The latest Census figures show real earnings for young college grads fell again in 2011. This makes the sixth straight year of declining real earnings for young college grads, defined as full-time workers aged 25-34 with a bachelor’s only. All told, real average earnings for young grads have fallen by over 15% since 2000, or by about $10,000 in constant 2011 dollars.
This statistic is fundamental to our understanding of the current economy. College graduates have jumped through the hoops that were supposed to give them a better life. They are supposed to have the skills that enable them to compete on the global economy. But something is going wrong. The fastest growing jobs now for young college grads include dental assistants, hairstylists, and bus drivers.
The middle-skill jobs that young college grads generally take (think sales agents, teachers, and financial analysts) continued to shed workers in 2011. And for the few high-skill jobs actively hiring (think engineers, web developers, and computer support specialists) most college graduates still lack the necessary training. That leaves many young grads taking jobs that don’t require a college degree for less pay. I call this “The Great Squeeze” – as college grads take the lower-skill jobs, they squeeze out those with less education and experience from the labor market. Nobody wins.
Given the prospect of falling real wages, coupled with rising college costs and debt, many young people are beginning to question the value of a college degree altogether. That means it’s essential whoever wins the election make the plight of young college grads a priority. Not making the investment in education is not the answer; ensuring there are better jobs upon graduation is.
Are U.S. manufacturing jobs gone for good? Many so-called experts have mocked the Obama Administration’s latest trade action against China as being fundamentally useless, the economic equivalent of spitting into the wind. After all, factory job seem like a relic of the past.
Yet by our calculations, the U.S. could regain 4 million jobs in manufacturing at relatively low cost – if we follow the right policies. PPI does not advocate a trade war with China, or a tit-for-tat exchange of trade actions. But taking legitimate disputes to the WTO is the right way to enforce the rules – and in most cases to date with China the U.S. has had success. Such carefully targeted actions, back by accurate data, could make a big difference in boosting the economy.
That’s because we are fighting to recapture competitiveness that may have been disingenuously lost. When countries like China provide non-market financing or other subsidies to industries like automobiles, it gives their companies an advantage that wouldn’t be there absent government support. Such an advantage negatively impacts U.S. companies trying to compete, even if China does not export directly to the U.S. As the NYT explains, “While China exports virtually no fully assembled cars to the United States, it has rapidly expanded exports to developing countries, and those exports compete to some extent with cars exported from or designed in the United States.”
Monday’s WTO filing may be a small first step, but we must start somewhere. We are in a slow-growth economy with an anemic labor market. If we want U.S. companies to keep and increase production (and jobs) here, if we want to close the non-oil trade gap, we must be competitive. And it would help if we gave U.S. companies a level playing field to fight on instead of an uphill battle. Continue reading “WTO Filing a Step Toward Enhancing Competitiveness”→
PPI’s Michael Mandel was quoted in CNN Money about the bottoming out of the manufacturing sector:
“What we’re seeing is the bottoming out of manufacturing,” said Michael Mandel, chief economy strategist with the Progressive Policy Institute. “The really sharp jump in wanted ads coincides with the portion of manufacturing that is switching from shrink to growth mode.”
Last week’s employment status report of America’s youth from the BLS shows the number of people aged 16-24 not in the labor force or enrolled in school in July continues to rise, despite the overall recovery in the labor market.
The number of youth “at loose ends” during the summer of 2012 totaled over 7.5 million – a 2% increase over the same month in 2011, and a 10% increase over 2007. These are young people aged 16-24 that were not working for pay, not actively looking for work, and not enrolled in school in July. I analyzed data from the Current Population Survey to get these numbers.
What’s likely happening is that potential young workers are being squeezed out of the labor force. I’ve written about the “Great Squeeze” before. As middle-tier jobs fall away, we see a shift down in the workforce. College grads squeeze out non-degree holders by taking jobs that don’t require a degree (and pay less). Those with less education squeeze out those with even less education. Eventually there are no jobs left for the youngest, least educated workers.
