Following Up: Mercury News Treats H1B Debate as Non-News

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Following Up, H1B, immigrants, Immigration, journalism, Mercury News, Neil Chase, Norman Matloff, Ro Khanna, Silicon Valley, tech, tech workers, workers

The story of the video of a major debate on U.S. immigrant tech worker policies that earlier this week looked like it was being kept under wraps now looks like the story of a video that never was – due to some astonishingly unenterprising journalism from the Mercury News, Silicon Valley’s main newspaper and therefore a leading source of information on the technology industry.

As RealityChek regulars know, the story began with a June 1 debate in Silicon Valley centering on the controversial H1B immigrant visas. Squaring off were the Valley’s new Democratic Member of Congress, Ro Khanna and Norman Matloff, a professor of computer science at the University of California, Davis. (A tech entrepreneur took part in the event, too, but in a minor way.)

Technology companies claim that the H1B and similar programs are crucial to accessing the world’s best talent. Critics charge that they’ve overwhelmingly been used to cut their costs by replacing native-born U.S. workers with much cheaper foreign counterparts. Khanna favors relatively modest changes to H1B policies; Matloff believes major surgery is needed.

Matloff, who’s become a valued friend of mine, has written that the event marked  the first time a debate has been held between an elected official and a researcher on the topic, a major event in that sense. (Khanna has not disagreed.) Matloff also noted that a videographer from the Mercury News was present and apparently recording the proceedings.

Yet the Mercury News failed to cover the debate and never posted a recording on its website. Matloff asked a reporter on the paper to find out why, and was told that a recording existed, but that “it was essentially scrapped as a standalone report, but there’s apparently a possibility that parts of it will be used in coverage of Rep. Khanna. Not sure the reason(s) for this…” Matloff then speculated that the paper failed to make the video public because Khanna performed poorly – leading the Mercury News, which editorially has sided with the tech industry on H1B and related issues, to consign it to non-event status.

I emphatically agreed that the video’s import deserved to see the light of day, and last Sunday urged the Mercury News to post it both to perform a public service on a major technology policy area and to affirm its journalistic chops. Gratifyingly, the post and follow-up tweets prompted Khanna readily to agree, and to call openly for the video’s posting. (For the record, he contends that it was Matloff who was highly ineffective.)

Two days later, Matloff and I got answers from Mercury News editor Neil Chase. In the version he sent Matloff, he wrote, “We had a photographer there who captured some still photos and some video for use with a future story, but we didn’t attend with the intention of taping the full debate and did not.”

Based on information Matloff had shared with me and my own journalistic experience, yesterday, I sent Chase the following email. I had hoped to get a response from him in time to prepare this post, but no such luck yet:

Dear Neil,

Many thanks for your comment to my blog and my apologies for the short delay in responding.  

I must confess, though, that the response leaves me somewhat mystified on two counts.

First, the statement that the Mercury News videographer did not “record the whole event” doesn’t track with an email from one of your reporters, Ethan Baron, to Matloff.  Baron said, in response to the latter’s query re the video’s availability, “it looks like the video was essentially scrapped as a standalone report, but there’s apparently a possibility that parts of it will be used in coverage of Rep. Khanna.”  Granted he’s conveying some uncertainty here. But Matloff also has written in his blog that “the videographer seemed to be taping continuously.”  In addition, Matloff noted that “the video cam [was] on a high tripod, seemingly much for an occasional clip.”

Similarly, it sounds odd, as your email indicates, to give the videographer the responsibility for choosing the portions of the debate to be shot.  Was this the case?  If so, what were the criteria used to determine what was captured?  Or were they simply taken to get a bit of file footage of each participant, irrespective of what they were saying at the time?  

Second, I certainly don’t mean to tell you how to do your job.  But as someone with a journalistic background, I’m hard pressed to understand the paper’s seemingly offhand attitude toward this event.  After all, the H1B issue has been described as crucial by the dominant industry in the region served by the Mercury News, and it’s surely of comparable importance to all your tech worker subscribers.  The new Congressman from your area, Rep. Khanna, has been touted by several national publications as a rising star in the Democratic party, and possibly all of national politics.  To his credit, he was willing to appear in public with an outspoken, prominent critic of the H1B and related programs – a rare event at the very least, according to Matloff.  And of course, H1B and other immigration issues have become even greater controversies nationwide since the last presidential campaign heated up.  So from all appearances, the leading paper of Silicon Valley would be expected to view the debate was highly newsworthy from the get-go.  And yet it seems from your email that no coverage was ever planned.  

