COVID-19 Economic Crisis Snapshot

 Workers in the United States are in the midst of a punishing COVID-19 economic crisis.  Unfortunately, while a new fiscal spending package and an effective vaccine can bring needed relief, a meaningful sustained economic recovery will require significant structural changes in the operation and orientation of the economy.

The unemployment problem

Many people blame government mandated closure orders for the decline in economic activity and spike in unemployment.  But the evidence points to widespread concerns about the virus as the driving force.  As Emily Badger and Alicia Parlapiano describe in a New York Times article, and as illustrated in the following graphic taken from the article:

In the weeks before states around the country issued lockdown orders this spring, Americans were already hunkering down. They were spending less, traveling less, dining out less. Small businesses were already cutting employment. Some were even closing shop.

People were behaving this way — effectively winding down the economy — before the government told them to. And that pattern, apparent in a range of data looking back over the past two months, suggests in the weeks ahead that official pronouncements will have limited power to open the economy back up.

As the graphic shows, economic activity nosedived around the same time regardless of whether state governments were quick to mandate closings, slow to mandate closings, or unwilling to issue stay-at-home orders.

The resulting sharp decline in economic activity caused unemployment to soar. Almost 21 million jobs were lost in April at the peak of the crisis.  The unemployment rate hit a high of 14.7 percent.  By comparison the highest unemployment rate during the Great Recession was 10.6 percent in January 2010.

Employment recovered the next month, with an increase of 2.8 million jobs in May.  In June, payrolls grew by an even greater number, 4.8 million.  But things have dramatically slowed since.  In July, only 1.8 million jobs came back.  In August it was 1.5 million.  And in September it was only 661,000.  To this point, only half of the jobs lost have returned, and current trends are far from encouraging.

The unemployment rate fell to 7.9 percent in September, a significant decline from April.  But a large reason for that decline is that millions of workers have given up working or looking for work and are no longer counted as being part of the labor force.  And, as Alisha Haridasani Gupta writes in the New York Times:

A majority of those dropping out were women. Of the 1.1 million people ages 20 and over who left the work force (neither working nor looking for work) between August and September, over 800,000 were women, according to an analysis by the National Women’s Law Center. That figure includes 324,000 Latinas and 58,000 Black women. For comparison, 216,000 men left the job market in the same time period.

The relationship between the fall in the unemployment rate and worker exodus from the labor market is illustrated in the next figure which shows both the unemployment rate and the labor force participation rate (LFPR), which is measured by dividing the number of people 16 and over who are employed or seeking employment by the size of the civilian noninstitutional population that is 16 and over.

The figure allows us to see that even the relatively “low” September unemployment rate of 7.9 percent is still high by historical standards.  It also allows us to see that its recent decline was aided by a decline in the LFPR to a level not seen since the mid-1970s.  If those who left the labor market were to decide to once again seek employment, pushing the LFPR back up, unless the economic environment changed dramatically, the unemployment rate would also be pushed up to a much higher level.

Beyond the aggregate figures is the fact, as Heather Long, Andrew Van Dam, Alyssa Fowers and Leslie Shapiro explain in a Washington Post article, that “No other recession in modern history has so pummeled society’s most vulnerable.”

As we can see in the above graphic, the 1990 recession was a relatively egalitarian affair with all income groups suffering roughly a similar decline in employment.  That changed during the recessions of 2001 and 2008, with the lowest earning cohort suffering the most.  But, as the authors of the Washington Post article state, “even that inequality is a blip compared with what the coronavirus inflicted on low-wage workers this year.”  By the end of the summer, the employment crisis was largely over for the highest earners, while employment was still down more than 20 percent for low-wage workers and around 10 percent for middle-wage workers.

Poverty is on the rise

In line with this disproportionate hit suffered by low wage workers, the poverty rate has been climbing.  Five Columbia University researchers, using a monthly version of the Supplemental Poverty Measure (SPM), provide estimates of the monthly poverty rate from October 2019 through September 2020.  They found, as illustrated below, “that the monthly poverty rate increased from 15% to 16.7% from February to September 2020, even after taking the CARES Act’s income transfers into account. Increases in monthly poverty rates have been particularly acute for Black and Hispanic individuals, as well as for children.”

The standard poverty measure used by the federal government is an annual one, based on whether a family’s total annual income falls below a specified income level.  It doesn’t allow for monthly calculations and is widely criticized for using an extremely low emergency food budget to set its poverty level.   The SPM includes a more complete and accurate measure of family resources, a more expansive definition of family, the cost of a broader basket of necessities, and is adjusted for cost of living across metro areas.

As we can see in the above figure, the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was passed by Congress and signed into law on March 27th, 2020, has had a positive effect on poverty levels.  For example, without it, the poverty rate would have jumped to 19.4 percent in April. “Put differently, the CARE Act’s income transfers directly lifted around 18 million individuals out of poverty in April.”

However, as we can also see, the positive effects of the CARES Act have gradually dissipated.  The Economic Impact Payments (“Recovery Rebates”) were one-time payments.  The $600 per week unemployment supplement expired at the end of July.  Thus, the gap between the monthly SPM with and without the CARES Act has gradually narrowed.  And, with job creation dramatically slowing, without a new federal stimulus measure it is likely we will not see much improvement in the poverty rate in the coming months.  In fact, if working people continue to leave the labor market out of discouragement and the pressure of home responsibilities, there is a good chance the poverty rate will climb again.

It is also important to note that the rise in monthly rates of poverty, even with the CARES Act, differs greatly by race/ethnicity as illustrated in the following figure.

The need to do more

Republican opposition to a new stimulus ensures that that there will be no follow-up to the CARES Act before the upcoming election.  Opponents claim that the federal government has already done enough and the economy is well on its way to recovery. 

As for the size of the stimulus, the United States has been a lagger when it comes to its fiscal response to the pandemic.  The OECD recently published an interim report titled “Coronavirus: Living with uncertainty.”  One section of the report looks at fiscal support as a percent of 2019 GDP for nine countries. As the following figure shows, the United States trails every country but Korea when it comes to direct support for workers, firms, and health care.  

A big change is needed

While it is natural to view COVID-19 as responsible for our current crisis, the truth is that our economic problems are more long-term.  The U.S. economy has been steadily weakening for years.  In the figure below, the “trend” line is based on the 2.1% average rate of growth in real per capita GDP from 1970 to 2007, the year before the Great Recession.  Not surprising, real per capita GDP took a big hit during the Great Recession.  But as we can also see, real per capita GDP has yet to return to its historical trend. In fact, the gap has grown larger despite the record long recovery that followed. 

As Doug Henwood explains:

Since 2009, the growth rate has averaged 1.6%. Last year [2019], which Trump touted as the greatest economy ever, it managed to get back to the pre-2008 average of 2.1%, an average that includes two deep recessions (1973–1975 and 1981–1982).

At the end of 2019, actual [real GDP per capita] was 13% below trend. At the end of the 2008–2009 recession it was 9% below trend. Remarkably, despite a decade-long expansion, it fell further below trend in well over half the quarters since the Great Recession ended. The gap is now equal to $10,200 per person—a permanent loss of income, as economists say. 

The pre-coronavirus period of expansion (June 2009 to February 2020), although the longest on record, was actually also one of the weakest. It was marked by slow growth, weak job creation, deteriorating job quality, declining investment, rising debt, declining life expectancy, and narrowing corporate profit margins. In other words, the economy was heading toward recession even before the start of state mandated lockdowns.  The manufacturing sector actually spent much of 2019 in recession.   

Thus, there is strong reason to believe that a meaningful sustained recovery from the current COVID-19 economic crisis is going to require more than the development of an effective vaccine and a responsive health care system to ensure its wide distribution.  Also needed is significant structural change in the operation and orientation of the economy.

There is a union difference: mortality rates from COVID-19 are lower in unionized nursing homes

We need strong unions, all of us.  Tragically, even during the pandemic, businesses continue to aggressively resist worker attempts at unionization. And recent decisions by the NLRB only add to worker difficulties.

