The New York Times is not only an informative newspaper. It is also an establishment newspaper. Accordingly, we are fed with a mix of truth and fiction. In a recent article on the front page of the business section, the NY Times reports "Recovery Finally Yields Big Gains for Average Worker's Pay. The article concludes that the "tighter labor market forces employers to pay more to hire and retain workers. But in reality, the gains of last year of 2.9% were paltry. For when the inflation rate of 1.7% is subtracted, the real wage increase was only 1.2%. That is by no means a major improvement.
About the newspaper's claim that the labor market is tight, the very opposite is far more accurate. There is a growing surplus of unemployed workers. As the NY Times article acknowledges, millions of workers have stopped looking for work because they have been unable to find jobs. But they haven't disappeared. These discouraged workers, who exceed 2 million, are ready, willing, and able to work. If they were included in the unemployment figures, as they should be, the official unemployment rate would climb from 4.7% to 6.1%.
Also, about 6 million workers are employed part time because they are unable to obtain full time jobs. Many employers, who want to escape the costs of fringe benefits and pay lower wages, split full time jobs in half, which creates two jobs out of one. During the first week of every month the Department of Labor's Bureau of Labor Statistics (BLS) reports the number of new jobs that have been added to the economy. The BLS exaggerates the growth in the number of new jobs because it includes these newly created part time jobs that do not reflect any economic growth at all.
What the employers have mainly created by destroying full time jobs is poverty and despair. And they have also increased the labor surplus because many of these workers who are now forced to work only part time will be competing for full time jobs.
Also, undocumented workers add to the surplus labor force. The official estimate of the number of undocumented workers in the United States is 8 million. But it is most likely higher because the estimate is inferred rather than directly counted. Undocumented immigrants try, so to speak, to slip into the shadows because they do not want to risk deportation. But they certainly contribute substantially to the pool of job seekers. Indeed, that's why the government looked the other way as so many illegally entered this country.
Yet despite the overwhelming evidence that too many workers are competing for scarce jobs, the NY Times claims that our economy is close to full employment. That's nonsense! When we include the aggregate number of discouraged workers, part-timers who want full time jobs, and undocumented workers, we realize that the labor surplus is huge and even staggering.
But the NY Times sees things quite differently. For example, although It notes that the majority of workers without college degrees have fewer opportunities, it nevertheless misses the important point. Since our economy is many light years away from full employment, it is inevitable that some groups will fare more poorly than others.
Even many college students have little to look forward to. Actually, higher education institutions are often warehouses for young people. Most are not receiving any training or any other preparation for good jobs. Moreover, many of the good jobs are disappearing. The federal government has the resources but not the will to create good, living wage jobs. But unfortunately, if the government did nothing at all, it would be an improvement. The government has been playing a major role facilitating the ability of business to migrate offshore, particularly to lower wage countries. Among the major domestic labor force disasters, over 4 million manufacturing jobs have disappeared in a 20 year period.
The tax advantages to corporations of relocating offshore are considerable. Moving expenses are completely tax deductable. Also, thanks to the tax code, the effective income tax rate on reported income by foreign subsidiaries is substantially lower than the tax paid on domestic earnings. It's about a 10% difference. Also, corporations can even report their profits as foreign income although they were actually earned in the United States. And most of all, among the major roles of American foreign policy is to protect and nurture American multinational corporations abroad. The aggregate result of government's pro-business practices is that unemployment and low wages are both growing domestically.
Already, too many businesses are shedding jobs. Sears will shut 150 stores, and lay off over 6,000 employees. Macy's is closing 63 stores and cutting 10,000 jobs. Wal-Mart is slashing 17,500 jobs. Other corporations that are reducing jobs include Microsoft, 4,700, DuPont, 6,000, and Bank of America, 10,000. Some of the cuts are showing up as an increase in empty stores that are not being replaced by other businesses. Empty store fronts in shopping centers have risen in 30 metropolitan areas. The real estate industry is worried that the worse may be ahead. When stores close without being replaced, shopping centers lose their vibrancy, and could eventually become blighted, which in turn, causes more closings and layoffs. Of course, many businesses are losing sales to Amazon and other internet companies. But the massive reduction in jobs mainly reflects the state of the American economy. According to the recent weekly figures, 237,000 workers applied for unemployment insurance! That's quite worrisome. Isn't it?
Higher Wages Will Boost the Economy
Are there any positive developments? Yes, indeed. As a result of well organized campaigns, there have been important gains in the minimum wage. This issue is not only important because it reduces poverty for low wage workers and their families. Higher wages increase purchasing power, which both saves and creates jobs.
Thanks to minimum wage laws, wages have recently improved for 4.3 million workers. In Berkeley, San Francisco, and Emeryville, the wage will reach $15 an hour and will include an annual cost of living increase and paid sick leave. Over 200 economists signed a detailed statement asserting that a $15 an hour wage would help stabilize the economy because it would appreciably boost spending. To those who think this wage is excessive, keep in mind that if the federal minimum wage kept up with inflation and productivity gains since 1968, the minimum wage would now be about $26 an hour.
When Oakland, California passed a ballot measure that appreciably increased the minimum wage. Despite the cries that the sky is falling, interviews with over one hundred employers eight months after the law took effect acknowledged that the higher wage posed no serious problem. As the official figures showed, the unemployment rate declined and there was no major effect on employment opportunities. That's not surprising. A substantial increase in wages and benefits will have a positive impact on all working people and their families by improving the economy.
Frankly D. Roosevelt was committed to both reducing poverty and stimulating the economy. He remarked, "No business which depends for existence on paying less than living wages to its workers has any right to continue in this country."
*The New York Times article was written by Nelson D. Schwartz, whose writings represent the point of view of the NY Times. He is officially responsible for covering economic issues in the newspaper's business section