Now it’s clear that some fur was flying at the event, and that Rep. Khanna and Matloff are begun feuding in public over what was said and over their qualifications to claim expert status on the issue.  I.e., because of this aftermath, their debate has become by any reasonable definition even more newsworthy.     

So I respectfully make the two following requests:

1. Would you check whatever video archive you have – including whatever the videographer might possess – to determine conclusively whether a full recording of the debate is indeed available?  (If not, I would hope to find out how it was disposed of, and why.)

2. Would you assign a reporter to cover this emerging Khanna-Matloff dispute — in which a local Congressman who’s increasingly prominent nationally has publicly gone after a critic on an issue that’s one of his top legislative priorities, and a major national concern?  The Mercury News would get an excellent scoop, and perform a valuable public service at the same time.  

Thanks for your consideration, and I look forward to your reply.

Sincerely,

Alan

As per the email, I’m still hoping that the Mercury News finds a recording and shares it, and that it reports on the differences between Khanna and Matloff, which cut to the heart of the debate on H1B and broader questions and arguments concerning the future of the domestic workforce in an age of rapid innovation. At a time when Fake News abounds, it would amount for welcome coverage of some real news.

(What’s Left of) Our Economy: As Political Wars Rage, U.S. Wages Keep Stagnating

Tags

inflation-adjusted wages, manufacturing, private sector, real wages, Russiagate, Trump, wages, workers, {What's Left of) Our Economy

The tragedy of the continuing Trump and “Russiagate” political battles was perfectly illustrated yesterday by the release of the Labor Department’s newest data on inflation-adjusted wages. As the administration and its foes intensified a fight that’s ultimately over the legitimacy of the president’s White House win last November, the statistics made clear that the growth of Americans’ paychecks is still deeply stuck in the mud.

The real wage figures are always one month behind their pre-inflation counterparts, so the new numbers only take us through April. And they and the March results are still preliminary. At first glance, the news looked mixed. On a monthly basis, wages for the private sector (these data leave out government workers’ wages, since they’re determined largely by politicians’ decisions, not market forces) inched up only 0.09 percent in April. That was worse than March’s 0.28 percent improvement, and that March figure was revised down from the initial 0.47 percent reading.

The picture was somewhat brighter for manufacturing; April’s sequential increase of 0.46 percent was its best since August, 2015 (0.66 percent). But the March rise was downgraded from 0.37 percent to 0.28 percent.

And no one should be happy about the year-on-year changes. April’s was 0.37 percent for the private sector as a whole, and 0.46 percent for manufacturing. Between the previous Aprils, the numbers were 1.42 percent and 1.79 percent, respectively.

The cumulative results during this nearly eight-year old economic recovery? After-inflation private sector wages have increased only 4.07 percent, and manufacturing wages are up only 1.49 percent.

In other words, American workers – and especially those in manufacturing – have all but lost nearly eight years when it comes to their ability to keep up with the cost of living. And given Washington’s focus on the political wars, more lost months at the least are likely on the way.

(What’s Left of) Our Economy: More Signs of Better Wage Growth

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inflation-adjusted wages, manufacturing, private sector, wages, workers, {What's Left of) Our Economy

The days when Washington releases more than one set of economic data are always a little frustrating, and today was no exception. Shortly before the Federal Reserve put out the July industrial production figures, the Labor Department issued that month’s numbers on inflation-adjusted wages. They deserve attention because they add – albeit modestly – to the evidence that seven years after the current economic recovery began, American workers are finally starting to see respectable boosts in their constant dollar pay.

After-inflation private sector hourly wages were up 0.37 percent month-to-month in July – a nice turnaround from June’s 0.19 percent decline (the dip that was originally reported). More important, on a July-to-July basis, inflation-adjusted wages rose by 1.71 percent. That matched June’s rate – which was revised up from 1.52 percent.

Even the apparent fly in this ointment doesn’t look so bad upon closer inspection. These annual increases in real wages were smaller than the same 2014-2015 figures. But the numbers for that year looked strong largely because the 2013-2014 real wage improvement was almost non-existent. As stock investors would say, it was easy to beat those “comps.” Since then, we’ve seen two straight good year-on-year increases.

