That’s certainly one of the factors keeping GDP growth low.
Four years into the economic recovery, U.S. workers’ pay still isn’t even keeping up with inflation. The average hourly pay for a nongovernment, non-supervisory worker, adjusted for price increases, declined to $8.77 last month from $8.85 at the end of the recession in June 2009, Labor Department data show.
Stagnant wages erode the spending power of consumers. That means it is harder for them to make purchases ranging from refrigerators to restaurant meals that account for most of the nation’s economic growth.
Not only that, but unemployment remains historically high years after the “recovery”. The question, however, is why wages are remaining stagnant. The WSJ cites three factors:
Economic growth remains sluggish, advancing at a seasonally adjusted annual pace of less than 2% for three straight quarters—below the prerecession average of 3.5%. That effectively has put a lid on inflation, which has been near or below the 2% level the Federal Reserve considers healthy for the economy. With demand for labor low, prices not rising fast and 11.5 million unemployed searching for work, employers aren’t under pressure to raise wages to retain or attract workers.
Emphasis mine. The Fed is happy with the inflation rate. And the administration, despite numerous claims to be focused like a laser beam on “j-0-b-s” has done little if anything to address unemployment or economic growth. Finally, given the uncertainty that regulation and new laws (such as ObamaCare) bring to the table, employers are even less likely to hire until the regulatory and legal dust settles and they have a much better idea of how both effect their business and industry. It’s not about “pressure”. It’s about a lack of incentive.
Businesses are changing how they manage payrolls. Economists at the Federal Reserve Bank of San Francisco in a recent paper said that, in the past, companies cut wages when the economy struggled and raised them amid expansions. But in the past three recessions since 1986—and especially the 2007-2009 downturn—companies minimized wage cuts and instead let workers go to keep remaining workers happy. As a result, to compensate for the wage cuts that never were made, businesses now may be capping wage growth. “As the economy recovers, pent-up wage cuts will probably continue to slow wage growth long after the unemployment rate has returned to more normal levels,” the researchers said.
Another point to make, again considering the unemployment rate, is that those working are glad to still have a job. And with the economy still struggling it is unlikely that many feel the time right to push for higher wages. In fact, it is a “buyers market” right now when it comes to labor. And it will remain one until we get into much higher growth percentages and the demand for labor begins to outstrip the supply. We’re not even close to that at this point.
Globalization continues to pressure wages. Thanks to new technologies, Americans are increasingly competing with workers world-wide. “We are on a long-term adjustment, as China, in particular, but all developing countries, get their wages closer to ours,” said Richard Freeman, an economist at Harvard University. According to Boston Consulting Group, there will be only a roughly 10% cost difference between the U.S. and China in making products such as machinery, furniture and plastics by 2015.
Technology is also replacing workers in many industries. Automation is especially tough on low skilled workers. But again, given laws like ObamaCare, the incentive at work is to have fewer employees, not more. Businesses will automate where it makes sense and helps make a profit. It is also a means of closing that wage gap mentioned above, so it isn’t a trend that is likely to end anytime soon.
All of those factors and what I’ve mentioned in addition to them combine to make unemployment and wage growth both remain static. There simply aren’t any incentives at the moment to hire more people. Certainly not in GDP growth. Certainly not with the plethora of new regulations and laws.
In fact, as is mentioned in the article, at the moment there are only two paths to higher wages:
The only path to wage gains is through a stronger economy or an increase in demand for specialized skills.
The economy is moribund and has been for quite some time with GDP growth under 2% for the last three quarters.
That narrows the path to wage gains to a single one – developing specialized skills. It isn’t a path open to everyone, unfortunately, for a number of reasons.
So how could government help change all of that? Quite simply by getting out of the way – something it seems completely unable to comprehend or do.
And because of that, it continues to contribute negatively to the economic situation we endure.
This week, Michael, and Dale discuss many things.
The direct link to the podcast can be found here.
As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here.
This week, Bruce, Michael and Dale talk about Greece, and the folly of governments.
The direct link to the podcast can be found here.
As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2010, they can be accessed through the RSS Archive Feed.