Here is one example of what is at stake: a recently published study of New York State nursing homes found that mortality rates from COVID-19 were 30 percent lower in unionized nursing homes than in facilities without health care worker unions.  By gaining better protection for themselves, unionized workers were also able to better protect the health of those they served.

Although the pandemic makes organizing and solidarity actions more difficult, it is essential that we find effective ways to support worker struggles for strong unions.

Work during the pandemic

Many workers, especially those now celebrated as “essential” or “frontline,” don’t feel safe at work, and for good reason.  Many have been denied needed personal protective equipment (PPE) or even information about the health status of their coworkers.

While surveys find that many employers have implemented new workplace cleaning procedures, they also find that a large percentage of workers continue to work without access to PPE, especially masks and gloves.  Strikingly, according to one study,

If [worker] access to PPE was limited in our data, policies mandating that workers wear protective gear were even more uncommon. Around a third of workers in restaurants, fast food, coffee shops, and hotels and motels reported requirements to wear gloves. This share was dramatically lower (around 12%) in big-box stores, department stores, retail stores, grocery stores, and pharmacies. The share of workers required to wear gloves was even lower in warehouses, fulfillment centers, and in delivery. Mask requirements were vanishingly uncommon across workplaces, at between 2% and 7% in convenience stores, coffee shops, fast food, restaurants, grocery stores, retail, department stores, and big-box stores. Just 12% of those in fulfillment centers reported a mask requirement, which was significantly higher than the 5% of warehouse and delivery workers.

Adding to the danger, many companies are aggressively trying to keep information about worker infections secret from coworkers and the public.  As a Bloomberg Law post explains:

U.S. businesses have been on a silencing spree. Hundreds of U.S. employers across a wide range of industries have told workers not to share information about Covid-19 cases or even raise concerns about the virus, or have retaliated against workers for doing those things, according to workplace complaints filed with the NLRB and the Occupational Safety and Health Administration (OSHA).

Workers at Amazon.com, Cargill, McDonald’s, and Target say they were told to keep Covid cases quiet. The same sort of gagging has been alleged in OSHA complaints against Smithfield Foods, Urban Outfitters, and General Electric. In an email viewed by Bloomberg Businessweek, Delta Air Lines told its 25,000 flight attendants to “please refrain from notifying other crew members on your own” about any Covid symptoms or diagnoses. At Recreational Equipment Inc., an employee texted colleagues to say he’d tested positive and that “I was told not to tell anybody” and “to not post or say anything on social media.”

These policies may help the corporate bottom line, but they endanger workers and those they serve, and thereby help to spread the pandemic.

Without unions, workers have limited ways to force their employers to create a safe work environment.  One is to file a complaint with the Occupational Safety and Health Administration.  And, despite fears of retaliation, many workers have done just that.  As a Brookings blog post reports:

Using data from the Occupational Safety and Health Administration (OSHA), [the figure below] shows the cumulative number of COVID-19 related workplace safety complaints. Between April 20 and August 20, total COVID-19 related workplace safety complaints rose over 350 percent.

Unfortunately, these complaints have achieved little.  According to the Bloomberg Law post,Many thousands of OSHA complaints about coronavirus safety issues have yielded citations against just two companies—a health-care company and a nursing home—totaling about $47,000.” OSHA has still not issued any regulations that address the pandemic.

OSHA rarely sends out inspectors to investigate complaints.  The Bloomberg Law post describes one case in which a mechanic at Maid-Rite, a company that supplies frozen meat products to military bases, nursing homes, and schools, wrote to OSHA describing unsafe conditions:

The mechanic says OSHA called him to say it would be sending Maid-Rite a letter instead of coming to inspect the plant, and that was the last he ever heard from the agency about his complaint. Letters between OSHA and Maid-Rite show OSHA told Maid-Rite in April to investigate worker allegations itself, and Maid-Rite wrote back saying that it was providing and mandating masks and that 6-foot distancing sometimes wasn’t feasible.

No changes were made and so other workers followed up with more complaints over the following weeks, leading OSHA to finally send an inspector to the plant.  However,

in a break from typical protocol, [the inspector] gave the company a heads-up. “OSHA is here, so do everything right!” a supervisor told staff during the inspection, the mechanic later wrote in an affidavit. Fifteen minutes later, the supervisor returned to say “Never mind,” because the visit was over, the mechanic wrote: “As soon as OSHA left, everything went exactly back to the way it was.”

Unions can help

Unions are far from perfect, but they are one of the most effective means workers have to protect their interests, and by extension those they serve.  That point is highlighted by the results of the above noted study on COVID-19 deaths in nursing homes which found that mortality rates from COVID-19 are lower in unionized nursing homes.  This is significant because approximately 43% of all reported COVID-19 deaths in the United States have occurred in nursing homes.

The three authors–Adam Dean, Atheendar Venkataramani, and Simeon Kimmel–focused on nursing homes in New York State, which has had over 6,500 COVID-19 nursing home deaths, second only to New Jersey.  The authors built a model that attempted to explain the variation in confirmed COVID-19 deaths at these New York State nursing homes with an eye to determining if the presence of a health care union made a difference.  They used “proprietary data from 1199SEIU United Healthcare Workers East, the International Brotherhood of Teamsters, and the Communication Workers of America (CWA), as well as publicly-available data from the New York State Nurses Association (NYSNA) to determine if a labor union represented health care workers in each facility.”

Their cross-section regression model also included a range of nonunion variables as possible causes for the variation.  These variables included: whether or not a facility had an adequate supply of PPEs, including masks, eye shields, gowns, gloves, and hand sanitizer; the average age of residents; Resource Utilization Group Nursing Case Mix Index of resident acuity, which classifies patient care needs based on diagnosis, proposed treatment, and level of needed assistance with activities of daily living; occupancy rates; staff-hours-to resident-days ratios for RN, CNA, and licensed practical nurses; percent of residents whose primary support comes from Medicaid or Medicare; Overall 5-Star Rating; whether the nursing home was part of a chain; whether the nursing home was for-profit or non-profit; and county-level data on confirmed cases of COVID-19 and population.

Their main regression result, confirmed by several sensitivity tests, was that, taking all the other variables into account, the presence of a health care labor union was associated with a 30% relative decrease in the COVID-19 mortality rate compared to facilities without a health care labor union.

In examining possible reasons for this result, they ran two other regressions.  One found that the presence of a health care labor union was associated with a 13.8% relative increase in access to N95 masks and a 7.3% relative increase in access to eye shields. Labor union status was not a significant predictor of access to other types of PPE.  The other regression found that the presence of a health care labor union was associated with a 42% relative decrease in the COVID-19 infection rate.

The struggle ahead

There is good reason to believe that the union benefits found by Dean, Venkataramani, and Kimmel in their study are not limited to New York State nursing homes.  Unions are one of the most effective ways for workers to ensure access to critical PPEs and implementation of safety regulations, things that as noted above workers desperately seek.

But of course, corporations don’t want to pay the higher costs that come with unionization.  They prefer the status quo, where working people are forced to pay far greater costs, individually and collectively.  And even in the midst of the pandemic, the NLRB continues to pass new rules making it ever more difficult for workers to unionize.

Workers are increasingly coming to understand that they cannot rely on OSHA or the NLRB to defend their interests. Thus, growing numbers of workers are bravely engaging in direct action, risking their jobs, to fight for their rights and the safety of their co-workers.  We need to find ways to support them and improve the broader environment for organizing and unionizing. A recent Gallup poll offers one hopeful sign: approval of unions continues to grow.

Times remain hard, especially for low-wage workers

The current economic crisis has hit workers hard.  Unemployment rates remain high, with total weekly initial claims for unemployment insurance benefits continuing to grow.  Recent reports of a sharp rise in median earnings for full-time workers appear to complicate the picture.  However, a more detailed examination of worker earnings and employment not only helps to sharpen our understanding of the devastating nature of the current crisis for working people, but makes clear that low wage workers are the hardest hit.

