There are all sorts of great issues on the political scene now. There is the “Culture of Corruption” thanks to Delay, Frist and a whole host of other Republicans. The Iraq War also comes to mind. Both of these issues are strong issues for the Democrats. However, there are other issues that are just as important that lack the visceral nature of corruption and war. These issues center around economic issues, or as I like to think of them “kitchen table issues.” If a family can’t afford health insurance or tuition, if they aren’t making more money than they were 4 years ago, then the other issues don’t matter. People have to survive before they can think about grander themes. Right now, Bush’s policies have hurt the middle class in numerous ways that II will document below. These have to be part of our themes in the 2006 election.
Below, I will use statistics from January 2001 when Bush was sworn in as president. Some Republicans use 9/11 and the recession as mitigating factors to explain Bush’s poor performance. These are mitigating factors. However, Bush got the job. He gets credit for the whole enchilada – not just the part that looks good.
Wages
According to the Bureau of Labor Services, the average hourly earnings of production workers was $14.27 in January 2001 and was $16.16 in August 2005 for an increase of 13.24%. Over the same period of time, the overall inflation index for all items increased from 175.1 to 196.4 for an increase of 12.16%. That means after inflation, the average production wage increased 1.08% in 4 and a half years. This is why the average American feels so much richer under Republican economic leadership.
Jobs
According to the Bureau of Labor Services, total nonfarm employment was 132,454,000 in January 2001 and 133,999,000 in August 2005 for a net 4.5 year gain of 1,545,000. This breaks down to approximately 28,600 jobs/month over the period. This is important because the economy must create 150,000 jobs/month to deal with natural attrition, people looking for new jobs, people entering the workforce etc…. In other words, Bush’s economy has not created enough jobs to deal with the natural expansion of the population or generally economic conditions. The next question to answer is “why is the unemployment rate so low?” The unemployment numbers do not count people who have not looked for work in the last 4 weeks. This is better documented by the labor participation rate which was dropped from 67.2% in January 2001 to 66.2% in August 2005.
In addition, the Bush economy is heavily skewed towards housing. Over the same time, the net gain in construction employment was 418,000, or 27% of total employment growth. In addition, financial services jobs increased by 487,000 over the same period. All of the financial jobs are not related to real estate. I have not seen any statistics that break this number down into a real estate and non-real estate portion. So let’s make a simple conservative assumption and say that 20% of the financial services jobs are related to real estate activities. That would mean 6.2% of the jobs created in the financial services area are related to real estate, bringing the total number of housing related jobs to 33.2% of total ob creation during the recovery. Finally, business and professional services increased employment by a little over 100,000. Assuming 10% of these are real estate related, an additional .5% of job growth is real estate related, bringing the grand total of housing based employment to 33.7% of all jobs created in the last 5 years. So, when housing slows so will the job market.
Of particularly scary significance is the loss in high paying technology and goods producing jobs. January 2001, the US economy has lost 2.8 million manufacturing jobs and 560,000 information jobs. These numbers alone should concern anybody who is concerned with the US’ mammoth international trade deficit.
Health Care
Actually, it would be better to title any description of Bush’s efforts on heath care as lack of health care. Kaiser Health recently issued its annual survey of health care. Here are some of the high points:
Premiums increased an average of 9.2% in 2005, down from the 11.2% average found in 2004. The 2005 increase ended four consecutive years of double-digit increases, but the rate of growth is still more than three times the growth in workers’ earnings (2.7%) and two-and-a-half times the rate of inflation (3.5%). Since 2000, premiums have gone up 73%.
The annual premiums for family coverage reached $10,880 in 2005, eclipsing the gross earnings for a full-time minimum-wage worker ($10,712). The average worker paid $2,713 toward premiums for family coverage in 2005 or 26% of the total health premium. While workers’ share of their premium has been relatively stable over the past few years, they are now paying on average $1,094 more in premiums for family coverage than they did in 2000.
For those who want the hard numbers, annual premium increases for 2001-2004 were 10.9%, 12.9%, 13.9%, and 11.2%. Read the rest of the report to get an idea for how poorly Bush’s ideas have not solved the problem. This is a crisis that has only grown in size and magnitude since Bush came into office. He has done nothing to address the problem.
College Tuition
I have an idea: let’s educate people so they can get better jobs. Call me a revolutionary. Or a fool. The last 4 years have seen large increases in public college education costs. Annual increases in the cost of public education from 2001-2005 were 7.1%, 9.1%, 13.9% and 10.6% respectively. The average cost of 452 state school tuition costs was $5153 in 2005, with the average for room and board expense coming in at $6058. This brings the 4-year total to $40,764 for an education and room and board.
Tuition and fees have increased 51% since the 1994-1995 school year. In addition, tuition has increased faster than inflation since the early 1980s.
But wait! A student can get a grant! This situation isn’t so bad! Well, the problem is the state and local grants aren’t keeping pace with the tuition increases. Therefore, the grants are now paying for less of the education than before. The bottom line is college is slowly becoming more and more a luxury people are having a more difficult time affording.