In 1960, the Democratic Party platform included the following in reference to agriculture in the US:
"The right of every farmer to raise and sell his products at a return which will give him and his family a decent living."
We shall take positive action to raise farm income to full parity levels and to preserve family farming as a way of life.
We shall put behind us once and for all the timidity with which our Government has viewed our abundance of food and fiber.
We will set new high levels of food consumption both at home and abroad.
As long as many Americans and hundreds of millions of people in other countries remain underfed, we shall regard these agricultural riches, and the family farmers who produce them, not as a liability but as a national asset.
Of course, in 1960, as today, children of farm families were an integral part of the success of family farms of that era. And, in 1960, that was apparently just fine with Democrats. Their labor many times made the difference in the farm surviving and flourishing. And the children learned the business and the work ethic necessary for the family farm to thrive and survive.
But apparently the party’s position has evolved over the years to one that is now anti-family farm. How else do you explain this?
The Department of Labor is poised to put the finishing touches on a rule that would apply child-labor laws to children working on family farms, prohibiting them from performing a list of jobs on their own families’ land.
Under the rules, children under 18 could no longer work “in the storing, marketing and transporting of farm product raw materials.”
“Prohibited places of employment,” a Department press release read, “would include country grain elevators, grain bins, silos, feed lots, stockyards, livestock exchanges and livestock auctions.”
The new regulations, first proposed August 31 by Labor Secretary Hilda Solis, would also revoke the government’s approval of safety training and certification taught by independent groups like 4-H and FFA, replacing them instead with a 90-hour federal government training course.
More government intrusion. Private organizations such as the FFA and 4-H club that have, for decades, successfully done safety training and certification are now to be stripped of that ability in favor of a 90 hour course taught by the same government that gave us the TSA. And, of course, with any government training, you have to wonder how much it will cost and how much of it will be worthwhile training and how much indoctrination.
Farm children have, for literal centuries in this country, worked side by side with their fathers and mothers to make a very difficult and labor intensive family businesses succeed. But the nanny state would now prohibit them from doing most of what they’ve traditionally involved themselves in because, well, nanny knows best, doesn’t she?
Of course farm families have a vested interest in insuring their children remain safe and able to work. It is of no advantage at all for a farm family to have their children do things in which there’s a high likelihood of them being killed or maimed. And, again, for centuries, they’ve been able to manage and determine what is or isn’t within the abilities of their children to do safely.
Additionally, over those centuries, private and independent groups like the FFA and 4-H have been developed and supported by farm families to ensure their children are properly trained in the safety, husbandry and farming skills so necessary to make the family farm a success and to make the US the breadbasket of the world.
Now we have government unilaterally intruding in an area that it really has no business. And it is a Democratic administration doing so … one I’m sure that would tell you, out of the other side of their mouth, that they are the party of the family farmer.
Nanny, with the supposed best of intentions, is about to take down another industry with its unwanted meddling.
And yet, there are those who will attempt to support this intrusion as something necessary to safeguard the children.
It is a travesty, it is unwanted by those it is being imposed upon and it will, in the end, kill the family farm for good.
But you knew that.
And so do they.
Big Agribusiness says “thanks”.
Where has this man been? Or perhaps the most salient question is what planet has he been hiding on? This is what he said in Hawaii to a gathering of CEOs at APEC about why we’re apparently in the mess we’re in:
“We’ve been a little bit lazy over the last couple of decades. We’ve kind of taken for granted — ‘Well, people would want to come here’ — and we aren’t out there hungry, selling America and trying to attract new businesses into America.”
Yes friends, the blame-shifter-in-chief says it is we lazy Americans who’ve taken everything for granted these last few decades that are responsible for the economic downturn we are experiencing now.
Never mind the fact that this administration has openly warred on business. Never mind we have the highest corporate taxes in the world. Never mind that government intrusion and regulation have only gotten worse. Never mind that government has actively sought to block businesses which could make a world of difference in both jobs and competitiveness. For instance:
– blocking oil and gas exploration in the Gulf even after safety and spill prevention procedures were upgraded
– trying to keep one of our major manufacturers, Boeing, from opening a new plant (jobs) in one of our few major industries (aerospace) by attempting to block non-union labor from working in a right-to-work state.