So, what are these 7.5 million young Americans doing on their summer vacation? Beach getaways and late nights out? Auditioning for American Idol? One Fed economist found an answer that may surprise most parents: “watching TV, playing video games and sleeping.” Of course we can also take comfort knowing at least some of these people are getting experience in unpaid internships, as they don’t count as being employed (statistically speaking).
How young Americans spend their summer vacation matters – for the 7.5 million young people in this category that aren’t unpaid interns, they are not getting the “real-world” experience that will enable future success. And we need them to be prepared for the economy they will inherent. Or at least able to pay for our retirement. That means doing what we can to fix the real problem: Getting young people the education and training that they need to prosper.
PPI’s Michael Mandel was quoted in The Washington Post about the long-term effects of the recession on unemployment.
Many workers are nervous about their livelihoods despite the economic recovery — and for good reason, it turns out.
Among those workers who lost a good job because of the struggling economy over the past three years, roughly one in four found a job that pays as well, according to data released Friday by the Labor Department.
The others remained unemployed, stopped looking for work or accepted jobs at lower wages.
“This data is telling a story of unemployment inflicting long-term damage for a lot of people,” said Michael Mandel, an economist at the Progressive Policy Institute, a centrist think tank. “This won’t turn around until wages overall start rising — and so far, we haven’t seen any strong signs of that.”
PPI’s popular summer policy brief, Investment Heroes, was picked up this week over at Forbes with analysis and commentary from Diana Carew. Carew explains how capital investments designed to increase efficiency still create jobs, points to foreign companies that would have made the list, and makes the case for a more positive view of Apple’s spending.
For all the talk about the trillions sitting on the balance sheets of the biggest U.S. companies, you might think that the S&P 500 is sitting on its hands and waiting for sunnier skies before investing capital.
The truth is rather different though, and a July report from the Progressive Policy Institute explains that capital investment, a critical means of growth for the economy, is hardly at a dead stop.
According to PPI, while the level of business investment remains below its 2007 peak, there are still companies shelling out hard-earned cash for new buildings, equipment and software. The think tank’s report lists 25 “Investment Heroes,” or companies that are pumping billions of dollars into the U.S. economy through their capital expenditures.
Looking over the list one thing becomes immediately clear: capital-intensive industries like telecom and energy are still spending. AT&T and Verizon Communications top PPI’s list, which drew on 2011 financial reports and regulatory filings by 150 of the biggest companies in the U.S. with $20.1 billion and $16.2 billion in capital expenditures respectively. Exxon Mobil comes in third, with$11.7 billion, followed by Wal-Mart ($8.2 billion) and Intel ($7.4 billion).
It’s become conventional wisdom: when the economy falters, it’s because people aren’t spending. Give people money and they will spend their troubles away (and our troubles, thanks to the money multiplier). Everyone is a winner. This advice is at the top of campaign trail talking points. It has been given by economists ranging from Bruce Bartlett and Paul Krugman to Ben Bernanke.
But what if that isn’t the whole story – the government has spent hundreds of billions in a series of stimulus measures aimed at consumers and it hasn’t been enough. Growth is painfully slow and today’s jobs report shows we are still not creating enough jobs–163,000 in July–to absorb recessionary losses. So what’s going on – was the stimulus too little? Is demand being unusually stubborn?
We’re missing something: it’s not only about demand; it’s also about investment. And the July 2012 annual revision to GDP confirms we are in an investment drought. The graph below tells the story.
Halfway into 2012, real nonresidential private investment is still 7% below its pre-recessionary level. And after initially increasing, real government investment is now almost 10% below its pre-recession level – and falling. Meanwhile, demand appears to be doing fine. Both real personal consumption expenditures (PCE) and real retail sales, two commonly used measures of consumer demand, have fully recovered from the recession – and then some.
Economists are constantly coming up with offbeat and fun economic indicators. We’ve seen the economy explained through hemlines, long-distance relationships and even the toughness of marine recruiting ads.
