Doing the Work Every Day

The Pitch: Economic Update for March 7th, 2022

(The Pitch is a weekly economics newsletter written by Zach Silk. Follow here on Medium or sign up for free on Substack to receive a new issue in your inbox every Thursday.)

Friends,

If you’re a frequent reader of the Pitch you’ve probably gathered that I’m an optimist. But my optimism doesn’t come from a place of naivete or contrarianism. Rather, it’s because I’ve worked in politics for my entire adult life and I know that great things are always possible — even at times when things feel hopeless.

Still, I can relate to the despair that some of you are feeling right now. A reader named Rose wrote that she agrees with many of the positions and policies that we highlight in this newsletter, but she said that inclusive, middle-out economic policies like this “have been talked about for a looong time and nothing ever really happens,” and the few policies that do manage to pass “are just a bandage on gaping wounds.”

I hear you, Rose, and my inbox is a testament to the fact that you’re not alone. I understand that there are moments when everything related to politics feels absolutely hopeless. With inflation on the rise, progressive legislation clogged in the Senate, and uncertainty over the upcoming midterm elections in the air, we’re in a moment like that right now. But I also want to share that I’m firmly optimistic despite all of these formidable circumstances, and my spirit is buoyed for the moment by this map created by Oxfam America last week showing the percentage of workers earning under $15 per hour by state:

I recommend that you click through to OxFam’s site and play with the interactive map for a while. It’s got lots of great cross-sections allowing you to divide up populations by race, age, gender, and family status. This map, to me, highlights the art of the possible in politics. One decade ago, when Civic Ventures founder Nick Hanauer was one of the first big-name advocates for the $15 minimum wage here in Washington state, he was dismissed as an unserious economic thinker. Forbes even called Nick’s embrace of a $15 minimum wage “near insane.” But now, Washington state has one of the smallest populations of workers earning under $15 in the union, and other states have joined the march. Twice in the last decade or so we’ve seen two huge ideas — marriage equality and a $15 minimum wage — transform from a fringe political theory to a mainstream reality accepted by millions of Americans. That’s not nothing — and it only happens because millions of people go out and do the work every day, even when people laugh at them and call them crazy.

The reason why I think that map is such an important symbol of political change, though, is that it shows how far we’ve come, while also showing how far we still have to go: Nearly half of all workers in Mississippi earn less than $15 per hour, for instance. But now those workers can look at workers in other states doing the exact same job as them and earning at times more than double per hour than they do, without a loss of business or an increase in unemployment rates. And as we’ve seen with surprisingly robust union drives in an Alabama Amazon warehouse, those workers are starting to develop a new understanding of what is possible.

The pandemic has provided another transformative moment by underlining how important quality affordable childcare is to keep the economy running, and now childcare is polling much higher than it did three years ago. It’s not easy to see the change around you as it happens, but I hope you’ll trust me when I say that it is happening. I can’t promise only breathtaking wins and dramatic forward progress in the days ahead — politics is a bumpy road — but the impossible becomes reality every day, in small and often immeasurable ways. It’s okay to despair sometimes, but it’s essential, too, to get back up and back to work as soon as you can. That’s the only way to get things done.

The Latest Economic News and Updates

February’s Jobs Report Finally Has Good News for Everyone

The March jobs report may have been announced on April Fool’s Day, but it was no joke, with over 430,000 jobs added to the economy and the job market falling just 1 percent short of its pre-pandemic levels. This jobs recovery has been so fast that it’s outpacing the recovery from the Great Recession by about 8 years.

When you dig into the numbers, you’ll also find positive downward trends in Black unemployment and strong employment showings for Black women and Latina workers. Black and Latina unemployment is still above pre-pandemic levels, but those numbers have made positive gains for the last three months, which has not been true at any point during the pandemic. For nonwhite workers, things are finally moving in the right direction.

But that job growth isn’t happening equally across sectors. There were more than two million leisure and hospitality and public-sector employees before the pandemic than there are now, for example, and more than 600,000 more people work in transportation and warehousing now than before the pandemic. There’s no question that the pandemic has reshaped the demands of our economy in dramatic ways.

More than 6 million Americans are now unpaid care workers

And while those job numbers are encouraging, it’s important to remember that the labor market isn’t back to normal. Abha Bhattarai writes for the Washington Post that 6.6 million people haven’t rejoined the workforce because they’re caring for family members, including elderly parents, sick spouses, and more. And because our society tends to consider caregiving to be a feminine responsibility, about two-thirds of those who have left the workforce are women.

The unpaid work that these family members provide are essentially wiping out two jobs from the economy — the work that a paid caregiver provides and the job that the family caregiver would otherwise be working if they didn’t have to stay home to take care of their loved one.

Several government responses could resolve this problem: Lawmakers could invest money into quality, affordable elder care services to take the pressure off family caregivers, or the government could ensure that all care work is work by paying people who take care of sick and ailing relatives. Medicare does already provide family members with caregiver pay in many states, but the pandemic has dramatically expanded the need for this program.