– delaying the Keystone XL pipe line (again, thousands of high paying jobs) for political reasons (delayed until after the election).
Etc. Not to mention the government policy and enforcement of that policy (Community Reinvestment Act) that led to the housing bubble and financial melt down.
It isn’t about a lazy America. It’s about an over-reaching, intrusive government whose level of intrusion and market distortion have only gotten worse “over the last couple of decades”.
And here’s a clue Mr. Obama – we lazy Americans didn’t run up a $14 trillion dollar debt. You pandering politicians did. And that debt load is also killing our competitiveness and has led to a downgrade of the country’s credit rating — on your watch.
Yeah, blame it on others, Mr. Obama — but thinking Americans, Americans who’ve actually run something and done something, know the score. Hopefully they’ll put you in a new position in November of 2012, where your primary responsibility will be getting with your wife and picking out wallpaper for your presidential library.
Where on earth has he been?
Michael Moore, the “documentary” film maker who has pushed various liberal causes with extraordinarily slanted films, has called on President Obama to “show some guts” and arrest the head of Standard & Poors.
“Pres Obama, show some guts & arrest the CEO of Standard & Poors. These criminals brought down the economy in 2008& now they will do it again,” Mr. Moore wrote.
Yes, it’s all S&P’s fault. Somehow the 100% of GDP debt, 4 trillion of which was heaped on the pile within the last 3 years, was an S&P plot. Apparently Moore is of the opinion that credit rating agencies ought to align themselves politically and if they don’t, or won’t, well they’re open to arrest. S&P obviously should have just kept to itself and supported the outrageous spending this administration has committed itself too.
It seems in Moore’s world the rating agency’s job is to turn a blind eye to actions and activities which, for any other country, would have earned a downgrade quite a while ago.
It it is telling that on the liberal side of things, the first inclination is to attack the messenger. And that inclination is driven by one primary thing – politics. Specifically the politics of personal destruction. The downgrade obviously hurts Obama politically. And all the spinning in the world doesn’t change that.
Because they see this as a desperate situation, the mask slips a bit and you see the true face of "liberalism". Imagine, in a Moore approved regime, how dissent would be handled if he’s now calling for the arrest of the CEO of S&P.
Mr. Moore went on to note that the “owners of S&P are old Bush family friends,” continuing a theme he has developed through several films about capitalism as essentially a crony system for the rich and Wall Street, especially the Bush family.
He went on to link approvingly to an article last week in the Guardian, a left-wing British newspaper, about a police raid in Milan against the offices of S&P and fellow ratings agency Moody’s. Italian police were searching for evidence on whether the rating agencies, in the words of a local prosecutor, “respect regulations as they carry out their work”.
Two more interesting points – somehow it is “Bush’s fault” (there’s a surprise). Additionally it is “important to respect regulations” when these agencies carry out their work. Of course Italy was downgraded by Moody’s and the reaction there by government has been much the same as here – “what us? How dare you”. Fallback? Government regulations, of course.
Naturally Moore doesn’t bother to point out that the government of Italy is run by a right-wing Prime Minister who, at any other time, he’d now be calling a “fascist” for doing that.
Vintage Moore. Vintage liberalism. Liberalism in very deep trouble. And that’s always when its inner totalitarian usually begins to show.
What was one of the first thing done by the Egyptian government when protests started to seriously build into threatening government’s further existence? It turned off the internet. That is, it abruptly ordered it be shut down along with cell phones in order to hamstring the protesters ability to communicate and coordinate and to not allow tweets, emails and liveblogs from recording the situation for the rest of the world.
It couldn’t happen here, though, could it?
A controversial bill handing President Obama power over privately owned computer systems during a "national cyberemergency," and prohibiting any review by the court system, will return this year.
Yes, it’s back. And the same sponsors who tried to get it through Congress the last time around are sponsoring it again.
Internet companies should not be alarmed by the legislation, first introduced last summer by Sens. Joseph Lieberman (I-Conn.) and Susan Collins (R-Maine), a Senate aide said last week. Lieberman, an independent who caucuses with Democrats, is chairman of the Senate Homeland Security and Governmental Affairs Committee.
