Productivity Slowing But Do We Care?

    This morning, The Wall Street Journal has a story about the slowing of productivity. But it misses the main point. First, here's the main thesis:

Productivity Lull
Might Signal
Growth Is Easing

Ripples Could Confuse
Interest-Rate Outlook;
Fed Remains Optimistic

By GREG IP
March 31, 2007; Page A1

The U.S. productivity boom that began in the mid-1990s is showing signs of running out of steam.

If it proves more than a temporary lull, slower growth in productivity -- that is, output per hour worked -- could lead to slower growth in living standards, more difficultly paying for the baby boomers' retirements and a greater risk of inflation. Inflation fears would make the Federal Reserve more reluctant to lower interest rates.

Official measures have slowed since the late 1990s, when an acceleration in productivity growth made possible faster growth, lower unemployment, lower inflation and lower interest rates. It fueled a boom in business investment and stock prices. Today, in contrast, productivity growth has slowed, business investment has turned down and inflation is proving stubborn.

"All the elements of the good years of the '90s have now turned around," said Robert Gordon, an economist at Northwestern University who has been studying productivity trends for years. As a result, he said, current Federal Reserve Chairman Ben Bernanke faces "tougher decisions" than his predecessor, Alan Greenspan.

    The main issue though is that while productivity was on fire for many years, workers got very little from the gains. Here is something I wrote almost two years ago to make the point:

The link between productivity gains and wages has been broken. Recently, the Economic Policy Institute showed that productivity has grown almost three times faster than wages since 2001. During that time, 70 percent of the nation’s income growth has gone straight into corporate coffers as profits—presumably to continue to finance staggering pay and benefits for executives—a complete reversal from the previous seven business cycles when 77 percent of the overall income growth went to wages.

Although the theft of workers’ sweat of the brow is even more obvious today, the erosion began about three decades ago. Joel Rogers, director of the Center on Wisconsin Strategy, has made a recent stunning calculation: Had wages tracked productivity as they have over the past 30 years, “median family income in the U.S. would be about $20,000 higher today than it is.”

Check this out: Taking into account productivity, the minimum wage should be $19.12—which would make it almost 50 percent above today’s median wage (not to mention the pathetic $5.15 current minimum wage). Rogers concludes: “It’s fair to say that most American workers today are making substantially less than the (historically, productivity-normed) wage of the economy’s worst-off workers of a generation ago.”  Now, most of us would find this lopsided economic arrangement obscene just by its sheer unfairness: No matter how hard you work, you won’t get a fair return on your labor. Beyond the unfairness, it also tears at the country’s social fabric because an economic system cannot endure if it is perceived to be unfair and fails to deliver a rising standard of living.

    Here's the post where you can link to the rest of the article.

Baseball Picks

    Alright, sports fans (since I've never done a reader poll, I have no idea how many of you even care). I've got my Opening Day tickets for Monday for Yankee Stadium (I like the idea that we start the season playing the Devil Rays, although they were pretty pesky two years ago). Here are my picks for the season--always a dangerous thing because who the heck knows what happens over 162 games...injuries, trades, locusts and boils (hey, Opening Day falls on the first night of Passover).

    Drumroll, please:

    Division Winners:

    AL East: Red Sox--awesome starting pitching *potential*--D-Mat is the real thing (a guy who gives up no hits and strikes out a bunch but is annoyed at too many walks in a spring training game is a gamer).

    AL Central: Twins, though my heart is with Detroit. It's all about pitching...

    AL West: Toss-up (coward) between A's and Angels. I'd have to go with Angels because of Vlad Guerrero and A's losing Barry Zito.

    NL East: Gotta stick with boys from Shea.

    NL Central: Cardinals. But wouldn't be surprised if the Reds sneak in.

    NL West: Diamondbacks. I think I'll regret this one...

    Wild Cards: Yankees and Dodgers

    AL Champs: Twins

    NL Champs: Dodgers

    World Series Champs...Twins

    I reserve the right to change my mind on May 1st...chicken...

GDP Up, But Class Warfare Continues

Thank god, I said--finally, a great juxtaposition of an argument I've made for lo these many years (and, not to great success, admittedly) that the Gross Domestic Product tells us very little about the general welfare of most people.

