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The False Economy


Yes, unemployment rates are low. There are jobs for most people who want them. But this has not really budged the national worry over income inequality and the widespread belief that the economy does not work for most of us. There’s a good reason for that–it does not. Unemployment numbers are a facile measure of the economy. High unemployment is by definition bad but low unemployment is only good in so far as it is better than high unemployment. It actually tells us very little about the functioning aspects of the economy. The lived economy–wage growth, debt levels, belief in a better future–these are metrics far more useful. And these are still very bad. This has led pundits to try and figure out why, which are often not very enlightening since they just repeat what anyone paying attention already knows, but they can be useful in at least stating the issues plainly.

So, why doesn’t today’s full employment come with effervescence?

Part of the reason could lie in the fact that once you look closely, you start to notice cracks in the glossy veneer, and the flaws become visible. Income inequality is still significant. Deep fractures exist within society and on the factory floor. In some cities, new arrivals take the best jobs while the rest struggle to catch up. Economic divisions remain in place along racial and gender lines. Many continue to struggle with student debt and health care costs. And anger over politics may be skewing views of the economy. There’s no easy explanation for all of it, and it’s hard to unpack all of the reasons why. But here’s a snapshot of some of the fault lines that might explain some of this:

During the Great Recession and the years that followed, wages fell and workers lost negotiating power. Since then, even as the economy has grown, year after year, companies have shown a remarkably high reluctance to raise wages even when they can’t find people. It’s left economists scratching their heads — this is not how the free market is supposed to work.

One piece of the puzzle behind suppressed wages can be found in the dual wage scale adopted by many factories during the Great Recession, where new hires for the same jobs would get substantially lower pay and benefits. That wage structure proved to be a disaster for morale. It created friction among workers on the factory floor and resulted in poor-quality work. The three big automakers discarded the system, and others followed. Other unions are negotiating their way out of this system, but it hasn’t deterred others from adopting it — UPS just adopted this for its drivers.

There’s no doubt that the Ubers, Lyfts, Amazons and Instacarts of the world have made the side hustle easy. Anecdotally, we know that stay-at-home parents might do a little Amazon or grocery delivery on the side when the kids are at school. It brings in some extra income.

But surveys show that for many, this is not a side gig: It’s their main job. The problem is, these jobs rarely come with benefits. The workers are not even considered employees. There’s no job security — you can get fired over text. And the income can vary vastly from month to month because each day, the number of deliveries is different.

There is more as well on the structural inequality based on race that endlessly impacts Latino and Black workers.

In short, the economy is basically terrible for most people and the next time there is a recession, it will become even worse since the only that has happened since 2008 to mitigate the problems of American life for workers is a very moderate health care reform that has sent the Republican Party into spasms of fury for a decade now. It’s going to get real ugly out there real soon.

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