"We’re not trying to mandate any requirements for the entire Internet, the entire Internet backbone," said Brandon Milhorn, Republican staff director and counsel for the committee.
Instead, Milhorn said at a conference in Washington, D.C., the point of the proposal is to assert governmental control only over those "crucial components that form our nation’s critical infrastructure."
Uh, yeah – that’s those are the same “crucial components” that Egypt used to cut its people off from the rest of the world. And somehow we’re supposed to trust government not to use its power in ways not yet imagined and certainly not wanted?
I don’t think so.
Portions of the Lieberman-Collins bill, which was not uniformly well-received when it became public in June 2010, became even more restrictive when a Senate committee approved a modified version on December 15. The full Senate did not act on the measure.
The revised version includes new language saying that the federal government’s designation of vital Internet or other computer systems "shall not be subject to judicial review." Another addition expanded the definition of critical infrastructure to include "provider of information technology," and a third authorized the submission of "classified" reports on security vulnerabilities.
I don’t know about you but given government overreach in the last two years, I see nothing about this that gives me a warm fuzzy. And I certainly don’t want anything to do with a bill which gives the executive or legislative branch power not subject to judicial review. That’s how rights get trampled.
And yes, friends, it’s all about protecting you from, well, something:
"For all of its ‘user-friendly’ allure, the Internet can also be a dangerous place with electronic pipelines that run directly into everything from our personal bank accounts to key infrastructure to government and industrial secrets," he said.
Hey Joe, I’m a big boy – I’ll take care of myself… hands off the Internet, m’kay?
But they won’t. You know it and they know it. Its there and since it is there it must be taxed, regulated and controlled by government.
Here’s the initial criteria for the supposed “vital internet or other computer systems”:
Under the revised legislation, the definition of critical infrastructure has been tightened. DHS is only supposed to place a computer system (including a server, Web site, router, and so on) on the list if it meets three requirements. First, the disruption of the system could cause "severe economic consequences" or worse. Second, that the system "is a component of the national information infrastructure." Third, that the "national information infrastructure is essential to the reliable operation of the system."
At last week’s event, Milhorn, the Senate aide, used the example of computers at a nuclear power plant or the Hoover Dam but acknowledged that "the legislation does not foreclose additional requirements, or additional additions to the list."
Yeah, “just give us this little bit – no more”. Uh huh. The proverbial camel’s nose under the tent that is not subject to judicial review. Let me stress that for the third time – none of this, if passed into law, is reviewable by the judiciary. And, of course, once passed, they won’t decide other parts of the infrastructure belong on there, will they? Oh, no.
As Berin Szoka of TechFreedom says, “blocking judicial review of this … essentially says that the rule of law goes out the window if a major crisis occurs.”
Well, yeah … and guess who gets to decide what is a “major crisis”? Without judicial review.
Sound good to you?
In this podcast, Bruce, Michael, and Dale discuss the Economy, and the government’s effect on it.
The direct link to the podcast can be found here.
As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2009, they can be accessed through the RSS Archive Feed.
Apparently the fear of increased premiums in reaction to the new Health Care Reform law recently passed by Congress is prompting Senate Democrats to propose a bill that would
give the federal government the power to regulate health insurance premiums.
Of course, you never saw this coming, right?
It appears our overlords simply do not trust those greedy insurance companies to not raise their premiums in reaction to the new law. Or as Sen Tom Harkin explains it:
“Rate review authority is needed to protect consumers from insurance companies’ jacking up premiums simply because they can. Protections must be in place to ensure that companies do not take advantage of current market conditions before health reform fundamentally changes the way they do business in 2014.”
You have to laugh (or throw up a little) at the economic naiveté and pure hypocrisy contained in that statement. Naive because it totally discounts the market and opts for central (and populist) top-down control (and we know how well that works) and hypocritical because the federal government is presently raising taxes before 2014 to “pay” for the health care monstrosity they’ve foisted upon us.
Care for a little more sanctimonious drivel intended to justify this power grab? Diane Feinstein:
“Water and power are essential for life,” Mrs. Feinstein said. “So they are heavily regulated, and rate increases must be approved. Health insurance is also vital for life. It too should be strictly regulated so that people can afford this basic need.”
