Weekend Economists at War! January 10-12, 2014

[Demeter]

46. No Jobs, No Benefits, and Lousy Pay NYT EDITORIAL

http://www.nytimes.com/2014/01/11/opinion/no-jobs-no-benefits-and-lousy-pay.html

There is nothing good to say about the December employment report, which showed that only 74,000 jobs were added last month. But dismal as it was, the report came at an opportune political moment. The new numbers rebut the Republican arguments that jobless benefits need not be renewed, and that the current minimum wage is adequate. At the same time, they underscore the need, only recently raised to the top of the political agenda, to combat poverty and inequality.

The report showed that average monthly job growth in 2013 was 182,000, basically unchanged from 2012. Even the decline in the jobless rate last month, from 7 percent in November to 6.7 percent, was a sign of weakness: It mainly reflects a shrinking labor force — not new hiring — as the share of workers employed or looking for work fell to the lowest level since 1978. That’s a tragic waste of human capital. It would be comforting to ascribe the dwindling labor force mainly to retirements or other long-term changes, but most of the decline is due to weak job opportunities and weak labor demand since the Great Recession. One result is that the share of jobless workers who have been unemployed for six months or longer has remained stubbornly high. In December, it was nearly 38 percent, still higher by far than at any time before the Great Recession, in records going back to 1948.

And yet, nearly 1.3 million of those long-term unemployed had their federal jobless benefits abruptly cut off at the end of last year, after Republicans refused to renew the federal unemployment program in the latest budget deal. Each week the program is not reinstated, another 72,000 jobless people who otherwise would have qualified for benefits will find there is no longer a federal program to turn to. Worse, in the Senate this week, after a show of willingness to discuss renewing the benefits, Republicans objected to a bill to do just that. They had demanded that a renewal be paid for, but they didn’t like how Democrats proposed to do that — with spending cuts at the end of the budget window in 2024 in exchange for relief today. There was no need to pay for the benefits, which have such a crucial and positive effect — on families, the economy and poverty — that it would be sound to renew them even if the government borrowed to do so. But Republicans would rather criticize President Obama’s handling of the economy than help those left behind.

A similar dynamic is developing around the drive for a higher minimum wage. In the December jobs report, the average hourly wage for most workers was $20.35. That means that the minimum wage, at $7.25 an hour, is only one-third of the average, rather than one-half, as was the case historically. Raising the wage to $10.10 an hour, as Democrats have proposed, would help to restore the historical relationship. But even that would fall far short of the roughly $17 an hour that workers at the bottom of the wage scale would be earning if increased labor productivity were reflected in their pay, rather than in corporate profits, executive compensation and shareholder returns. Republicans, however, are opposed to any increase, as if the numbers don’t speak for themselves. Their stance also dismisses research, and common sense, which says that raising the wages of low- and moderate-income workers is essential for lessening both poverty and inequality. Instead, in the past week, they have introduced ostensibly “antipoverty” ideas, most prominently Senator Marco Rubio’s plan to transform federal safety net programs into state block grants, another of the shopworn Republican ideas that also include privatizing federal services and slashing domestic spending. Block grants have allowed states to disregard the needs of the least fortunate. The proposal would set back the debate on wages, poverty and inequality.

The December jobs report is telling Congress what it needs to do. Unfortunately, that will not lead to action anytime soon.