Health check: US manufacturing is in trouble [feedly]

Health check: US manufacturing is in trouble
https://economicfront.wordpress.com/2020/02/18/health-check-us-manufacturing-is-in-trouble/

President Trump is all in, touting his success in rebuilding US manufacturing.  For example, in his state of the union address he claimed:

We are restoring our nation's manufacturing might, even though predictions were that this could never be done. After losing 60,000 factories under the previous two administrations, America has now gained 12,000 new factories under my administration.

Apparently, it is a family achievement.  Joe Ragazzo, writing at TPM Café, reports that:

In a towering act of sycophantry, the National Association of Manufacturers announced Friday that it will be giving Ivanka Trump the organization's first ever Alexander Hamilton Award for "extraordinary support of manufacturing in America." The organization made the outrageous claim that "no one"  — no one! — has ever "provided singular leadership and shown an unwavering commitment to modern manufacturing in America" like she has.

Unfortunately, US manufacturing is far from healthy.

Production

The reality is that manufacturing output has been relatively flat over the last two decades, thanks in large part to the globalization of US production.  In 2019, despite the growth of the overall economy, the manufacturing sector actually fell into recession.  In contrast to Trump's claim, manufacturing output fell 1.3 percent over the year.

The figure below shows real manufacturing output indexed to 2012.  We see slow but steady growth from 2000 to 2007, relatively flat growth from 2010 to 2018, and then a decline in real output in 2019.

The manufacturing sector's woes in 2019 are on display in the following figure.

Investment

In line with these trends, as we can see below real investment in new structures by manufacturing firms has also been falling.  Real investment fell from $73.7 billion in 2015 to $56.4 billion in 2019.

Productivity

Manufacturing productivity is at a standstill.  The following figureshows manufacturing output per worker hour, indexed to 2012.  As we can see, it was largely unchanged from 2010 to 2014.  Since then it has trended downward.

Employment

The employment story is even worse.  As the next figure shows, manufacturing employment, in millions of jobs, took a nose dive beginning in the late 1990s and has yet to make a meaningful recovery.

Some 5 million manufacturing jobs have been lost since the late 1990s.  Nearly 90,000 U.S. factories have been lost as well.  And in line with manufacturing's current recession, manufacturing employment, as we see below, is again falling.

Earnings

Equally alarming, the average hourly earnings of production workers employed in manufacturing has now fallen below the average hourly earnings of private sector production and nonsupervisory workers.  Thus, even if US policy were to succeed in bringing back or spurring the creation of new manufacturing jobs, they likely won't be the living wage jobs of the past.

As the Monthly Labor Review explains:

Although manufacturing industries had a reputation for stable, well-paying jobs for much of the 20th century, shifts within the industry in the last several decades have considerably altered that picture. Since 1990, average hourly earnings trends in the various manufacturing industries have been disparate, with a few industries showing strong growth but many others showing growth rates that are lower than those of the total private sector. In fact, average hourly earnings of production and nonsupervisory workers in the total private sector have recently surpassed those of their counterparts in the relatively high-paying durable goods portion of manufacturing.

As we can see in the following figure, in 1990 average hourly earnings of production workers in manufacturing were greater than those of production and nonsupervisory workers in the total private sector (by about 6 percent.)  However, by 2007, average hourly earnings in the private sector had surpassed average hourly earnings in manufacturing.  And by 2015, average hourly earnings in the private sector surpassed average hourly earnings of manufacturing workers in the more highly compensated durable goods sector.  In 2018, the average hourly earnings of private sector production and nonsupervisory workers was approximately 5 percent greater than those of their manufacturing counterparts.

Workers in the auto industry have especially taken a big hit.

Trade

The overall trade deficit, which reflects the combined balances on trade in goods and services, slightly improved in 2019—falling by 1.7 percent or $10.9 billion.  So did the deficit in the trade of goods, falling by 2.4 percent or $21.4 billion. However, those improvements were mostly driven by the rapid growth in US exports of petroleum products.  The trade deficit in non-oil goods, mostly manufactures, actually increased by 1.8 percent in 2019, as can be seen in the following figure.

