The new normal is ... a new slavery?

In graduate school, a professor casually commented that unemployment is a privilege of the rich.  The poor simply cannot afford to be unemployed, he argued.

I had a question right then but did not ask.  I was way too self-conscious about my accent and I worried that I might have to repeat the question in order to be understood.  I stayed quiet.  The question was this: What if people are working but the returns are next to nothing.  You know, like slaves.  Like hamsters running forever but not really going anywhere.

That question continues to bug me.  I have forever worried that the automation means that owners of those digital abstractions will get to hoard way more money than ever before.  This, in a political environment that discourages redistribution of income, will lead to workers working away but ...

The NY Times adds more to my worries, via this chart:

Soure

So ...

The message is straightforward. Only a few decades ago, the middle class and the poor weren’t just receiving healthy raises. Their take-home pay was rising even more rapidly, in percentage terms, than the pay of the rich.
...
In recent decades, by contrast, only very affluent families — those in roughly the top 1/40th of the income distribution — have received such large raises. Yes, the upper-middle class has done better than the middle class or the poor, but the huge gaps are between the super-rich and everyone else.

Megan McArdle, who is by no means left of the political-economic center, writes about the slow wage growth even though unemployment rate is at a low, low 4.3 percent:

So this slow wage growth may simply be what the labor market now looks like. Earlier eras of tight labor markets produced big increases in wages, but those increases were matched by rising worker productivity. Today, employers striving for productivity may replace the worker altogether, either by outsourcing to a lower-wage country or by giving that job to a machine.
So the biggest mystery is not why U.S. wage growth seems stuck even as unemployment falls. The biggest mystery is how we’re going to adjust our economy, our culture and our politics to the new normal.

It is no mystery to me--I have forever blogged about the need for a new social contract.  If only this president and his minions, and the likes of Paul Ryan and Mitch McConnell who manically advocate tax-cuts for the wealthy, will honestly respond to these real trends, instead of inventing their own alternative facts!

Jobs, jobs, and jobs. But, hey, incomes?

"I am especially keen to have you involved in the panel given your distinguished track record," was a sentence in a lengthy email inviting me to a session at the upcoming international conference.  After years of marching to my own drumbeat of scholarship that is aimed at public engagement, it is encouraging that there is some recognition of the urgency of the issue--and, of course, recognition of what I do as an academic.

I won't hold my breath for any recognition within my university.  The latest was an email from my dean who pooh-poohed my work and external recognition with a note on how I need to work on "scholarly activities."  I.e., my public scholarship is not "scholarly activities."  I figured that his email is best ignored--no reply.  I hope at some time--sooner than later--he and the rest will understand that intellectual onanism is not necessarily what "scholarly" means.

In many op-eds and blog-posts over the years, and in classroom discussions with students, I have been worrying a lot about automation's impact on jobs and incomes.  My bottom-line to students has always been that they will experience a fantastic future thanks to automation, but that jobs--and well-paying jobs, in particular--might not be easy to come by.  "It could be a challenging future" is what I typically tell them.  But, like my faculty and administrative colleagues, most students too do not listen to me.  Why should they, when they hear from those faculty and administrators that awesome jobs wait for college graduates!

This POTUS does nothing to help people understand the rapidly changing employment scene.  He thinks believes that jobs--and well paying middle-class jobs--can be brought back by him beating the pulp out of the CEOs, as if his job is to be the mafia chief.  Why doesn't he explain to his faithful followers, and to the unprincipled Republican leaders, the reality about automation's impacts on employment?

Trump knows virtually nothing about technology — other than a smartphone, he doesn’t use it much. And the industries he’s worked in — construction, real estate, hotels, and resorts — are among the least sophisticated in their use of information technology. So he’s not well equipped to understand the dynamics of automation-driven job loss.

One does not need to even work in the information industry, or in manufacturing, in order to understand the impact of automation.  Consider, as a contrast, the former POTUS, whose experiences were shaped elsewhere--"community organizing" that the unprincipled Republicans always ridiculed:

“The next wave of economic dislocations won’t come from overseas,” Mr. Obama said. “It will come from the relentless pace of automation that makes a lot of good, middle-class jobs obsolete.”

Even if he is informed enough, the current POTUS does not want to talk about automation because that will mean speaking truth with people.  And he has made it immensely clear that truth is nowhere in his mind, ever.  While he makes a grand spectacle out of his "negotiations" over plant closings and offshoring,

automation-related job loss is difficult to negotiate about. It’s the silent killer of human labor, eliminating job after job over a period of time. Jobs often disappear through attrition. There are no visible plant closings to respond to, no press releases by foreign rivals to counter. It’s a complex subject that doesn’t lend itself to TV sound bites or tweets.

