The working class shows signs of life
Could one of our long national nightmares (with apologies to the late President Gerald Ford) finally be over? Yes, says today’s Wall Street Journal. “Much of the hardship suffered by workers in recent years is not a permanent feature of the economy.” In fact, reads the headline, ‘In Labor vs. Capital, Labor is now winning’.
The latest jobs report, the Journal’s Greg Ip writes, “reinforces a little-noticed shift in the economic landscape: the swing in the economic pendulum away from capital and back to labor.”
Specifically, labor’s share of the nation’s gross domestic income is close to where it was before the Great Recession hit. The turnaround reflects “both sturdy gains in jobs and a very modest acceleration in wages, and a steep hit to profits because of the drop in oil prices, a higher dollar and a squeeze on bank profits from lower interest rates.”
One caveat: “ideally, both labor income and profits should be growing robustly.” But they are not because of the continuing “collapse” in productivity — output per worker — which will not, if wages continue to rise without a concomitant increase in profits, be good for business. Should the trend continue,”expect the stock market to fret,” Ip writes.
One more caveat:
Reality is yet to catch up with perception. In a separate story. According to the Journal’s most recent poll 62% of Americans still insist the nation is on the wrong track, despite a raft of indicators suggesting things are getting better.
Take median household income. According to numbers reported by Sentier Research, based on the monthly Consumer Population Survey, stood at $57, 206 in June, a tad higher than the number in December 2007, on the eve of the Great Recession’s, and significantly higher than the Census Bureau’s most recently published calculation — $53, 657 — for 2014.
Minimum wage increases have a lot to do with the recent numbers, a Goldman Sachs analyst tells the Journal. And there’ll be more where that came from. “Many cities and states are only in the early phase of staggered minimum-wage increases that will affect a growing number of workers each year,” he said.
The tightening labor market is another factor, if not universally. “Tight labor markets for software developers in San Jose has really nothing to do with payroll accountants in Dayton, but we lump them all together for the national numbers,” cautioned the chief economist at Glassdoor, a salary and employment tracking firm.
At the same time, bad memories die hard.”Households may be unenthusiastic about a good year because they’ve seemed so few and far between,” notes the Journal, quoting a former Census Bureau official, now a partner at Sentier Research.
For many households, “it’s been very long, very painful.”
