Statistics They Don’t Show You: Productivity, Employment, and Wages

Recently, there’s been some controversy over claims that the American worker is being “exploited.” Many members of the public have opposed movements like Occupy which appear to have a sense of “entitlement.” The perception is that the protesters want “free money,” or other things they haven’t worked to earn.

“All you need to do to be successful is work,” the opponents say. Or, less gently, “get a job, you lazy bums/dirty hippies/spoiled college kids.” The Facebook group “Occupy a Job” pokes fun at protesters, photoshopping protest slogans off their signs and replacing them with “Please don’t make me work!”

It’s pretty obvious that things aren’t that simple. Unemployment doesn’t fluctuate as a result of people becoming lazy en masse. Unemployment fluctuates because there aren’t enough jobs to go around. Which means, for starters, that those unemployed during a recession are very probably not “lazy bums.”

But there’s more to it than that. A central claim of the Occupy movement has been that the “99%” are being exploited. There is in fact a lot of hard evidence backing this up. Even without looking at growing income inequality, there are a lot of disturbing statistics out there, showing that “job creators” are now demanding more work of fewer employees and for lower wages than any time in the last 50 years.

Let’s start with an odd fact about the current economy: our national GDP has recovered from the recession. It has completely recovered. We’re now producing pre-recession levels of goods, services, and ultimately profit. So why is unemployment still so high?

It’s simple: employers have figured out that during this economic squeeze, they can demand unprecedented levels of productivity from fewer employees from less pay. If an employee gives you trouble for it, there are 100 unemployed folks waiting to replace her. This has led some economists to speculate that high levels of unemployment and comparatively low job security and compensation may be here to stay. If there’s no productivity benefit to treating your workers well, why do it?

This has led some economists to predict a future in which temporary and part-time employment are the norm. If these are the most efficient ways to be productive, perhaps we should get used to the idea of working part-time for multiple organizations, or jumping from contract to contract as permanently temporary workers.

And this isn’t entirely new. The uncoupling of GDP from employment is more recent; the graph above shows the big divide starting around the time of the 2008 economic crash. But the uncoupling of worker productivity from worker compensation began decades ago.

The graph at left sums things up perfectly (please click on it for a better view; the only version I could find had this eye-hurting transparent background feature).

Here we see the average American’s wages (adjusted for inflation) rising barely a few percent since 1979, while our GDP nearly doubles and the wages of the top 1% much more than double.

It’s hard to argue against exploitation here. It’s hard to argue in favor of what we’re always told–that the system we live in is inevitable, that the cost of raising workers’ wages is unfeasible, that “job creators” don’t create jobs because they lack the necessary income. Or, my favorite: that it’s you’re fault if you’re struggling. That it’s your fault if you don’t have a job, or if you’re not paid a living wage, of if you’re in debt. And that, for that reason, you shouldn’t complain.

The Republicans are right about one thing: our current system is unsustainable. But not because of too much government in business. Rather, it may be because of not enough government in business–because we lack the financial and anti-monopoly regulations to actually make markets safe and competitive, because we lack any sort of legal control over the percentage of workers’ productivity that their employers profit.

It’s not that the rich are being taxed more than their fair share; it’s that everyone else isn’t being paid their fair share in the first place. The rise in productivity in recent decades certainly isn’t due solely to the actions of a privileged few: it’s due to their employees, whose wages the privileged few get to determine. If American wage growth reflected work and productivity, then taxing the rich proportionally less or everyone else proportionally more would make sense. But that’s not the way it is. There’s nothing inherently fair–or even slightly fair–in the way our wages are determined. If we wish to have any fairness in the marketplace, our tax system must necessarily act to compensate for unfair wages.

Our system is unsustainable because we continue to ignore, as a society, the thoroughly documented fact that the best way to have success in business in the U.S. is to be born rich. We continue to ignore the fact that the wealthy “job creators,” not market forces, decide the wages of the individual. And I’ll say this in their defense: it’s not their fault. It’s the fault of a culture that has said, for decades if not for centuries, that profit is the measure of success. That playing dirty to achieve profit in business is okay. However much we’d like to think that’s not the prevailing culture in business, anyone who’s ever worked in business will tell you that it is. Successful businessmen have been told by their culture that paying their workers as little as possible is the right thing to do.

Don’t get me wrong: there’s nothing wrong with being rich. There’s nothing wrong with being successful. There is, however, something very wrong with putting the interests of the rich and successful above those of the rest, even as the middle class disappears. There is something wrong with never calling out the top 1%, even as their income grows faster than the GDP while the workers’ remain unchanged. There is something wrong with pretending that lowering taxes on the rich are any way to solve this mess. And there is something especially wrong with pretending that government should defend this money-equals-success, profit-first culture.

In case we’ve all forgotten recent history, let’s review the last 20 years: we were told that if we repealed Glass-Steagall and other financial regulations in the 1990s, it would speed growth. It did. For a while. Then a massive crash happened as a result of–you guessed it–lack of financial regulation.

We were told that cutting taxes on the rich would stimulate job creation and fight the recession of the early 2000s, which now seems like the mildest of economic weather. And it did. For a few years. Then it quite noticeably stopped having any effect as layoffs became the norm and “job creators” continued to take home million-dollar paychecks while laying off employees.

If you can create manufacturing growth by opening up new markets for American products overseas, that might help. If you can put more money in the hands of the middle- and lower-classes who make up the vast majority of consumers for our important industries, that may help these industries recover. But if you put more money in the hands of the rich at the cost of the social programs that support the lower- and middle-classes, that will do the opposite of help. So let’s not do that again.

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One Response to Statistics They Don’t Show You: Productivity, Employment, and Wages

  1. http://www.skeptometrics.org/Earnings_GDP_1860.png Just in case you thought that wages and output had ever become totally unstuck before…

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