Iceland continues to experiment with new ways to promote majority living standards. See here for a discussion of the country’s unorthodox response to the 2008 global financial collapse.
According to the Icelandic Grapevine, a bill has been submitted to the Icelandic parliament that would shorten the workweek. More specifically, it would change the definition of a full time workweek to 35 hours instead of the current 40 and the full workday to 7 hours rather than the current 8.
As the Grapevine reports:
The bill points out that other countries which have shorter full time work weeks, such as Denmark, Spain, Belgium, Holland and Norway, actually experience higher levels of productivity. At the same time, Iceland ranked poorly in a recent OECD report on the balance between work and rest, with Iceland coming out in 27th place out of 36 countries.
The bill also points out that a recent Swedish initiative to shorten the full time work day to six hours has been going well, with some Icelanders calling for the idea to be taken up here. In addition, the bill also cites gender studies expert Thomas Brorsen Smidt’s proposal to shorten it even further, to four hours.
Although it is not easy to establish a clear relationship between work hours and productivity, as noted above there is reason to believe that the relationship may be inverse. In other words, the shorter the workweek the more productive we are.
There is certainly a significant variation among countries in the length of the workweek as the following information from the U.S. Bureau of Labor Statistics shows:
In 2011 the average annual hours worked per employed person in the U.S. was 1758. The number for French workers was 1476. It was 1411 for German workers. Assuming a 40 hour workweek, the average US worker had a work year more than two months longer than the average German worker. It is also worth noting that while all the countries that reported data for the entire period 1979 to 2011 showed reductions in work time, the reduction was the smallest in the U.S.
It would certainly be nice, for many reasons, if someone in the U.S. Congress followed the lead of Iceland and introduced a bill to reduce work time in the U.S.
Our media celebrates the dynamism of our leading technology companies. The message is that our world would be better if only other businesses could replicate their practices.
Not surprisingly, it is their products not their labor practices that draws the most attention. Unfortunately, many of the firms on the cutting edge of technology also tend to be leaders in fashioning the most alienating and exploitative labor practices.
Samsung, the leading Korean technology company and Apple’s main competitor, is no better. Samsung has used all means possible to keep its operations non-union.
The following is the beginning of an interview with Sunyoung Kim, the chair of the Samsung Electronics Service Union, about the union’s recent victory, becoming the first recognized union in the company’s 76 year history. The interviewer is Dae-Han Song, the International Strategy Center’s Policy and Research Coordinator.
Sunyoung Kim: We started the union because of the harsh working conditions. Sometimes, we might work twelve to thirteen hours a day, and still not make the minimum wage. You might come to work on Saturday or Sunday from 8:00 to 6:00 PM and come out on the minus. Why? Because you didn’t get paid, but you still had to pay for lunch and gas. You even had to pay for your own training from Samsung. In addition, our work is dangerous, whether it is installing air-conditioning, or climbing a wall, or working with live electricity. Despite these dangers, the company doesn’t provide any safety equipment. We have to wear neckties even when working with moving parts. They force us to wear dress shoes even when working on a roof in the rain, just for the sake of maintaining a clean and professional image.
Dae-Han Song: How can a person work 12 to 13 hours a day and not even get paid the minimum wage?
Sunyoung Kim: It’s a system based on commission. There is no base pay. You are basically a freelancer. You come in to work, and if there is work you work if there is not then you just stay in the office. However, while a real freelancer can decide whether or not to show up to the office, we have a specified clock in and clock out time. When there is work, we just keep working. In the summer, there’s a lot of work: air conditioning, refrigerators. So, we just keep on working until everything is done. Not only is working such long hours exhausting, it is also exhausting doing so in the summer heat. Sometimes you don’t get home until 12:00 AM and can’t even rest on the weekends. That’s when we make our money that carry us through the fall, winter, spring when there is little work. In these off seasons we might sometimes just get one or two calls in a day and since we get paid by commission, if we don’t work, we don’t get paid.