Earnings growth

The labor department recently published data showing wages skyrocketing.  As Federal Reserve Bank of San Francisco researchers reported in a recent Economic Letter:

Recent data show that median usual weekly earnings of full-time workers have grown 10.4 percent over the four quarters preceding the second quarter of 2020. This is a 6.4 percentage point acceleration compared with the fourth quarter of 2019. The median usual weekly earnings measure that we focus on here is not an exception. Other measures of wage growth—like average hourly earnings and compensation per hour—show similar spikes.

The spike can be seen in the movement in the blue line in the figure below (which is taken from the Economic Letter).  As we can see, nominal average weekly earnings for full-time employees grew by 10.4 percent between spring of 2019 and spring of 2020, the fastest rate of growth in nearly 40 years.

While this earnings trend suggests a strong labor market, it is, as the researchers correctly note, highly misleading.  The reason is that this measure has been distorted by the massive loss of jobs disproportionally suffered by low wage full-time workers.  The decline in the number of full-time low wage workers has been large enough to change the earnings distribution, leading to a steadily growing value for the median earnings of the remaining full-time workers.

In other words, the spike in median earnings is not the result of currently employed workers enjoying significant wage gains.  This becomes clear when we adjust for the decline in employment by only considering the nominal median earnings of those workers that remained employed full-time throughout the past year.  As the downward movement in the green line in the above figure shows, the gains in medium earnings for those continuously employed has been small and falling.

Disproportionate job losses for full-time low-wage workers

The researchers confirmed that it was low-wage workers that have disproportionately suffered job losses by calculating the earnings distribution of the full-time workers forced to exit to, in the words of the researchers, “nonemployment” – by which they mean either unemployment or nonparticipation — each month over the past two decades.

They began by estimating the yearly share of full-time worker exits to unemployment and nonparticipation.  As we see in the figure above, in non-recession years, about 7 percent of those with full-time jobs become nonemployed each year—2 percent become unemployed and 5 percent leave the labor force.  During the Great Recession, nonemployment peaked in August 2009 at 11 percent, with most of the increase driven by a sharp rise in unemployment (as shown by the big bump in green area).  There was little change in the rate at which full-time workers dropped out of the labor force.

The severity of our current crisis is captured by the dramatic rise in the share of workers exiting full-time employment beginning in March 2020.  Exits to nonemployment peaked in May 2020 at 17 percent, with 9 percent moving to unemployment and 8 percent to nonparticipation. Not only is this almost twice as high as during the Great Recession, the extremely challenging state of the labor market is underscored by the fact that the share of nonemployed who chose nonparticipation and thus exit from the labor market was almost as great as the share who remained part of the labor force and classified as unemployed.

The next figure shows the share of workers exiting to nonemployment by their position in the wage distribution. The three areas depict exits by workers in the lowest quarter of the earnings distribution, the second lowest quarter, and the top half, respectively.

As the researchers explain,

In the months following the onset of COVID-19, workers in the bottom 25 percent of the earnings distribution made up about half of the exits to nonemployment. In contrast, the top half of the distribution only accounted for about a third of the exits. . . .

Therefore, the recent spike in aggregate nominal wage growth does not reflect the benefits of pay raises and a strong labor market for workers. Instead, it is the result of the high levels of job loss among low-income workers since the start of the pandemic.

Tragically, low wage workers have not only suffered disproportional job losses during this pandemic. Those who remain employed are increasingly being victimized by wage theft.  As Igor Derysh, writing in Salon, notes: “A paper released this week by the . . . Washington Center for Equitable Growth found that minimum wage violations have roughly doubled compared to the period before the pandemic.”

These are indeed hard times for almost all working people but, perhaps not surprisingly, those at the bottom of the wage distribution are suffering the most.

Big tech support for racial justice is more talk than action

In the month following the May 25th death of George Floyd, the largest technology companies collectively pledged more than a billion dollars in support of racial justice.  Sounds like a lot of money, but for these companies it is pocket change.  And, despite the accompanying corporate statements of support for structural change to fight racism, there is little indication that they plan to back up their words with meaningful action.

Big tech is riding high

In early June Apple announced the launch of a $100 million Racial Equity and Justice Initiative to “promote racial equality for people of color with a focus on ‘education, economic equality, and criminal justice reform.’”  But, as Jay Peters, writing in The Verge, makes clear, the amount doesn’t sound so impressive when you consider Apple’s earnings.

Apple is now the world’s most valuable company.  Apple made $6.3 million in profit every single hour in 2019, which means that its initiative cost it about 16 hours of business on one day of the year.

And despite the current recession, big tech appears set to earn more this year than last. “Right now, it’s big tech’s world and everyone else is paying rent,” said Wedbush Securities analyst Dan Ives. “They are consumer staples now and this crisis has bought their growth forward by about two years.”

Combined, Amazon, Apple, Alphabet and Facebook reported revenue of $206 billion and net income of $29 billion in the three months ending in late June 2020.  As the New York Times summarized:

Amazon’s sales were up 40 percent from a year ago and its profit doubled. Facebook’s profit jumped 98 percent. Even though the pandemic shuttered many of its stores, Apple increased sales of all its products in every part of the world and posted $11.25 billion in profit. Advertising revenue dropped for Alphabet, the laggard of the bunch, but it still did better than Wall Street had expected.

Very modest giving

To put tech company racial justice donations in perspective, Peters calculated what the equivalent giving would be for person earning the median U.S. salary of $63,179.  The calculation was based on the size of the corporate donation relative to company revenue, not profits, since the $63,179 is the median worker’s salary and not disposable income.  As the following figure shows, recent corporate donations are indeed quite modest.

If someone earning the median U.S. salary donated the same percentage of their salary to racial justice as Amazon, that person would be contributing a yearly amount of just $4.17.  The median salary annual equivalent donation would also be under $5 for Dell, Intel, Disney, and Verizon. Even for Facebook, the biggest giver, the equivalent would only be $100.  It would take Dell 6 minutes to recuperate its pledge, Intel 35 minutes, and Disney and Verizon less than 5 hours.

And as highlighted above, the reason for such modest giving is not low profits.  The figure below shows the pledged amount for racial justice by major U.S. tech companies and their annual profit.

As Peters commented:

Frankly, a lot of these contributions seem even tinier when you consider how much these companies tend to spend on other things. AT&T reportedly spent $73 million on a single campaign to advertise its fake 5G network, which is more than three times its commitment to Black lives. At $7 to $11 million per episode, Amazon would have been hard-pressed to produce three episodes of its alternate reality Nazi-fighting show The Man in the High Castle with the money it’s pledged since Floyd’s death. Microsoft spent over $100 million trying to reinvent the Xbox gamepad only to wind up nearly all the way back where it started.

Money isn’t everything

Of course, there are other things companies can do to promote racial equality. One is to change their hiring policies.  For example, the share of Black employees is just 3 percent at Google and 9 percent at Apple.  And beyond increasing numbers, it is essential that tech companies also reconsider how they organize and compensate the work of their Black employees.

An even more important action tech companies could take would be to listen to their workers and BIPOC leaders and reconsider the nature of the goods and services they choose to develop and sell.  Johana Bhuiyan, writing in the LA Times, highlights the contrast between corporate statements in opposition to racism and corporate profit-driven production priorities to illustrate what is at stake.  Here is her portrait of Amazon:

What [Amazon] said: “The inequitable and brutal treatment of black people in our country must stop. Together we stand in solidarity with the black community — our employees, customers, and partners — in the fight against systemic racism and injustice.”

What the record shows: At the center of the protests demanding justice for Floyd are calls for police reform and an end to racist policing. Amazon has several contracts with law enforcement agencies. Of particular note, Ring, Amazon’s home surveillance company, has partnerships with at least 200 police departments across the country, as Motherboard has reported. As part of its contract with some police departments, Ring incentivized police to encourage citizens to adopt the company’s neighborhood watch app — which has reported issues with racial profiling. After reviewing more than 100 posts on the app, Motherboard found that the majority of people who users deemed “suspicious” were people of color.

