Random Thoughts from the High Desert
Written by Sig Silber
Employment has been increasing but the mix may not be optimal for our economy.
Bubble charts can be revealing. In this case it reveals one aspect of the way government policy has constrained economic growth.
The data used by the National Employment Law Project (NELP) is readily available from the Bureau of Labor Statistics (photo of their office shown above), but I really think their graphical presentation is very helpful in understanding a lot of issues facing the U.S. economy.
As you can see, there are only a handful of sectors where employment has declined over the past four years. But they are all high-wage jobs mostly in government. Personally I have mixed emotions about government staffing as in some cases government is helpful or even essential and in other cases it is the great enslaver of the general populace. But aside from the philosophical issue of how much government is ideal, one wonders why Federal Government employees are worth more than twice as much as a nursing home worker and state and local government employees are worth twice as much as someone working in retail trade. Generally speaking a person working in retail trade is trying hard to please you while the state or local government employee is trying hard to ruin your day. All I want for Christmas is more police to pull me over – NOT.
Do the laws of supply and demand apply in the government sector especially the Federal Government? Pharaoh may have had the same problem with too many overseers and not enough brick makers. The overworked brick makers of course decided to emigrate some place with fewer overseers. Efforts to impose an exit tax failed due to unusual winds or divine intervention depending on your perspective. I assume that pyramid construction tailed off.
Re the minimum wage, this chart illustrates the problem. The two largest circles on the chart where there was employment growth are low-pay sectors: retail trade and food services which pays even less than retail. Of course they are drawn as large circles because they are very aggregated. If they were subdivided, they would be shown as a number of smaller circles. So those two sectors may not have grown disproportionately to overall employment – beware of those who create graphics.
Nevertheless those two sectors have seen a lot of new job creation but these are low-paying jobs. Employees in those sectors are most impacted by the increase in the minimum wage either benefiting from a higher wage or losing their job. Most will benefit but 500,000 or possibly more will not. https://econintersect.com/b2evolution/blog2.php/2014/04/19/alien-invasion-or-where-did-that-idea-come-from-1
Food services looks like it will be impacted the most. That is fine with me as the last thing I want when I go out to eat is a waiter or waitress. I much prefer counter service or buffets. So they can get rid of every waiter or waitress in the U.S. and I will be pleased. If I must have a wait-person, I prefer it to be a robot rather than a person and that clearly is coming.
Same goes for retail other than stores selling produce or meat. I would just as soon order on line and take my chances with UPS and FedEx or USPS. They get it wrong (where to deliver the package) about as often as they get it right but at least I don’t have to deal with the stupid paper bags that The City Different (code for Santa Fe, NM) has decided makes people more noble even though the environmental impact of paper bags is far greater than plastic bags. But it either makes those in charge feel good or they have some other equally invalid reason for this nonsense which inflicts paper cuts on check-out clerks and stimulates antibiotic sales to treat those who use the cloth bags. Carrying the paper bags at shoulder height also creates needed work for orthopedists and I am sure the hospitals appreciate that also.
But there remains the question of what is the impact of eliminating low-paying jobs. It is clear that many do not navigate our educational system to qualify for the many high-paying jobs available so how will these people get their first job. The answer is that many of them will not or will not until they go back and get additional training and run up their student loan debt.
This creates situations as shown in this exhibit which shows the decline in home ownership among the age group that should be forming families and buying starter houses. It seems that those with the most education are least likely to buy houses which is very unusual. This and similar results precondition our economy for slow growth for an extended period of time.
For society, these people who only qualify for low-paying jobs will be considered overhead (paid for by taxpayers or consumers paying higher wage-control related prices) or the Reserve Army of the Unemployed keeping wage levels down and corporate profits up. They vote so to some that is a good thing. From a Marxist perspective, this cohort of unemployables are a cash crop for various special interests. Unfortunately it is a cash crop that is supported by the general public and benefits those seeking votes or cheap labor. It is a very valuable crop, but public policy that is designed to increase the size of this crop is very cynical.
I think immigration is good for the U.S. as it refreshes the energy level and brings demographics more in line with what is reasonable, but clearly Democrats and Republicans have very cynical reasons for importing this crop of low-wage workers.
The situation in the U.S. may not be that different from the situation in other developed nations. In “emerging” nations the strategy or at least the result is that large numbers of people are moving from low-earnings situations to higher-earning situations. In developed nations and I think especially in the U.S., the process is extracting part of the share normally received by labor and transferring this share to capital. This would be perhaps justifiable if the capital to labor ratio was increasing. But it seems that this transfer is not totally driven by micro economics at the level of the firm but by government policy.
If this policy in the U.S. was created by one or the other major Political Parties, voters would have no problems dealing with it. But it seems to be pretty much a policy perspective that is shared by both major Political Parties. Thus voters may think they have a way of dealing with it but in reality they do not.
Such a form of institutional arrangements is perhaps not properly described as Capitalism but as more closely resembling Fascism. It is perhaps going too far to make that claim since in the U.S., foreign policy has always supported commercial interests and to the extent commercial interests and the interests of the working class and middle class are aligned, this would seem to be democracy in action and a well functioning nation state. But if the interests of the people (working class and small business/middle class) are not aligned with the policy of those in power and if the policies of those in power are fairly similar from one Political Party to the next in a two-party political system, you have at best an Oligarchy and at worst a from of government that has some resemblance to a Fascist State in the sense of an unhealthy relationship between government and very large businesses .
It seems to be good for the stock market.