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Businesses restructuring job market to keep wages down, profits up

By Masao Suzuki |
August 18, 2015
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San José, CA - In May of 2015, the official unemployment rate was 5.5%, close to the 5.0% rate in December 2007 when the last recession began. But despite what appears to be a recovery in the labor market, wages continue to rise at a very slow rate while profits have soared. In fact, businesses used the recession to continue their restructuring of the labor market in their interests, to the detriment of those who have to work for a living.

A recent study by the Wall Street Journal of 33 metropolitan areas where the official unemployment rate had reached or fallen below the pre-recession rate found that wages were growing much slower than before the recession in two-thirds of the cities. One important factor mentioned in the article is that there is a large number of workers who are out of work but no longer counted as unemployed. This can be seen in the fall in the Labor Force Participation Rate, which gives the percentage of adult workers who are either employed or looking for work. This rate fell from 66.0% in December 2007 to only 62.9% in May 2015. This 3.1% drop represents some 7.5 million people, who if added to the unemployment rate, would push it up by 3 percentage points to 8.5%. While not counted in the official unemployment rate, they represent a pool of potential workers that businesses can hire.

Another factor is that businesses have shifted to using more and more part-time workers, who can be paid less and/or cost less in terms of benefits. The number of part-time workers who would like to work full-time is still 2 million higher than before the recession started. Most of the increase is from workers who say that full-time work is just not available (as opposed to saying that economic conditions are still bad).

This trend towards part-time workers has been taken to the extreme with the growth of the so-called ‘sharing economy’ where companies like Uber don’t even hire their workers, but instead make them contractors. When their expenses are factored in, many Uber drivers earn as little as $10 per hour, only slightly above the minimum wage. Other companies, taking advantage of new human resources computer software, vary their workers hours day-to-day to minimize their costs, but at the expense of the workers lives - for example, they are not able to attend classes or take care of their families.

Another trend has been the growing attacks on public sector workers. The pro-business climate has come full circle, starting with President Reagan’s busting of the air traffic controllers union in the early 1980s, to Scott Walker’s assault on government workers’ unions and passage of ‘Right to Work for Less’ laws in Wisconsin. This pro-business movement has had a disproportionate impact on women and oppressed nationality workers, especially African Americans, who have long pursued government jobs as a path to economic stability. With the ranks of union labor at historically low levels as a percentage of the workforce, workers as a whole suffer from the lack of collective strength that can oppose the business owners’ efforts to push down wages.

The rise of long-term unemployment along with the end of Federal Extended Benefits (EB) and Emergency Unemployment Compensation (EUC) has also weakened workers’ ability to get higher wages. In December 2007, the average length of unemployment was 16.6 weeks, less than the 26 weeks of Unemployment Insurance available from the states. But in May 2015, the average length of unemployment was almost twice as long, at 30.7 weeks, and much longer than state unemployment benefits last.

Over the last eight years, labor productivity or the value produced by an hour’s work, has risen 11%, adjusted for inflation, five times as fast as wages, which have only risen 2.2% after inflation. The difference has gone to corporations and other businesses, whose U.S. profits have soared 50% since 2007. This spectacular rise in profits, despite a lackluster economy, has pushed corporate stocks to record levels and restored all the lost wealth (and more) to the 1% who control most stocks and businesses in the U.S.