As a result, the country's economic hardships risk morphing
from pressuring specific segments of the population to undermining more general
aspects of social justice.
The numbers are striking - and worrisome. Over the last 30
years, labour's share of the national pie has declined to 44% from 52%, with
profits growing at twice the annual rate for average wages.
Friday's monthly employment report adds to the concerns.
Unemployment remains very high, whether measured by the most-quoted
unemployment rate (9.1%), the less partial under- and unemployment rate,
(16.2%) or, most comprehensively, the proportion of total adults who are not
working (42% compared to 35% 10 years ago).
The duration and composition of joblessness is very
troubling. The average unemployed American has been without a job for 40 weeks,
a record level, and 44% of the unemployed have been out of a job for more than
26 weeks.
The incidence of joblessness is severe among those lacking a
college degree (11%, compared to 4% for college graduates). For 16- to
19-year-olds the unemployment rate is a horrible 25%.
Whichever number you look at, America's labour market
problems constitute a full-blown crisis with far-reaching economic, social and
political consequences. If current trends continue, joblessness will become
stubbornly embedded in the system and, distressingly, some of the unemployed
will become unemployable.
We all know that such a crisis fuels rising poverty and
misery. Shelter is an issue, too, as mortgage and other debt payments are
harder to meet. And credit will become even scarcer for those who are already
struggling.
Regrettably, there is little to suggest that, left to its
own devices, the economy would improve any time soon. It is mired in low growth
and insufficient job creation, and the balance of risks is increasingly tilting
toward a recession.
State intervention falls short
Since economic growth will not solve the issue, what about
government action? Here, initial conditions are far from ideal.
Budgets - be it state, local or federal - are generally
stretched. Indeed, rather than reduce the challenges facing workers, current
budgetary policies accentuate them through cuts in education, healthcare,
emergency benefits and other social services.
Meanwhile, active redistribution policies are off the table
with an extremely divided Congress vehemently disagreeing on what constitutes
appropriate policy responses. And the Federal Reserve is already in full policy
experimentation mode, with limited durable impact on economic growth.
It is tempting to blame all this on what economists call an
"exogenous factor" - a phenomenon that is outside direct societal
control. The two most cited factors are globalisation and technological
advances.
Globalisation has brought hundreds of millions of low paid
workers into the global labour force, thus putting pressure on higher paid ones
in advanced countries such as the US. Technological progress has allowed
companies to raise productivity, helping them generate record profits with
fewer employees.
Before embracing this explanation wholeheartedly, it is wise
to recall Reinhold Niebuhr's prayer asking God to grant us the serenity to
accept the things that cannot be changed, the courage to change those that can
and the wisdom to know the difference.
It is not feasible to reverse either of those two phenomena
(globalisation and technological advances). It is not desirable to do so either
given that, overall, they have a beneficial impact on global welfare.
Think of the millions of people around the world who have
been pulled out of absolute poverty and misery. Think also of the wider range
of affordable goods available to consumers globally (the largest segment of
which is in the US). And think of innovations that have saved lives and
improved the quality of life.
Rather than try to unwind globalisation and technological
progress, the challenge for the US is to adapt its labour force and economy to
these realities.
Through better policymaking at both the national and
international levels, America should - and can - be a bigger beneficiary rather
than a helpless victim. No wonder President Barack Obama's speech next week is
so eagerly anticipated, and rightly so.
While we must not underestimate the significant design and
implementation difficulties facing the president, many look to him for
restoring America's economic leadership.
This involves three challenging and complex steps (especially given today's economic, financial and political environment): propose a set of policies that decisively lift structural impediments to growth; mobilise sufficient political support to start the multi-year implementation process; and, as the data evolve, provide for timely mid-course corrections as appropriate.
Billionaires lead the way
Better-off segments of the population may be tempted to
dismiss all this as irrelevant to their particular reality. After all, they are
doing well - in several cases, extremely well.
But such an attitude is shortsighted. It is not just about
fairness; the rich have genuine self-interest in reversing the country's
economic malaise and the worsening of income and wealth inequalities.
Whichever way you look at it, the outlook for the wealthier
cannot be divorced from society as a whole. Such considerations have already
led some American billionaires to react in dramatic fashion.
Warren Buffett and Bill Gates are among those leading the
way, through both actions and words. Howard Schultz, the CEO of Starbucks, has
urged companies not to wait for government policy but instead to move more
aggressively to employ and produce more.
Many others are doing their part, albeit in a less public
fashion. They know that national prosperity cannot, and should not, be
sustained without social justice.
Unlike many parts of the world, America has experienced,
until now, few if any meaningful eruptions of social tensions. Yes, there have
been some "flash mobs", but they pale in comparison to what has
occurred elsewhere this US summer.
This is not about the comparisons out there to uprisings in
Arab countries driven by a thirst for social justice.
Rather, it is about what the series of unthinkables that has
already occurred in several advanced countries where, facilitated by social
media that lowers traditional coordination problems, more people are taking to
more streets to express frustration and, in some cases, a call for greater
social justice.
Britain and Greece have experienced widespread rioting. Car
torching in Germany is now way too common for comfort. France, Italy and Spain
have had national strikes. Israel has seen the sudden emergence of a large
social movement that has taken both local politicians and worldwide observers
by surprise.
This weekend, American workers will understandably temper
their celebrations. Their malaise is about more than the challenging economic
headwinds. It is about fundamental social issues.
America is now on the growing list of advanced countries
where social cohesion is coming under increasing pressure.
If left to fester through inadequate public and private sector responses, this phenomenon will damage the welfare of current and future generations. Loud alarm bells should be ringing everywhere.
- Reuters