The bounce back in real manufacturing wages was even stronger. Between June and July, they advanced only by 0.18 percent. But that was way better than the 0.46 percent decrease the previous month. (A figure that was also left unrevised.)

Year-on-year, July hourly pay for manufacturing increased by 2.07 percent – more than for the private sector overall. It’s true that the improvement was slower than that between June, 2015 and June, 2016 (2.37 percent). But it was faster by a wider margin that the July, 2014-2015 rise (1.43 percent).

Since broader inflation-adjusted compensation statistics that include benefits also show a recent pickup, you’d figure that this is great news for Democratic presidential candidate Hillary Clinton and bad news for her Republican opponent Donald Trump. And this conclusion could be justified.

But the new real wage numbers still leave two, potentially decisive, questions unanswered: First, will voters be more focused on this good news or on how slowly their pay has risen for so long – only 3.88 percent for all private sector workers during the recovery so far, and an even more paltry 1.12 percent for manufacturing workers? And second, how long will this favorable trend last?

(What’s Left of) Our Economy: A Badly Needed History Lesson on Trade and Wages

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2016 election, chattering classes, David Frum, Donald Trump, illegal immigration, Immigration, imports, labor force, Populism, Republican Party, Republicans, The Wall Street Journal, Trade, wages, William Jennings Bryan, workers, {What's Left of) Our Economy

David Frum has played an invaluable role during this presidential campaign in explaining why the rise of soon-to-be Republican presidential nominee Donald Trump has been such a deserved rebuke to the party’s out-of-touch establishment. His indictments of the GOP’s Washington-centered chattering class have been especially devastating since he comes out of the party’s Bush wing.

That’s why I was so surprised to read Frum’s claims in a Saturday Wall Street Journal article that the kinds of economic nationalist trade policies Trump says he favors were harmful to American workers when they were in effect during in the late 19^th and early 20^th centuries.

Comparing Trump to the leading political maverick of that era – Democratic populist William Jennings Bryan – Frum contends that “The great irony of [the 1896 election] was that Bryan was more right than wrong about his central issues” including freer trade, which “would have enhanced consumer purchasing power at a time when wages were growing slowly.”

The problem is, the best data we have tells exactly the opposite story: In the days when America’s (mainly Republican) presidents determinedly shielded American industry from foreign competition, the country’s workers saw their paychecks grow strongly.

As detailed in the U.S. government’s authoritative Historical Statistics of the United States, Colonial Times to 1970, from 1900 to 1929 – when the Great Depression struck – the annual earnings of U.S. employees adjusted for inflation increased by a total of 68 percent. The closest version of these figures available that covers a comparable period of time is the Social Security Administration’s average annual net compensation series. It shows that this measure of pay – during a period when U.S. trade flows have been almost unprecedentedly free – was up nearly 121 percent between 1990 and 2014.

Free trade wins hands down, then? Not by a long shot. First, those more recent statistics haven’t been adjusted for inflation. Second, during that 1900 to 1929 period, U.S. workers might have been protected from imports, but for most of those years, they were exposed to record increases in immigration – which all else equal tends to suppress wages by increasing the supply of labor.

In fact, according to Historical Statistics, before World War I’s outbreak greatly reduced immigration opportunities from Europe, the prime source region, the arrival of these newcomers regularly increased the labor supply by between 1.10 and 2.87 percent. (This figure counts only working-age immigrants who are recorded as boasting occupations.)

Total legal immigration inflows into the country recently have been roughly one million, and some 20 percent are not working age. In addition, they represent a much smaller share of the total national workforce – which currently numbers about 144 million.

It’s true that the labor available to domestic employers has been augmented as well by a sizable illegal immigration inflow. But even taking this population into account, legal immigration-fueled labor force increases in the early 20^th century were considerably higher than in the first 15 years of this century. Then, the rate of growth typically hovered around 2.50 percent annually. Since 2000, it’s only topped two percent annually once (in 2014), and has ranged from that 2.19 percent increase to a 3.76 percent plunge during the recession year 2009.

No one’s saying that policies that succeeded 100 years ago will succeed today. But the historical record remains clear. Despite unprecedented immigrant-dominated increases in the labor force, when Washington curbed imports, American workers’ pay still tended to rise healthily – and at rates most of their descendants would envy.

