Reports from the Economic Front

a blog by Marty Hart-Landsberg

Monthly Archives: December 2015

Problematic US Labor Market Trends

It seems like everyone talks about the importance of education to our economy.  Unfortunately, the US business community, the people our politicians call the “job creators,” doesn’t seem to care.  To be blunt: they continue to create jobs that don’t require higher education skills.

The US Bureau of Labor Statistics regularly does employment projections.  The table below shows their recent projection for the 15 fastest growing occupations over the next decade in terms of numbers of workers.  The list accounts for more than a third of all projected labor growth.

job growth

As you can see eight of the fifteen require “no formal educational credential.”  One requires only a high school diploma. Just four require a bachelor’s degree.  Only four have an annual wage above the median.

Doug Henwood, who blogs at LBO news, summarized the educational requirements for the entire projected labor force as follows:

Just over half, 51%, require no more than a high school diploma for entry, and another 14% some post-high school education short of a bachelor’s.  Just 35% require a bachelor’s, and 9% an advanced degree.  The educational distribution of the workforce will change little from today.  For example, 25.6% of today’s jobs require a bachelor’s or more for entry; in a decade, that will rise 0.6 point to a dizzying 26.2%.  Today 63.6% of jobs require no more than a high school diploma; in 2004, that will plummet by 0.8 point to 62.8%.

education

To be clear, these are the educational requirements associated with the jobs to be created according to Bureau projections.  Nothing says that growing numbers of jobs requiring only a high school diploma won’t be filled by college educated workers.  In fact, the Wall Street Journal highlights the growing possibility of just such a trend:

Underemployment—skilled workers doing jobs that don’t require their level of education—has been one of the hallmarks of the [current] slow recovery. By some measures, nearly half of employed college graduates are in jobs that don’t traditionally require a college degree.

Economists have generally assumed the problem was temporary: As the economy improved, companies would need more highly educated employees. But in a [2013] paper released by the National Bureau of Economic Research, a team of Canadian economists argues that the U.S. faces a longer-term problem.

They found that unlike the 1990s, when companies needed hundreds of thousands of skilled workers to develop, build and install high-tech systems—everything from corporate intranets to manufacturing robots—demand for such skills has fallen in recent years, even as young people continued to flock to programs that taught them. . . .

[U]sing Labor Department data, Mr. Beaudry and his coauthors found that demand for college-level occupations—primarily managers, professionals and technical workers—peaked as a share of the workforce in about 2000, just as the dot-com bubble was about to burst, and then began to decline. The supply of such workers, meanwhile, continued to grow through the 2000s. The subsequent housing boom helped mask the problem by creating artificially high demand for workers of all kinds, but only temporarily.

While it is impossible to know the future course of the economy, projected trends are far from worker-friendly.

 

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Continuing Struggle In South Korea

You wouldn’t know it from reading the mainstream press in the United States, but things are rapidly going from bad to worse for working people in South Korea.  South Korea is typically presented as one of America’s strongest democratic allies in Asia and an economic powerhouse.  Unfortunately, such a presentation is far from accurate.

South Korea was ruled by US-supported military dictatorships from 1961 until 1987 when, thanks to the heroics of millions of people demonstrating in the streets, the military dictatorship in power at the time was forced to allow the direct election of the president.  The country didn’t get its first civilian president until 1993.

Despite having now achieved a regularized electoral process, South Korea’s democracy still remains compromised by the 1948 division of the country.  For example, the previous President Lee Myung-bak and the current President Park Geun-hye (the daughter of the first military dictator who ruled from 1961-1979) have repeatedly used the country’s draconian national security law to limit freedom of education and the press, political speech, and the rights of workers and social movement and civic activists.

Park’s own election victory was due, at least in part, to a secret and illegal on-line campaign to tar the opposition as cozy with North Korea which was run by the country’s National Intelligence Service.  And in 2014, the government formally dissolved the Unified Progressive Party, removing its five members from the National Assembly using trumped up charges that the party was a North Korean front dedicated to the violent overthrow of the South Korean government.

The democratic labor movement, one of the main pillars of the country’s democracy struggle, was severely weakened by the 1997-98 economic crisis and the IMF -promoted structural adjustment policies that followed.  Successive governments, responding to a dramatic slowing of growth due in large part to South Korean corporate decisions to globalize operations, have sought to stimulate domestic investment and production by boosting corporate profits through new measures designed to weaken the country’s labor laws.

Although South Korea already has the largest percentage of precarious workers among all Organization for Economic Cooperation and Development countries, President Park is obviously not satisfied.  Hyun Lee and Gregory Elich, two Korea experts, provide the following summary of her proposed new labor reforms:  

President Park and her ruling New Frontier party want to introduce a package of laws that would fundamentally change the country’s labor market and undermine the power of unions. They would let employers fire workers arbitrarily, increase the use of temporary labor, and extend the contract term for temporary workers from the current two years to four.

