Wednesday, September 19, 2007

No Mexican Trucks - Score One For Living Wages and Public Safety

Hope folks caught the really significant victory for living wage jobs won by the Teamsters and their allies. The Bush Administration had proposed allowing Mexican trucks to make long hauls across the border and across country, but the Senate and House handily overturned the proposals by denying funds to implement the rules.

I was especially ticked by conventional wisdom that chided the Teamsters and the Sierra Club as protectionists and self-serving for opposing the change, and called on Congress to fulfill the promise of NAFTA by allowing long haulers to drop off goods in all three countries.

There was no real promise of NAFTA for workers in Mexico, the U.S. or Canada. On the Mexican side, such a real promise would have to included massive economic development aid and freer borders for labor to migrate. Never happened. What we got was a one sided deal, that allowed companies to place production in Mexico when it was profitable (without making long-term investment) and for U.S. imports to snuff out traditional agriculture and other native grown Mexican businesses. The other ‘promise’ of NAFTA was that their would be meaningful labor and environmental standards, so that companies couldn’t reap massive profits by simply bringing US-banned union-busting and hazardous environment practices to Mexico. Never happened.

That’s why it was so heartening to see Congress just say no to the further NAFTA-ization of the economy. If the Mexican truck rules had gone through, we would have lost one more source of good blue collar living wage jobs that are unlikely to come back. Moreover, it would be one more example where the NAFTA regime would have been allowed to over-rule decades of hard fought regulations that protected American drivers (including truckers) from accidents and poor emissions. When all the world order gives us is half-baked globalization (termed second-best globalization in a brilliant article by Daniel Rodrik), sometimes all we can do is just say no.

Wages - It's All About the Leverage

Last week, the New York Times’ David Leonhardt presents an article talking about the all-too-real disconnect between family bottom lines and the growth in the economy. The story is familiar, real wages have stood still from 2003 to the second quarter of 2007 as the economy has grown gangbusters. What little gains we’ve since then are likely to be erased if job growth continues to slow. This astounds economists like Lawrence Katz who throw up their hands and say that we just need white hot growth and truly full employment to get higher wages. I don’t disagree with the need to have macroeconomic policies geared towards full employment – and that full employment in today’s super deregulated workplace is something at 4.0% or below.

While I really like David’s reporting, what disappointed me about the article was the lack of perspective on why this has happened and potential solutions – with the article meekly pointing to a potential decline in the number of college degrees in the country. In my mind, its not really a mystery why economic growth is not going to workers. The disconnect has occured through a precipitous decline in wage-setting power of US workers and the government through wage floors.

On one hand, you have the precipitous drop in unionization rates in the economy which allows firms to attract employees at lower prices at lower and middle ends of the spectrum. On the other hand, you have a tremendous weakening of the wage floor. Not only do workers face a declining value of the minimum wage but the watering down of overtime rules. To make matters worse, one in ten companies misclassify their workforce as independent contractors which totally exempts them from any kind of wage rules. But perhaps most importantly, you have the impact of fear. Companies of all stripes can point to globalization and the availability of cheaper workers overseas to instill an omnipresent anxiety that parallelizes workers from demanding pay raises. NAFTA and the WTO have aided and abetted the destruction of living wage jobs to the benefit of the very top of the economic spectrum.

We need sympathetic reporters to start identifying these causes—because they lead to potential prominent solutions that can rebalance the economy, rather than pointing to more nebulous economic forces. There are proposals all over Congress that would get us on the right traack-- Employee Free Choice Act, the increase in the minimum wage, various proposals to cut off scofflaw employers, and tough stands on unfair trade deals could start to rebalance the economy to give workers the leverage to turn their productivity into real gains in their paycheck. But, we still have a long way to go in convincing the media and the public that these solutions can start to reverse the tide. Editorial after editorial talks about the decline in the middle class but rarely mention even big ticket items like EFCA. When liberal pundits pine for the ‘natural economic gains’ produced when the economy becomes red hot like it did in the late 1990s, we are going to be sorely disappointed. Today’s workforce needs the tools to fight for its fair share of the pie in all stages of the business cycle.

Friday, September 07, 2007

Recession on the Horizon?

Today, for the first time in four years the economy has experienced negative job growth. In August 2007 the economy reportedly lost approximately 4,000 private sector jobs. Of greater concern is the ob creation trend over the past few months­in January of 2007 the economy created 162,000 jobs, dropping quickly to only 69,000 in June, 68,000 in July, and finally to negative 4,000 in August, the lowest since August 2003.

The recent job creation patterns, working in tandem with troubles in the housing market, wide-spread fluctuations in the stock market, are raising a real possibility that the job market expansion may be nearing the end. Economists are still divided about the risk of a full-blown recession, but today's numbers seem to be pushing many over the edge as reported here in the New York Times. The US economy is in a tight balancing act--with the rest of the world's growth pull the US out of the hangover in the housing and credit markets. I think there is a real chance that world demand could inject enough stimulus into the US to pull us along in a state of slow growht versus recesson. However, Louis Uchitelle and others have written about the danger of an economy based on leveraged buyouts and re-organizations and short-term profits versus innovation. That's the kind of an economy that could short circuit when the credit bubble bursts.

If we do dip into recession, it will be one of the most disappointing expansion on record. For example, the nation’s factories have lost 215,000 jobs over the year and is still down 1.8 million jobs from the end of the last recession. By this point in the last recovery, manufacturing employment had completely recovered all of its losses.

We'll see in the next few months. Should job creation remain stagnant, decrease even further, or fail to keep pace with individuals seeking employment, the national unemployment level and unemployment rate will increase in the months to come (they were stagnant in August). I've noticed an uptick in the unemployment insurance figures in many states and the nation as well, there are already 2.55 million people collecting unemployment checks, which is 100,000 more than last year at the same time. One bright spot, as stated below, Congress has some real chances to take action while the storm clouds are gathering but the thunder has yet to begin.
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