(What’s Left of) Our Economy: No Inflation Take-off in Wages – or Even Close

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inflation, Labor Department, labor market, manufacturing, private sector, real wages, recovery, wages, workers, {What's Left of) Our Economy

More evidence appeared today that, if it’s true that inflation is starting to pick up (after years of deep slumber), America’s workers don’t deserve any blame. The Labor Department today released its latest data (for June) on overall price increases in the economy, and for price-adjusted wage increases. They and the department’s databases reveal that the workforce on the whole is barely, at best, keeping up with the cost of living.

According to the Labor Department, core inflation (i.e., prices with food and energy costs omitted, since they’re exceptionally volatile) rose 2.26 percent between June, 2015 and last month. How did inflation-adjusted wages do for the private sector? They rose only by 1.52 percent. (The Labor Department doesn’t include government workers’ wages in these statistics, since they’re determined by politicians’ decisions, not by the fundamental state of the economy.)

Workers did a little better between the previous Junes. Core inflation increased by 1.76 percent, and their price-adjusted wages improved by 1.84 percent.

But between June, 2013 and June, 2014, the story was substantially different. While core prices were increasing by 1.96 percent, real wages weren’t increasing at all. That is, they were completely flat.

Strengthening the case that real wage growth is anything but strong: June private sector wages saw a sequential drop of 0.19 percent, and have fallen for two of the last three months. As a result, hourly private sector pay is now down since March. And since the economic recovery began, in June, 2009, real private sector wages have risen only 3.49 percent.

The story in manufacturing, which historically has generated most of the economy’s best-paying jobs, is somewhat better over the short-run and somewhat worse over the long run.

Even though real manufacturing wages decreased on month in June (by 0.46 percent, much more than overall private sector pay) they rose 2.37 percent year-on-year – considerably faster than the private sector pace. Indeed, through May, after-inflation manufacturing wages had grown sequentially for eleven straight months.

June’s yearly manufacturing real wage hike was also more than twice as great as that between the previous two Junes – just 0.86 percent. But during the twelve months before, real manufacturing wages actually decreased – by 0.19 percent.

Longer-term, moreover, manufacturing remains a decided real wage laggard. Since the recovery’s June, 2009 onset, inflation-adjusted hourly pay has improved by only 0.93 percent.

Economists worry about wage inflation – and the tight labor markets it implies – because businesses have tended to react by raising prices to compensate, and that’s tended to prompt workers to press pay demands even more aggressively. The consequent spiral can be difficult to stop or even slow.

Of course, for this kind of action-reaction cycle to take hold, wages would first have to catch up with living costs. The June inflation and real wage figures show that workers might still be short of even that modest goal.

Im-Politic: More Economic Roots of Political Anger

Tags

2016 election, Bernie Sanders, chattering class, compensation, Donald Trump, Im-Politic, inflation, manufacturing, non-supervisory workers, political class, Populism, recovery, workers

Some more data has just come out from the government on how much Americans have been making at the workplace lately, and if you work with them with a little intelligence, you can see what a lousy economic recovery the middle and working classes have experienced. P.S. Do you think that at least some in their ranks might be supporting Republican presidential front-runner Donald Trump?

The statistics come from the Labor Department’s series on total employee compensation. They’re not adjusted for inflation, but they include everything from wages and salaries to benefits to the monetary cost of paid leave, vacations, and the like.

For the broadest groups examined – like “all private sector workers” – the numbers provide some support for widespread claims that low recent jobless rates are finally tightening the labor market enough to drive up pay strongly. For example, although overall compensation between the fourth quarters of 2014 and 2015 rose by a mediocre 1.21 percent, the two previous comparable annual increases of 2.63 percent and 5.70 percent respectively. These average out to advances that are quite respectable by historical standards. (The data, though, only go back to 2004.) They certainly represent a faster advance than that for the three years before – 1.20 percent, 2.95 percent, and 1.05 percent respectively.

For the manufacturing sector, the results have been even better. Following four years of painfully sluggish growth in pay, total compensation jumped by 4.83 percent in 2013, 4.52 percent in 2014, and 4.82 percent last year. (All figures, again, are fourth-quarter-to-fourth-quarter.) In fact, it looks like potentially dangerous “wage” inflation is starting to take hold, doesn’t it?

Not exactly. And here’s why. These employee compensation figures don’t separate management and executives on the one hand from non-supervisory workers on the other, either for the entire private sector or for manufacturing. But they do provide economy-wide statistics for those employed in two good proxy categories: production occupations; and installation, maintenance, and repair occupations.