One of these days, I will figure out a way to make these issues really exciting and visceral so people actually start talking about them. Until that happens, these issues will probably continue to fall through the cracks of US political dialog — along with the middle class.
Bondad,
The work you’re doing with this is very important.
I honestly believe this stuff is visceral and important. But its like medicine. The people this stuff actually affects don’t feel qualified to hold an opinion on it. The folks who do hold opinions are too remote from actually being affected by it (wall street, profs, economists), or have been accepted “conventional wisdom” (bankers, lawyers, professionals with 401k’s, press).
The Nobel Prize winners announced this morning discovered most ulcers are caused by a strain of bacteria, not “too much stomach acid” as conventional wisdom held. When it comes to economics, the realities of our “global economy” are out there, but few people are looking past their biases and “conventional wisdom”.
A middle-class blue collar worker loses his job when his factory closes. A white collar worker loses his job when it is outsourced to India. Of course they are upset. But when they goes looking for answers, all they hear is “it’s necessary to save the business”, the factory was “too expensive to compete”, or competition required “a new labor strategy”.
What do the Republicans tell them? Its because of high-taxes on US Corps, because of clean air and clean water regulations, because of unions and pensions. Its because of global competition.
What do the Dems tell them?
The pundits and economists tell them the same thing as the Republicans. The press confirms it, as if it were the law of gravity — something inevitable, with nothing that can be done about it.
If the Dems say anything, its that “what happened is bad, and shouldn’t happen”. They have no answers. They have no model, no theory, no plan that offers alternatives to Conventional Wisdom. It sounds an awful lot like “The Republicans are right, but we feel bad about it”.
So what does he believe?
And who does he then trust on economic matters? The guys with the unpleasant “answers”, confirmed by all sources? Or the guys without an opinion?
I believe people will pay attention to economics when they feel there is an alternative to the current Conventional Wisdom
On Education:
It does seem obvious, doesn’t it? After all, the premise of the Republican Economy is “We’ll move up the ladder, and leave the lesser jobs to the foreigners” (at home, and abroad).
And education has proven a reliable indicator for avoiding all sorts of social problems — teen pregnancy, crime, poverty. Many of the “pulled up by your own bootstraps” stories the Republicans love to use to push “its an individual’s responsibility to escape poverty” involve folks putting themself through school. So why not make an affordable (not free) education available to all people, so they can play in the wonderful “free market economy”, regardless of their history or background? Why not give everyone a fair start?
You’re no fool to have that idea.
In my mind, that’s a nice summary of why education won’t solve the problem.
Its easy to look at education, see the correlation and say “hey, educated people are hurt less by this economy”, and proclaim that education is the answer.
But alone, it just isn’t enough. The whole “climb up the economic ladder” idea isn’t a sound economic philosophy. Why? Because even the “poor” countries like India and China are creating millions of jobs at the top of the ladder already.
And they’re doing it a heck of a lot cheaper than we can, currently. This is why outsourcing terrifies a growing number of white collar workers.
Lets be honest, the life of a white collar worker is pretty plush, all things considered. And as long as his/her firm is doing fine, the average worker isn’t really questioning when the gravy train is going to end. They know they’re at the top of their field, and can compete on skills with anyone, anywhere, at any time.
But not on wages.
Most engineers and tech workers I know would discourage college age students from entering these fields. Too many years of 20% layoffs, outsourcing, boom-bust-bust-bust cycles have convinced these fairly bright people that its just not worth it. The advice is to go into business instead — easier work, better pay, more hope for a full career.
And that’s the sad part of it all. While politicians and the press are telling everyone the answer lies with high-tech, many folks in high-tech are just hoping those jobs exist through retirement.
Maybe bio-med is the new high-tech to replace computers. I don’t know. But take a look at the number of people employed by a GM. Now take a look at the number employed by Google. Tell me that’s a sustainable employment model of growth through high-tech.
There will always be high-tech jobs in America. And the folks who do them will be paid pretty darn well. But educating everyone to become high-tech isn’t going to create enough jobs.
(so why the big push? Supply and Demand. Too many qualified workers + not enough jobs = falling wages)
Thanks for the comments. I don’t really have anything to add, but I appreciate whay you wrote.
First off, General Motors has shed jobs like no tomorrow and is continuing to do so by the hundreds of thousands, and compensation has remained stagnant for the high school educated blue collar worker since the early 1970s.
But, while there have certainly been high tech jobs that were exported of disappeared, and there certainly is foreign competition, there has been overall job growth in high tech sectors over the comparable time period and almost all wage growth has acrued to the college educated. I certainly know a number of engineers who aren’t doing engineering. But, many of them are still doing things like computer programming, or projected management, or high level corporate sales of technical equipment that still leave them far better off then their friends who decided to major in marketing.
Most people, regardless of their profession, are not going to have jobs that stay in existance from the time that they are hired until the time that they retire. The pseudo-feudal model of employment where you pledge your life to the company and the company pledges to take care of you for life is gone. The particular jobs will come and go. But, if we have a good skill base, our nation will have the raw materials (a skilled workforce) to replace jobs that disappear — say, quality control engineer at a CRT factory — with new and different jobs in the future.