Employment monopsony is draining workers of power

For the Washington Center for Equitable Growth, Carmen Sanchez Cumming has published a wonky look at the effects of monopsony on wages. Monopsony, remember, is monopoly’s less popular cousin — it’s when only one buyer capitalizes on a market. So when one employer has dominance over a labor market, they have excessive monopsony power over wages, employment conditions, and other worker rights.

This is a problem in much of the United States — particularly in rural areas and in red states:

It’s a complicated problem to explain, but the solutions, according to Sanchez Cumming, are pretty simple and would benefit all workers — not just those in areas dominated by employer monopsonies:

To boost competition in labor markets, policymakers can start by banning noncompete agreements — contracts that limit workers’ ability to move from job to job and that affect a large share of low-wage workers. Public policy also should support workers’ bargaining power by raising the federal minimum wage, expanding the right to organize and join a labor union, and enforcing labor standards to prevent violations, such as wage theft and employment discrimination.

The breakfast cereal theory of inflation

Jeanna Smialek at the New York Times spotlighted Federal Reserve Governor Lael Brainard’s excellent explanation of why inflation impacts low-income workers more than high-wage workers and the super-rich. I found this definition, explaining inflation through the price of cereal, to be especially on-point:

“A household that had been purchasing brand-name cereal could save money by purchasing store-brand cereal instead, perhaps even eliminating any effect of the price increase on their actual spending while purchasing the same quantity of cereal,” [Brainard] said. But for the store-brand buyer, going down the price chain is not possible.

Our economy is powered by consumer demand, so it stands to reason that when the bottom two-fifths of the economy is unable to buy as much due to high inflation, that decreased spending will cause ripple effects throughout the economy. The Roosevelt Institute made a great case for increasing wages for low-income workers in order to spur the economic recovery from the pandemic.

That Roosevelt study is especially useful because it combines various studies to make a compelling case that the economy grows more when low-wage workers get raises than when the upper end of the wage scale sees an increase in pay. Workers on the lower end of the wage spectrum are more likely to spend their pay on goods and services, strengthening the economy. By raising the minimum wage, we’re improving the economy for everyone — and if wages continue to rise below the rate of inflation, the economy will slow down.

Will union successes inspire corporations to finally invest in their workforce?

It’s been another banner week for labor unions, with a Staten Island Amazon warehouse unexpectedly voting to unionize and multiple high-profile Starbucks stores continuing to vote for unions. Expect to see more high-profile union wins as these stories get more attention — once workers see a similar group unionize, they’re more likely to picture themselves unionizing. The Amazon Labor Union claims that after Staten Island’s vote was confirmed, more than 50 Amazon warehouses across the country reached out for more information on how to unionize their location.

On Monday of this week, former Starbucks CEO Howard Schultz reinstated himself as interim CEO to combat the union influences that he claimed — in an unfortunate bit of wording — have “assaulted” his company. Confusingly, in a speech meant to rouse the company and discourage unionization, Schultz for some reason promised that Starbucks would get into the NFT business later this year.

Schultz also announced that he was putting an end to Starbucks’ program of stock buybacks in an effort to “invest more profit into our people.” The company spent $10 billion on buybacks, basically dumping 11-figure profits into the hands of executives and shareholders with no strings attached, in 2019, and Starbucks was on track to give another $20 billion in the next few years before Schultz ended the plan. Schultz is right to draw a direct line between buybacks and worker pay — a good portion of the wages that workers have lost over the past few decades has instead been leveraged into executive pay and shareholder bonuses in the form of buybacks.

The big question: Is Schultz’s decision to end buybacks and invest that money into worker pay too little, too late for employees who are riding high on union wins?

Guaranteed income is good for you health

Guaranteed income pilot programs have been launched or are about to be launched around the country, delivering regularly scheduled payments to (largely low-income) Americans. Minerva Canto at Capital and Main reports on the positive results that researchers have found so far, including a general improved sense of well-being, less intergenerational distress caused by money concerns, better mental health, and “an 8.5 percent decrease in hospitalizations compared to the control group, especially for mental health, accidents, and injuries.” It turns out, when you don’t have to stress over money every month, your stress levels lower and your health markedly improves.

And according to other studies, guaranteed income programs aren’t just good for physical health — they also reinforce economic health. A study in Stockton found that full-time employment went up among people who received basic income payments. And of course, near-universal payments during the pandemic like the Child Tax Credit (The Pitch is a weekly economics newsletter written by Zach Silk. Follow here on Medium or sign up for free on Substack to receive a new issue in your inbox every Thursday.). While a concept like a Universal Basic Income which sends monthly checks to every single American might not be a popular or viable program, it’s becoming clear that direct, no-strings-attached cash payments are an excellent way to ensure the health of the citizens and communities who most need investments.

