Reports from the Economic Front

by Martin Hart-Landsberg

Archive for December, 2013

The Unemployed Dismissed

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Congress left Washington D.C. without renewing an emergency program that extends the length of time the unemployed can receive unemployment insurance benefits.  As it now stands, on December 28, 2013 some 1.3 million unemployed Americans will lose their unemployment benefits.

As Brad Plummer explains in his blog post at wonkblog:

In normal times, the states and federal government work together to fund up to 26 weeks of unemployment benefits. (The precise number varies from state to state— North Carolina only provides up to 19 weeks, Michigan 20 weeks.) When unemployment is particularly high, states can usually get some federal funding to provide an extra 13 or 20 weeks of “extended benefits.”

But starting in 2008, Congress expanded this program significantly. First, the federal government promised to pick up the entire tab for those “extended benefits” and made it easier for states to receive this money. Second, Congress created the Emergency Unemployment Compensation program to provide additional aid to workers when their state benefits ran out.

This additional financing has shrunk somewhat from its peak — currently only about one-third of the 4.1 million long-term unemployed receive benefits, and budget cuts have pared back benefit levels. Even so, at the moment, many states still offer up to 63 or even 73 weeks of unemployment aid, and benefits average around $300 a week.

The following two charts highlight what will happen if Congress doesn’t act.  The first shows current state unemployment benefit periods and the second shows state benefit periods if Congress allows the emergency programs to expire.  In short, anyone who is currently receiving benefits beyond the standard 26 weeks (or fewer in some states) will be cut off.

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Some 1.3 million people will, as noted above, immediately lose their benefits.  But that is only the beginning.  According to Center on Budget and Policy Priorities estimates, millions more workers will find themselves dropped from unemployment coverage over 2014.  All together almost 5 million people will be affected as illustrated below.

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This outcome is not only cruel to those already suffering from unemployment.  It will also have wider negative consequences.  For example, the loss of benefits by millions of workers can be expected to reduce spending and slow economic growth.  It is also likely to put additional downward pressure on wages as desperate people complete for jobs.

It is estimated that a one year renewal of emergency benefits will cost some $25 billion.  Significantly, the recent Congressional budget deal which reduced scheduled sequestration cuts gave the Pentagon a $20 billion boost.

It is all a matter of priorities.

Written by marty

December 23rd, 2013 at 5:28 am

Global Wealth Inequality

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This look at global wealth inequality comes from Credit Suisse’s 2013 global wealth report.

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On the left side of the triangle we can see the division of all adults in the world into four groups based on net wealth.  The base of the triangle includes all those adults with less than $10,000 in net wealth.  That group includes 3.2 billion people, or more than two-thirds of all adults in the world.  They collectively own a total net wealth of $7.3 trillion or 3% of total world wealth.

The next group up includes those individuals with net wealth between $10,000 and $100,000.  This group has 22.9% of all adults and owns $13.7% of total world wealth.

Jumping to the top group, we see that the wealthiest 32 million adults control 41% of total world wealth.  This group, with less than 1% of all adults, has more wealth than the bottom 91% of all adults.

According to the report, global wealth grew 4.9% from last year, with the United States accounting for 72% of the increase.

Written by marty

December 19th, 2013 at 10:41 am

Posted in Inequality

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Increase The Minimum Wage

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The federal minimum wage is $7.25 an hour.  Several states mandate a higher minimum wage; the state of Washington has the highest, at $9.19.

President Obama recently voiced his support for efforts to increase the minimum wage to $10.10.  The federal minimum wage was last raised in 2009 and certainly needs to be increased again.  The fact is that the federal minimum wage has not kept up with inflation.

As the New York Times graphic below shows, the current minimum wage is, when adjusted for inflation, 32% below what it was in 1968.  It is 8% below what it was in 2010.  In other words, those earning the minimum wage are suffering a real decline in income.

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As for the appropriate value, why not $22.62?  That, as the graphic illustrates, is what the minimum wage would be if it grew at the same rate as the income of the top 1%. As Alan Pyke explains:

[Such a large increase] may seem outlandish, but previous research indicates American workers have just about earned it. Worker productivity has more than doubled since 1968, and if the minimum wage had kept pace with productivity gains it would have been $21.72 last year. From 2000 to 2012 alone workers boosted their productivity by 25 percent yet saw their earnings fall rather than rise, leading some economists to label the early 21st century a lost decade for American workers.

Looked at from that perspective the current movement for a $15 hourly wage at fast food restaurants sounds reasonable.  

Written by marty

December 8th, 2013 at 12:54 pm

The Need For A Jobs Program

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Talk of economic recovery distracts attention from the fact that this recovery largely remains a jobless one. 

The chart below, taken from Catherine Rampell’s New York Times blog, shows the number of months it has taken for the US economy to restore its pre-recession number of nonfarm payroll jobs in our six most recent economic recoveries.  

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As Rampell explains:

The chart above shows economic job changes in this last recession and recovery compared with other recent ones; the red line represents the current cycle. Since the downturn began in December 2007, the economy has had a net decline of about 1.1 percent in its nonfarm payroll jobs. And that does not account for the fact that the working-age population has continued to grow, meaning that if the economy were healthy there should be more jobs today than there were before the recession.

Current economic dynamics make clear that it is time to stop waiting for market forces to create a jobs recovery.  We need a real jobs program, one that will not just generate jobs, but living wage jobs that involve the production of needed goods and services. That, not deficit reduction, is what should be at the top of our political agenda. 

Written by marty

December 1st, 2013 at 1:01 pm