Home > Uncategorized > Promises, promises (3 graphs)

Promises, promises (3 graphs)

from David Ruccio

They keep promising, ever since the recovery from the Great Recession started more than eight years ago, that workers’ wages will finally begin to increase. But they’re not.

Sure, profits continue to rise. And so is the stock market. But not wages. And mainstream economists can’t come up with an adequate explanation of why that’s the case.


We’ve all heard or read the story. According to mainstream economists, as the unemployment rate falls (the blue line in the chart above), a labor shortage will be created and workers’ wages (the red line) will begin to rise.  

That’s the promise, at least. But the official unemployment rate is now down to 4.4 percent (from a high of 9.9 percent in 2009) and yet wages (for production and nonsupervisory workers) are only increasing at a rate of 2.3 percent a year—much less than the 4 percent workers saw back in 2007 when the unemployment rate was pretty much the same.

What’s going on?

One of the things going on is the Reserve Army. The existence of a large pool of unemployed and underemployed workers competing with other workers for the available jobs is keeping wage growth at a very low rate.


Consider, for example, the growth of full-time (the green line in the chart above) and part-time work (the purple line) in the United States. Since 1968, the two kinds of employment increased more or less simultaneously—until the most recent crash. Notice in the chart that, as full-time employment fell (from 121.9 million in 2007 to 111 million in 2010), part-time employment soared (from 24.7 million to 27.4 million). But then, even as full-time work began to increase again (reaching 125.8 million in August 2017), part-time employment remained high (27.6 million in that same month).


And it’s that pool of part-time American workers (in addition to the pool of surplus workers in other countries, increased automation, and low wages in the retail and food-service sectors) that is keeping most workers’ wages from growing.

Mainstream economists keep promising the American working-class an increase in wages. But neither they nor the economic system they celebrate is able to deliver on those promises.

The fact is, the longer those promises are proffered but remain unmet, the more frustrated workers will become. And the more likely it is they will demand a solution—a radically different economic system that doesn’t rely on a Reserve Army and can actually deliver on its promises to workers.

  1. Tom Welsh
    October 6, 2017 at 8:34 am

    “And mainstream economists can’t come up with an adequate explanation of why that’s the case”.

    Mainstream economists actually don’t need to come up with such an explanation, mainly because they are not paid (their large salaries) by workers. They are paid by the rich and the employees of the rich, and so their job is to justify policies that further enrich the rich.

    If even one economist was paid by the workers, (s)he could start by revealing how false and deceptive all the official figures are, and thus how all the establishment economists are building skyscrapers on sand.


    • robert locke
      October 6, 2017 at 11:48 am

      In Germany, Betriebsrat (works councils), which are elected by a firm’s employees, regularly employ economists, especially when negotiating with management, on the ground that if economics is not an objective science, nonetheless knowledge about it is still useful when vested interests oppose each other at a table.

      • Jeff Z
        October 6, 2017 at 7:29 pm

        Robert, I like that a lot. Thank you for that comment

  2. October 7, 2017 at 3:54 pm

    Thanks David, as usual. I’ve been looking for an opportunity to call readers’ attention to a column by conservative commentator David Brooks of the New York Times. David is an unhappy camper these days, as this column shows, what with the far Right in the Republican camp insurgent, if not triumphant, and the same for the Sanders forces inside (and outside) the Democratic Party. (I would “curb the enthusiasm,” Larry David like, on the Democratic Party side). But the economic unhappiness driving this (and that certainly is not the only factor, but a main one) is all mistaken he writes. The problem isn’t maldistribution of wages – he says median family income is rising (not the best indicator of wages for the bottom 60%, one would think) – but the poor productivity growth. And what’s the recipe for curing that? De-regulation, corporate tax breaks and more Neoliberalism.

    I think its important to recognize the establishment push back against the left’s narratives, and Brooks’ column is one of the clearest examples of that.

    Here, in his own words is the cure for the terrible productivity figures, which he asserts, haven’t decoupled from wages; the productivity is just so low workers don’t deserve better and haven’t been getting it:

    “If productivity itself is the problem, not distribution, radically different politics is demanded than we’re seeing today. If productivity is the problem, we need more dynamism, not less, more openness, not less, more growth-oriented policies, not more dirigiste and redistributive ones.

    There are a few things government can do to help boost productivity: Increase market competition with more antitrust enforcement and fewer licensing regulations; admit more skilled immigrants; invest more in human capital; deregulate urban land usage back to the 2008 levels; introduce more market incentives into the low productivity sectors, like health care and education; fund more research into promising technologies like new energy storage systems.”

    Readers will observe that he has picked up on a favorite American neoliberal remedy for growing inequality in urban areas: we need denser cities, with higher high rises, echoes of the supply siders’ remedies in all matters, taken to land-use issues. Build more units and the price will come down, surely…? As a New Jersey boy who spent a lot of time working in land-use, that’s a whopper; Krugman has sung this tune as well. The whole Mount Laurel Dynamic in NJ – requiring builders to supply an increment of affordable units – was required because the supply side market dynamics didn’t build affordable units for the poor…and a good chunk of NJ middle classes decamped for Pennsylvania farm fields – and a 4-6 hour drive to the jobs in the Metro NY area…The NJ Building interests were always singing songs from Brooks’ hit list presented here.

    And the link to the article: https://www.nytimes.com/2017/09/15/opinion/the-economy-isnt-broken.html

  3. October 10, 2017 at 1:08 pm

    “The fact is, the longer those promises are proffered but remain unmet, the more frustrated workers will become. And the more likely it is they will demand a solution—a radically different economic system that doesn’t rely on a Reserve Army and can actually deliver on its promises to workers.”

    “Exploiting the masses” has been the mantra of capitalism since its beginning. The masses were useful to capitalism. First as workers. Then as consumers. So long as they remained useful, capitalists tolerated the masses. And that meant exploiting them at every opportunity. But that’s all changing now. As machine learning and robotics improve in the coming decades, hundreds of millions of jobs will likely disappear, disrupting the economies and trade networks of the entire world. The Industrial Revolution (not capitalism) created the urban working class. Much of the social and political history of the 20th century revolved around this class and its battles with capitalists. Similarly, the artificial intelligence (AI) revolution might create a new “unworking class,” whose hopes and fears will shape the history of the 21st century. Capitalists were parasites on the Industrial Revolution. It remains to be seen whether they will have a similar part to play in the AI revolution. Can capitalists exploit the unworking class as they previously did the working class? Should they? Or will the old model of capitalist exploitation of the masses simply collapse. Opening the way to new and uncertain models. One such is “universal basic income.” According to Elon Musk, “There’s a pretty good chance we end up with a universal basic income … due to automation.” And President Obama said, “whether a universal income is the right model … that’s a debate that we’ll be having over the next 10 or 20 years,” it is unclear who “we” are. The American people? Humanity? Or just rich folks? It’s unlikely universal basic income, or any other new model will save us from future conflicts about equity in wealth or conflicts about political control.

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