As Robert E. Scott remarks,

The small decline in overall US trade deficits follows an 18.3 percent increase in the goods trade deficit in the first two years of the Trump administration. Taken altogether, the US goods trade deficit increased $116.2 billion (15.5 percent) in the first three years of the Trump Administration. . . .

Meanwhile, the deficit in non-oil goods trade has nearly tripled since 2000, rising from $317.2 billion in 2000 to $852.3 billion in 2019, an all-time high. For the past two years, the non-oil goods trade deficit also reached record territory as a share of GDP, reaching or exceeding 4.0% of GDP. This growing U.S. trade deficit in non-oil goods is largely responsible for the loss of 5 million U.S. manufacturing jobs since 1998.

 

As we can see, talk of a manufacturing renaissance is nonsense.  And there is no reason, based on Trump administration's economic policies, to expect one.

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Piketty: Social-federalism vs national-liberalism [feedly]

The rotten  fruits of austerity 'liberalism'

Social-federalism vs national-liberalism

Thomas Piketty

https://www.lemonde.fr/blog/piketty/2020/02/11/social-federalism-vs-national-liberalism/

The United Kingdom officially left the European Union a few days ago. So now, make no mistake; along with the election of Trump in the United States in 2016 this is a major upheaval in the history of globalisation. The two countries which had the choice of ultra-liberalism with Reagan and Thatcher in the 1980s and which, since then, have witnessed the highest rise in inequalities, have decided three decades later to opt for nationalism and a form of return to frontiers and national identity.

This change in direction can be viewed from different angles. In its way, it expresses the failure of Reaganism and Thatcherism. The British and American middle and working classes have not experienced the affluence promised by absolute liberalism, laissez-faire policies and economic deregulation. Over time they have felt themselves increasingly under pressure from international competition and the world economic system. Culprits had to be found. For Trump it was the workers from Mexico, China, and all those cunning people in the rest of the world who are reputed to have stolen the hard work of white America. For the Brexiters it was the Polish workers, the European Union and all those who attack the grandeur of Great Britain. In the long run, withdrawing into nationalism and identity-based politics will in no way resolve any of the major challenges of our times which are associated with inequality and global warming. This is all the more true as the Trumpists and the Brexiters have added a new layer of fiscal and social dumping in favour of the wealthiest and the most mobile which will only increase the inequalities and frustrations. But in the immediate future, the nationalist-liberal discourse often appears to those voters who do still vote as being the only new and credible answer to their sense of unease, for lack of any convincing alternative discourse.

De facto, this risk of ideological drift extends far beyond the English-speaking world. The temptation of nationalism and xenophobia exists in many places, in Italy and in Eastern Europe, in Brazil or in India. In Germany, in Thuringe the "right-wing centre" party has just elected a regional government with support from the extreme right for the first time since World War Two. In France, the Arabophobic hysteria has grown to epic proportions. An increasing share of the press seems to imagine that the "left" is responsible for the rise in Islamism at world level as a result of its permissiveness, its support for the Third World and its electoral politics. In reality, if voters of North African or sub-Saharan origin vote for the left-wing parties, it is primarily due to the violent hostility expressed toward them by right wing and extreme-right parties; the same applies to black voters in the United States or Muslims in India.

Over and above national specificities, Brexit must be analysed in the first instance for what it is: the consequence of a collective failure in the way in which economic globalisation has been organised since the 1980s, particularly within the European Union. All the European leaders in turn, in particular the French and the Germans bear their share of responsibility. The free circulation of capital, goods and services with no collective regulation or joint fiscal or social policy functions primarily to the benefit of the richest and the most mobile, and undermines the most disadvantaged and the most vulnerable. It is not possible to define a political project and a model for development by relying simply on free trade, everyone competing with everyone else and market discipline.

True, the European Union has added two elements to this general scheme of organisation of the world economy: free circulation of persons and a small joint budget (1% of European GDP) maintained by contributions from States and financed by small transfers from the richest countries (approximately 0.5% of their GDP) to the poorest ones. Along with the shared currency (which we also find in West Africa) this is what distinguishes the E U from other free trade areas in the world, like for example North America (Mexico, the United States and Canada), where there is neither free circulation of persons nor a joint budget or joint regional structural funds.

