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‘A tale of 2 recessions’: As rich Americans get richer, the bottom half struggles

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The path toward economic recovery in the U.S. has become sharply divided, with wealthier Americans earning and saving at record levels while the poorest struggle to pay their bills and put food on the table.

The result is a splintered economic picture characterized by high highs — the stock market has hit record levels — and incongruous low lows: Nearly 30 million Americans are receiving unemployment benefits, and the jobless rate stands at 8.4 percent. And that dichotomy, economists fear, could obscure the need for an additional economic stimulus that most say is sorely needed.

The trend is on track to exacerbate dramatic wealth and income gaps in the U.S., where divides are already wider than any other nation in the G-7, a group of major developed countries. Spiraling inequality can also contribute to political and financial instability, fuel social unrest and extend any economic recession.

The growing divide could also have damaging implications for President Donald Trump’s reelection bid. Economic downturns historically have been harmful if not fatal for incumbent presidents, and Trump’s base of working-class, blue-collar voters in the Midwest are among the demographics hurting the most. The White House has worked to highlight a rapid economic recovery as a primary reason to reelect the president, but his support on the issue is slipping: Nearly 3 in 5 people say the economy is on the wrong track, a recent Reuters/Ipsos poll found.

Democrats are now seizing on what they see as an opportunity to hit the president on what had been one of his strongest reelection arguments.

“The economic inequities that began before the downturn have only worsened under this failed presidency,” Democratic presidential nominee Joe Biden said Friday. “No one thought they’d lose their job for good or see small businesses shut down en masse. But that kind of recovery requires leadership — leadership we didn’t have, and still don’t have.”

Recent economic data and surveys have laid bare the growing divide. Americans saved a stunning $3.2 trillion in July, the same month that more than 1 in 7 households with children told the U.S. Census Bureau they sometimes or often didn’t have enough food. More than a quarter of adults surveyed have reported paying down debt faster than usual, according to a new AP-NORC poll, while the same proportion said they have been unable to make rent or mortgage payments or pay a bill.

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And while the employment rate for high-wage workers has almost entirely recovered — by mid-July it was down just 1 percent from January — it remains down 15.4 percent for low-wage workers, according to Harvard’s Opportunity Insights economic tracker.

“What that’s created is this tale of two recessions,” said Beth Akers, a labor economist with the Manhattan Institute who worked on the Council of Economic Advisers under President George W. Bush. “There are so obviously complete communities that have been almost entirely unscathed by Covid, while others are entirely devastated.”

Trump and his allies have seized on the strength of the stock market and positive growth in areas like manufacturing and retail sales as evidence of what they have been calling a “V-shaped recovery”: a sharp drop-off followed by rapid growth.

But economists say that argument fails to see the larger picture, one where roughly a million laid-off workers are filing for unemployment benefits each week, millions more have seen their pay and hours cut, and permanent job losses are rising. The economy gained 1.4 million jobs in August, the Labor Department reported Friday, but the pace of job growth has slowed at a time when less than half of the jobs lost earlier this year have been recovered.

Some economists have begun to refer to the recovery as “K-shaped,” because while some households and communities have mostly recovered, others are continuing to struggle — or even seeing their situation deteriorate further.

“If you just look at the top of the K, it’s a V — but you can’t just look at what’s above water,” said Claudia Sahm, director of macroeconomic policy at the Washington Center for Equitable Growth. “There could be a whole iceberg underneath it that you’re going to plow into.”

The burden is falling heavily on the poorest Americans, who are more likely to be out of work and less likely to have savings to lean on to weather the crisis. While recessions are always hardest on the poor, the coronavirus downturn has amplified those effects because shutdowns and widespread closures have wiped out low-wage jobs in industries like leisure and hospitality.

Highly touted gains in the stock market, meanwhile, help only the wealthiest 10 percent or so of households, as most others own little or no stock.

The disconnect between the stock market and the broader economy has been stark. On the same day in late August that MGM Resorts announced it would be laying off a quarter of its workforce, throwing some 18,000 workers into unemployment, its stock price jumped more than 6 percent, reaching its highest closing price since the start of March.

“The haves and the have-nots, there’s always been a distinction,” Sahm said. But now, she added, “we are widening this in a way I don’t think people have really wrapped their head around.”

A store going out of business
A customer leaves a retail store, which is going out of business, during the coronavirus pandemic. | Lynne Sladky/AP Photo

Without further stimulus, the situation appears poised to get worse. Economic growth until now had been led by increasing levels of consumer spending, buoyed by stimulus checks and enhanced unemployment benefits that gave many people, including jobless workers, more money to spend.

Low-income consumers have led the way, and they spent slightly more in August than they did in January, according to the Opportunity Insights tracker — even as middle- and high-income consumers are still spending less.

But those low-income consumers were also the most dependent on the extra $600 per week in boosted unemployment benefits, which expired in July. Since that lapsed — and since Congress appears unlikely to extend it any time soon, if at all — “we’re likely to see other macroeconomic numbers really fall off a cliff in the coming weeks,” Akers said.