    The Bureau of Economic Analysis just dropped an e-mail to report that:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.5 percent in the fourth quarter of 2006,according to final estimates.

    That number is revised up slightly than previously estimated. Overall, GDP growth last year was 3.3 percent--a number the president and many Republicans are using to run around the country claiming that the economy is doing just fine and so why are people whining?

    And in to that debate falls David Cay Johnston's piece today in The New York Times entitled "Income Gap Is Widening, Data Shows." Johnston has long been one of the best reporters in the MSM keeping tracking of the on-going class warfare in the country. Here are the killer first grafs:

Income inequality grew significantly in 2005, with the top 1 percent of Americans — those with incomes that year of more than $348,000 — receiving their largest share of national income since 1928, analysis of newly released tax data shows.

The top 10 percent, roughly those earning more than $100,000, also reached a level of income share not seen since before the Depression.

While total reported income in the United States increased almost 9 percent in 2005, the most recent year for which such data is available, average incomes for those in the bottom 90 percent dipped slightly compared with the year before, dropping $172, or 0.6 percent.

The gains went largely to the top 1 percent, whose incomes rose to an average of more than $1.1 million each, an increase of more than $139,000, or about 14 percent.

The new data also shows that the top 300,000 Americans collectively enjoyed almost as much income as the bottom 150 million Americans. Per person, the top group received 440 times as much as the average person in the bottom half earned, nearly doubling the gap from 1980.

   So, the bottom line is this: the economy may be growing--that is, alot of stuff is being made and sold--but the GDP growth is telling us very little about what that means for the average person. Income distribution is a much better barometer--and the facts there are quite astounding. It's pretty clear why workers are feeling anxious about the future. They are strapped, while the top one  percent are not.

   Which brings me to another point I've made: with these figures making clear that the top one percent of income earners are continuing to reap an  unconscionable slice of the nation's income, why is the Democratic Party not making the rolling back of the Bush tax cuts a top priority? Yes, Bush will veto any such attempt. But, the public will be with us.

No Loss For New York

    This is an example of what a determined effort can do. The Beast of Bentonville is throwing in the towel in its efforts to get into the New York City market:

Frustrated by a bruising, and so far unsuccessful battle to open its first discount store in the nation’s largest city, Wal-Mart’s chief executive said yesterday, “I don’t care if we are ever here.”

H. Lee Scott Jr., the chief executive of the nation’s largest retailer, said that trying to conduct business in New York was so expensive — and exasperating — that “I don’t think it’s worth the effort.”

Mr. Scott’s remarks, delivered at a meeting with editors and reporters of The New York Times amounted to a surprising admission of defeat, given the company’s vigorous efforts to crack into urban markets and expand beyond its suburban base in much of the country. In recent years, Wal-Mart has encountered stout resistance to its plans to enter America’s bigger cities, which stand as its last domestic frontier.

    Kudos for this effort go to the New York City Central Labor Council and the UFCW which worked together to spearhead a coalition to keep the Beast out of the city (that coalition spanned a wide variety of unions and other community groups). The coalition got out early and pushed the campaign as soon as people got a hint that Wal-Mart was sniffing around.

    I would make one other observation that I raised at least a year ago, maybe longer than that (the old brain can't remember and I don't have time to look): the UFCW should be focusing a long-term effort on non-union Whole Foods. It has opened mammoth stores in New York, knocking out lots of other supermarkets. It is the Wal-Mart of high-end food. And I would argue that it is more vulnerable to strong consumer opposition (the "B" word) because people who shop at Whole Foods, given its higher prices and fancy produce, have more disposable income. In other words, unlike Wal-Mart, which preys on poverty, Whole Foods appeals to people who could make a decision not to shop there.

On China

    The folks at Global Labor Strategies have a new look at how corporations are trying to weaken and attack any semblance of workers' power in China. Here are some points from the Executive Summary of the report, UNDUE INFLUENCE: Corporation Gain Ground in Battle Over China’s New Labor Law:

1.  A behind-the-scenes battle is raging worldwide over reforms in China’s labor law.  On the one side are U.S.-based and other global corporations who have been aggressively lobbying to limit new rights for Chinese workers. On the other side are pro-worker rights forces in China, backed by labor, human rights, and political forces in the U.S. and around the world.

