[lbo-talk] Wageless, profitable recovery

[David Green]

This article was recently published in my local right-wing newspaper:
Despite increased production, employment and earnings data show long-term economic decline in Champaign-Urbana region
David Green
Recent economic data (until the most recent) show decreases in unemployment. Such reports are uninformative if not deceptive for at least three reasons: First, decreases in the rate of unemployment are largely attributable to a decline in labor force participation since its peak prior to the recession, in late 2008. Second, a focus on unemployment since the beginning of the current recession obscures a long-term decline in employment—relative to population—over recent decades. Third, emphasizing unemployment rather than production and earnings data obscures long-term trends regarding productivity, profits, wages, and inequality. 
These trends belie what little optimism can be manufactured from trivial and unstable employment gains. Employment and earnings of the median (middle) earner and household have suffered from long-term decline; barring radical or at least rational political measures, there’s no reason to predict a brighter economic future for most of us.
These observations generally apply to the nation as a whole, and can be characterized by local data, which highlight the difference between worker productivity and total production on one hand, and general prosperity on the other. The Champaign-Urbana Metropolitan Statistical Area (MSA) is a geographic definition used in data collected by the U.S. Census, the Bureau of Labor Statistics (BLS), and the Bureau of Economic Analysis (BEA). All the data below are accessible at government websites. 
The C-U MSA includes Champaign, Ford, and Piatt counties. Between 1990 and 2010, its population grew from 203,000 to 231,000, or 14%. During that same period, the number of employed grew by 5%. Employed workers as a percentage of the entire population decreased from 52.5 to 48.5; in current terms, this means over 9,000 fewer jobs. There are currently nearly 112,000 jobs in the C-U MSA, but this number was first surpassed in April 2000, over 11 years and 20,000 residents ago.
Decreased unemployment rates currently reflect decreased labor force participation more than job creation. In March 2010 there were over 111,775 jobs and a 9.2% unemployment rate, while in March of this year there were 111,930 jobs, and a rate of 7.8%. Over the past year, lower unemployment rates primarily result from nearly 2,000 discouraged workers dropping out of the labor force, a perspective regularly omitted from newspaper articles on the job market.
Nevertheless, data over the past decade show increased worker productivity, lower collective compensation, and growing economic equality among workers and households. From 2001 to 2009, the gross domestic product of the C-U MSA, which includes both private and government investment and spending, continued to grow steadily, from $6.2 billion to $7.5 billion in constant 2001 dollars. This reflects an overall 8-year absolute increase of 21% in output concurrent with a population increase of less than 10% and a numerically stagnant labor force—a steady increase in the productivity of local workers.
By two measures of compensation, it’s clear that earnings do not reflect this increased output. Per capita income, which reflects the average income of all residents in the C-U MSA, decreased by 2.7% when adjusted for inflation. In 2001, each resident earned on average $34,600 in 2009 dollars, while in 2009 only $33,700 in current (2009) dollars. While output grew steadily in real terms, total earnings and purchasing power declined.
Second, median household income declined even more rapidly during this eight-year period, from over $48,000 in 2001 (in 2009 dollars), to under $44,000 dollars in 2009 in current (2009) dollars. This entails an 11% decrease in the real earnings of households at the middle rung of the income ladder.
Throughout the vicissitudes of the bubble economy, tri-county workers continue to expand the per capita real output of all residents. Fewer workers as a proportion of the population are employed to produce this output, leaving more unemployed. Well over half of all households are rewarded with lower total incomes, while the vast majority at best break even. All economic rewards accrue either to the top 20% or fewer of local households, or to non-residents who are beneficiaries of corporate profits and/or management earnings.
If management salaries and corporate profits increased at a rate that reflected increases in worker productivity, then all workers’ earnings would also increase at that rate if those increases were fairly divided among them. In neither case is this true. Moreover, high unemployment and lower earnings constitute a vicious cycle of desperation and lowered expectations.
These realities are the result not of markets but of public policies. But it’s clearly not in the interest of the beneficiaries of these policies for the majority of the population to understand either the realities or the policies. From the media to academia, economics has to be made to seem more technical or mysterious than it really is. Meanwhile, the data show that our economy is one of legalized theft.