“Given the reality of police violence, with impunity, impacting primarily people of color in the United States, these kinds of acts threaten the lives of third parties who are simply, in some cases, doing their jobs or living in their own neighborhoods,” Shahid Buttar, director of grass-roots advocacy for the Electronic Frontier Foundation, told Motherboard.

Amazon also licenses facial-recognition software, called Rekognition, to law enforcement agencies. A study by the MIT Media Lab found that the software performed worse at identifying the gender of individuals with dark faces, although Amazon contested the validity of the findings. Other facial-recognition algorithms have struggled to accurately identify non-white faces.

 

We shouldn’t forget that it is the strength of the Black Lives Matter movement that pushed corporations to project themselves as supporters of racial justice and make their well-publicized donations.  And it is better to have them promoting racial equality than opposing it.  But to this point, corporate actions remain largely limited to public relations statements.  Since real change will require a fundamental rethinking of the organization and aims of corporate production, we shouldn’t count on CEOs going beyond that in any meaningful sense in the near future.  At the same time, as the movement for change grows both inside leading tech companies and in the broader community, we shouldn’t discount the possibility of winning meaningful shifts in corporate policy.

 

The pandemic, technology, and remote work: the corporate push for greater control over workers’ lives

The U.S. economy is undergoing a major transformation largely driven by the coronavirus pandemic.  One hallmark of that transformation is the explosion in what is called “remote” work.

In 2017, according to a Census Bureau study, only 3 percent of full-time workers in the United States reported that they primarily worked from home.  Today, in response to the pandemic, some 42 percent of the U.S. labor force is working from home—with only 26 percent still working on-site.

Corporate leaders appear to have embraced this shift to at-home work and are pursing the use of new technologies designed to increase managerial control over the remote work process. The response of workers to these changes is still evolving.

The pandemic and the corporate embrace of at-home work

Although most corporations initially viewed the shift to remote work as a necessary short-term response to government mandated closures and consumer and worker health concerns, a number are now planning for a permanent, post-pandemic increase in its use. As the New York Times reports:

Facebook expects up to half its workers to be remote as soon as 2025. The chief executive of Shopify, a Canadian e-commerce company that employs 5,000 people, tweeted in May that most of them “will permanently work remotely. Office centricity is over.” Walmart’s tech chief told his workers that “working virtually will be the new normal.”

Quora, a question-and-answer site, said last week that “all existing employees can immediately relocate to anywhere we can legally employ them.” Those who do not want to go anywhere can still use the Silicon Valley headquarters, which would become a co-working space.

And these large firms are not alone.  As Luke Savage, writing in Jacobin, notes:

With the lockdown still only a few weeks old, a survey of company CFOs by PricewaterhouseCoopers found that almost 30 percent were already planning to reduce their business’s physical footprint, with an April study by Gartner suggesting that some three-quarters were planning to shift at least some employees to remote work on a permanent basis.

It’s a different world

Of course, this is not the first time that corporations have embraced remote work.  A number—including such major companies as IBM, Aetna, Best Buy, Bank of America, Yahoo, AT&T and Reddit—actively promoted telecommuting as recently as 15 years ago.  But they all eventually reversed course, concluding that employee productivity, loyalty, and innovation suffered.  Tech companies, in particular, responded by building expansive and expensive new facilities that offered a range of free on-site benefits such as communal cafeterias and gyms to keep employees motivated and loyal.

Because of this history, some analysts doubt that the current corporate celebration of remote work will last long.  But there is reason to believe that this time is different.  Certainly, early indications are that at-home workers remain focused and hard at work.  Savage cites a Globe and Mail article that leads with this head: “Employers used to believe remote workers were happier but less productive. Turns out it’s the opposite.”  The Globe and Mail article goes on to say:

One fear about shifting to a work-from-home culture is that it would lead to operational chaos: missed meetings, spotty WiFi, games of broken telephone (both figurative and literal). Instead, even companies with tens of thousands of employees are finding that the IT infrastructure is holding up and so are lines of authority. Workers are responding to their emails and joining Zoom calls at approximately the right time. Everyone is always reachable.

The Globe and Mail is not alone in finding evidence of high worker productivity.  For example, the New York Times quotes John Sullivan, a professor of management:

“The data over the last three months is so powerful,” he said. “People are shocked. No one found a drop in productivity. Most found an increase. People have been going to work for a thousand years, but it’s going to stop and it’s going to change everyone’s life.”  Innovation, Dr. Sullivan added, might even catch up eventually.

And Bloomberg came to much the same conclusion, reporting that corporate executives at several different finance and investment companies all see evidence of gains in productivity.

Underlying these gains are three potentially long-lasting developments that provide support for the view that the current corporate commitment to expanding remote work needs to be taken seriously. The first is the availability of relatively low cost and easy-to-use online communication platforms like Zoom that allow managers to easily communicate with their workers and for workers to engage in group work when necessary.  The online infrastructure for corporate communication continues to improve.

The second is the recent and ongoing development of technologies that allow management to monitor and evaluate the online work effort of their employees.  As the New York Times explains: “Demand has surged for software that can monitor employees, with programs tracking the words we type, snapping pictures with our computer cameras and giving our managers rankings of who is spending too much time on Facebook and not enough on Excel.”

Of course, corporations have long used technology to monitor and direct work, and large companies like Amazon have pioneered the development and use of software for directing and intensifying the pace of warehouse workers.  Josh Dzieza, writing in the Verge, offers an example:

Every Amazon worker I’ve spoken to said it’s the automatically enforced pace of work, rather than the physical difficulty of the work itself, that makes the job so grueling. Any slack is perpetually being optimized out of the system, and with it any opportunity to rest or recover. A worker on the West Coast told me about a new device that shines a spotlight on the item he’s supposed to pick, allowing Amazon to further accelerate the rate and get rid of what the worker described as “micro rests” stolen in the moment it took to look for the next item on the shelf.

But as Dzieza makes clear, there is also growing availability and use of new software that makes it possible for corporations to easily oversee the work effort of their online workers.  One example is WorkSmart.  Dzieza describes the experience of a software engineer in Bangladesh who was required to download the software as a condition of his employment with Austin-based Crossover Technologies.  Among other things:

The software tracked his keystrokes, mouse clicks, and the applications he was running, all to rate his productivity. He was also required to give the program access to his webcam. Every 10 minutes, the program would take three photos at random to ensure he was at his desk. If [he] wasn’t there when WorkSmart took a photo, or if it determined his work fell below a certain threshold of productivity, he wouldn’t get paid for that 10-minute interval.

Other recently developed software programs currently in use to monitor the work of call center employees could easily be used to monitor home-based employees doing the same work. Recording the number and length of calls is old hat.  These new programs, using artificial intelligence, can now evaluate the “emotional” tone of the worker’s voice during their conversations with customers.  Some programs can even “coach workers in real time, telling them to speak more slowly or with more energy or to express empathy.” The growing corporate interest in remote work can be expected to spur the development of ever more sophisticated products that will allow even tighter control over at-home work and more detailed evaluation of at-home workers.

The nature of the ongoing transformation of the economy is the third reason that this period may well mark the start of a major shift in the location of work.  Simply stated: unemployment is now high and, when possible, workers welcome a safe alternative to on-site employment.

In the past on-site work was the standard corporate practice and most workers preferred it.  Thus, workers were generally able to undermine individual corporate attempts to push them into working from home.  Now, not only is remote work the new norm, because of the virus it has actually become the desired alternative.  With fear of the virus likely to remain for some time, corporations are in a far stronger position than in the past to normalize remote work and win worker acceptance of new work relations even after the pandemic is brought under control.

