mother Jones, The American Prospect, The New Republic, The Atlantic, Slate, Salon and numerous other publications. He is the author of 2005’s PPI report, Parity-Plus: A Third Way Approach to Fix America’s Mental Health System, and is currently researching a book on mental health issues. Levine also posts commentary at Art Levine Confidential.


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Economic Policy and Unemployment: The Power of Stupidity

Posted on by Dean Baker
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Image: Dean Baker*This article originally appeared in CEPR on March 1, 2010. Reprinted with permission.

The housing bubble and subsequent crash were the result of extreme incompetence on the part of the country’s top economic policymakers. Somehow these people could not see, or did not care about, the dangers of an $8 trillion housing bubble.

Unfortunately, economic policymaking is not like most jobs where workers get fired when they make serious mistakes. In economics, they just keep getting promoted. Therefore, the people who sank the economy are for the most part the same group of people still designing policy today. Now this group of incompetent economists is telling the rest of us that we are going to have to endure five more years of high unemployment.

However, the rest of the country should not be forced to suffer even more just because those determining economic policy cannot do their jobs. We know how to get the unemployment rate down. Keynes taught us more than 70 years ago that we just have to spend money to eliminate mass unemployment. People work for money, if the government spends, people will work. It’s pretty straightforward.

But, the deficit hawks seems to have largely closed this route. Members of Congress somehow think that they are helping our children by putting their parents out of work.

Fortunately, we can even find a way to create jobs that can keep the deficit hawks happy. It’s called “work-sharing.” The basic point is so simple that even an economist can understand it.

Instead of paying workers to be unemployed – in the form of unemployment benefits – we pay workers to stay employed, but work fewer hours. In effect, to avoid one worker from being laid off, several workers put in somewhat less time on the job and take a small cut in pay. Germany and the Netherlands have used this path to keep their unemployment rates from rising even though they have experienced steeper downturns than the United States.

The way the system works in Germany, a firm will cut back the hours of its workers by 20 percent. The government then replaces 60 percent of the lost pay (12 percent of total pay). The firm is expected to kick in 20 percent of the lost pay (4 percent of total pay) and the worker ends up taking home 4 percent less pay.

In this scenario the worker ends up working 20 percent fewer hours for 4 percent less pay. This can mean, for example, that the worker ends up working a four-day week instead of a five-day week. Given the savings on work-related expenses, like transportation and childcare, most workers would almost certainly end up better off under a work-sharing arrangement than they are now.

While the economy is past its period of rapid job loss, a huge number of workers still lose their jobs each month through the economy’s normal job churning. Each month, companies lay off or fire close to 2 million workers. These job losses are largely offset by hiring by other firms, so that the net change in jobs has been a small negative in recent months. However, if we could just reduce the rate of job loss by 10 percent, then it would be equivalent to creating an additional 200,000 jobs a month or 2.4 million jobs a year. This would get us back to full employment in two years, rather than five or six, as is currently projected.

There are other potential benefits from work sharing. The reduction in work time could give companies an opportunity to adopt more family friendly work practices. For example, they could adopt a policy of paid family leave or paid sick days on a trial basis during the downturn.

There also would be environmental benefits to reducing work hours. Suppose everyone worked a four-day week so that we reduced the number of commutes by 20 percent. This would substantially reduce the amount of greenhouse gas emissions associated with getting to and from work. The fact that Europeans tend to work many fewer hours than we do is undoubtedly one of the main reasons that their per person carbon emissions are about half of the U.S. level.

There are already 17 states that have work-sharing programs in place. There are bills in both the House and Senate that would strengthen these programs and give support to other states to set up their own programs. If Congress is serious about addressing unemployment, it will act on these bills.

About the Author: Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of False Profits: Recovering from the Bubble Economy. He also has a blog on the American Prospect, “Beat the Press,” where he discusses the media’s coverage of economic issues.


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Surge in Women’s Employment Brings Unemployment Rate Down to 9.7 Percent

Posted on by Dean Baker
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Image: Dean BakerThe index of total hours worked is below the November 1997 level.