Life in the tech sector is going to look more like life in the construction industry or Hollywood, where individuals and small businesses flock from one project to another, with unpleasant downtime in between. High tech specific skills are basically about inventing new ways of doing things, and once you’ve invented something new, it is time to go on to the next gig. What the high tech industry needs to do, however, is create the equivalent of a carpenter’s union, or actor’s equity, to buffer workers between jobs in the constantly shifting economic landscape.
The equation of “Too many qualified workers + not enough jobs = falling wages.”, doesn’t have to fall true. Ultimately, our economy as a whole gets to consume what our workers in the aggregate produce. If an increased supply of qualified workers makes possible an increased number of high productivity jobs, then wages don’t have to fall. (Whether they fall or rise then comes down to the fairness with which the fruits of that labor is distributed.)
We want more qualified workers because qualified workers are more productive, often dramatically so, than less qualified workers. A bull dozer operator can do a lot more work than a bunch of guys with shovels, even if he has to finance his own bull dozer purchase and pay for it out of his own pocket with high interest rate loans. If the guys with shovels are just left to rot, that’s a bad thing. And, the bull dozer drivers may reduce the amount of digging workers needed in the construction industry. But, if those guys with shovels are trained to become practical nurses, where we have an urgent demand for new workers as our population ages, they can improve their lot in life too.
Eh, I give you straight facts from personal experience in the field, you give this:
I’ll assume you meant it as more than simplistic platitudes, but I’m not seeing it. Taking it a chunk at a time:
That last point is key. An economy isn’t very sustainable if it can only afford to meaningfully employ the under 40 set.
(nevermind that they’ll be competing with the 25 million Chinese tech grads every year for those same jobs)
I wouldn’t say the tech industry is going to die in America. But I’m saying despite the platitudes and pronouncements of politicians and pundits, the current job growth curve of high-tech will never create enough jobs, and there aren’t any new technologies on the horizon to change that picture.
Trade imbalance does not mean that individual trades aren’t fair. It means that of trading partners are choosing to be compensated for their work with investments in the U.S. economy or services provided in the U.S. (such as U.S. based higher education and medicine two of our biggest exports that don’t count as exports).
The point is that if you have more qualified people, the pie will get bigger. Our economy is not a zero sum game.
“Hasn’t worked especially well for textile workers, steel plant workers, autoworkers, customer support specialists, or IT workers.”
It hasn’t worked well for textile workers, steel plant workers, autoworkers or customer support specialists, because all of they are predominantly unskilled workers. But, while IT work is being done abroad, it is not clear to me that there is widespread unemployment among IT workers. My brother, for example, works at the software compnany in Boston that decided not to out source to India, and his limited its out sourcing to Russia, because local talent could do it and because coordinating a far flung enteprise turns out to be quite difficult.
Yes, the IT sector has soured compared to the peak of the tech boom, but that was because it was artifically high from a lot of idiot investors putting money into companies with no business plans.
As far as corporate behavior, they still have to work in the marketplace, and if anything, in the IT sector the problem is not that there is a huge amount of age discrimination, but that the age discrimination in favor of older workers in much of the rest of the economy is less prevailant there.
Bonddad, this is great (although depressing!) as usual.
I’ve been encouraging my kids to go into a healthcare field, because I think it’s harder to outsource those jobs.
I agree. My niece is studying to be a nurse. She will always have a good-paying job in that field.
I have a pharmacy degree, thankfully. Hopefully it will allow me to send my kids to college to become something similar.
Your niece made a good choice, what with the aging of the population.
Wow — a pharmacist. If I had only known you in my silder days.
My niece will be taking care of me in my old age.
Don’t forget the stock market, which the middle class invests its 401(k)s in.
The Dow started off in January of 2001 at about 10,912. Today, in October of 2005, it is at about 10,531 at midday. This is not the 7% annual rate of return so many investors expected when Bush took office. The average middle class American has had zero investment return in the stock market during Bush’s tenure.
And, the President wants to have us invest Social Security funds in this very stock market.
Reducing the tax rate on capital gains doesn’t mean very much if you don’t have any capital gains to pay taxes on.
And this time span has been “recession free”. I am very concerned over rising fuel costs, and the effect that will have on our markets. I hope four years from now a 10,000+ Dow is not referred to as the good old days.
and Information jobs lost since 01! Add that to higher health care, higher education, and higher fuel costs (which has an inflationary effect on nearly everything we purchase) and the picture you paint for the middle class is quite bleak. Add (in many parts of the country) a growing unskilled labor force and it is easy to understand why some folks are finding it hard to replace that job they just lost, with even a minimum wage job. I think you are understanding why I sign my comments the way I do.
The Bush plan seems to be to dismantle the government, throw away the safety net, send our jobs elsewhere to lower consumer prices, cut taxes for the wealthy owner class, and tell everyone that in America people solve their own problems. More money for the Bush faithful. So what if the country goes to hell in a hand basket. What will they care? They will all (or are already) millionaires!