In this spirit, let me unveil a new indicator—the American Idol indicator.
This indicator uses the number people attending Idol auditions each year to tell us if younger workers are more discouraged about their employment prospects. The idea here is that people are more likely to go to an AI audition if they have a lot of time on their hands – presumably because they are unemployed, underemployed, or have given up looking for a job. So a rise in the number of auditions might correspond to a rise in the unemployment rate, while a drop in auditions might signal things are getting better.
As it turns out, PPI’s American Idol indicator suggests younger workers are feeling better about their employment prospects over the coming months. The graph below compares the unemployment rate of workers aged 16-29 with the number of American Idol auditions since 2007. Rules of AI auditions stipulate contestants must be American citizens that are between the ages of 15-28.
PPI’s Michael Mandel was cited over at Slate about the potential to decrease unemployment through an increase in manufacturing jobs in the United States. While Slate’s Yglesias views this as unlikely, the proposal is nevertheless intriguing.
It might seem odd for the United States to be running such a large trade deficit amid such high unemployment. One of the main reasons to import goods rather than make them yourself is that by importing goods you free up scarce labor to do other things. But right now we’ve freed up labor to enter the unemployment sector. Bad news.
One potentially useful way of thinking about this is through the calculation Michael Mandel deploys to ask what the economy-wide consequences would be of balancing America’s trade in nonoil manufactured goods (PDF). He thinks it would take 3.5 million to 4 million workers to make the requisite stuff. Potentially that would be a very costly change if it involved 4 million fewer people working in hospitals, schools, and restaurants just to get our hands on material goods that we already have. But unemployment is high. So under present circumstances, he writes that this could “reduce unemployment by about 2.3-2.6 percentage points,” which would be a lot.
However, firms don’t locate production abroad for no reason. They do it because it’s cheaper. So if we relied more on domestically made goods, prices would have to be higher
American voters are finding it hard to get excited about this year’s presidential election. Job growth is slow. Economic growth is slow. Real wages have been essentially stagnant since 2009. It’s the same old story as when the recovery began three years ago. We are in an atmosphere of economic uncertainty. Voters—swing voters especially—are looking for news that will boost their confidence from all the economic doom and gloom going around. We are a country that needs to hear more (if not have more) economic successes.
Such successes begin at home with investment—business investment, government investment, and household investment. Government has to invest in infrastructure, education, and research. Households have to invest in their own human capital. And businesses have to invest in buildings, equipment, and software. All are essential—but in this report we will focus on business investment. Domestic business investment generates growth, raises productivity, increases wages and creates jobs for Americans. It can span the gamut from new office buildings to improved production lines to faster communications equipment to deeper natural gas wells.
Unfortunately, U.S. business investment tanked during the Great Recession, and has yet to recover. The graph below shows the extent of the drop-off—in 2011, non-residential investment remained more than 7% below 2007 levels, adjusting for prices. By comparison, personal consumption in real terms was higher in 2011 compared to 2007. We find ourselves in an investment drought, not a consumption drought.
Equally as important, before the recession companies were expanding their domestic investment at a rapid pace. In fact, we estimate there would have been a total of $1.4 trillion more in non-residential business investment over 2008-2011, in 2005 dollars, had business investment continued to grow at the same average annual rate in the ten years before the recession (4.8% over 1997-2007). That extra investment could have gone a long way creating jobs, boosting productivity, and enhancing U.S. competitiveness.
The decline and lackluster recovery in business investment has a wide range of causes, including globalization, regulatory barriers, and weak demand. Many companies are investing overseas rather than in the United States. Multiple layers of regulation, even if well-intentioned, have the impact of discouraging capital investment and innovation. And the continued weakness in demand at home makes it difficult to justify building new factories. But no matter what the reason, this weakness is having an adverse effect on economic growth and is one of the main reasons behind the job drought.