Workers in the former category have actually seen their total compensation fall slightly for the last two years, after good 2.81 percent and 3.32 percent gains. Workers in the latter category have recently been on a roller coaster. Their total compensation increased by 2.38 percent in 2013, surged by 4.28 percent in 2014, and then plunged by 1.55 percent last year.

The gap between these blue-collar workers and the rest of the American labor force becomes much clearer upon examining cumulative compensation increases since the current economic recovery began, in the second quarter of 2009. During that period, here are the total compensation gains for major groups of U.S. employees:

All private sector workers: +15.61 percent

All management, business, and financial occupations: +21.76 percent

All manufacturing workers: +20.12 percent

All production workers: +8.96 percent

All installation, repair, and repair workers: +8.14 percent

When looking at those last two categories in particular, please keep in mind that these represent the trends over nearly seven years. Please also keep in mind that, although inflation rates have been weak judging by the official figures, prices for housing, health-care, and higher education have been rising at much faster rates.

In other words, once they figure out a serious response to the Trump insurgency (and, in many respects, to the success of Democratic presidential challenger Bernie Sanders), America’s political, chattering, and policy classes will be entitled to scorn and bemoan and bewail and condemn the success of populist, outsider political candidates. But not one moment before.

(What’s Left of) Our Economy: Inflated Claims of Real Wage Inflation

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BLS, blue-collar workers, Bureau of Labor Statistics, inflation, inflation-adjusted wages, labor market, private sector, productivity, recession, recovery, wages, workers, {What's Left of) Our Economy

This morning’s real wage figures from the Bureau of Labor Statistics (BLS) once again vividly remind us how important baselines are in measuring economic trends and evaluating their strengths. They just as vividly underscore the importance of overall inflationary and deflationary trends in the economy in calculating these wage data – which especially over the short term have nothing to do with workers’ genuine earnings, bargaining power, and success in keeping up with living standards. To me, the bottom line for these latest (January, 2016) numbers is that real wages in America continue to go nowhere.

BLS reported today that inflation-adjusted wages for the entire private sector rose by 0.38 percent month-on-month – the best sequential advance since August’s virtually identical reading. (Government workers aren’t measured here because their pay is determined overwhelmingly by politicians’ decisions, not fundamental labor market conditions.)

Moreover, the December monthly constant dollar wage improvement was revised up from 0.09 percent to 0.19 percent. As a result, the December year-on-year (and full-year 2015) figure increased from 1.82 percent to 2.01 percent. That’s the best such performance since 2008 – when many employers facing a strengthening recession were quickly shedding less experienced, lower-paid workers and therefore statistically pushing real wages way up.

Yet the new January number (which, like December’s, is still preliminary), means that January, 2015-January, 2016 after-inflation wage increases totaled only 1.14 percent. That’s much lower than 2014-2015’s 2.43 percent, but much higher than the previous 0.39 percent advance. In fact, the most recent January-January increase was the biggest such improvement 2009’s 3.70 percent – which was also boosted by the aforementioned recession-era downsizing strategy.

At the same time, here’s where those problematic economy-wide inflation data come in. January, 2015 was one heck of an unusual inflation month. Sequentially, core prices fell then by 0.64 percent. That’s the biggest drop by far since December, 2008, when the financial crisis was peaking and the economy seemed about to fall off a cliff. The harsh winter weather at the end of 2014 and the start of 2015 was clearly a big reason, and it has major effects on all comparisons based on January, 2015.

Another problem with this (and previous) January data: As I’ve previously noted, lots of state and local minimum wage hikes have kicked in during those months. These government-mandated decisions have as little bearing on labor market conditions as the government’s own pay levels.

So my own preference is to look over the longer term, and in particular, to compare real wage trends among recent economic recoveries – which provides the best apples-to-apples data. Unfortunately, BLS creates a problem here. Its figures on inflation-adjusted wages for all private sector workers only go back to March, 2006. So they can reveal what’s happened to these wages since the current recovery began – in June, 2009. (They’re up in toto by 3.39 percent.) But they can’t tell us what happened in previous recoveries.

One way to address the problem is to use BLS’ figures for production and non-supervisory private sector workers. This is of course a different group than all workers, but the data here go back to 1964, and these “blue collar” Americans currently make up more than 82 percent of the entire private sector workforce. As a result, they’re pretty representative.