The unemployment rate fell to 9.7 percent in January, driven by a 0.4 percentage-point drop in the unemployment rate for women to 8.4 percent. The unemployment rate for men fell 0.2 percentage points to 10.8 percent. This drop came in spite of a reported loss of 20,000 jobs in the establishment survey.

The improved employment picture was primarily a story for adult white women. Their unemployment rate fell by 0.6 percentage points to 6.8 percent, while their employment rate (EPOP) rose by 0.6 percentage points to 56.1 percent. The unemployment rate for black women rose slightly to 13.3 percent, although their EPOP also rose 0.2 percentage points to 54.7 percent. It is striking that the EPOP for white women is now 1.4 percentage points higher than for black women. Until last summer it had always been lower, although the gap had been narrowing over the last three decades.

For blacks overall, January was a bad month. The unemployment rate rose to 16.5 percent, the highest of the downturn. The unemployment rate for black men rose a full percentage point to 17.6 percent, also a high for the downturn.

By education group, the big winners were people with some college, who saw 1.2 percentage-point increase in their EPOP. There was little change in the EPOPs for other groups. Workers over age 55 continued to fare best, accounting for 178,000 of the 541,000 increase in employment. Women over age 55 accounted for 140,000 of these jobs.

In addition to the gains in employment, the household survey also showed a sharp fall in the number of people involuntarily working part-time, from 9,055,000 to 8,193,000. The U-6 measure of labor market slack correspondingly fell from 17.3 percent to 16.5 percent. It is also worth noting that the percentage of the unemployed who have voluntarily quit their job has edged up to 6.1 percent. This is still very low, but somewhat better than the 5.6 percent reported last summer, suggesting somewhat greater confidence in the labor market.

The establishment data look somewhat less positive. Not only do the data continue to show job loss, but the job loss over the last three months (Oct-Dec) was revised upward by 102,000, giving an average job loss of 103,000 per month over this period. Without 33,000 temporary census jobs, the establishment survey would have shown a loss of 53,000 jobs for January.

However, even in the establishment survey there are some positive signs. Manufacturing employment increased by 11,000, the first gain since January of 2007. This was fully explained by a 22,700 rise in auto employment. While this may not be repeated, it is likely that manufacturing employment has finally bottomed out.

Retail trade added 42,100 jobs, although this may be a seasonal anomaly with fewer people than normal hired in the holiday season and therefore fewer layoffs in January. Employment services showed another big increase, adding 52,000 jobs in January. This is consistent with a picture of employees getting ready to add permanent employees. Hours worked also increased, with the index of aggregate hours rising from 97.9 to 98.2.

Aggregate Weekly Hours

However, there were also many negative aspects to the establishment data. Construction lost another 75,000 jobs, the vast majority in non-residential construction.  State and local governments shed 41,000 jobs. The leisure and hospitality sector shed 14,000 jobs. Even health care seems to be weakening as a bastion of employment growth, adding just 14,500 jobs in January.

The benchmark revisions show the downturn to be even deeper than previously believed. The revised data show a loss of 8,424,000 from the peak in December of 2007.  Over the decade from January 2000 to January 2010, the economy actually lost 1,254,000 jobs.  The economy lost 2,100,000 construction jobs (27.2 percent) since the peak in August of 2006 and 2,467,000 manufacturing jobs since the decline began in January 2007. The index of hours worked is below the November 1997 level.

On the whole, there is some positive news in this report, with the household survey showing a much brighter picture than the establishment survey. It is possible that the birth/death data could now be understating job growth.

*This article originally appeared in CEPR on February 5, 2009.

About the Author: Dean Baker is the Co-director of the Center for Economic and Policy Research. CEPR’s Jobs Byte is published each month upon release of the Bureau of Labor Statistics’ employment report. For more information or to subscribe by fax or email contact CEPR at 202-293-5380 ext. 102, or chinku [at] cepr [dot] net.


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Stimulus and Jobs: We Can Do Better

Posted on by Dean Baker
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Image: Dean BakerThe Obama administration came out with its first set of numbers on the jobs impact of its stimulus package. It’s pretty much along the lines of what was predicted. To date, the package has created close to one million jobs. That is good news, but in an economy with more than 15 million unemployed workers, it is not nearly good enough. We need to do more, much more.