That’s why PPI wants to highlight those companies that are still investing domestically in buildings, equipment, and software. Using publicly available financial reports, PPI constructed a list of the top 25 nonfinancial U.S.-based companies ranked by their U.S. capital spending in 2011. In many cases this required detailed calculations and assumptions, since companies often report global capital spending without breaking it down by country. Financial companies were excluded because they do not publicly report their capital expenditures. (A more detailed explanation of our methodology can be found later in this memo.)
PPI calls these companies “Investment Heroes” to make a key point: the U.S. economy is at its best—in terms of growth and job creation—when companies and workers are partners with the same objectives. Half of the leading companies are telecom and energy, but the list also includes tech, retail, automotive, and entertainment companies.
According to new calculations by the Progressive Policy Institute, the strongest growth in employment for college grads aged 21-29 since the end of the recession has been in jobs like dental assistants, bus drivers, hairstylists, and event ticket takers.
This sobering news may make recent college grads – and their bill-paying parents – wonder what exactly they’re getting for all the years and dollars invested in getting a degree.
According to data compiled by PPI, since May 2009 young college grads have seen big employment gains in occupations once held by those workers with less than a college degree. That includes healthcare support, transportation, personal care & service, and production jobs, which all saw employment gains of over 20% for those with a college degree or higher aged 21-29. Employment growth in office and administrative jobs – secretaries, file clerks, bank tellers, payroll assistants, etc. – increased over 10% for young college grads. Meanwhile, young workers with less than a college degree saw substantial employment declines in similar jobs.
The late economist Mancur Olson would have been a fan of Jonathan Ames. Ames is the creator of the HBO series Bored to Death as well as the eponymous protagonist, an aspiring novelist who moonlights as a private investigator. Olson may have enjoyed the ensuing hijinks, but he would have seen a larger economic lesson in the show.
In his classic book, The Logic of Collective Action, Olson demonstrated that small groups are usually more efficient and effective at achieving collective ends than large groups. Despite the narrower interests they represent, small groups find it easier to engage in coordinated behavior and achieve group ends, even when those ends may work against the interests of the larger society. Today, this “logic of collective action” can be seen in the spread of professional and occupational licensing. Whereas in the 1950s only five percent of the American workforce was subject to such licensing, it currently stands at nearly one-third. What this means is that, to enter certain professions and occupations, individuals must attain minimum levels of education and training and, often, pass exams to demonstrate their competency to practice.
Top Democratic and union leaders play host this week to prospective 2012 Congressional candidates, highlighting labor’s status as a critical cog in progressive campaigns. Some observers believe that, in the aftermath of Wisconsin Gov. Scott Walker’s efforts to strip the state’s public unions of collective-bargaining rights, labor has found both renewed public sympathy and political momentum.
It’s not clear, however, that such attitudinal shifts will be enough to reverse the steady erosion of union membership, and the voting power that goes with it. That’s the fundamental reality progressives must reckon with as they ponder how to forge electoral majorities.
To offset labor’s declining share of the electorate, Democrats logically must do one of two things: do better among union households or do better among non-union households. As it happens, the key to both is the same – winning more moderate voters.
China may look like an unstoppable economic juggernaut, but it is increasingly beset at home by worker protests and strikes. Last June, for example, security officials in Zengcheng, a manufacturing city in southern China, fired tear gas at hundreds of migrant workers who smashed windows and overturned police cars after hearing the rumor that authorities had pushed a pregnant migrant street vendor to the ground.
Spreading labor unrest in China has large economic as well as political implications for Sino-American relations. Put simply, stronger rights for Chinese workers is good for America’s bottom line. By explaining our economic interest in empowering China’s workers, U.S. leaders could galvanize broad public support behind a more insistent push for individual and civil liberties in China. Too often, however, they fail to make that connection. They may deplore the way China arbitrarily limits speech and imprisons lawyers,
human rights watchdogs, religious leaders, and worker advocates. But they rarely note that empowering China’s workers would likely lead to higher wages and benefits, and therefore a shrinking labor cost advantage over U.S. competitors.