2.  Corporations operating in China are claiming success in pressuring the Chinese government to weaken or abandon significant pro-worker reforms it had proposed.  Global Labor Strategy’s analysis of the revised draft of the law shows how many of their demands have been conceded. 

3.  Now both the American Chamber of Commerce in Shanghai (AmCham) and the US-China Business Council have launched an unpublicized new attack demanding further weakening of the law.

4. The Bush Administration recently revealed to the U.S. Congress that it has been “closely following” the drafting of the new labor contract law and that the American Embassy in China has been consulting AmCham on this matter.  But the Administration appears to have done nothing to disassociate itself from the efforts of U.S. corporations and their representatives to restrict the rights of Chinese workers.   

5.  Chinese and international forces are engaged in a significant pushback against the gutting of China’s new labor law.  U.S. members of Congress have introduced legislation decrying the corporate intervention and apparent Administration complicity; China’s official labor organization, the All-China Federation of Trade Unions (ACFTU), has taken a strong stand against corporate pressure; international union federations have pressured their employers to reverse course; and human rights organizations have mobilized support for Chinese workers’ rights.

6.  Such counter-pressure has led to splits among global companies operating in China. Nike has virtually repudiated the efforts of the United States Chamber of Commerce in Shanghai (AmCham) to lobby against the law.  And the E.U. Chamber of Commerce has reversed its opposition to the law and renounced its threat that its member companies may leave China if the law is passed.

7. The battle is likely to come to a head in the Chinese National People’s Congress in April or June of 2007.  But the implementation of the new law, and the further expansion of Chinese workers’ rights, will depend on the rapid changes going on in Chinese labor relations, which are increasingly marked by burgeoning strikes, worker protests, lawsuits, and changing forms of labor organizations, including the expansion of the ACFTU into foreign invested enterprises such as Wal-Mart.

8. The new focus on the role of U.S. and other global corporations in China represents the emergence of a “new paradigm” for analyzing the current form of globalization not just in terms of a “trade debate” based on “free trade vs. protectionism,” but as a product of a global “sweatshop lobby” that is deliberately shaping labor law and labor markets around the world.

9. The role of China in the global economy is shaping up to be the dominant economic issue in the 2008 presidential elections in the U.S.  With widespread anxiety about the security of U.S. jobs, the role of U.S. corporations in opposing rights for Chinese workers is emerging as a significant issue in those elections.

They Are Just Small Boxes Now

    One way to judge that the war has gone on far too long--yes, it should never have started--is how death seems to become routine. Five soldiers were killed on Sunday due to car bombs exploding in Baghdad and areas near the capitol--yet their deaths only merit a short, buried story in The New York Times. Ho-hum...another five lives wasted.

    Which makes Bob Herbert's column on John and Elizabeth Edwards even more appropriate:

The pack is obsessed with the horse race, which is regrettable. It would be far more constructive and interesting if this heightened attention to Mr. Edwards’s campaign resulted in the media and the public taking a closer look at the issues he has been pushing, not just in the campaign but ever since his unsuccessful run for vice president in 2004.

    And:

A closer look at John Edwards’s views on health care, poverty and other issues would require, of course, a closer look at the positions of the other candidates. What could be better? What’s the sense of having a presidential campaign that takes up the better part of two years if the bulk of that time is spent on foolishness?

    Exactly. The idiotic nature of the coverage of the presidential race pushes the real issues into small boxes.

Heroes of the Vote

    I understand the rationale that people are giving for the vote on the supplemental appropriations bill--that it, for the first time, sets a deadline for withdrawal of the troops. But, I think those people who pushed for an end to the war this year are heroes, as the After Downing Street people show.

The UAW Gears Up

    This is going to be a tough fight for our sisters and brothers in the UAW (of which I am a member). The Wall Street Journal has a story previewing the bargaining convention taking place in Detroit next week:

United Auto Workers union leaders will convene in Detroit next week for a critical collective bargaining convention against the backdrop of hard times for the U.S. auto makers and suppliers that anchor the 72-year-old union's membership.