Fortunately, there is an easy and quick way to begin to get these unemployed workers back to work. It involves paying workers to work shorter hours. The mechanism can take the form of a tax credit to employers. The government can give them a tax credit of up to $3,000 in order to shorten their workers’ hours while leaving their pay unchanged. The reduction in hours can take the form of paid sick days, paid family leave, shorter workweeks or longer vacations. The employer can choose the method that is best for her workers and the workplace.

A map showing Michigan, the west coast, the southwest and the southeast as hardest hit by unemployment. (Photo: austrini / flickr)
A map showing Michigan, the west coast, the southwest and the southeast as hardest hit by unemployment. (Photo: austrini / flickr)

If take-home pay is left unchanged as a result of the credit, then demand should be left unchanged. If workers are on average putting in fewer hours and demand is unchanged, then employers will need to hire more workers.

This logic is about as simple as it gets. The process is also quick and cheap. In principle, the government can go this route to save jobs at a cost of a bit more than $20,000 per job, far less than the estimates of the cost per job under the administration’s stimulus package.

We don’t even have to speculate about whether this sort of short-hours arrangement can work. Germany put a short-hours program in place at the start of its recession. Its unemployment rate today is 7.6 percent, about the same as the unemployment rate it had going into the recession. Imagine that workers in the United States, like workers in Germany, were dealing with the recession by putting in four-day weeks (while getting paid for five) or getting an extra two weeks a year of paid vacation. This sure beats being unemployed or being threatened with unemployment.

Seventeen states already have a “work-share” program in place that allows employers to use unemployment insurance money to cover a reduction in work hours, without a corresponding reduction in pay. More than 100,000 layoffs have been prevented as result of this program.

Sen. Jack Reed of Rhode Island has a bill that would increase funding for work-share programs and remove some of the bureaucracy that makes it difficult for employers to take full advantage of the programs that currently exist. The bill would also provide start-up money for the states that do not have work-share programs.

The Reed bill would be a big step towards following the Germany model, taking advantage of a program that is already in place. It could very quickly make a big dent in the unemployment rate, by preserving many of the jobs that are now being lost.

In this respect, it is important to clear up a common confusion about the economy. Every month, we get a figure from the Labor Department for the new jobs created or lost. However, this is a net figure. Approximately four million people leave their jobs every month, about half of these workers, or two million, lose their jobs involuntarily. If the economy creates more than four million new jobs, then we will have a positive jobs figure for the month. If the economy creates less than four million new jobs, then the Labor Department will report that the economy lost jobs in the month.

Suppose that this work-share program reduced the number of people who lose their jobs involuntarily by 20 percent, or 400,000 workers per month. This would have the same effect to our job count as adding 400,000 additional new jobs. If this rate could actually be maintained over a full year, then it would imply that the economy would generate nearly five million new jobs.

All the projections show that the unemployment rate is likely to continue to rising for the immediate future and remain high for years to come. The Congressional Budget Office projects that the unemployment rate will average 10.2 percent next year and even in 2011 it will average 9.1 percent. If this projection proves accurate, it would be a disastrous scenario for tens of millions of people.

There are quick and effective ways to increase employment, with shorter hours at the top of the list. Making tens of millions of people suffer for economic mismanagement and the greed of the bankers is not acceptable. We must do something.

This article originally appeared in Center for Economic Policy and Research on November  2, 2009. Reprinted with permission from the author.

About the Author: Dean Baker is co-director of the Center for Economic and Policy Research in Washington, DC.  He is frequently cited in economics reporting in major media outlets, including the New York Times, Washington Post, CNN, CNBC, and National Public Radio.  He writes a weekly column for the Guardian Unlimited (UK), and his blog, Beat the Press, features commentary on economic reporting.  His analyses have appeared in many major publications, including the Atlantic Monthly, the Washington Post, the London Financial Times, and the New York Daily News. He received his Ph.D in economics from the University of Michigan.