If only his people will understand this:

Technology delivers its benefits and harms in an unequal way. That explains why even though the economy is humming, it doesn’t feel like it for a large group of workers.

The solutions to this are not simple, and "they’re not easily summarized in a sound bite."  Certainly not in 140 characters!

I have a job for you ... but, don't ask about the pay!

Faculty working their ways from kindergarten through their doctorates and then continuing on with teaching, without having had meaningful employment in the real world, is not unusual at all.  Sure, they might have held summer jobs somewhere, but that's it.  

Such a model works well for research universities.  But, those are not the places where the majority of the youth go for higher education--it is teaching universities like mine that serve the vast numbers.  And most students at the teaching universities have questions about jobs after graduation.  Ok, not all but the responsible ones do.  It is an increasingly difficult challenge for me to give them rosy, optimistic answers, given my understanding of the situation now and what I understand will be the immediate future.

Though the argumentative Indian who lives in India disagrees with me, I don't buy into his optimism for the future and how labor is overpriced in the US, especially when I read pieces like this on employment and wages:

the labor force's 273,000 person decline was part of the reason the unemployment rate fell from 5.8 to 5.6 percent. The participation rate, which shows how many people have a job or are looking for one, ticked down to 62.7 percent, tying a 38-year low. That's not so good.
You know what else isn't good? Wages.

Yes, of course, I am continuing from where I left off yesterday.  Well, this thread is not anything new in this blog anyway!

it's a little surprising that wages have stayed stagnant despite declining unemployment. That's not supposed to happen, not when joblessness is under 6 percent. Indeed, unemployment is already near the semi-mythical "natural rate" of, the Fed guesses, 5.2 to 5.5 percent, where inflation is supposed to start accelerating. The idea is that workers have more bargaining power when there aren't as many people out of work—so they can demand higher wages, which turns into higher prices.
That this hasn't happened tells us that there's still a decent amount of slack in the labor market. And that's clear enough if you look at how, even now, millions of people can only find part-time jobs when they want full-time ones, or have been looking for work for six months or longer.

So, yes, there is employment.  But, employment that is not full-time work. And even that full-time being vast under-employment with low wages.

Generating jobs even as the economy shows robust growth is getting to be difficult:

The problem is that most industries formed since 2000—electronic auctions, Internet news publishers, social-networking sites, and video- and audio-streaming services, all of which appeared in official industry classifications for the first time in 2010—employ far fewer people than earlier computer-based industries. Whereas in 2013 IBM and Dell employed 431,212 and 108,800 workers, respectively, Facebook employed only 8,348 as of last September.

The bottom-line is:

the digitization of the economy may have far-reaching implications for the future of growth and employment.

So, what can be done?

there is much that governments can do to prevent stagnation. They can redistribute income to those with a higher propensity to spend. They can also support investment into industries that might foster more new jobs than digital technologies—jobs for solar photovoltaic installers, wind energy engineers, biofuels production managers and transportation planners.
Finally, while digital technologies may create fewer jobs than previous innovations, they also substantially reduce the amount of money it takes to start a new digital business—and that will make it possible for more people to become entrepreneurs. Indeed, self-employment might become the new normal. The challenge for economic policy is to create an environment that rewards and encourages more entrepreneurial risk taking. A basic guaranteed income, for instance, would help by capping the downside to entrepreneurial failure while boosting spending and combating inequality.

Wait, wait, wait--that laundry list requires a great deal of responsible discussions in the political space, especially at the federal level, in the House, in the Senate, and at the White House.  Which means ... yep, the youth are screwed!

So ... as a faculty at a teaching university, if I present such a view to students, then I will be turning students away from my classes.  Perhaps I should simply tell them that my job is to only teach a few courses and that their jobs is not my concern.  Nope, that ain't me.  Which means ... yep, I am screwed!

Where have all the wages gone?

Thus, after a week of reflecting on the life as it evolved on the way to and from India, and when in India, I return to my regular programming--how much I missed it! ;)

I went to fill gas (petrol, for you readers outside the US! haha) in the car and thought I had traveled back in time when I saw that a gallon was $2.27.  (and 9/10 after the 27, of course)

So, low gas prices are good, right?  Ahem, "it could prove a headache for Federal Reserve Board Chairwoman Janet Yellen."

The Fed is thus facing a bizarre economic dilemma: It has runaway growth and collapsing prices at the same time. The weapons available to Yellen to fight deflation are flimsy. Normally, the Fed would want to lower interest rates. But they are already at zero—there is nowhere left to go. And, of course, house-on-fire economic growth usually calls for higher interest rates, which would only exacerbate the deflation side of the problem.