Federal Reserve Board survey data on wealth certainly imply that it is getting harder and harder to succeed in our economy.
Steve Roth has created some great charts using this data, which is based on surveys done every three years beginning in 1989. The chart below looks at the median real (or inflation adjusted) household net worth by the age of the head of household. Each line shows the real net worth of a household headed by the relevant age group. In other words it allows us to compare the real net worth of a representative household headed by a 35-44 year old in 1989 with the real net worth of a similarly representative household headed by a person of the same age range in 2013. We are not looking at the fortunes of the same household as its head ages, but rather at households at different periods to see how age cohorts have fared over time.
The chart shows that households, with the exception of those headed by people 65 years and older, were worse off in 2013 than they were in 1989. For example, the representative household headed by someone 35-44 had far less wealth in 2013 than the representative household headed by someone from the same age range had in 1989.
The following chart makes it easier to see such trends by focusing on changes over the period 1989 to 2013.
When a line falls below 100 it means that the representative household in the specific age grouping was poorer that year than it was in 1989. It is striking that many household groupings grew poorer over the decade of the 2000s, years before the 2008 crisis, when our economy was supposed to be the envy of the world.
The growth in inequality might be one reason this immiseration has been missed. While the representative household defined by the age of its head might be growing poorer over time, a small number of households in each group might be enjoying ever greater riches, thus possibly confusing people about the nature majority experience.
The next chart looks at changes over time in the mean: median ratio for the different household groupings. The greater the ratio, the more inequality within the household grouping. Inequality within all household groupings, except those headed by someone 75 years or more, has grown over time. The real standout is the household grouping headed by those 35-44 years of age; while the income of the typical household has been falling (see the chart above), some of its members have really been hitting it rich (as illustrated in the chart below).
In sum, while wealth does grow with age, trends strongly suggest that the American experience is moving in reverse. Households with similar aged heads are growing poorer not richer over time.
As workers battle to raise the minimum wage it is nice to see more evidence that raising the minimum wage helps low wage workers and state economies.
Thirteen states raised their respective minimum wages in 2014: AZ, CA, CT, FL, MO, MT, NJ, NY, OH, OR, RI, VT, and WA. Elise Gould, an economist at the Economic Policy Institute, compared labor market changes in these thirteen states with changes in the rest of the states from the first half of 2013 to the first half of 2014.
Economic analyst Jared Bernstein summarizes the results as follows:
Elise compares the 10th percentile [lowest earners] wage growth among these thirteen states that increased their minimums with the rest that did not. The results are the first two bars in the figure below.
Real wages for low-wage workers rose by just about 1% over the past year in the states that raised their minimum wages, and were flat (down 0.1%) in the other states.
OK, but did those increases bite into employment growth, as opponents typically insist must be the case? Not according to the other two sets of bars. They show that payroll employment growth was slightly faster in states that raised, and the decline in unemployment, slightly greater.
In short, raising the minimum wage did boost the earnings of those at the bottom of the income distribution. Moreover, workers in states that raised the minimum wage also enjoyed greater employment growth and a greater decline in unemployment than did workers in states that did not.
Swedes will be going to the polls Sunday, September 14, and according to the Guardian it appears that they will vote the ruling center-right coalition out of power. The main reason: the privatization of public services has not produced good results. If Americans can learn from this experience we might avoid a real disaster.
Excerpts from the Guardian article:
Over the past three years, cracks have shown in the Nordic model, most notably with last year’s riots in the suburbs of Malmö and Stockholm, and the rise of the far-right Sweden Democrats, which is polling at almost 10%. Income gaps have increased by a third, more than in any other OECD country, and unemployment benefit has fallen below the European average.
Formerly called John Bauergymnasiet, Grillska used to be one of Sweden’s publicly funded but privately run friskolor (free schools) until its owner, the Danish private equity company Axcel, filed for bankruptcy last April.