In this paper, I explore the vital link between the rights of Chinese workers and the competitive health of the American economy. If a nation has lax labor laws, or has good ones but doesn’t enforce them, local employers can keep wages down and produce goods at much cheaper cost. Moreover, if workers are unable to strike or effectively petition their employers because the legal system doesn’t guarantee freedom of speech and association, then their country is essentially subsidizing its companies, giving them an unfair advantage in the global economy.
Indeed, inconsistent labor law enforcement, inattention to workplace safety, and violations of binding legal contracts (such as wage agreements) have enabled Chinese manufacturers to hold down the price of Chinese labor. The labor cost differential, of course, is the main reason Chinese goods are significantly cheaper, even after they have been shipped to the United States. Raising labor standards in China will inevitably lead to raising the price of Chinese-produced goods, making goods produced by U.S. workers more competitive. That’s why strong U.S. support for the rights of China’s workers should be an integral part of Washington’s strategy of constructive engagement with Beijing. Not only is it the right thing to do from a human rights standpoint, it is also clearly in America’s economic interests as we seek a more balanced commercial relationship
with China.
More specifically, let me offer seven recommendations for U.S. policymakers:
Put human and worker rights at the center of U.S. diplomacy toward China.
Raise public awareness of the link between workers’ rights in China, and economic benefits for Americans.
Work closely with other liberal democracies to demand China’s adherence to its own labor laws and international standards.
Expand bilateral working groups on labor rights, so that these issues come up routinely in Sino-American relations.
Fund civil society groups that promote and defend workers’ rights.
Use trade as leverage to achieve progress on workers’ rights.
Ratify two key International Labour Organization protocols: the Freedom of Association and Protection of the Right to Organise Convention (1948), and the Right to Organise and Collective Bargaining Convention (1949). In advocating rights and liberties around the world, the U.S. must also lead by example.
The following is a guest column from PPI friend and sometime contributor Earl Brown, Labor and Employment Law Counsel for the American Center for International Labor Solidarity.
If you want to see what a society without law or civic space looks like, go to Burma. A half century of military misrule has devastated this once fertile center of Asian science, scholarship, law, commerce and civic debate. But in this desert, Burmese activists are preparing to seize the potential democratic space recently opened up by the new regime. Last month, it issued a new labor law, the Labor Organization Law, which appears to allow independent unions to register and function legally for the first time in memory.
The new law allows the creation of new unions, with a minimum of 30 members. Burmese trade union activists are now using this new labor law and filing papers to establish free trade unions. In the past few weeks, groups of woodworkers, garment workers, hatters, shoemakers, seafarers and other trades, including agricultural workers, have registered openly as trade unions. After decades of unceasing international pressure and sanctions to little discernable effect, outside watchers of Burma are eager to see positive movement and are praising this new law. They see the new labor law as part of other highly publicized initiatives by the regime to open up Burmese society. For example, Burma’s new president has recently received the leader of the Burmese democracy movement, Daw Aung San Suu Kyi, in a highly publicized audience. The Burmese regime released 200 political prisoners in October and has also cancelled a huge dam project with Chinese construction firms that was fiercely opposed by villagers.
Whether these apparent openings—including the new labor law—are real is a matter of debate by those following events in Burma. All are watching to see the reaction of the Burmese regime to the efforts by Burmese industrial workers as they organize under the Labor Organization Law. Will the regime actually allow free unions?
Autonomous unions were once among the pillars of the robust civil society in Burma that had grown up in the face of British rule, fueled by a fierce desire for independence and democracy. Unions helped build this vibrant and diverse civil society by giving voice to industrial workers. Alongside associations of scholars, students, professionals in various disciplines, including lawyers, religious folks in temples and churches, ethnic and political parties, unions laid the basis for Burmese democracy. So did the Burmese bar.
True, many of Burma’s laws were repressive imports from colonial India. But the independent and anti-colonial Burmese bar was populated by talented advocates and drafters, employing both Burmese and British traditions and languages. In this bar, a skilled group of labor lawyers waged vigorous advocacy for both sides of the industrial relations equation, for unions and employers.