Benefits and costs

It is easy to understand why corporations are excited about increasing their use of remote work.  One reason is that it will allow them to greatly reduce their spending on facilities.  Gains on the labor side are likely even larger.  Companies will be able to expand their job search, hiring workers who may live thousands of miles away from the location of corporate operations with no need to pay moving expenses and with the possibility of cheapening the cost of labor by paying salaries commensurate with local living costs.  And, as a bonus, the more a company’s labor force is geographically separated and isolated, the harder it will be for its workers to build the bonds of solidarity needed to challenge management demands.

The use of remote work opens up possibilities for even greater labor savings by making possible the reclassification of new hires into independent contractors.  After all, many remote workers are already paying for the equipment they need (desks, chairs, computers, webcam), the supporting technological infrastructure (high speed Wi-Fi), and office maintenance (cleaning).

Of course, most workers also viewed at-home work positively, at least initially.  They appreciated being able to remain employed and work safely from their homes during the pandemic. But the costs of remote work, as currently structured, are mounting up for workers.

As a Bloomberg article summarizes, “We log longer hours. We attend more meetings with more people. And, we send more emails.”  The article highlights a recently published study by the National Bureau of Economic Research which was based on surveys of some 3 million people at more than 21,000 companies across 16 cities in North America, Europe and the Middle East.  The researchers:

compared employee behavior over two 8 week periods before and after Covid-19 lockdowns. Looking at email and meeting meta-data, the group calculated the workday lasted 48.5 minutes longer, the number of meetings increased about 13% and people sent an average of 1.4 more emails per day to their colleagues.

An online survey of 20,262 people in 10 countries by the technology company Lenovo Group Ltd. found that “A disturbing 71% of those working from home due to Covid-19 have experienced a new or exacerbated ailment caused by the equipment they now must use. . . the most common symptoms [being] back pain, poor posture (e.g., hunched shoulders), neck pain, eye irritation, insomnia and headaches.”

Looking just at the United States, a study done by NordVPN, based on tracking when at-home workers connected and disconnected from its service, found that at-home workers logged three hours more per day on the job than before the start of city and state lockdowns.  And a survey of 1,001 U.S. employees by Eagle Hill Consulting found that “By early April, about 45% of workers said they were burned out. Almost half attributed the mental toll to an increased workload, the challenge of juggling personal and professional life, and a lack of communication and support from their employer.”

Given the direction of corporate planning, it is likely that the costs of remote work for workers—physical and emotional—will only increase.  As one public relations executive explained when discussing why his company now views remote work so positively: The technology is better. Moreover, “we have rules now,” he said. “You have to be available between 9 a.m. and 5:30 p.m. You can’t use this as child care.”

Challenges ahead

For many workers, it is the pandemic, with its forced isolation of family in small housing units, that has made remote work so difficult and emotionally wearing.  And, for many, the experience of on-site work before the coronavirus pandemic forced closures was also far from ideal.  Thus surveys show, as the New York Times reports,

Most American office workers are in no hurry to return to the office full time, even after the coronavirus is under control. But that doesn’t mean they want to work from home forever. The future for them, a variety of new data shows, is likely to be workweeks split between office and home.

For example, a survey by the company Morning Consult done in mid-June found that:

Overall, 73 percent of U.S. adults who have careers where remote work is possible report that the pandemic has made them feel more positively about the prospect of remote work. And given the option, three quarters of these workers say they would like to work from home at least 1-2 days a week once the pandemic is under control.

At issue, then, is who will decide the place of work and perhaps even more importantly, the conditions of work, including remote work.  Current indications are that corporations plan to push workers into more remote work than surveys suggest they want, and definitely under conditions of surveillance and evaluation that they will find objectionable.  It is less clear whether those working remotely or threatened with remote work will be able to organize rapidly enough to force corporations to bargain with them over both the location of work and the work process, on- and off-site, including the aim and uses of new technology.

If there is a reason for optimism it is that there appears to be a growing solidarity between white- and blue-collar workers in the tech industry that includes support for unionization, especially at some of the large firms like Google and Amazon. As Tyler Sonnemaker and Allana Akhtar, writing for Business Insider, describe:

Even a year ago, the idea that tech’s cafeteria workers and office workers were on the same page about forming a labor union would have seemed unthinkable.

The recent wave of employee activism and organizing efforts represents a widening rift between the industry’s rank-and-file employees and its executives. For the first time, developers and product managers with higher pay and closer ties to management are siding with their lower-paid colleagues in warehouses, cafeterias, and contract gigs. . . .

Frequent leaks to the media – notable given the historically tight-knit culture at tech companies – and the emergence of groups like Rideshare Drivers United, Tech Workers Coalition, Athena, and Amazonians United are just two signs of the rise in employee activism in recent years. But over the past few months, emboldened by the pandemic and racial justice protests, workers at startups like Away and giants like Facebook have become a vocal chorus of critics.

Passively allowing management to use technology to shape the work process and the resulting final product is a recipe for ever worsening working and living conditions for the great majority of working people. Hopefully, the ongoing worker agitation and organizing in the United States will continue regardless of the unpredictable nature of the pandemic, producing a shared critique of profit-driven work and support for new organizational forms, including unions, that can fight for a more humane economic system.

Seeking Peace on the Korean Peninsula

Although the date drew little notice in the U.S. media, July 27, 2020 marked the 67th anniversary of the Korean War Armistice Agreement, an agreement that ended the fighting but not the war between the United States and the Democratic People’s Republic of Korea (North Korea).

The government of North Korea continues to seek a peace treaty with the United States, with the support of the current president of the Republic of Korea (South Korea), to finally bring an end to the Korean War.  The leadership of the United States remains opposed.  The costs of maintaining this state of war are immense.  Tragically, the media has done little to educate Americans about the actual history and consequences of U.S. policy towards Korea 

Founded in 2005, the Korea Policy Institute (KPI) is an independent research and educational institute that works to increase popular awareness and understanding of developments on the Korean peninsula and to promote a U.S. policy towards Korea that respects the Korean peoples’ desire for peace, sovereignty, reconciliation, and the reunification of Korea—I am a member of its board of directors.  In line with its mission, KPI has just published its second reader—this one titled Seeking Peace on the Korean Peninsula.

This 93-page reader, which features articles from leading analysts, journalists, and scholars in the United States, Asia, and the Pacific, offers critical context to developments on the Korean Peninsula. The reader is divided into four sections:

1. The Continuing Korean War
2. The Costs of U.S. Sanctions on North Korea
3. Trump’s North Korea Legacy: Failed U.S.-DPRK Summits
4. Time for a People’s Policy Toward Korea.

 

It can be viewed and downloaded for free here

There is great need for a new U.S. policy towards Korea, one that promotes peace on the Korean Peninsula:

  • The ongoing state of war between the United States and North Korea helps to fuel an ever-growing U.S. military budget, an expanding U.S. military presence in Asia, the militarization of Japan, and an East Asian arms race, all at the expense of needed spending on social programs.
  • U.S. hostility towards North Korea strengthens conservative political forces in South Korea, restricting the ability of labor and other social movements to freely pursue progressive political changes.
  • U.S. policy towards Korea continues to undermine attempts by the leaders of South Korea and North Korea to end the division of Korea, keeping millions of families separated, including some 100,000 Korean Americans.
  • U.S. sanctions on North Korea, which deny the country access to international aid, loans, and investment, and severely limit the country’s ability to engage in international trade, are causing wide-spread human suffering in North Korea, especially among women and children.
  • U.S. militarism encourages the militarization of South Korea by pressuring the country to engage in joint military exercises that involve training for invasion and occupation of North Korea; purchase and deploy new U.S. missile defense systems aimed at both China and North Korea; construct new naval facilities for use by U.S. warships; and boost its military spending to, among other things, pay a large share of the costs of hosting U.S. bases and obtain increasingly expensive U.S. military weaponry.
  • And then there is the real threat of a new, nuclear Korean War, with human and environmental costs that cannot be calculated.

To learn more about these and related issues, check out the new KPI reader, Seeking Peace on the Korean Peninsula.  And if you have the time, you might  want to check out the 130-page, 2018 KPI reader, U.S. Policy and Korea, which can also be viewed and downloaded for free.