Since then, the school has been managed – and improved – by Stockholm’s Stadsmissionen, a non-profit charity. But the John Bauer scandal has made many Swedes question the pro-privatization policies of the government, led by the Moderate party’s Fredrik Reinfeldt. . . .
A series of scandals has made many Swedes question the private sector’s role in public services. Axcel was accused of trying to maximize profits by saving on teachers’ wages and lowering the teacher-student ratio below the national average; the privately run Hälsans chain of preschools was reported to serve its pupils crispbread and water for lunch, having budgeted only nine kronor (87 p) a student for food.
No other state in Europe had been as generous in allowing the private sector free access to its pupils. The proportion of employees in privately provided services rose from 5% in 1993 to 23% in 2011.
“Overnight, the debate changed,” said Roger Jakobsson, Grillska’s head of education. “For years, people had been accusing schools run by private equity of pocketing the state’s money and putting it into their offshore bank accounts. But now it looked like these companies weren’t even capable of running a business properly.”
The education changes ushered in by the conservative government in 1992 promised to improve the quality of teaching in Swedish schools. Instead, the Programme for International Student Assessment saw the homeland of the Nobel prize drop below the OECD average in maths, reading comprehension, natural science and problem solving. Grade inflation, meanwhile, was rampant.
The care sector also suffered a privatisation scandal in 2011, when the Dagens Nyheter newspaper reported that an elderly care centre in Koppargården, run by the private company Carema, was catastrophically neglecting its customers, allegedly weighing their diapers to see if they could be used for longer, thus ensuring maximum usage and lower costs. . . .
Complaints about poor service and frequent delays on the high-speed train between Malmö and Stockholm also swung the mood against rail privatisation of the railways. How was it, some asked, that information centres were closing at train stations while Sweden’s popular, 100% state-owned Systembolaget alcohol stores could afford staff who advised on which wine went best with reindeer stew?
Under prime minister Reinfeldt, Sweden for the first time discovered an appetite for tax cuts. Wealth tax, income tax and corporate tax were slashed. Tax breaks for domestic services such as cleaning or babysitting (RUT) and relief on household renovations (ROT) have been popular with the middle classes. . . .
But surveys show that Swedes’ willingness to pay higher taxes has risen recently. As columnist Fredrik Virtanen said in Aftonbladet newspaper: “Taxes are the price we pay for civilisation. Not only is it cool to pay taxes, it’s sexy.”
Even Reinfeldt has bowed to the polls and vowed there would not be further tax cuts until 2018. Finance minister Anders Borg is still popular, and Sweden’s public debt, at 40% of GDP, is half that of Germany, but unemployment remains a problem in spite of liberal reforms in the labour market.
“The Moderates and their allies have gradually lost the argument about the future,” said Eric Sundström, political editor of Dagens Arena website. “They have failed to recognize how even the middle class is upset with the perceived general decline of schools and welfare services.”
People are slowly but surely recognizing that there is no economic light at the end of the tunnel. In fact, it appears that we may be looking into a cave not a tunnel.
The U.S. economy has undergone a major transformation. Globalization, financialization, privatization, deregulation, and liberalization, to mention just a few of the developments that define this transformation, have created an economic system that rewards only a very few people.
The chart below shows these are good times for those at the top–economic profits are up and the stock market is soaring over this expansion period. But what about for the great majority? Growth is slow and even more importantly median household (HH) income has actually fallen by 3 percent.
The following two charts highlight some of the pressures facing working people. The first shows that the average earner, the one at the 50th percentile, has suffered a 2.7 percent real decline in hourly wages since 2007. The decline has actually been much greater since 2009, when the recession allegedly ended and the good times began. Even those at the 95 percentile have suffered real hourly declines since 2009.
The second shows that family income has fallen for almost all income groups over the period 2007 to 2012. We can get some idea of the transition period by comparing income trends in the three periods shown. Suppressing wages is one way to boost profits and stock prices in a period of slow growth.