Economists do not like inflation, yes.  But, deflation is way more worrisome--panic provoking--than inflation is.  And the Fed will not tinker with interest rates for a while:

This would imply that labor-market indicators would become critical to the FOMC’s analysis of when to raise rates—and in particular wage growth. As Yellen put it in August last year, “since wage movements have historically been sensitive to tightness in the labor market, the recent behavior of both nominal and real wages point to weaker labor market conditions than would be indicated by the current unemployment rate.”
That is, rate hikes may be put on hold until people start seeing the benefits of growth in their take-home pay.

Growth in the take-home pay?  Oh, yeah, haven't I been blogging for a long time that middle-class jobs are incomes might never come back?  What does Paul Krugman have to say?

wages are still going nowhere, up only 1.7 percent over the past year.

That's it?  Maybe he will have more on this over the next few days.

This blogger is convinced that the wage stagnation is here for the long haul.  And is even more convinced when he reads pieces like this:

A declining labor share of income also makes it possible for labor productivity to rise without average wages rising in turn. That is, it means that workers can get more productive without seeing the fruits of their labor. That's a big deal, both for workers and for economics as a discipline. For decades, most economists have treated the existence of a stable labor share of income as something like a law of nature. It was one of six "stylized facts" the famous economist Nicholas Kaldor proposed in 1957. Those facts serve as foundations for a staggering number of influential macroeconomic models, including the ones that the Federal Reserve and federal budget officials rely upon. If the labor share is falling, things that most economists would have treated as impossible ten years ago start to look very troubling.

For those of us who have jobs with a decent enough pay, well, this ain't a bad time, with low interest rates, low inflation, low gas prices.  But, if you are like me who believes that it is the responsibility of middle-aged folks to watch out for the long-term welfare of the young, then you, too, will be worried.  Even if you live in India and not in the US--especially because many of the economic dynamics are similar!

Of course, you can forget all these, and utter your own version of "let them eat cake" and watch the "college" football national championship game, then "the superb owl," and then the "March Madness," and go international with sports all over the world.  The youth be damned!

Unions, wages, inflation, and deflation

According to the Bureau of Labor Statistics:

The Consumer Price Index for Urban Wage Earners and Clerical Workers
 (CPI-W) decreased 1.7 percent over the last 12 months 

So, here is a question: if a big reason for unions to negotiate a wage increase is to keep up with the uptick in the Consumer Price Index, will unions now negotiate for a wage decrease?
Just asking :-)

More pay and less security for teachers. Go for it.

I suspect that the generational dynamics that Paul Tough refers to in the K-12 system might apply to higher education too. Tough blogs that:
One striking phenomenon revealed by the Denver negotiations was a generational split among teachers. Younger teachers were generally in favor the deal being offered, and older teachers tended to oppose it. (Some veteran teachers told the Denver Post that they felt "dissed.")
A similar generational divide has appeared in D.C., where, as the Washington Post reported last month ...

The split in the teaching corps largely, but not exclusively, is occurring
along generational lines, with younger teachers more willing to accept the risks
and older ones often questioning the proposal.

The Post story mentioned an anonymous young teacher-blogger, "D.C. Teacher Chic," who is a fan of Chancellor Rhee and is decidedly in favor of her new deal (under which teachers could choose a "green plan" that would trade tenure for a higher salary or a more traditional "red plan"). Her blog—often funny, usually outraged—offers a great insight into the mind of a teacher on the young side of this growing generational divide.
At the beginning of August, when it seemed that George Parker, the president of the D.C. teachers union local, was going to turn down Rhee's offer, D.C. Teacher Chic blew a gasket:

I am going to cry. Seriously. And then I am going to start looking for another
school system.I cannot believe George Parker is supporting scraping this entire
contract and going for a more "traditional agreement." Clearly, not only does he
not represent me, but he is also taking money right out of my pocket!I
understand that shitty teachers who have been working in the system since 1952
don't want to give up tenure. Fine. I get it. So choose the red plan! I don't
understand opposing the entire proposal, unless you just haven't read it.

Chinese labor shortage. For real. Not from the Onion!

"China's “surplus” labour has been used up," The Economist notes, and demographics will soon affect its economy--"factory bosses have recently complained of labour shortages and wages have been rising more rapidly."

Not a huge surprise actually.

Just over a year ago, the NY Times reported on August 29, 2007, that wages are on the rise. Of course, Chinese officials would not admit any labor shortage. Instead, according to them, "there is a shortage of young workers willing to accept the low wages that prevailed in the 1990s." Hello? Isn't that a textbook definition of shortage?

However, given the global economic slowdown, and the recession in the US, plus the post-Olympic economic impacts in China, I wonder what the impact on wages there will be--I am guessing there will be a downward pressure on Chinese wages.