During the current recovery, price-adjusted wages for this large group of U.S. workers is up 3.85 percent – a faster rate than that for all workers. And it’s a much faster rate than for the previous, bubble-era recovery (which was only a little shorter). Then, real blue-collar wages inched up by only 0.35 percent. Wages during this expansion are up less than during its 1990s counterpart (6.64 percent), And that’s the case even factoring in their different durations. That “Clinton boom” lasted nearly ten years – about one and a half times longer than the current expansion. But real wages advanced by nearly twice as much.

During all these expansions, real blue-collar wages have performed better than during the so-called Reagan recovery of the 1980s. During that expansion, which like the current recovery also lasted about six and one half years, these wages actually fell by 1.86 percent. Even though the significant expansion preceding the Reagan recovery was much shorter – lasting from only March, 1975 to the end of 1979 – inflation-adjusted blue-collar wages sank even faster – 3.19 percent. Then, of course, inflation was at recent historic highs.

Therefore, the current recovery looks pretty good, real wage-wise. But there’s one other expansion we can examine – that during the 1960s. Data for the entire upswing, which ran from February, 1961 through November, 1969, isn’t available from BLS. But between January, 1964, when the numbers begin, through the expansion’s end, inflation-adjusted non-supervisory wages shot up by 8.58 percent. No wonder this period is seen as a Golden Age by many of those old enough to remember it firsthand.

Two other developments also take much of the shine off today’s wage growth. First, the current expansion is getting long in the tooth, and thus it’s unclear how much more inflation-adjusted wages will rise going forward. And second, despite the big real wage increases of the 1960s, America’s productivity was rising much faster than today as well. So “let the buyer beware” still seems like good advice for information consumers today when confronted with claims of worrisome wage inflation.

(What’s Left of) Our Economy: State of the Union Fakeonomics on Immigration

Tags

demand, economics, free trade agreements, Gillian B. White, Goldman Sachs, illegal immigration, Immigration, Jan Hatzius, Jobs, Obama, offshoring, State of the Union, supply, The Atlantic, TPP, Trade, Trans-Pacific Partnership, wages, workers, {What's Left of) Our Economy

The more I go over the economic thinking behind President Obama’s final State of the Union address, and some of the commentary it’s generated, the weirder both get. Here are two especially noteworthy examples, and they both flow from the president’s claim that: “Immigrants aren’t the principal reason wages haven’t gone up; those decisions are made in the boardrooms that all too often put quarterly earnings over long-term returns.”

Actually, Mr. Obama’s starting point is a straw man. I don’t know of anyone whose views have attracted significant attention who solely blames immigrants for wage stagnation. I don’t even know anyone who blames illegal immigrants. I do know lots of folks who believe that the levels (too high) and mix (too many uneducated and unskilled) of legal and illegal immigration have contributed meaningfully to this problem. But I guess States of the Union are no place for nuance.

Even stranger about the president’s contention, though, was his defense of mass immigration’s role in the American employment picture was its contrast with his treatment of trade deals like his Trans-Pacific Partnership and their own destructive impact on jobs and pay. This issue went unmentioned.

No one blames these agreements and related policies for the entire wage problem, either. But does the president genuinely suppose that trade deals, and the job and production offshoring to very low-wage countries they’ve encouraged, have been totally unrelated to the pursuit of those “quarterly earnings over long-term returns,” and by extension to wage woes? In fact, can he or anyone else reasonably doubt that these same shortsighted boardroom denizens have lobbied so hard to push these deals through Congress precisely because they help maximize short-term earnings so effectively at American workers’ expense?

Just askin’.

The second example of State of the Union-related economic weirdness comes from an Atlantic post making the case for the president’s views on immigration and wages. It was perfectly conventional – to the point of predictability – for Atlantic staffer Gillian B. White to trot out the usual studies showing that most economists strongly deny any immigration responsibility for U.S. wage stagnation.

What was a lot less conventional was her neglect of the obvious immigration- (and trade-) related implications of this point from another leading economist that she quoted and then paraphrased:

“‘The weakness of wages and the resulting strength of profits are telling signs that the US labor market is still far from full employment’” Jan Hatzius, the chief U.S. economist at Goldman Sachs wrote in a 2014 research note. That’s because many companies have learned to be leaner, they hire fewer employees, and still benefit from continually growing productivity. And because the country is still not at full employment, they can keep paying workers less. All of this serves to boost the company’s bottom line, while workers are unable to participate in those benefits.”