The pandemic taught us how to fix our broken safety net

Two new reports explore how the social safety net did and did not succeed during the pandemic, and they make suggestions for how the programs can be improved in the future.

• The National Employment Law Project argues that reforming unemployment insurance “Is an Economic and Racial Justice Imperative.” They offer four points of policy guidance to end the structural racism that’s built into the unemployment system, including updating the benefit distribution system so that it automatically enrolls people and enhances benefits in times of crisis. (Like so many equity measures, that policy would actually improve the system for everyone, regardless of race.)
• And the Center for American Progress argues that the Temporary Assistance for Needy Families program must be strengthened. CAP’s analysis found that approvals for families to receive TANF benefits have steadily declined over the past few decades, even during moments of economic crisis like the pandemic and the Great Recession. (A little more than one in five American families who applied for TANF benefits actually received them in the first year of the pandemic.) They, too, call for more of these benefits to be automatically distributed at times when American families feel the economic pinch in order to allow people to access TANF and to save the program from partisan tugs-of-war.

• Just as a general observation from those two recommendations: More and more over the last three years, experts have embraced the idea of automatic stabilizers on benefits, which would streamline the distribution of benefits and eliminate red tape for families in times of crisis. This is a policy that should be a standard in politicians’ platforms for years to come — it’s efficient, it eliminates bureaucracy, and it creates solutions that are sized to meet the scale of the problem.

Real-Time Economic Analysis

Civic Ventures provides regular commentary on our content channels, including analysis of the trickle-down policies that have dramatically expanded inequality over the last 40 years, and explanations of policies that will build a stronger and more inclusive economy. Every week I provide a roundup of some of our work here, but you can also subscribe to our podcast, Pitchfork Economics; sign up for the email list of our political action allies at Civic Action; subscribe to our Medium publication, Civic Skunk Works; and follow us on Twitter and Facebook.

• On Civic Action Live this week, we’ll discuss the great employment news that has come out over the last week and what that might mean for union pushes around the country, why inflation hurts low-wage Americans far worse than the wealthy, and what policies our leaders should be embracing as we learn from the government response to the pandemic. Join us on Friday at 10:30 am, Seattle time.
• This week’s Pitchfork Economics podcast features an in-depth conversation with economist Robynn Cox about the painful effects of America’s mass incarceration problem. Not only do we have the largest prison population in the world, but that policy of mass incarceration has destroyed communities and left generations of Americans poorer and less equipped to build wealth. And because the criminal justice system disproportionately targets young Black men, those economic effects are felt most acutely by Black communities. It’s a complex conversation about an economic topic that doesn’t get nearly enough attention.
• In his Business Insider column, Paul notes that if worker pay had kept pace with productivity and inflation, the federal minimum wage would be above $20 by now.

Closing Thoughts

If you’re looking for more newsletters that provide economic insight, I can’t recommend Alex Pareene’s Substack enough. (You should be warned that Pareene was one of the best writers at Gawker, and he still retains some of the arch writing style that made that blog famous — which is to say, he can be a little sharp-elbowed in his assessments.) I was especially struck by the April 4th edition of his newsletter, which responded to a survey that found 37 percent of the American public actually believes more jobs had been lost than gained over the last year.

Of course, the opposite is true — millions of jobs have been created over the last year, workers are getting raises, and employers are scrambling to hire and retain workers. So how can it be that nearly four in ten Americans believe that the job market is atrocious right now? As with all polls, there’s a partisan bias, of course — a certain percentage of Republicans will never believe that a Democratic president could ever create jobs — but that can’t account for the entirety of that huge number, and nor can the high prices we’re all paying at grocery stores and gas stations. Pareene makes the argument that because (as we noted earlier in this newsletter) so many leisure and hospitality jobs are unfilled right now, people feel like the job market is in trouble. Or, as he puts it: “it must be hard to find work, because no one will serve me.”

The American economy has become increasingly divided between the professional class and the service economy. That division became especially clear in the early days of the pandemic when the media became obsessed with two types of workers: the “normal” office workers who were experiencing work-from-home during lockdowns, and the “heroes” doing the “essential work” of selling groceries, distributing goods, and providing healthcare. But now that things are increasingly looking normal, Americans are finding it hard to squeeze back into those slots. In the face of low pay and awful customer behavior, service economy workers are quitting their jobs and we see “nobody wants to work anymore” signs on the windows of fast food restaurants. The truth, of course, is many don’t want to work degrading, stressful and dangerous jobs for the little that exploitative employers are willing to pay.

Hopefully, there’s room to insert some humanity and understanding into this realignment. No worker in America is an unskilled worker — they simply perform the work that we as a society have decided not to value. It’s past time that we honor the expertise of American service workers — both in higher pay and respect. Maybe now that we’ve had a little taste of what the world is like when service workers are not around, we’ll be more willing to honor the talent and hard work that they display every day.

Be kind. Be brave. Get vaccinated — and don’t forget your booster.

Zach