Though most Americans don’t realize it, for the past three decades real wages in the United States have not risen. In 2007 the hourly wage of the average American worker, adjusted for inflation, was lower than in 1972.
What caused this prolonged wage stagnation? Most observers acknowledge the role played by economic globalization, in the form of outsourcing and intense competition from abroad. But two other powerful factors figure in the mix: the erosion of equalizing institutions and a glut of available workers. We know a lot about the former, from the decline of unions to the stubbornly low minimum wage. The worker surplus is less familiar. We hear about specific or seasonal labor shortages in the economy (nurses, farm laborers), but general labor shortages are extremely rare. Federal data indicate that we have achieved full employment only three times since World War II: in the early 1950s (Korea), the late ’60s (Vietnam), and the late ’90s (a miracle).
But even in the best times, our high employment rates have been misleading. Take last April—before the full impact of the housing collapse was felt—when the government announced an unemployment rate of 5 percent. Scholars and activists have long questioned the Bureau of Labor Statistics employment criteria, which characterize as unemployed only those who have recently looked for work and not found it. Thirty years ago the BLS inaugurated alternative measures to include people who wanted work but had not searched recently, and part-timers who wanted full-time work. Adding in those categories, the bureau itself generated a 9.2 percent unemployment rate for April. And when the National Jobs for All Coalition included people who have given up looking for work, or are hampered from working outside the home because of family responsibilities, it came up with an unemployment rate of 11.1 percent. Our official unemployment statistics, in other words, are misleading. We have far more people available for work than get reported, and too few jobs to give them. Among other consequences, this means weaker bargaining power for employees, resulting in chronically weak wages.
How might we work toward a solution? First, we need to come to terms with the depth of the job shortage, using more accurate figures. Second, the Federal Reserve needs to take unemployment and low wages as seriously as it does instability in capital markets or inflation. When it ignores hidden unemployment and low wages, it does so at the peril of millions of Americans. Third, politicians must use the current recession as an impetus for dealing with our long-term jobs problem.
Addressing this problem cannot be done without large-scale federal investment, committing public money to generate good jobs to repair our crumbling infrastructure. Think of Katrina, the bridge collapse in Minneapolis, the failure of levees this summer in the Midwest, and the physical condition of many of our city schools. We ought to expand the underfunded Youth Conservation Corps, which pays young people to plant trees and conduct urban-beautification projects, projects that refurbish America even as they build character. We need more and better-paid child-care workers. Federal investment in a government environmental corps, something similar to the New Deal’s WPA, could promote cleaner air and water and renewable energy. It could help develop and deploy low-cost solar panels, insulate homes and government buildings, and plant trees to clean the air.
Some of these activities are already being fostered by alternative groups like Green for All and the Apollo Alliance. But we need federal funding to boost such efforts and insure that they provide decent wages and benefits. While the WPA was a fine model for putting large numbers of people to work at needed tasks, it kept pay levels low, so as not to compete with the private sector. We can no longer afford that luxury in an era when much of the private sector is addicted to policies that rely on low wages, stingy benefits, and reduced commitment to employees.
A major national jobs program would require affirmative action for those living in depressed communities, but it need not be limited to the very poor. It should be open to a broad spectrum of Americans—such as the working-class men and women in the Midwest who lost good factory jobs and now eke out a living at Wal-Mart.
But how do we pay for it? A program that would fund 4 million jobs and leave money for administration sounds costly—and it would be, probably on the order of $200 billion a year. Yet $200 billion is less than some recent federal deficits; and in the end, whether the money seems large or small will depend on whether you like what it is doing. The issue isn’t the cost but how we want to use our national resources. Canceling the Bush tax breaks for households earning above $200,000 would soon save over $100 billion annually. Ending the war in Iraq, another $100 billion. There’s your jobs program.
While a broad federal jobs program would cost money up front, in the long run it would create wealth by enriching the quality of our lives and adding millions of new workers, who in turn would pay taxes and contribute to Social Security. It would diminish the number of people on welfare and food stamps, while stimulating job creation in other sectors. In sum, it would increase overall social well-being. Remember, too, the aim of a government jobs program is not simply that every adult has a full-time job. Rather, it is to ensure that eventually more people will have jobs that pay well. People should earn enough to support a family. They should be able to create enough of a financial cushion that they can step out of the labor force to care for children, tend to sick relatives, or engage in the democratic process.