“If the reform passes, an employer could hire workers for four years, fire them temporarily, then rehire them for another four years, and they would have no incentive to hire permanent, regular workers,” [Korean Confederation of Trade Unions (KCTU) President Han Sang-gyun] warned in a recent interview.

Contract workers are not entitled to the four major types of insurance that South Korean employers must legally provide to permanent workers—health insurance, unemployment insurance, industrial-accident compensation, and social security.  Unions say employers will use this loophole to replace regular workers with contract workers.

Another proposed law would replace the country’s seniority-based salary system with a performance-based system, and let employers terminate workers based on subjective assessments of “low performance.” (Currently, “low performance” cannot be grounds to fire an employee legally, so employers resort to all manners of harassment and humiliation tactics to force employees to leave their jobs voluntarily.)

Also, if companies want to push workers into early retirement, they are legally required to pay them 30 days or more of average wages for each year of consecutive service as severance pay.  This new system “would allow a company to get rid of unwanted workers without spending a dime,” Han said.

The new law would also allow employers to change their employment regulations as they please without worker consent. By law, employers of ten workers or more are required to prepare rules of employment, such as payment method of wages and annual paid-leave, etc., and submit them to the Ministry of Labor, as well as post them where workers can have free access to them. A company can alter its employment regulations only with the explicit consent of the labor union, or, if there is no labor union, the majority of its workers. . . .

The government is also introducing a peak-wage system, in which pay is automatically cut for workers at age 55.  The government argues that businesses need to cut the pay of older workers, because they become less productive as they age, and with the money they save, companies can hire more young people and solve the country’s growing youth unemployment. The government is trying to pit the young against the old, but its feigned concern for young people masks the real beneficiaries of the labor reform – companies that stand to reap enormous profits from cutting the wages of older workers and increasing their reliance on temporary labor.

The KCTU is fighting back, and they have allies.  The farmer’s movement opposes President Park’s push for new trade agreements that will drive down the price of rice, slash their income, and leave the country ever more food dependent.  And most people oppose the government’s proposal to take it upon itself to write the only history textbooks to be used in public schools.

The KCTU has worked to build a coalition of popular movements around a new vision for the country and helped initiate huge demonstrations in Seoul on November 14 and December 5 demanding the resignation of the president. Park, in response, ordered the police to raid the offices of several KCTU unions and unsuccessfully tried to outlaw new demonstrations.  She also ordered the arrests of top KCTU leaders.  The KCTU president was arrested on December 10.  The police are still searching for other union officers.  It appears that President Park will charge all of them with sedition, which if true will be first time such a charge has been made since the end of the military dictatorship.

korea demonstration

There is a lot at stake in this struggle, one that seems to fly below the radar of the US media.  As I noted in a previous post:

With the deepening of corporate-led globalization processes, governments everywhere seek to weaken labor movements and worker protections and restrict options for public education and democratic debate. As a consequence, the KCTU’s efforts to revitalize its own union structures through its first ever direct election for top officers and renewed internal education and anchor a broad coalition of social forces around an alternative social vision deserves widespread support and serious study.

Telling Lies About Trade

Warning: The trio of agreements being pushed by the US government–the Transpacific Partnership, The Transatlantic Trade and Investment Partnership, and the Trade in Services Agreement—are all dangerous to our health and well-being.

President Obama claims otherwise.  For example, as Lauri Wallach notes:

President Barack Obama has launched unprecedented attacks on the very notion that the [Transpacific Partnership] pact could undermine public interest policies. For instance, in a high profile May 2015 speech at Nike headquarters, Obama said that critics’ warnings that the TPP could “undermine American regulation — food safety, worker safety, even financial regulations” was “just not true.” He said: “They’re making this stuff up. No trade agreement is going to force us to change our laws.”

Well, here is something not made up.  In December, the WTO ruled that the US County-of-Origin-Labeling (COOL) law for meat (beef, pork, and poultry) violates global trade rules and authorized Canada and Mexico to impose more than $1 billion in trade sanctions on the US each year until the US Congress repeals it.

Canadian and Mexican governments won an initial WTO ruling against COOL in 2011.  The Obama administration tinkered with the law in 2013 hoping to avoid sanctions, but both governments pressed their case.  Finally, in May 2015 the WTO tribunal ruled that COOL still violated the Technical Barriers to Trade Agreement (TBT) and in December authorized the sanctions.

The Technical Barriers to Trade Agreement, in the words of the WTO, “aims to ensure that technical regulations, standards, and conformity assessment procedures are non-discriminatory and do not create unnecessary obstacles to trade.” More specifically that means that a country cannot pass legislation related to the process of production of a good that might hurt sales of a foreign good even if the legislation was not designed for that purpose.