Defunding police and challenging militarism, a necessary response to their “battle space”

The excessive use of force and killings of unarmed Black Americans by police has fueled a popular movement for slashing police budgets, reimagining policing, and directing freed funds to community-based programs that provide medical and mental health care, housing, and employment support to those in need.  This is a long overdue development.

Police are not the answer

Police budgets rose steadily from the 1990s to the Great Recession and, despite the economic stagnation that followed, have remained largely unchanged.  This trend is highlighted in the figure below, which shows real median per capita spending on police in the 150 largest U.S. cities.  That spending grew, adjusted for inflation, from $359 in 2007 to $374 in 2017.  The contrast with state and local government spending on social programs is dramatic.  From 2007 to 2017, median per capita spending on housing and community development fell from $217 to $173, while spending on public welfare programs fell from $70 to $47.

Thus, as economic developments over the last three decades left working people confronting weak job growth, growing inequality, stagnant wages, declining real wealth, and rising rates of mortality, funding priorities meant that the resulting social consequences would increasingly be treated as policing problems.  And, in line with other powerful trends that shaped this period–especially globalization, privatization, and militarization–police departments were encouraged to meet their new responsibilities by transforming themselves into small, heavily equipped armies whose purpose was to wage war against those they were supposed to protect and serve. 

The military-to-police pipeline

The massive, unchecked militarization of the country and its associated military-to-police pipeline was one of the more powerful factors promoting this transformation.  The Pentagon, overflowing with military hardware and eager to justify a further modernization of its weaponry, initiated a program in the early 1990s that allowed it to provide surplus military equipment free to law enforcement agencies, allegedly to support their “war on drugs.”  As a Forbes article explains:

Since the early 1990s, more than $7 billion worth of excess U.S. military equipment has been transferred from the Department of Defense to federal, state and local law enforcement agencies, free of charge, as part of its so-called 1033 program. As of June [2020], there are some 8,200 law enforcement agencies from 49 states and four U.S. territories participating. 

The program grew dramatically after September 11, 2001, justified by government claims that the police needed to strengthen their ability to combat domestic terrorism.  As an example of the resulting excesses, the Los Angeles Times reported in 2014 that the Los Angeles Unified School District and its police officers were in possession of three grenade launchers, 61 automatic military rifles and a Mine Resistant Ambush Protected armored vehicle. Finally, in 2015, President Obama took steps to place limits on the items that could be transferred; tracked armored vehicles, grenade launchers, and bayonets were among the items that were to be returned to the military.

President Trump removed those limits in 2017, and the supplies are again flowing freely, including armored vehicles, riot gear, explosives, battering rams, and yes, once again bayonets.  According to the New York Times, “Trump administration officials said that the police believed bayonets were handy, for instance, in cutting seatbelts in an emergency.”

Outfitting police departments for war also encouraged different criteria for recruiting and training. For example, as Forbes notes, “The average police department spends 168 hours training new recruits on firearms, self-defense, and use of force tactics. It spends just nine hours on conflict management and mediation.”  Arming and training police for military action leads naturally to the militarization of police relations with community members, especially Black, Indigeous and other people of color, who come to play the role of the enemy that needs to be controlled or, if conditions warrant, destroyed.

In fact, the military has become a major cheerleader for domestic military action.  President Trump, on a call with governors after the start of demonstrations protesting the May 25, 2020 killing of George Floyd while in police custody, exhorted them to “dominate” the street protests.

As the Washington Examiner reports:

“You’ve got a big National Guard out there that’s ready to come and fight like hell,” Trump told governors on the Monday call, which was leaked to the press.

[Secretary of Defense] Esper lamented that only two states called up more than 1,000 Guard members of the 23 states that have called up the Guard in response to street protests. The National Guard said Monday that 17,015 Guard members have been activated for civil unrest.

“I agree, we need to dominate the battle space,” Esper said after Trump’s initial remarks. “We have deep resources in the Guard. I stand ready, the chairman stands ready, the head of the National Guard stands ready to fully support you in terms of helping mobilize the Guard and doing what they need to do.”

The militarization of the federal budget

The same squeeze of social spending and support for militarization is being played out at the federal level.  As the National Priorities Project highlights in the following figure, the United States has a military budget greater than the next ten countries combined.

Yet, this dominance has done little to slow the military’s growing hold over federal discretionary spending.  At $730 billion, military spending accounts for more than 53 percent of the federal discretionary budget.  A slightly broader notion, what the National Priorities Project calls the militarized budget, actually accounts for almost two-thirds of the discretionary budget.  The militarized budget:

includes discretionary spending on the traditional military budget, as well as veterans’ affairs, homeland security, and law enforcement and incarceration. In 2019, the militarized budget totaled $887.8 billion – amounting to 64.5 percent of discretionary spending. . . . This count does not include forms of militarized spending allocated outside the discretionary budget, include mandatory spending related to veterans’ benefits, intelligence agencies, and interest on militarized spending.

The militarized budget has been larger than the non-militarized budget every year since 1976.  But the gap between the two has grown dramatically over the last two decades. 

In sum, the critical ongoing struggle to slash police budgets and reimagine policing needs to be joined to a larger movement against militarism more generally if we are to make meaningful improvements in majority living and working conditions.

Racism, COVID-19, and the fight for economic justice

While the Black Lives Matter protests sweeping the United States were triggered by recent police murders of unarmed African Americans, they are also helping to encourage popular recognition that racism has a long history with punishing consequences for black people that extend beyond policing.  Among the consequences are enormous disparities between black and white well-being and security.  This post seeks to draw attention to some of these disparities by highlighting black-white trends in unemployment, wages, income, wealth, and security. 

A common refrain during this pandemic is that “We are all in it together.”  Although this is true in the sense that almost all of us find our lives transformed for the worst because of COVID-19, it is also not true in some very important ways.  For example, African Americans are disproportionally dying from the virus.  They account for 22.4 percent of all COVID-19 deaths despite making up only 12.5 percent of the population. 

One reason is that African Americans also disproportionally suffer from serious preexisting health conditions, a lack of health insurance, and inadequate housing, all of which increased their vulnerability to the virus.  Another reason is that black workers are far more likely than white workers to work in “front-line” jobs, especially low-wage ones, forcing them to risk their health and that of their families.  While black workers comprise 11.9 percent of the labor force, they make up 17 percent of all front-line workers.  They represent an even higher percentage in some key front-line industries: 26 percent of public transit workers; 19.3 percent of child care and social service workers; and 18.2 percent of trucking, warehouse and postal service workers.

African Americans have also disproportionately lost jobs during this pandemic.  The black employment to adult population ratio fell from 59.4 percent before the start of the pandemic to a record low of 48.8 percent in April.  Not surprisingly, recent surveys find, as the Washington Post reports, that:

More than 1 in 5 black families now report they often or sometimes do not have enough food — more than three times the rate for white families. Black families are also almost four times as likely as whites to report they missed a mortgage payment during the crisis — numbers that do not bode well for the already low black homeownership rate.

This pandemic has hit African Americans especially hard precisely because they were forced to confront it from a position of economic and social vulnerability as the following trends help to demonstrate.

Unemployment

The Bureau of Labor Statistics began collecting separate data on African American unemployment in January 1972.  Since then, as the figure below shows, the African American unemployment rate has largely stayed at or above twice the white unemployment rate. 

As Olugbenga Ajilore explains

Between strides in civil rights legislation, desegregation of government, and increases in educational attainment, employment gaps should have narrowed by now, if not completely closed. Yet as [the figure above] shows, this has not been the case.

Wages

The figure below from an Economic Policy Institute study, shows the black-white wage gap for workers in different earning percentiles, by education level, and regression-adjusted (to control for age, gender, education and regional differences).  As we can see, the wage gap has grown over time regardless of measure. 