It’s clear to any thinking person that Corporate America has gotten much leaner (although this greater efficiency isn’t showing up in the productivity data any more). And it should be equally clear, as Hatzius notes, that this development has increased the supply of labor more than the demand for workers (the ultimate reason full employment hasn’t been reached), and therefore reduced the price of labor (as over-supply will do for anything in a reasonably free market, human or otherwise, that’s in surplus).

Hatzius wasn’t quoted on the link between this labor market mismatch and American immigration flows, but White is confident that “Obama is right” (about immigration – not trade, which she also ignores) and that “the level of wage dampening that immigration is actually responsible for in the broader scope of the problem pales in comparison to the wage suppression that has occurred since multi-billion dollar companies decided to prioritize rewarding shareholders first and workers last.”

Indeed, she states, the immigration effects are so slight compared with the supposedly entirely separate corporate governance and strategy changes that discussing the former is “a bit beside the point.”

But by definition, if she’s right, here’s what’s a bit beside the point, too: At a time of subpar employment levels that themselves are undermining workers’ bargaining power, the United States keeps admitting roughly one million legal immigrants each year. Moreover, it has enforced its borders so poorly that the illegal population stands at more than 11 million.

In turn, White’s reasoning implies, significantly reducing either the illegal population, or the legal flow (or both), and accordingly improving the labor supply-demand balance, would leave the bargaining power and wages of current, legal workers virtually the same.

It sounds like White doesn’t really believe that the laws of supply and demand apply to labor markets at all, or at least not to those with significant immigrant participation rates. Same for that majority of economists she cites. Who’s to say “No”? After all, economics isn’t a real science. But if this is the case, couldn’t these analysts declare their heresy openly, or at least tell the rest of us where supply and demand still matters, where it doesn’t, and why? While they’re at it, of course, they could let the rest of us in on what other venerable maxims of economics they’ve now decided we can do without – and when.

(What’s Left of) Our Economy: Grossly Inflated Claims of Wage Inflation

Tags

blue-collar workers, labor, wage inflation, wages, White-collar workers, workers, {What's Left of) Our Economy

I suppose that if you look at the shortest possible time frame, you can make a respectable case that wages in America are finally showing or soon will show long-awaited signs of life – as so many analysts keep contending. Trouble is, that’s the only way that the case for wage pickup can be made – and even those short-run data are problematic.

As always, the monthly jobs report released by the Labor Department last Friday also provided the latest wage (December) figures for the American workforce before adjusting for inflation. (The inflation-adjusted data is scheduled to come out on the 20^th.) Although the figure will be revised, Labor reported that current dollar wages for the entire private sector rose 2.52 percent year-on-year. As the graph below shows, that was indeed the best such improvement since these data began to be tracked (which is only since 2009).

Yet as several observers have pointed out, this December-to-December comparison looks to be unsustainably juiced by a terrible wage performance in December, 2014 – which made the December, 2015 rise look that much bigger. For what it’s worth, few expect these easy comparisons to continue.

It’s also important to remember that sizable minimum wage increases kicked in last year in 23 states and the District of Columbia. So a fair portion of the wage advance had nothing to do with the natural strength of U.S. labor markets, and everything to with politicians’ decisions.

Longer-term data is available for workers whose jobs are described as “non-supervisory” and “production.” Think of this as the blue-collar workforce – i.e., those workers who depend on wages rather than salaries, bonuses, and other forms of non-benefits pay. (Often their benefits aren’t so great, either, but that’s another story.) And here’s where the wage recovery story breaks down.

Here’s how blue-collar wages have changed year-on-year before inflation since 2009-10 – the maximum time-frame available for the entire private sector.

 

Obviously, these workers have enjoyed much less progress than their white-collar counterparts, even though their 2.41 percent 2014-15 increase was also their best since 2009-10.

Go back further, though, with blue-collar wages, and you see how feebly these non-supervisory wages have been growing for literally decades. The graph below shows the annual percentage increases since 1980. And yes, you’re permitted to react with a “Yuck”!

In other words, there’s been no acceleration of wage inflation since the late-1980s.

At the same time, as I’ve written repeatedly, the most valid way to judge economic trends over time is not according to completely arbitrary, economically meaningless units like calendar years, but according to periods of economic expansion and contraction. So do those numbers provide any support for the wage inflation thesis? Anything but. Here’s how they look for non-supervisory workers for all the economic recoveries since Ronald Reagan became president.