The convention, scheduled for Tuesday and Wednesday, is a longstanding ritual for the UAW in the runup to national contract talks with Detroit's Big Three, which begin this summer. In the past, UAW leaders used the convention to rally their troops to seek improvements in job security, pay and health-care benefits.

But this year, the UAW will confront intense pressure from the auto makers to give up hard-won gains, amid the most difficult environment for the unionized U.S. auto industry since the dark years of the recession and energy shocks of the early 1980s.

    Shake your head time for this little nugget:

At the same time, GM and Ford have announced plans to give bonuses or stock awards to top management -- reflecting the diverging markets for skilled, managerial talent and UAW hourly workers who increasingly are measured against lower wage, nonunion workers in the U.S. and elsewhere in the world.

    Well, sure, it may be true that UAW members are competing against lower wage workers. But, the "diverging markets" relative to pay have more to do with the unbelievable corporate greed, not some competitive issue. Executive pay abroad is not close to the outsized packages that the pigs in our corporate suites seem to believe they are entitled to.

    Yesterday, I pointed out that GM executives have no shame in their excessive greed. In today's piece, a UAW leader asks the same question:

"Why do they deem it necessary to reward these executives with exorbitant bonuses?" asked Rick Vargesko, president of UAW local 544, whose members work at a GM metal-fabrication plant in West Mifflin, Pa. Recalling the union's acceptance of buyouts in the past two years to help GM rein in costs, he added, "I thought we were in this together. Are we saving this company or not?"

    The answer is that auto executives don't really care about saving the industry if they end up with huge pay and pensions--they figure that they can land somewhere else if the company goes under (failure in the corporate suite has never been a barrier to future employment) or retire somewhere and live off the pile of money they've socked away--money that the rank-and-file workers they are about to screw made for the company. Is this a great system, or what?

Have They No Shame

    Obviously, the answer is no, is you caught today's story in the The Wall Street Journal:

For the first time since 2003, General Motors Corp. is giving bonuses in the form of stock to Chairman and Chief Executive Rick Wagoner and other top executives, a move that could complicate GM's efforts to get further concessions from its biggest U.S. labor union this year.

Mr. Wagoner received restricted stock valued at $2.8 million and 500,000 options, according to disclosures GM made to the Securities and Exchange Commission. A total of 18 executives disclosed equity grants in separate filings yesterday. The company will disclose full compensation details in its annual proxy, which will be released in late April.

GM's board made the stock grants, which will vest over time, even though the Detroit auto maker has lost a total of $12.4 billion in the past two fiscal years: $10.4 billion in 2005 and $2 billion in 2006. The company hasn't formally provided guidance on its 2007 earnings expectations and likely won't, due to a recent policy to not give detailed forecasts.

    Ridiculous. And predictable. And wait until negotiations start with the UAW--Wagoner and his minions will be out working the press, explaining how dire the company's finances are and how it is so important for the union to give concessions. Mr. Wagoner, can you see my middle finger now?

Dems Hug Lobbyists

    Last Fall, during the election, I mused numerous times about the worrisome phenomena of Democrats hugging corporate lobbyists (for example, here). Yeah, I know, this isn't new. The point was that if Democrats wanted to take power and really be different, they needed to reject those kind of relationships.

    Well, The Politico has a story which is not a good sign:

The top Democrats on the 20 most business-related congressional committees hauled in nearly $240,000 from the 35 most active corporate political action committees in the first couple of months of the year, according to an analysis by The Politico.

Their Republican counterparts -- the committees' ranking members -- received $182,200 from the same industry committees.

The giving trend reflects a simple reality: Democrats are resetting congressional legislative priorities, threatening some industries and boosting others. Previous Republican chairmen, for instance, were content to largely protect the energy industry; the new Democratic hierarchy wants to remake it. Companies from both sides of that equation are now trying to make sure they can get a hearing with the new agenda-setters.

    Read the rest here. This is a far more important aspect of our politics than who happens to be leading in the polls.