Elise Gould summarizes some important take-aways from this study:

The black–white wage gap is smallest at the bottom of the wage distribution, where the minimum wage serves as a wage floor. The largest black–white wage gap as well as the one with the most growth since the Great Recession, is found at the top of the wage distribution, explained in part by the pulling away of top earners generally as well as continued occupational segregation, the disproportionate likelihood for white workers to occupy positions in the highest-wage professions.

It’s clear from the figure that education is not a panacea for closing these wage gaps. Again, this should not be shocking, as increased equality of educational access—as laudable a goal as it is—has been shown to have only small effects on class-based wage inequality, and racial wealth gaps have been almost entirely unmoved by a narrowing of the black–white college attainment gap . . . . And after controlling for age, gender, education, and region, black workers are paid 14.9% less than white workers.

Income

The next figure shows that while median household income has generally stagnated for all races/ethnicities over the period 2000 to 2017, only blacks have suffered an actual decline.  The median income for black households actually fell from $42,348 to $40,258 over this period.  As a consequence, the black-white income gap has grown.  The median black household in 2017 earned just 59 cents for every dollar of income earned by the white median household, down from 65 cents in 2000.

Moreover, as Valerie Wilson, points out, “Based on [Economic Policy Institute] imputed historical income values, 10 years after the start of the Great Recession in 2007, only African American and Asian households have not recovered their pre-recession median income.“  Median household income for African American households fell 1.9 percent or $781 over the period 2007 to 2017.  While the decline was greater for Asian households (3.8 percent), they continued to have the highest median income.

Wealth

The wealth gap between black and white households also remains large.  In 1968, median black household wealth was $6,674 compared with median white household wealth of $70,768.  In 2016, as the figure below shows, it was $13,024 compared with $149,703.

As the Washington Post summarizes:

“The historical data reveal that no progress has been made in reducing income and wealth inequalities between black and white households over the past 70 years,” wrote economists Moritz Kuhn, Moritz Schularick and Ulrike I. Steins in their analysis of U.S. incomes and wealth since World War II.

As of 2016, the most recent year for which data is available, you would have to combine the net worth of 11.5 black households to get the net worth of a typical white U.S. household.

The self-reinforcing nature of racial discrimination is well illustrated in the next figure.  It shows the median household wealth by education level as defined by the education level of the head of household. 

As we see, black median household wealth is below white median household wealth at every education level, with the gap growing with the level of education.  In fact, the median black household headed by someone with an advanced degree has less wealth than the median white household headed by someone with only a high school diploma.  The primary reason for this is that wealth is passed on from generation to generation, and the history of racism has made it difficult for black families to accumulate wealth much less pass it on to future generations. 

Security

The dollar value of household ownership of liquid assets is one measure of economic security.  The greater the value, the easier it is for a household to weather difficult times not to mention unexpected crises, such as today’s pandemic.  And as one might expect in light of the above income and wealth trends, black households have far less security than do white households.

As we can see in the following figure, the median black household held only $8,762 in liquid assets (as defined as the sum of all cash, checking and savings accounts, and directly held stocks, bonds, and mutual funds).  In comparison, the median white household held $49,529 in liquid assets.  And the black-white gap is dramatically larger for households headed by someone with a bachelors degree or higher. 

Hopeful possibilities

The fight against police violence against African Americans, now being advanced in the streets, will eventually have to be expanded and the struggle for racial justice joined to a struggle for economic justice.  Ending the disparities highlighted above will require nothing less than a transformational change in the organization and workings of our economy.

One hopeful sign is the widespread popular support for and growing participation in the Black Lives Matter-led movement that is challenging not only racist policing but the idea of policing itself and is demanding that the country acknowledge and confront its racist past.  Perhaps the ways in which our current economic system has allowed corporations to so quickly shift the dangers and costs of the pandemic on to working people, following years of steady decline in majority working and living conditions, is helping whites better understand the destructive consequences of racism and encouraging this political awakening. 

If so, perhaps we have arrived at a moment where it will be possible to build a multi-racial working class-led movement for structural change that is rooted in and guided by a commitment to achieving economic justice for all people of color. One can only hope that is true for all our sakes.

The economy: we are still in big trouble

The announcement by the Bureau of Labor Statistics that the federal unemployment rate declined to 13.3 percent in May, from 14.7 percent in April, took most analysts by surprise.  The economy added 2.5 million jobs in May, the first increase in employment since February.  Most economists had predicted further job losses and a rise in the unemployment rate to as high as 20 percent.

This employment gain has encouraged some analysts, especially those close to the Trump administration, to proclaim that their predicted V-shaped economic recovery had begun.  But there are strong reasons to believe that the US economy is far from recovery.

Long term trends and the coronavirus

Predictions for a V-shaped recovery rest to a considerable degree on the belief that our current economic collapse was caused by state mandated business closures to battle the coronavirus which unsurprisingly choked off our long expansion.  Now that a growing number of states are ending their forced lockdowns it is only natural that the economy would resume growing.  Certainly, the stock market’s recent rise suggests that many investors agree. 

However, there are many reasons to challenge this upbeat story of impending recovery.  One of the most important is that the pre-coronavirus period of expansion (June 2009 to February 2020), although the longest on record, was also one of the weakest. It was marked by slow growth, weak job creation, deteriorating job quality, declining investment, rising debt, declining life expectancy, and narrowing corporate profit margins. In other words, the economy was heading toward recession even before the start of state mandated lockdowns.  For example, the manufacturing sector spent much of 2019 in recession.   

Another reason is that the downturn in economic activity that marks the start of our current recession predates lockdown orders.  It was driven by health concerns.  As Emily Badger and Alicia Parlapiano explain in their New York Times article, and as illustrated in the following graphic taken from the article:

In the weeks before states around the country issued lockdown orders this spring, Americans were already hunkering down. They were spending less, traveling less, dining out less. Small businesses were already cutting employment. Some were even closing shop.

People were behaving this way — effectively winding down the economy — before the government told them to. And that pattern, apparent in a range of data looking back over the past two months, suggests in the weeks ahead that official pronouncements will have limited power to open the economy back up.

In some states that have already begun that process, like Georgia, South Carolina, Oklahoma and Alaska, the same daily economic data shows only meager signs so far that businesses, workers and consumers have returned to their old routines.

Thus, while some rebound in economic growth is to be expected given the severity of the downturn to this point, it is unlikely that the May employment jump signals the start of a powerful economic recovery.  Weak underlying economic conditions and health worries remain significant obstacles.

In fact, even the optimistic US Congressional Budget Office predicts at best a long, slow recovery.  As Michael Roberts describes:

It now expects US nominal GDP to fall 14.2% in the first half of 2020, from the trend it forecast in January before the COVID-19 pandemic broke. Then it expects the various fiscal and monetary injections by the authorities and the end of the lockdowns to reduce this loss from the January figure to 9.4% by end 2020. The CBO still expects a sort of V-shaped recovery in US GDP in 2021 but does not expect the pre-pandemic crisis trend in US economic growth (already reduced in the Long Depression since 2009) to be reached until 2029 and may not even return to the previous trend growth forecast until after 2030! So there will be a permanent loss of 5.3% in nominal GDP compared to pre-COVID forecasts – $16trn in value lost forever. In real GDP terms, the loss will be about 3% cumulatively, or $8trn in 2019 money.  And this assumes no second wave in the pandemic and no financial collapse as companies go bust.

Depression level unemployment

Although President Trump has celebrated the May employment gains, the fact is we continue to suffer depression level unemployment.  The following figure from the Washington Post provides some historical perspective.  The current official unemployment rate of 13.3 percent is more than a third higher than the highest level of unemployment reached during the Great Recession. 

But even the Bureau of Labor Statistics acknowledges that because of the unique nature of the current crisis the official announced unemployment rate for each of the last three months is flawed.  The unemployment rate is based on household surveys.  For the past three months, in an attempt to better understand the impact of the coronavirus, interviewers were supposed to classify people not working because of the virus as “unemployed on temporary layoff.” However, as the Bureau of Labor Statistics acknowledges, many of those people were incorrectly classified as “employed but absent at work,” which is the classification used when a person isn’t coming to work because of vacation, illness, bad weather, a labor dispute, or other reasons.  People in this latter category are not counted as unemployed.