The problem is that these two elements are not enough to bond these countries together. The Brexiters gamble is simple: the present rate of globalisation enables access to free trade in goods, services and capital, while at the same time, maintaining control over the flow of people and does not involve contributing to a joint budget.

This trap which spells death to the European Union can only be avoided by radically redefining the rules of globalisation with a "social-federalist" type of approach. In other words, free trade must be conditional on the adoption of binding social aims enabling the wealthiest and most mobile economic actors to be obliged to contribute to a model for sustainable and equitable development. To sum up: the nationalists attack the free circulation of people; social federalism must deal with the circulation of capital and the fiscal impunity of the wealthiest. Karl Polanyi and Hannah Arendt in 1944 and 1951 denounced the naiveté of the social democrats in the face of capital flows and their federal timidity – a lesson that still applies today. To go in this direction, a revision of the European and international treaties is required, beginning with a few countries. In the meantime, we can and must all take new unilateral and incentive measures, for example by taxing imports from countries and firms which practice fiscal dumping. If we do not oppose national-liberalism with a resolute alternative, it will sweep everything aside in its path.

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Economic Update - Socialism and Left Unity in the US [feedly]

Economic Update - Socialism and Left Unity in the US
https://economicupdate.podbean.com

Updates on Trump's 2019 $ 1 trillion plus deficit, burden of poor countries' debt, Amsterdam forgives young peoples' debts, "strong man" governments' fund-raising strategy, and gross failures of Trump/GOP's 2017 tax cut. Interview Karen Ranucci (Center for Critical Thought) and Rob Robinson (Left Forum) on their programs and their collaboration to serve the rising US interests in socialism and building a movement for transition.  

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Telephone Switchboard Operators: Rise and Fall [feedly]

Tim Taylor dives into details of a technological transition affecting thousands of workers and the structure of a regulated monopoly

Telephone Switchboard Operators: Rise and Fall
http://conversableeconomist.blogspot.com/2020/02/telephone-switchboard-operators-rise.html

n  1950, there were 342,000 telephone switchboard operators working for the Bell Telephone System and some independent operators, as well as another 1 million or so telephone switchboard operators who worked at private locations like office buildings, factories, hotels, and apartment buildings. Almost all of these switchboard operators were female. To put it another way, about one out of every 13 working women in 1950 were telephone operators.  But by 1984, national employment as an operator in the telecommunications industry was down to 40,000, and now it's less than 2,000 (according to the Bureau of Labor Statistics). 

 David A. Price sketches the  history of this rise and fall in "Goodbye, Operator," appearing in Econ Focus (Federal Reserve Bank of Richmond, Fourth Quarter 2019, pp. 18-20). The story provokes some thoughts about the interaction of workers with new and evolving technologies. 

For more than a half-century from the late 19th century up to 1950, technology was creating jobs as telephone operators. From the phone company point of view, customers needed personal assistance and support if they were to incorporate this new technology into their lives. The workers with what we would now call the "soft skills" to provide this interface between technology and customers were reasonably well-rewarded. Price writes:

In the early decades of the industry, telephone companies regarded their business less as a utility and more as a personal service. The telephone operator was central to this idea, acting as an early version of an intelligent assistant with voice recognition capabilities. She got to know her 50 to 100 assigned customers by name and knew their needs. If a party didn't answer, she would try to find him or her around town. If that didn't succeed, she took a message and called the party again later to pass the message along. She made wake-up calls and gave the time, weather, and sports scores. During crimes in progress or medical emergencies, a subscriber needed only to pick up the handset and the operator would summon the police or doctors. ...

While operators were not highly paid, the need to attract and retain capable women from the middle classes led telephone companies to be benevolent employers by the standards of the day — and in some respects, of any day. Around the turn of the century, the companies catered to their operators with libraries, athletic clubs, free lunches, and disability plans. Operators took their breaks in tastefully appointed, parlor-like break rooms, some with armchairs, couches, magazines, and newspapers. At some exchanges, the companies provided the operators with a community garden in which they could grow flowers or vegetables. In large cities, company-owned dormitories were offered to night-shift operators.

