How the reserve army works
The new jobs report is out and, pretty much as expected, a bunch of new jobs (242,000, to be exact) were created in February and the official unemployment rate remained the same (at 4.9 percent). But workers’ wages actually declined.
What’s going on?
What’s going on is a key feature of capitalism: the reserve army of labor.
As Ben Casselman explains,
There is one downside to a growing labor force: If more people start looking for work there will be more competition for available jobs, holding down wages. Average hourly earnings fell by three cents in February, and the year-over-year rate of growth dropped to 2.2 percent, the slowest pace since last summer.
The fact is, the Second Great Depression created a large pool of potential workers who haven’t formally been part of the labor force but who would be willing to work—to take a job or search for a job—under the right circumstances. In the meantime, while they’re not part of the official labor force, these people do lots of things: they work at home, they work with and for their friends and neighbors, and they engage in a variety of other activities (both legal and illegal). They form part of capitalism’s relative surplus population.
Their existence—as potential members of the official labor force, first-time members of the labor force, or as reentrants to the labor force—puts downward pressure on all workers’ wages.
That’s how the reserve army of labor works: even as the labor force participation rate rises, workers’ wages continue to stagnate and their employers’ profits continue to grow.