The BLS has determined that correcting the classification error would boost the official April unemployment rate to 19.7 percent and the May rate to 16.3 percent.  And, it is important to note that this unemployment rate does not include those workers who have stopped looking for work and those who are involuntarily working part-time.  Including them would push the May rate close to 25 percent.  

Stephen Moore, an economic adviser to President Trump, has stated that the May job numbers take “a lot of the wind out of the sails of any phase 4 [stimulus bill] — we don’t need it now. There’s no reason to have a major spending bill. The sense of urgent crisis is very greatly dissipated by the report.”  This is crazy.

Danger signs ahead

There are three reasons to fear that without substantial new federal action May employment gains will be short-lived. 

First, it has been relatively low-wage production and nonsupervisory workers who have suffered the greatest number of job losses.  That has left many businesses relatively top-heavy with managers and high-income professionals. A number of business analysts are now predicting a new wave of layoffs or firings of higher-income and management personal to bring staffing levels back into pre-coronavirus balance.

The following figure shows that almost 90 percent of the jobs lost from mid-February to mid-April were in the six lowest paid supersectors as defined by the Bureau of Labor Statistics. The May employment gains were also in these six sectors.

Economists with Bloomberg Economics are now warning of a second wave of job losses that will include “higher-paid supervisors in sectors where frontline workers were hit first, such as restaurants and hotels. It also includes the knock on-effects to connected industries such as professional services, finance and real estate.”

As Bloomberg explains:

The pandemic isn’t finished with the U.S. labor market, threatening a second wave of job cuts—this time among white-collar workers. . . .

For the analysis, [Bloomberg Economics economists] looked at job losses by sector in March and April—with affected industries dominated by blue-collar, hospitality and production workers—and determined how those layoffs would move to supervisory positions, since management cuts tend to lag the frontline workers.

The economists then took government data on relations between industries to compute the ones most reliant on demand from the most-affected sectors. Combining that information with the hit to employment in the most affected sectors they extrapolated to other jobs at risk, most of which were higher-skilled, white-collar roles.

The second reason to downplay the significance of the May employment gains is that critically important stimulus measures–in particular the one-time grant of $1200 for individuals and the $600 a week additional unemployment benefit (which expires at the end of July)–appear unlikely to be renewed.  If that boost to earnings is withdrawn, economic demand and employment will likely fall again.

As Ben Casselman, writing in the New York Times, points out:

Research routinely finds that unemployment insurance is one of the most effective parts of the safety net, both in cushioning the effects of job loss on families and in lifting the economy. In economists’ parlance, the program is “well targeted” — it goes to people who need the money and who will spend it. Various studies have found that in the last recession, the system helped prevent 1.4 million foreclosures, saved two million jobs and kept five million people out of poverty.

The impact could be greater in this crisis because the program is reaching more people and giving them more money. The government paid $48 billion in benefits in April and has reached $86 billion in May, according to the Treasury Department.

As the following figure shows, almost all workers have suffered significant declines in employment income with low income workers taking the biggest hit.

Yet, the increase in food insecurity has been relatively small, especially for low income workers.

It is, as highlighted in the next figure, the massive individual benefit boosts included in the March stimulus package that has so far kept the decline in employment income from translating into dramatic spikes in food insecurity. If Congress refuses to pass a new stimulus that includes direct aid to the unemployed, the odds are great that the economic recovery will stall and unemployment will grow again.

The last reason for pessimism is the likely further contraction in state and local government spending and, by extension, employment and services, as a result of declining revenue.  State and local government employment fell by 1 million from February to April, and by an additional 600 million in May.  Looking just at state budgets, the Center for Budget and Policy Priorities estimates a shortfall in state budgets of $765 billion over fiscal years 2020-22, “much deeper than in the Great Recession of about a decade ago” (see the figure below).

And unfortunately, as the Center for Budget and Policy Priorities also notes, the federal government has, up to now, been unwilling to do much to help state governments manage their ballooning deficits:

Federal aid that policymakers provided in earlier COVID-19 packages isn’t nearly enough. Only about $65 billion is readily available to narrow state budget shortfalls. Treasury Department guidance now says that states may use some of the aid in the CARES Act of March to cover payroll costs for public safety and public health workers, but it’s unclear how much of state shortfalls that might cover; existing aid likely won’t cover much more than $100 billion of state shortfalls, leaving nearly $665 billion unaddressed. States hold $75 billion in their rainy-day funds, a historically high amount but far too little to meet the unprecedented challenge they face. And, even if states use all of it to cover their shortfalls, that still leaves them about $600 billion short.

States must balance their budgets every year, even in recessions. Without substantial federal help during this crisis, they very likely will deeply cut areas such as education and health care, lay off teachers and other workers in large numbers, and cancel contracts with many businesses. . . . That would worsen the recession, delay the recovery, and further harm families and communities.

Without a new stimulus measure that also includes support for state and local governments, their forced reduction in spending and cuts in employment can only add to the existing pressures working against recovery.

In sum, the crisis is real.  A new stimulus that included a renewal of special unemployment payments as well as direct support for state and local governments and other critical services like the postal service could help stabilize the economy.  But real progress will require a major effort on the part of the federal government to ensure adequate production of COVID-19 test kits and PPE as well as nationwide testing and contact tracing programs and then, most importantly, a fundamental reorganization of our economy.

Victory: Ohio’s plan to deny workers their unemployment insurance is shelved

Some stories are just so satisfying that they deserve to be shared.  Here is one.

In early May, Ohio Republican Governor Mike DeWine began reopening the state economy.  And to support business and slash state expenses, both at worker expense, he had a “COVID-19 Fraud” form put up on the Ohio Department of Job and Family Services website where employers could confidentially report employees “who quit or refuse work when it is available due to COVID-19.”  Inspectors would then investigate whether the reported workers should lose their unemployment benefits and possibly be charged with unemployment fraud.

Significantly, as Sarah Ingles, the board president of the Central Ohio Worker Center, noted in a statement quoted by the Intercept, the form “does not define what constitutes a ‘good cause’ exemption, and by doing so, may exclude many Ohio workers who have justifiable reasons for not returning to work and for receiving unemployment insurance benefits.”  In other words, “while the state did not take the time to define what a ‘good cause’ exemption includes or does not include, it did have time to develop an online form where employers could report employees.”

However, thanks to the work of an anonymous hacker, the site has now been taken down. In officialese, “The previous form is under revision pending policy references.”  Most importantly, as Janus Rose writing for Motherboard reports:

“No benefits are being denied right now as a result of a person’s decision not to return to work while we continue to evaluate the policy,” ODJFS Director Kimberly Hall told Cleveland.com.

According to Rose, the hacker developed a script that overwhelmed the system:

The script works by automatically generating fake information and entering it into the form. For example, the companies are taken from a list of the top 100 employers in the state of Ohio—including Wendy’s, Macy’s, and Kroger—and names and addresses are randomly created using freely-available generators found online. Once all the data is entered, the script has to defeat a CAPTCHA-like anti-spam measure at the end of the form. Unlike regular CAPTCHAs, which display a grid of pictures and words that the user must identify, the security tool used by the form is merely a question-and-answer field. By storing a list of common questions and their respective answers, the script can easily defeat the security measure by simply hitting the “switch questions” button until it finds a question it can answer.

To make the code more accessible, software engineer David Ankin repackaged the script into a simple command line tool which allows users to run the script in the background of their computer, continuously submitting fake data to the Ohio website.

“If you get several hundred people to do this, it’s pretty hard to keep your data clean unless you have data scientists on staff,” Ankin told Motherboard.

The hacker told Motherboard they viewed their effort as a form of direct action against the exploitation of working people during the COVID-19 crisis.  Score one for working people.