But even as the number of telephone operator jobs was growing rapidly, the job of being a telephone operator evolved dramatically. By 1950, the hyper-personal touch seems to have greatly diminished, and the telephone operator skills involved being able to handle "the board," which involved plugging and unplugging several hundred connections per hour.

Looking back, the slow diffusion of automatic telephone switching technology seems a little puzzling. One reason is that digital technology differs in some fundamental ways from the earlier methods of automation. It's a standard story that the switchboard operators were replaced by automation. But why weren't they replaced by automation much earlier? Part of the answer seems to be that the automated telephone-switching systems in the first half of the 20th century did not actually display economies of scale. Price writes: 

With the electromechanical systems of the day, each additional customer was more, not less, expensive. Economies of scale weren't in the picture. To oversimplify somewhat, a network with eight customers needed eight times eight, or 64, interconnections; a network with nine needed 81. "You were actually getting increasing unit costs as the scope of the network increased," says Mueller. "You didn't get entirely out of the telephone scaling problem until digital switching in the 1960s."

This pattern of technology led to a situation where small-scale independent phone companies were more likely to use automated switching in the early part of the 20th century, while the giant Bell company continued to rely heavily on combinations of automatic switching with oversight from human switchboard operators--especially for long-distance calls.

More broadly, diffusion of technology is important in many contexts. Some well-known historical examples of important technologies that diffused slowly, over decades, include tractors and electricity. In the modern economy, a prominent pattern across many industries is that a few leading "superstar" firms are jumping farther ahead in terms of productivity, and their example of how to achieve such productivity gains is apparently not diffusing as quickly to other firms. There's an old economic lesson here, which is that for purposes of economic growth, just inventing a new technology is not enough: instead, many participants in the economy need to find ways to change their behavior in both simple and more fundamental ways to take full advantage of that technology. 

Back in 1964, even knowledgeable industry observers thought that the decline in telephone operators from about 1950 to 1960 was a one-time and temporary shift. Elizabeth Faulkner Baker wrote in  her 1964 book, Technology and Women's Work:

In sum, it is possible that the decline in the relative importance of telephone operators may be nearing an end. It seems that in the foreseeable future no machines will be devised that can completely handle person-to-person calls, credit-card calls, emergency calls, information calls, transient calls, messenger calls, marine and mobile calls, civilian defense calls, conference calls, and coin-box long-distance calls. Indeed, although an executive vice-president of the American Telephone and Telegraph Company has said that the number of dial telephones will reach almost 100 percent in the next few years and that there will be an increasing amount of customer dialing of long-distance calls: "Yet we will still need about the same number of operators we need now, perhaps more."

Again the underlying notion was that the job of being a telephone operator would evolve, but not the need for people who could play a role of facilitating use of telecommunications technology easier for customers. When it comes to the specific job of telephone operator, this prediction was clearly off-base. (Although as a college student in the late 1970s and early 1980s, I remember the days when if you really needed to call home, you could just grab a public phone, dial zero for "operator," and be answered by a person, from whom you would recite your home phone number and request a collect call.) But when thinking more broadly about the interaction between workers and technology, the central question remains as to what areas now and in the future will continue to benefit from human support at the interface between new technologies and ultimate users. 

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Top five Valentine’s Day gifts ideas for U.S. workers: Nothing spells ‘romance’ like a fair wage and quality jobs [feedly]

Top five Valentine's Day gifts ideas for U.S. workers: Nothing spells 'romance' like a fair wage and quality jobs
https://www.epi.org/blog/top-five-valentines-day-gifts-ideas-for-u-s-workers-nothing-spells-romance-like-a-fair-wage-and-quality-jobs/

That's why we decided to sum up what we think are the top five Valentine's Day gifts ideas for working people across the country.

Power through collective action!

Our economy is out of balance. Corporations and CEOs hold too much power and wealth, and working people know it. Workers are mobilizing, organizing, protesting, and striking at a level not seen in decades, and they are winning pay raises and other real change by using their collective voices.