“Reagan recovery,” Dec. 1982-June 1990  (c. 7.5 years) +27.18% 

“Clinton recovery,” Apr. 1991-Feb. 2001 (c. 10 years)  +37.38% 

“George W. Bush recovery,” Dec. 2001 to Nov. 2007 (c. 6 years) +19.59%

“Obama recovery,” June 2009-present (6.5 yeaes) +14.27% 

They demonstrate that although the current expansion isn’t yet especially long by recent standards, its blue-collar wage increases have been by far the weakest.  In other words, if there’s anything that’s increasingly inflating about the American wage scene, it’s claims or accelerating wage inflation.

(What’s Left of) Our Economy: New Productivity Figures Remind That Manufacturing Matters

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labor productivity, living standards, manufacturing, manufacturing renaissance, multi-factor productivity, productivity, wages, workers, {What's Left of) Our Economy

The new labor productivity numbers issued by the Labor Department this morning underscore why it’s so discouraging that domestic U.S. manufacturing is in the doldrums again – and in fact in a technical recession. Because the new figures show that manufacturing has regained its longstanding status as America’s labor productivity growth king after briefly losing it. Oddly, however, the same productivity report provides another reminder that manufacturing’s status as America’s king in pay growth is gone.

According to the new first look at labor productivity in the third quarter, by this measure of efficiency, all of America’s non-farm businesses (the Labor Department’s universe of American businesses) improved by 1.60 percent at an annual rate over the second quarter. That’s pretty low by historical standards, buttressing growing claims that the nation’s productivity performance has been lagging lately. But the second quarter growth figure was revised up from a much better 3.30 percent to a better still 3.50 percent.

(Remember – labor productivity is one of two productivity measures tracked by the government. It gauges output nationwide, and by different sectors of the economy, per total hours worked. The other productivity measure is multi-factor productivity. As its name suggests, it examines a much broader range of inputs, including capital, energy, and materials. Another big difference – the labor productivity numbers come out each quarter, but the multi-factor productivity data take a good deal longer to calculate.)

By contrast, labor productivity in manufacturing between the second and third quarters zoomed up at a 4.90 percent annual rate. That’s by far the best such result since the 6.60 percent recorded in the first quarter of 2011, much earlier in the current economic recovery, when such strong gains tend to be par for the course because they follow declines or very slow growth during recessions. This result was so good that it overshadowed the downward revision to manufacturing’s labor productivity growth during the second quarter. That figure, originally pegged at 2.30 percent, is now judged to have been 2.10 percent. And significantly, it unusually trailed the productivity growth for the economy as a whole.

Year-on-year, manufacturing’s relative labor productivity performance looks even better. From the third quarter of last year to the third quarter of this year, manufacturing labor productivity increased by 1.50 percent. That’s also low historically speaking, but it’s much faster than the rounding-error 0.40 percent growth registered by all non-farm businesses. In the second quarter, manufacturing held the edge here, too, but it was narrower – 1.00 percent versus 0.80 percent.

The real hourly compensation statistics published along with the productivity numbers tell a much different story, however. On a quarter-to-quarter basis, the growth of manufacturing’s inflation-adjusted pay did leave that of non-farm businesses in the dust – by 4.20 percent to 1.40 percent. But year-on-year, even though manufacturing outperformed the rest of the economy productivity-wise, too, its real pay gains lagged – 1.80 percent versus 2.20 percent.

In fact, since the last recession ended, in the second quarter of 2009, non-farm business labor productivity has grown by a total of 6.94 percent, and its after-inflation compensation is up 2.15 percent – which certainly supports the widespread view that American workers haven’t enjoyed enough of the benefits of working better. But in manufacturing, the situation has been even worse for workers. Its productivity is up 24.97 percent. But its real compensation has actually fallen – by 1.41 percent.

As I’ve written consistently in my productivity posts, both labor and multi-factor productivity are subjects where even normally supremely confident economists often fear to tread, and many critics charge that the U.S. government figures grossly understate America’s performance – and even that the mis-measurement keeps worsening. I haven’t examined these accusations completely enough to decide if they’re on target. But given the vital role played by productivity growth in fostering higher living standards on a sustainable, not bubbly, basis, if the Labor Department’s findings are even remotely accurate, they’re warning that fostering a real renaissance in America’s productivity-leading manufacturing sector is more important than ever.