The expected drop in spending, paired with the expiration of economic relief initiatives like the Paycheck Protection Program, could also spell trouble for businesses in the coming months. Many economists expect a wave of bankruptcies and business closures in the fall, contributing to further layoffs.

In that sector, too, owners are feeling disparate impacts. More than 1 in 5 small business owners reported that sales are still 50 percent or less than where they were before the pandemic, according to a recent survey from the National Federation of Independent Business, and the same proportion say they will need to close their doors if current economic conditions do not improve within six months.

At the same time, however, half said they are nearly back to where they were before, and approximately 1 in 7 owners say they are doing better now than they were before the pandemic, the survey showed.

Those diverging narratives could be understating the need for further stimulus by smoothing over some of the deeper weaknesses in the labor market and the economy, experts say.

“This is a case where the averages tell a different story than the underlying data itself,” said Peter Atwater, an adjunct economics professor at William & Mary.

While Republicans appear to be embracing the idea of further “targeted” aid, they are also touting what Trump has called a “rocket-ship” economic recovery and emphasizing record-breaking growth while downplaying the record-breaking losses that preceded it.

“There’s no question the recovery has beat expectations,” said Rep. Kevin Brady (R-Texas), the top Republican on the House Ways and Means Committee, this week on a press call with reporters.

Talks between the White House and Democratic leaders, meanwhile, have been stalled for weeks. The Senate is set to return from its summer recess next week with no clear path forward on a relief package.

“People are in these bubbles,” Atwater said. “And if people aren’t leaving their homes, are not really getting out, it’s unlikely that they’re seeing the magnitude of the downside of this K-shaped recovery.”

This article originally appeared at Politico on September 7, 2020. Reprinted with permission.

About the Author: Megan Cassella is a trade reporter for POLITICO Pro. Before joining the trade team in June 2016, Megan worked for Reuters based out of Washington, covering the economy, domestic politics and the 2016 presidential campaign. It was in that role that she first began covering trade, including Donald Trump’s rise as the populist candidate vowing to renegotiate NAFTA and Hillary Clinton’s careful sidestep of the Trans-Pacific Partnership.

A D.C.-area native, Megan headed south for a few years to earn her bachelor’s degree in business journalism and international politics at the University of North Carolina at Chapel Hill. Now settled back inside the Beltway, Megan’s on the hunt for the city’s best Carolina BBQ — and still rooting for the Heels.


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Field Museum Workers Say It’s Time for the CEO to Start Making Sacrifices, Too

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Facing devasting pay cuts and layoffs amid the Covid-19 crisis, workers at Chicago’s Field Museum are organizing to demand greater transparency and equitable sacrifice from upper management.

“We fear these cuts will disproportionately impact staff of color and those already paid the least,” Field Museum workers explain in a petition that has now garnered over 1,700 signatures. “We are proud to call the Field home, and are prepared to make sacrifices to preserve it for generations to come. We are asking leadership to do the same.”

Best known for being the home of SUE, the most intact T. rex skeleton in the world, the Field is the nation’s third largest natural history museum after the Smithsonian and New York’s American Museum of Natural History. As of 2019, the museum had an endowment of approximately $440 million, up from $299 million in 2012.

The museum has been shuttered since mid-March due to the pandemic, and it remains unclear when it will be able to reopen to the public. Though the Field secured a loan from the federal Paycheck Protection Program and 70% of its revenue comes from sources other than ticket sales, at a May 19 virtual town hall with employees, CEO Richard Lariviere announced an impending 10% pay cut as well as an unspecified number of layoffs.

“At the town hall, we had a lot of staff proposing alternatives and various cost-cutting ideas like rotating furloughs, graduated pay reductions, and reducing hours, and asking if those had been explored,” says Anna Villanyi, an educator who has worked at the museum for two years. “But those ideas were dismissed without transparency about to what degree leadership had already explored them.”

Lariviere’s total compensation in 2018—the most recent year with available data—was $796,000. While the presidents of the Boston Museum of Science and American Museum of Natural History have respectively taken a 50% and 25%pay cut in light of the crisis, Lariviere reportedly dismissed the idea of reducing his own compensation as “a meaningless gesture.”

“A lot of museums are experiencing hardship due to this time, and we can see the different ways that is being addressed,” Villanyi tells In These Times. “We have such a large and seemingly financially stable institution that’s choosing not to make equitable moves like graduated pay cuts that other museums are doing.”

The Field Museum’s nearly 400 employees include scientists, collection managers, educators, technicians, guest services workers, maintenance workers and security guards. Many, like Villanyi, have been working from home during the pandemic, but others, like those who manage the upkeep of the museum’s exhibits, are not able to work from home.

Staff who can work remotely have been donating their vacation hours to their coworkers who don’t have the option of working from home, ensuring they continue receiving income. “It has been a really helpful act of sacrifice,” Villanyi says. “I believe it’s been over $200,000 worth of vacation hours that have been donated into that pool.”

In addition to aiding one another through the crisis, Field Museum employees have also been helping the public by sewing face masks and repurposing 3-D printers to make face shields for frontline workers.