When General Ne Win seized power in the 1960s, however, he launched an attack on the diversity and vigor of Burmese civil society. Using the slogans of socialism, General Ne Win sought to replace peaceful debate about and advocacy of divergent interests with the dreary and artificial “harmony” of military rule. The honest articulation of any interests beyond those of the military was suppressed in the name of order. In this imposed order, unions, and lawyers as vehicles of advocacy and debate became targets. After 50 years of suppression, these once proud traditions of democratic trade unionism, of legal advocacy, and of civil debate eroded and eventually disappeared.
The demise of a vigorous civil society and civic debate did not steal the impulse for democracy. But it did eliminate robust traditions of independent trade unionism and law. Unions and legal institutions, such as independent lawyers, could have helped check the repressive hand of Burma’s military junta. That is why they, and most other independent civil society organizations, became targets of the military.
In her 2010 speech to the Community of Democracies on civil society, Secretary of State Hilary Clinton explained why dictators are impelled to suppress unions, lawyers and the other building blocks of that civic pluralism and robust advocacy so essential to sustaining democracy beyond elections:
Our democracies do not and should not look the same. Governments by the people, for the people, and of the people will look like the people they represent. But we all recognize the reality and importance of these differences. Pluralism flows from these differences. And because crackdowns [to civil society] are a direct threat to pluralism, they also endanger democracy.[1]
Freedom of association and expression is the air that union movements and lawyers must have to breath. Guaranteeing those rights is thus one first step to rebuilding the pluralistic Burmese civil society so necessary to democracy and economic development. Unions and lawyers are clearly key to recreating the vigorous democratic civic world and discourse that have been suppressed and degraded for so long inside Burma, and so necessary to any Burmese revival.
If you worry, like so many Americans, about excessive regulation, just check out recent Burmese history—where military officers can get a piece of your enterprise or endeavor at their whim. Talk to the Burmese entrepreneurs who without consent, compensation or process acquired new and rapacious military “partners” in their businesses. That’s what a world without rules and regulations looks like. A world without law, process, or lawyers does not have the diversity of interests needed to insure governmental accountability.
The International Confederation of Trade Unions (ITUC) has just completed an analysis of the new labor law, pointing out its many defects. It allows for the complete suppression of strike activity for wages, hours and working conditions. This important economic law was issued without any consultation with unions, independent scholars or employers. It is poorly drafted, and not harmonized with other Burmese laws or the new Burmese Constitution. It lacks clarity and important detail, and sadly reflects the deterioration of Burmese legal traditions such as draftsmanship. But, despite all these negative features, this new law seems to allow for registration of autonomous trade unions. The woodworkers and other workers who are registering under the Labor Organization Law will give the outside world, and Burma itself, a real test of whether this initiative in the direction of a freer civil society is genuine.
We, on the outside, will not only be able to see if the apparent opening of civil society is real, we may also see the recreation of a robust civil society with unions and other civic associations as new soil for the growth of democracy and the rule of law inside Burma. All concerned with the rule of law and democracy in Burma and Asia should keep their eyes on the efforts of the Burmese woodworkers, garment workers, seafarers and others to register free unions. Their efforts will tell us all if the openings are cosmetic for outside consumption or real for use by Burmese civil society.
[1] Clinton, H. (2010, July). Civil Society: Supporting Democracy in the 21st Century. Speech presented at the Community of Democracies, Krakow, Poland.
PPI’s popular summer policy brief, 
If you want to see what a society without law or civic space looks like, go to Burma. A half century of military misrule has devastated this once fertile center of Asian science, scholarship, law, commerce and civic debate. But in this desert, Burmese activists are preparing to seize the potential democratic space recently opened up by the new regime. Last month, it issued a new labor law, the Labor Organization Law, which appears to allow independent unions to register and function legally for the first time in memory.