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Pace of Job Loss Slows Sharply, as Unemployment Edges Down

Posted on by Dean Baker
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Employment of older workers has increased by almost 1 million in the downturn.

The economy lost 247,000 jobs in July, bringing the rate of job loss over the last three months to 331,000. This is down sharply from the 700,000 monthly rate of decline in the months from November to February. The unemployment rate actually slid slightly to 9.4 percent, although this was entirely attributable to people dropping out of the workforce. The employment-to-population ratio fell by 0.1 percentage points to 59.4 percent, four full percentage points below the pre-recession peak.

The slower rate of job decline is largely due to a moderation of the pace of job loss in manufacturing and employment services, two sectors that had seen employment plummet during the worst of the downturn. Manufacturing lost 52,000 jobs in July; by contrast, it lost 205,000 jobs per month between November and February. This improvement was, in turn, driven largely by the auto sector, which lost jobs at a rate of 30,000 per month in the winter plunge. By contrast, employment in the auto sector rose by 28,200 in July. This is entirely a seasonal story as unadjusted employment in the sector actually decreased by 8,600 in July. Workers who ordinarily would have been laid off for retooling in July had already lost their jobs earlier in the year.

The employment services sector lost 25,600 jobs in July, compared to an 86,000 monthly rate of job loss between November and February. Temporary jobs are always the easiest for firms to shed. The July data still shows that the direction is clearly negative, but the rate is far slower than in the months of free fall. Construction lost 76,000 jobs, with all sectors of the industry still shedding employment, although the pace is down from a 115,000 peak monthly rate.

The establishment data showed a modest 0.1 hour increase in the average workweek. This was driven largely by the 1.6 hour increase in the workweek reported in the auto sector. However, even though the increase may prove to be an artifact of seasonal adjustment, it appears that the length of the workweek has at least stabilized.

The picture in the household data continues to be mostly bad, but there were a few somewhat encouraging signs. Consistent with the rise in hours reported in the establishment survey, there was a decline of 198,000 in the number of people involuntarily working part-time. As a result, the U-6, the broadest measure of labor market slack, fell from 16.5 percent to 16.3 percent, the first drop since November of 2007.

There continues to be the extraordinary trend of increased employment among older workers in spite of the economic downturn, as employment among workers over age 65 increased by 11,000 in July, even as it fell by 166,000 for everyone else. Since November of 2007, employment of people over age 55 has increased by 957,000 even as it has decreased by 7,581,000 for everyone else. To some extent, this presumably reflects not only the desire of baby boomers to work later in life than the cohorts that preceded them, but also the need of older workers to secure health care coverage through employment.

One especially disturbing item was a jump of 0.9 percentage points to an unemployment rate of 12.6 percent for women who maintain families, the highest rate since the peak of the 1982 recession. While this rate peaked at 13.6 percent in early 1983, there are almost 80 percent more women who maintain families in the labor force today.

The increase in the average hourly wage was 3 cents, bringing the annual rate of increase over the quarter to 1.2 percent. The 14 cent reported rise in manufacturing wages accounted for more than half of the month’s increase.

Given the steepness of the winter decline, this report has to be viewed as positive news. The stimulus has worked in stabilizing the economy and ending the free fall. The main impact to date was felt through tax cuts and benefit increases which raised the annual rate of consumption in the quarter by roughly $100 billion, adding more than 2 percentage points to growth. However, without further stimulus, the economy will have excessive unemployment for years to come.

Dean Baker: Dean Baker is co-director of the Center for Economic and Policy Research in Washington, DC. He is frequently cited in economics reporting in major media outlets, including the New York Times, Washington Post, CNN, CNBC, and National Public Radio. He writes a weekly column for the Guardian Unlimited (UK), and his blog, Beat the Press, features commentary on economic reporting. His analyses have appeared in many major publications, including the Atlantic Monthly, the Washington Post, the London Financial Times, and the New York Daily News. He received his Ph.D in economics from the University of Michigan.

This article appeared originally at CEPR on August 7, 2009 and is reprinted here with permission from the author.


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