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Published on Tuesday, October 11, 2011 by In These Times

Bogus ‘Recovery’ Offers Households Bigger Income Drop Than Recession

by Roger Bybee

Progressive economist Heidi Schierholz once described America’s ongoing economic crisis—falling wages, insecure jobs, high unemployment, rampant home foreclosures—as “an experiment in stress” imposed on working families.

The supposed recovery has produced neither the desperately-needed expansion of jobs nor a long-awaited increases in wages, as Corporate America sits on a record $2 trillion in domestic savings (and another $1 trillion stashed overseas) available for investment and pay hikes. (Flickr | Creative Commons | jbhthescots) But the unwilling subjects of the “experiment in stress” now seem be in revolt, first among public employees in Wisconsin and in Ohio, and now with the Occupy Wall Street movement spreading to well more than 100 cities.

The supposed recovery has produced neither the desperately-needed expansion of jobs nor a long-awaited increases in wages, as Corporate America sits on a record $2 trillion in domestic savings (and another $1 trillion stashed overseas) available for investment and pay hikes. In fact, The New York Times reported Monday that median household income actually declined twice as fast during the recovery, which technically began in June 2009, than during the two-year recession it followed:

In a grim sign of the enduring nature of the economic slump, household income declined more in the two years after the recession ended than it did during the recession itself, new research has found.

Between June 2009, when the recession officially ended, and June 2011, inflation-adjusted median household income fell 6.7 percent, to $49,909, according to a study by two former Bureau officials. During the recession — from December 2007 to June 2009 — household income fell 3.2 percent

The magnitude of the drop might be exaggerated by a difference in methods used in different Census Bureau studies, suggests Times economic reporter David Leonhardt. But there seems to be little doubt that wages have continued to fall during the recovery. 

THE DISMAL DECADE OFFERED BIGGEST INCOME DROPS SINCE GREAT DEPRESSION

Leonhardt had noted in October 2009 that American workers' “pay cuts, sometimes the result of downgrades in rank or shortened workweeks, are occurring more frequently than at any time since the Great Depression.”

The existence of some 25 million workers who are jobless or forced to settle for part-time worker creates a huge “reserve army of labor” leaving employers with great enhanced leverage to drive down pay. A recent survey shows how newly-rehired workers have been forced to accept major decreases in pay:

Henry S. Farber, an economics professor at Princeton, found that people who lost jobs in the recession and later found work again made an average of 17.5 percent less than they had in their old jobs.

The Dismal Decade—aka the 2000s—was marked by a net job creation level just above zero. In every decade since 1940s, America’s supply of jobs rose between 20 percent and 38 percent, the Washington Post reported last year. The other chief symptom of the Dismal Decade was falling wages. The Times' Leonhardt reported, 

The typical American household made less money last year than the typical household made a full decade ago. Median household fell to $50,303 last year, from $52,163 in 2007. In 1998, median income was $51,295. All these numbers are adjusted for inflation.

This marks the first time in which median income has fallen for an entire decade “since at least the 1930s,” according to available data, he observed.

BOTH PRIVATE AND PUBLIC SECTORS TAKE SIMILAR HITS

Despite the recent enthusiasm of Republican governors like Wisconsin’s Scott Walker and Ohio’s John Kasich for targeting public employees like teachers, nurses, police officers and firefighters as a privileged class enjoying an exemption from the wage cuts occurring In the private sector, there was little difference in the pay declines for both public and private workers during the last decade.

"Real median annual income declined to a similar degree for households headed by private-sector wage workers (4.3 percent) and government-sector workers (3.9 percent), the Times reported. 

Wage-cutting has been expanded even to unionized workforces at profitable corporations (as discussed here in depth), which use the threat of relocation to impose two-tier wages structures.

The pattern on display over the Dismal Decade shows an emerging model of corporate globalization that is built on employing super-cheap workers (their wages held down by government policy in places like Mexico and China to attract more foreign investment) and simultaneously slashing wages and minimizing job creation in the United States.

As Harold Meyerson puts it:

… [Transnational corporations] are increasingly selling and producing overseas. General Motors is going like gangbusters in China, where it now sells more cars than it does in the United States. In China, GM employs 32,000 assembly-line workers; that's just 20,000 fewer than the number of such workers it has in the States. And those American workers aren't making what they used to; new hires get $14 an hour, roughly half of what veterans pull down. 

The GM model typifies that of post-crash American business: massive layoffs, productivity increases, wage reductions (due in part to the weakness of unions) and reduced sales at home; increased hiring and booming sales abroad. 

The chief outcome of these trends is deeper suffering for working families and greater inequality—and vastly enhanced profits and dividends for the richest 1 percent. But of course, as the growing Occupy Wall Street movement shows, many Americans are well aware of this.

© 2011 In These Times
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