Really? Is that why it has to be “strictly regulated”? Or is it because if the market actually begins to react properly to the artificial pressure brought by the legislation Democrats passed it will be shown up for the fiscal black hole and legislative piece of garbage it is?
Sen. Lamar Alexander brings a little context to the debate:
“Health insurance companies’ profits for one year equal about two days of health care spending in the United States. So even if we were to take away all the profits of the so-called greedy insurance companies, that would still leave 363 days a year when health care costs are expanding at a rate our country cannot afford.”
Let’s also remember that the 4 major health insurance companies in Massachusetts – all non-profit organizations – requested over 200 premium increases and were denied all but a few. Was it greed that drove them to request those increases?
Grace-Marie Turner, president of the Galen Institute, a research center that advocates free-market health policies, said the Democrats’ proposal was unlikely to succeed in lowering insurance costs.
“Capping premiums without recognizing the forces that are driving up costs would be like tightening the lid on a pressure cooker while the heat is being turned up,” Mrs. Turner said.
Instead, it gives single-payer types (like Harkin and Feinstein) a way to hurry along the failure of the private health insurance market and eventually, by fiat, usher in government health care.
Mr. Harkin praised a bill introduced by Senator Dianne Feinstein, Democrat of California, that would give the secretary of health and human services the power to review premiums and block “any rate increase found to be unreasonable.” Under the bill, the federal government could regulate rates in states where state officials did not have “sufficient authority and capability” to do so.
Arbitrary, capricious and, if passed, eventually deadly. Just hide and watch.
The proposed bank regulations, all driven by President Obama’s war on Wall Street, would limit big bank’s trading and size. Obama claims that the nation will never again be held hostage by institutions deemed “too big to fail”.
Well, here’s a clue – the only ones who claimed they were too big to fail and threw all that money at them are the same ones now trying to regulate them into noncompetitiveness. You’d almost think this was part of a plan if you didn’t believe they weren’t smart enough or quick enough to do such a thing. But, as they’ve claimed, they won’t let a crisis go to waste.
In fact, this is another battle in the long class war against the rich. Nothing symbolizes the “rich” like Wall Street. And nothing serves Democrats in trouble better than a populist cause (or at least one they deem to be populist). So while voters continue to send messages to the Democrats via VA, NJ and MA, health care reform implodes and the President’s job approval rating tanks, he’s warring on the institutions which are critical to the economic recovery of the nation.
How freakin’ tone deaf can one be?
Mayor Bloomberg has some immediate local issues that concern him – possible layoffs and the erosion of the tax base. But he also recognizes that handicapping US banks when no such handicaps exist for foreign banks, hurts their long term competitiveness and will therefore have negative long term consequences.
Obama’s proposals would prevent banks or financial institutions that own banks from investing in, owning or sponsoring a hedge fund or private equity fund.
He called for a new cap on the size of banks in relation to the overall financial sector that would take into account not only bank deposits, which are already capped, but also liabilities and other non-deposit funding sources.
The proposed rules also would bar institutions from proprietary trading operations that are for their own profit and unrelated to serving customers
According to sources, Geithner says the proposed regulations “do not necessarily get at the root of the problems and excesses that fueled the recent financial meltdown.”
He’s not alone in that criticism:
Lawrence White, a professor at New York University’s Stern School of Business and a former regulator, said Obama’s proposals were “a solution to the wrong problem.”
“They have this rhetoric that it was proprietary trading that was the problem,” White said. “That’s wrong.”
Of course the Obama war on Wall Street is certainly having an effect – bank shares have declined as has the dollar against other currencies.
If you don’t get the idea that this is mostly an ideologically driven “war” trying to cash in on populist anger at a time when nothing is going well for the administration, you’re not paying attention. It also points to an “war of choice” based in a very poor understanding of economics and the fact that we’re engaged in a global economy where competitiveness is critical. If these regulations pass and when the recovery falters because banks are hobbled and noncompetitive, I’m sure that somehow the White House will again play the “greed” card out in a effort to hide the effects of their own short-sighted and ideologically driven economic malpractice.