Craven Dems Still Leaving Workers to be Flattened

Thursday, July 27, 2006

I'd share David Sirota's disappointment if I had ever been optimistic about beltway Dems standing up for the American worker. Writes Sirota:

Last night, I wrote optimistically about the possibility of Democratic Party elites finally realizing the error of their ways in ramming corporate-written trade policies down the throat of average Americans. Though I noted that most of the key players are still comfortable in the minority, and still awash in Washington's pay-to-play culture, I cited some recent moves as evidence that they may at the very least realize that they no longer live in the go-go Clinton Era where rhetoric about the "booming economy" could paper over the very serious economic challenges faced by regular working folks.

Apparently, I was wrong. A stunning piece by Washington Post business reporter Steve Pearlstein today shows that the real agenda of these Big Money insiders is to pretend to care about stagnating wages, slashed pensions, and job outsourcing - but not actually be willing to attack the "free" trade policies that are causing those hardships.

Pearlstein's piece is an eye-opener and he puts trade policies in a broader context of the Democratic Party's political impotence.

Democrats now have a perfect opportunity to deliver what the business community wants -- and to demand in exchange programs designed to provide workers more economic security. But such negotiations will never succeed if influential Democrats give away the store in advance by signaling they support all trade liberalization, unconditionally.

No guarantees of health care, pensions, expanded unemployment insurance -- no more trade deals. It's a simple message even chief executives can understand. Voters, too.

To appreciate why reigning in free trade and standing up to corporations are winning issues for Democrats one need only listen to increasingly frustrated Americans whose earning power is not recovering with the economy. Our current trade policies are a key factor in our increasing income disparity. I've written before that wages for many Americans are stagnant. In fact they are worse than stagnant. Earlier this week the LA Times reported wages for college graduates have actually dropped a stunning 5.2% over the last five years. Consider that as those wages have fallen, the cost of living, particularly energy prices, has risen steadily.

The recent wage slump has affected a substantial part of the workforce. About 30 million Americans age 20 to 59 have a four-year degree and no advanced degree, according to the National Center for Education Statistics.

The White House economists did not lay out wage trends for people with master's and other advanced degrees. But other studies have found that their inflation-adjusted wages were essentially flat between 2000 and 2004, and the studies have confirmed a decline for people with four-year degrees.

When wages for people with bachelor's degrees declined in the 1970s, the cause was a flood of baby boomers entering the job market.

This time, economists say, much of the blame goes to trends familiar to workers with less education, who are now creeping up the wage ladder.

Offshoring, which has shifted manufacturing and call-center jobs to such nations as Mexico and India, is increasingly affecting white-collar sectors such as engineering and software design.

And companies have continued their long effort to replace salaried positions with lower-paid, nonsalaried jobs, including part-time and freelance positions without benefits. Those contingent positions make up nearly half of the 6.5 million jobs created since 2001, said Paul Harrington, a labor economist at Northeastern University in Boston.

Harrington said the number of salaried jobs increased an average of 11.5% during the last five economic recoveries, compared with 2.5% during the current recovery.

"There's clear deterioration in the college labor market," he said. "The American economy just does not generate jobs the way it has historically."

As long predicted the repercussions of free market fundamentalism are affecting both white and blue collar workers. The benefits of our economic growth are concentrated in the hands of a very small group of people. As Paul Krugman wrote recently, workers across a broad economic spectrum are being left behind.

Here's what happened in 2004. The U.S. economy grew 4.2 percent, a very good number. Yet last August the Census Bureau reported that real median family income — the purchasing power of the typical family — actually fell. Meanwhile, poverty increased, as did the number of Americans without health insurance. So where did the growth go?

The answer comes from the economists Thomas Piketty and Emmanuel Saez, whose long-term estimates of income equality have become the gold standard for research on this topic, and who have recently updated their estimates to include 2004. They show that even if you exclude capital gains from a rising stock market, in 2004 the real income of the richest 1 percent of Americans surged by almost 12.5 percent. Meanwhile, the average real income of the bottom 99 percent of the population rose only 1.5 percent. In other words, a relative handful of people received most of the benefits of growth.

There are a couple of additional revelations in the 2004 data. One is that growth didn't just bypass the poor and the lower middle class, it bypassed the upper middle class too. Even people at the 95th percentile of the income distribution — that is, people richer than 19 out of 20 Americans — gained only modestly. The big increases went only to people who were already in the economic stratosphere.

The other revelation is that being highly educated was no guarantee of sharing in the benefits of economic growth. There's a persistent myth, perpetuated by economists who should know better — like Edward Lazear, the chairman of the president's Council of Economic Advisers — that rising inequality in the United States is mainly a matter of a rising gap between those with a lot of education and those without. But census data show that the real earnings of the typical college graduate actually fell in 2004.

In short, it's a great economy if you're a high-level corporate executive or someone who owns a lot of stock. For most other Americans, economic growth is a spectator sport.

Free trade enthusiast Thomas Friedman claims that The World Is Flat and that it is incumbent on American workers to make themselves competitive in a global marketplace, but it would be fairer to say that American workers are being flattened by policies that do not serve them. Democrats could gain a real advantage this election year by demonstrating some moral courage, but it would mean biting the corporate hand that feeds them. As I wrote before, their surprising rectitude on the minimum wage is a start but it's a drop in the economic bucket. It allows them to demagogue about their concern for wage earners, while they scratch the backs of corporatocrats who are displacing increasing numbers of middle class workers. The Post's Pearlstein gives us a glimpse at the cynicism of Democratic big-wigs. I wish I could say I was surprised.