Perhaps not surprisingly, many in the US House and Senate, with the urging of the Secretary of Agriculture, are now calling for the elimination of the law despite the fact that it enjoys strong popular support.

According to a Food Safety News report:

Canada and Mexico initially sought more than $3 billion in retaliatory tariffs. The United States Trade Representative (USTR) said this was a dramatic overestimation of damages and argued that the WTO set allowable tariffs at no more than $43.22 million and $47.55 million for Canada and Mexico, respectively.

WTO decided . . . that Canada could impose $780 million in retaliatory tariffs for COOL, and Mexico could impose $228 million. . . .

Over the summer, many in Congress called for a full repeal of COOL for beef, pork and chicken, and the House of Representatives passed a bill which would do just that. Others . . . said action had to wait at least until WTO had approved tariff levels. Sen. Debbie Stabenow (D-MI) offered up a bill to make COOL on meat voluntary. . . .

“The WTO has warned us multiple times, and Congress has ignored the warning,” said Sen. Pat Roberts (R-KS), chairman of the Senate Committee on Agriculture, Nutrition and Forestry, in reaction to WTO’s decision Monday. “This is no longer a warning. Retaliation is real. Now more than ever, we need to repeal COOL.”

Unfortunately, this is not the only US product law successfully challenged.  In November, the WTO ruled for Mexico against the US dolphin-saving labeling program for tuna, citing it as a violation of the TRT.  As the Sierra Club explains:

Since 1990, the United States has maintained a “dolphin-safe” labeling program for tuna that allows consumers to choose to purchase tuna caught in a manner that does not kill dolphins. The “dolphin-safe” label has contributed to a 97-percent reduction in dolphin deaths since the 1980s in Pacific waters where dolphins and tuna cohabitate.

[The November] ruling marks the fourth time that the WTO has ruled against the U.S. label in the last four years and means that the U.S. could face WTO-authorized trade sanctions for maintaining the dolphin-saving label.

What makes the three proposed new agreements noted above especially threatening is that they all include an investor-state dispute settlement mechanism.  The WTO only allows governments to sue governments.  These investor-state dispute settlement mechanisms allow corporations to directly sue governments.  This is a critical change, one that will greatly increase the number of challenges to US consumer protection, environmental, and health and safety laws.

Who is Obama kidding?

eight_col_tpp

UPDATE: On December 18, one week after the WTO approved trade sanctions on the US, the US Congress terminated the COOL law as part of its approval of the 2016 omnibus spending bill.

Lonely At The Top: Wealth In The US

We all know that wealth is unequally distributed in the US.  But, the results of a new study by the Institute for Policy Studies, authored by Chuck Collins and Josh Hoxie, are still eye popping.

Collins and Hoxie find that the wealthiest 0.1 percent of US households, an estimated 115,000 households with a net worth starting at $20 million, own more than 20 percent of total US household wealth.  That is up from 7 percent in the 1970s.  This group owns approximately the same total wealth as the bottom 90 percent of US households.

Moving up the wealth ladder, they calculate that the top 400 people—yes, people not households, each with a net worth starting at $1.7 billion, have more wealth than the bottom 61 percent of the US population, an estimated 70 million households or 194 million people.

Finally, we get to the top 20 people, those sitting at the pinnacle of the US wealth distribution. As the authors explain:

The wealthiest 20 individuals in the United States today hold more wealth than the bottom half of the U.S. population combined. These 20 super wealthy — a group small enough to fly together on one Gulfstream G650 private jet — have as much wealth as the 152 million people who live in the 57 million households that make up the bottom half of the U.S. population.

top 20

 

list

Although obvious, it is still worth emphasizing, as Collins and Hoxie do, that great wealth translates into great power, the power to shape economic policies.  And, in a self-reinforcing cycle, the resulting policies, by design, create new opportunities for the wealthy to capture more wealth.  Think: free trade agreements, privatization policies, tax policy, and labor and environmental laws and regulations.

Oh yes, also think presidential politics.  As a New York Times study points out:

They are overwhelmingly white, rich, older and male . . . . Across a sprawling country, they reside in an archipelago of wealth, exclusive neighborhoods dotting a handful of cities and towns. . . . Now they are deploying their vast wealth in the political arena, providing almost half of all the seed money raised to support Democratic and Republican presidential candidates. Just 158 families, along with companies they own or control, contributed $176 million in the first phase of the campaign, a New York Times investigation found (emphasis added).

And yet, one still hears some people say that class analysis has no role to play in explaining the dynamics of the US political economy.  Makes you wonder who pays their salary.