As I said above, people are beginning to recognize that current trends are no aberration. A recent Rutgers University poll asked Americans how they viewed the Great Recession and its aftermath. The figure below present the results.
Here is what the Rugers researchers had to say:
The survey finds 71 percent saying the recession left us with “a permanent change in what are normal economic conditions in the country.” Moreover, the belief that the economic downturn created irreversible shifts in the economy grew from 49 perent in November 2009 to 56 percent in September 2010, and to 60 percent in Janary 2013. Now, 71 percent of Americans think the economy has changed permanently, which represents a broad consensus.
At least some people are drawing the appropriate conclusion—they are taking direct action to improve their working and living conditions. As the Guardian reports:
America’s fast food workers are planning their biggest strike to date this Thursday (September 4th), with a nationwide walkout in protest at low wages and poor healthcare.
The strike is the latest in a series of increasingly heated confrontations between fast food firms and their workers. Pressure is also mounting on McDonald’s, the largest fast food company, over its relations with its workers and franchisees. . . .
Workers from McDonald’s, Burger King, Pizza Hut and other large chains will strike on Thursday and are planning protests outside stores nationwide, in states including California, Missouri, Wisconsin and New York.
The day of disruption is being coordinated by local coalitions and Fast Food Forward and Fight for 15, union-backed pressure groups which have called for the raising of the minimum wage to $15 an hour for the nation’s four million fast-food workers.
Thursday’s strike will be the seventh since fast food workers in New York walked out on their jobs in November 2012. Each walkout has been bigger than the last and have been credited with spurring President Barack Obama to focus on an increase in the minimum wage.
Our current economic expansion is now past the five year mark and the gains for most working people are hard to find. Media attention has largely focused on the weak record of job creation. Less attention has been given to the lack of growth in wages and benefits.
As Bloomberg News explains:
Meager improvements since 2009 have barely kept up with a similarly tepid pace of inflation, raising the real value of compensation per hour by only 0.5 percent. That marks the weakest growth since World War II, with increases averaging 9.2 percent at a similar point in past expansions, according to Bureau of Labor Statistics data compiled by Bloomberg.
The chart below looks at the inflation adjusted growth in hourly compensation (wages and benefits) for 11 different economic expansions. The gains are for the first five years for those expansions that lasted longer. Full business cycle dating can be found here.
Clearly, business feels no pressure to boost compensation—and it is worth underlining that we are talking about wages and benefits—despite the severity of the past recession and the growing length of the current recovery. It is no wonder that many workers are even reluctant to believe we are in recovery.
To make matters worse, economists Martin Feldstein and Robert Rubin are now calling on the Federal Reserve to slow growth. In a Wall Street Journal op-ed they expressed their fear that new asset bubbles are growing dangerously large. However, as Dean Baker points out:
Given their enormous stature, Feldstein and Rubin undoubtedly expected their joint bubble warning to have considerable weight in economic policy circles. Of course this raises the obvious question, why couldn’t Feldstein and Rubin have joined hands to issue this sort of bubble warning ten years ago in 2004 about the housing bubble? If they used their influence to get a column about the dangers of the housing bubble in The Wall Street Journal in the summer of 2004 it might have saved the country and the world an enormous amount of pain. . . .
It would have been great if Feldstein and Rubin had used their stature to warn of the dangers of the housing bubble in 2004, but they were otherwise occupied. Feldstein was on the board of AIG (yes, that AIG), where he was pocketing several hundred thousand dollars a year for his services. Rubin was a top executive at Citigroup, which was one of the biggest actors in the securitization of subprime mortgages. He walked away with over one hundred million dollars for his work. So it was easy to see why Feldstein and Rubin could not have been bothered a decade ago to warn about the housing bubble.