But, the fact is, it is still too difficult for working people to form a union at their workplace when they want to. The law gives employers too much power and puts too many roadblocks in the way of workers trying to organize a union. The Protecting the Right to Organize (PRO) Act will go a long way toward restoring workers' right to join together to bargain for better wages and working conditions by streamlining the process when workers form a union, ensuring that they are successful in negotiating a first agreement, and holding employers accountable when they violate labor law. The U.S. Senate should join the House of Representatives and pass the PRO Act in order to restore power to working people.

Affording bread…and roses

The real (inflation-adjusted) minimum wage is now roughly 30 percent lower than it was in 1968, and it has been more than 10 years since congress raised the minimum wage—the longest stretch in history. To end this shameful streak, it is incumbent upon the Senate to take up and pass the Raise the Wage Act immediately. Raising the federal minimum wage to $15 by 2025 would lift wages for 33.5 million workers across the country—more than one-fifth of the wage-earning workforce. The increase would boost total annual wages for these low-wage workers by $92.5 billion, lifting annual earnings for the average affected year-round worker by $2,800. Recent survey data have shown that 74% of U.S. workers live paycheck to paycheck. Policymakers should give working people the ability to make ends meet—but also the ability to treat themselves occasionally.

Figure A

Pay workers for their hours worked, or give them their time back

The U.S. Department of Labor announced in September its final overtime rule, which will set the salary threshold under which salaried workers are automatically entitled to overtime pay to $35,568 a year. The rule leaves behind millions of workers who would have received overtime protections under the much stronger rule, published in 2016, that Trump administration chose to abandon. A stronger overtime protection would pay more workers for working more than 40 hours a week, or allow them extra time with their families.

Seven states have already taken steps to raise the overtime threshold, but without further action, it's estimated that 8.2 million workers who would have benefited from the 2016 rule will be left behind by the Trump administration's rule, including 3.2 million workers who would have gotten new overtime protections under the 2016 rule and 5.0 million who would have gotten strengthened overtime protections under the 2016 rule. States should follow suit and extend the overtime protections so workers don't continue to lose out on their hard-earned wages.

Let your workers move on

At least 36 million workers—27.8% of the private-sector workforce—are required to enter noncompete agreements. Noncompete agreements are employment provisions that ban workers at one company from going to work for, or starting, a competing business within a certain period of time after leaving a job. Establishments with high pay or high levels of education among workers are more likely to use noncompetes, but noncompetes agreements are also common in workplaces with low pay and low levels of education. More than a quarter (29.0%) of private-sector workers with an average hourly wage below $13.00 require noncompetes for all their workers. Noncompetes are part of a disturbing trend of employers requiring workers to sign away their rights. Noncompetes may be contributing to weak wage growth, given that changing jobs is how workers often get a raise. And given that noncompetes limit the ability of individuals to start businesses or take other jobs, it also is not difficult to see that noncompetes may be contributing to the declines in dynamism in the U.S. labor market. Congress should pass the bipartisan legislation, the Workforce Mobility Act of 2019, to prohibit noncompete agreements.

Labor protections for Uber drivers shuttling around Valentine's couples

The General Counsel of the National Labor Relations Board recently released a memo claiming that Uber drivers are independent contractors, not employees of Uber. The reality is that these drivers have very little entrepreneurial freedom: Drivers can't raise revenues because they can't control prices or expand their customer base through marketing. Unlike a typical enterprise, Uber drivers do not build earnings as they get more experience. Uber drivers are not able to choose their customers—drivers are penalized for rejecting or not accepting trips. And after accounting for Uber's commissions and fees and vehicle expenses, and taking into account the cost of a modest package of health insurance and other benefits equivalent to those earned by W-2 workers, Uber drivers earn the equivalent of $9.21 in hourly wages—less than what is earned by 90% of all other wage and salary earners, and below the minimum wage in 13 of the 20 major urban markets where Uber operates.

Recently, AB5 went into effect in California, a set of protections aimed at combatting the misclassification of workers as independent contractors, helping ensure that California's employees have access to basic labor and employment protections denied to independent contractors including: minimum wage and overtime protections, paid sick days and family leave, workers' compensation benefits, and unemployment insurance benefits. Policymakers across the country should take notice and provide similar protections to workers in their states.

 

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