The museum workers are specifically calling for a moratorium on pay cuts and layoffs until they can have a greater voice in cost-cutting measures, particularly by having a staff representative present at all future budget meetings.

“I’m hopeful that the increased awareness through our petition puts pressure on accountability for those things to happen,” Villanyi says.

Their organizing effort is being assisted by the Emergency Workplace Organizing Committee (EWOC), a joint project of the United Electrical, Radio and Machine Workers of America (UE) and the Democratic Socialists of America (DSA).

EWOC was launched shortly after the pandemic hit the United States to give non-union workers the resources needed to organize their own workplaces around coronavirus-related demands like hazard pay, sick leave and provision of personal protective equipment.

UE International Representative Mark Meinster says that over 1,000 workers from a range of industries including fast food, manufacturing, meatpacking, retail and higher education have received advice and assistance through EWOC on how to take workplace action around Covid-19 related issues.

With help from EWOC, workers around the country have already won several victories, including improved health and safety measures for grocery workers in Texas and Pennsylvania, and hazard pay for 250 Taco Bell workers in Michigan.

Meinster says that most of the work of EWOC is done through volunteers including DSA members, former Bernie Sanders campaign staff and UE activists.

“We’re building on models developed around the Bernie Sanders campaign of doing distributed organizing—where you’ve got a large group of motivated volunteers—and apply that model to workplace organizing,” Meinster explains. “That’s one of the keys to revitalizing a fighting labor movement. We’ve got to figure out how to go beyond mere staff resources and engage lots of motivated people out there.”

Meinster says the Field Museum organizing is a perfect example of workers organically coming together and reaching out to EWOC for assistance. “Like all museum workers, they’re facing some real difficult fights,” he says. “But here we’re seeing workers start to stand up and do something about it.”

This blog originally appeared at In These Times on June 12, 2020. Reprinted with permission.

About the Author: Jeff Schuhrke is a Working In These Times contributor based in Chicago. He has a Master’s in Labor Studies from UMass Amherst and is currently pursuing a Ph.D. in labor history at the University of Illinois at Chicago. He was a summer 2013 editorial intern at In These Times. Follow him on Twitter: @JeffSchuhrke.


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Day 1 in the Newly Seated Kentucky Legislature Is About Attacking Working People

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Kentucky Republican leaders, led by Gov. Matt Bevin, gained control of the state House, giving them control of the executive and legislative branches. Their first order of business? Go after working families. Bevin and the Republicans are pushing forward with several anti-worker resolutions. In the process, they have given more say in the state’s future to outsider billionaires and CEOs than the people of the state.

Kentucky Republicans abused their power, changing the rules to move the anti-working people bills as “emergency legislation,” even though the only emergency happening is the one they are creating for working families. Legislators don’t even have time to read the bills, much less take the time to fully understand the impact of the legislation. New legislators don’t even have phones or offices yet, and they’re being asked to quickly vote yes or no on dangerous, destructive bills.

Even worse, by bending the rules in their favor, Republicans have given the public no chance to weigh in on the legislation. The bills have been reported out of committee and could be voted on the floor of the legislature as early as Saturday.

The Kentucky State AFL-CIO condemned the sneaky move:

The so-called right to work and prevailing wage repeal bills passed (out of committee) today will deny economic opportunities for Kentucky’s working families.
Kentucky’s working families are suffering. They are facing employment, health care access and education challenges. The Kentucky GOP not only ignored their plight, they made them worse with these anti-worker bills.

Kentucky Governor Matt Bevin and House Republican leadership made hurting working Kentuckians their number one priority. They did not advance bills to increase education funding, raise wages, or fund vital services in our community. Instead they chose to give multi-national corporations more power to outsource jobs, cut wages, and reduce benefits at the expense of our workers, small businesses, and the local economy. This is shameful.

The Kentucky labor movement will continue to fight for the rights of Kentucky’s working families, like we have been doing for more than 100 years. We will demand government transparency and accountability. And we will continue to fight for better wages, reasonable hours and safer working conditions. We will take this opportunity to grow the labor movement and organize like hell!

Politicians didn’t create the labor movement and politicians aren’t going to destroy the labor movement.

Other working family advocates agree. Bill Finn, director of the Kentucky State Building and Construction Trades Council, said: “A lot of working people voted for change in this election. They didn’t vote for this. They didn’t vote for a pay cut.”

Learn more at Kentucky State AFL-CIO.

This blog originally appeared in aflcio.org on January 4, 2017.  Reprinted with permission.

Kenneth Quinnell: I am a long-time blogger, campaign staffer and political activist.  Before joining the AFL-CIO in 2012, I worked as labor reporter for the blog Crooks and Liars.  Previous experience includes Communications Director for the Darcy Burner for Congress Campaign and New Media Director for the Kendrick Meek for Senate Campaign, founding and serving as the primary author for the influential state blog Florida Progressive Coalition and more than 10 years as a college instructor teaching political science and American History.  My writings have also appeared on Daily Kos, Alternet, the Guardian Online, Media Matters for America, Think Progress, Campaign for America’s Future and elsewhere.  I am the proud father of three future progressive activists, an accomplished rapper and karaoke enthusiast.


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