Making matter worse, their current warnings are completely misplaced. The Fed has to concentrate on trying to promote growth and getting people back to work. The risk from the inflated asset prices that they identify are primarily a risk that some hedge funds and other investors may take a bath when asset prices (like junk bonds) move to levels that are more consistent with the fundamentals. . . .
So there you have it: two extremely prominent political figures who got rich off the housing bubble, now taking time from their busy schedule to call on the Fed to raise interest rates and destroy millions of jobs. In the “show no shame” contest, this looks like a real winner.
To this point, Janet Yellen, the head of the Federal Reserve Board, has wisely resisted their advice. But the problem is that the status quo is far from satisfactory.
If the well-being of our children is an indicator of the health of our society we definitely should be concerned. Almost one-fourth of all children in the U.S. live in poverty.
The Annie E. Casey Foundation publishes an annual data book on the status of American children. Here are a few key quotes from the 2014 edition (all data refer to children 18 and under, unless otherwise specified):
- Nationally, 23 percent of children (16.4 million) lived in poor families in 2012, up from 19 percent in 2005 (13.4 million), representing an increase of 3 million more children in poverty.
- In 2012, three in 10 children (23.1 million) lived in families where no parent had full-time, year-round employment. Since 2008, the number of such children climbed by 2.9 million.
- Across the nation, 38 percent of children (27.8 million) lived in households with a high housing cost burden in 2012, compared with 37 percent in 2005 (27.4 million). The rate of families with disproportionately high housing costs has increased dramatically since 1990 and peaked in 2010 at the height of the recent housing crisis when 41 percent of children lived in families with a high housing cost burden.
As alarming as these statistics are, they hide the terrible and continuing weight of racism. Emily Badger, writing in the Washington Post, produced the following charts based on tables from the data book.
Children live in poverty because they live in families in poverty. Sadly, despite the fact that we have been in a so-called economic expansion since 2009, most working people continue to struggle. The Los Angeles Times reported that “four out of 10 American households were straining financially five years after the Great Recession — many struggling with tight credit, education debt and retirement issues, according to a new Federal Reserve survey of consumers.”
Wealth inequality isn’t just growing among individuals. It is also growing among corporations—and that is not good for the U.S. economy.
According to Bloomberg News:
Eighteen American businesses held 36 percent of corporate wealth in 2013, up from 27 percent in 2009, according to a report from Standard & Poor’s, a credit rating firm in New York. The bottom 80 percent have lost ground, with just 11 percent.
The top 1 percent includes all the big companies you might well imagine, including Microsoft, Google, Apple, Coca-Cola, and Ford Motor Company.
The top companies are holding ever more of their wealth as cash and outside the United States. The wealthiest 1 percent of corporations raised the share of their assets held as cash from 20.4 percent in 2009 to 23.6 percent in 2013. The rest of the corporate sector held cash balances that were worth less than 7 percent of their total assets.
- Apple is holding 78 percent of its $40.7 billion in cash overseas.
- Cisco is holding 93 percent of its $47.1 billion in cash overseas.
Among other things this behavior means that corporations are dramatically cutting their tax obligations to the U.S. government. The congressional Joint Committee on Taxation estimates that this corporate strategy cost the U.S. Treasury over $83 billion dollars in revenue this fiscal year.
Corporations, fearful that the government might take steps to force them to invest this money in the United States economy, are exploring new strategies. For example, some are merging with foreign companies so that they can legally establish themselves in lower tax countries.
Bloomberg News ends its story as follows:
“You could argue that companies that make a billion dollars and don’t pay taxes are freeloaders,” said Mitch Rofsky, president of the Better World Club, an insurer based in Portland, Oregon, and member of the American Sustainable Business Council, a group of small employers.
“It’s basically an issue of do our economic models work, is infrastructure supported, does government have the money it needs,” Rofsky said. “It’s unfair.”
Unfortunately under capitalism fairness is besides the point. What matters is power and our challenge is to build popular support for effective policies that privilege the public interest over the private.