From The Vaults

“Workers Face A Wage Deficit, Not A Skills Deficit” — Says Lawrence Mishel Of Economic Policy Institute

The huge increase in productivity has created great wealth for the 1%, but, with the decimation of the unions, the U.S. has failed to create public policies that would find a way for the middle class and working class to have a fair share. This graph stops at 2006, but since then the gap has grown even larger.

Those who pay the fiddler call the tune and the tune we keep hearing again and again is that if only corporations had more freedom, less taxes, things would be better. And, we keep hearing that the main problem with our economy is the low skills of workers and the failure of our public educational system to properly educate students for jobs requiring Science, Technology, Engineering and Math. The elite who want to keep this tune playing have a lot to gain via public brainwashing.

While the powerful gobble up the incredible increases in wealth now being produced in this country they like to say: “Hey buddy, if you had worked a little harder in your high school math class, maybe you’d now have a better job.” Perfect. And our politicians who serve as lackeys for the elite, repeat the message with fervor. They blame teachers, public schools. They push the idea that our way forward is a focus on STEM education, big increases in college enrollment, and their solution for everything is more market freedom, more privatization.

We are immersed in the propaganda that the ruling class wants us to hear and this propaganda presents a reality that is mostly false. Any voice of thoughtfulness is shouted down by think tank “intellectuals” who have prostituted themselves to their ruling class overlords. Reality may start to get our attention by tapping politely on our shoulder, but eventually it hits us over the head, and many who now, through no fault of their own, find themselves among the working poor — no money, no insurance, no hope — are ready to hear what reality has to say.

Lawrence Mishel of the Economic Policy Institute is the voice of reason when he writes: “The huge increase in wage and income inequality experienced over the last 30 years is not a reflection of a shortfall in the skills and education of the workforce. Rather, workers face a wage deficit, not a skills deficit.” He says it is nonsense that we should blame the worker, because such blame is misplaced. Mishel writes:

“We increasingly hear or read claims that we have a serious structural unemployment problem, even to the extent of claiming that most of the unemployed beyond a normal (full-employment) rate face structural problems in finding work. This argument implies that unemployment difficulties reside in the workers who are unemployed: they either are located in the wrong place or do not have the required skills for the currently available jobs. If this is so, then macroeconomic tools such as fiscal policy (spending or tax cuts) or monetary policy cannot address our unemployment or long-term unemployment situation. But surprisingly, perhaps amazingly, there is no systematic empirical evidence for such assertions. …

The challenge, in my view, is to provide a much broader path to prosperity, one that encompasses those at every education level. The nation’s productivity has grown a great deal in the last 30 years, up 80% from 1979 to 2009, and such productivity growth or better can be expected in the future. Yet with all the income generated in the past and expected in the future it is difficult to explain why more people have not seen rapid income growth. It is not the economy that has limited or will limit strong income growth, but rather the economic policies pursued and the distribution of economic and political power that are the limiting factors. for lack of skills and that this argument is a foil meant to suppress the action that is actually needed.”

I became acquainted with Mishel when Stan Hirtle responded to my post “Let’s Reject Phoney Ideas About Prosperity And Start Discussing The Future Of The Working Class.” Stan pointed to this article:  “Schools as Scapegoats.” Some excerpts:

“American middle-class living standards are threatened, not because workers lack competitive skills but because the richest among us have seized the fruits of productivity growth, deny- ing fair shares to the working- and middle-class Americans, educated in American schools, who have created the additional national wealth. Over the last few decades, wages of college graduates overall have increased, but some college gradu- ates—managers, executives, white-collar sales workers—have commandeered disproportionate shares, with little left over for scientists, engineers, teachers, computer programmers, and others with high levels of skill. No amount of school reform can undo policies that redirect wealth generated by skilled workers to profits and executive bonuses. …

Statistically, the falling real wages of high school graduates has played a bigger part in boosting the college-to-high-school wage ratio than has an unmet demand for college graduates. Important causes of this decline have been the weakening of labor market institutions, such as the minimum wage and unions, which once boosted the pay of high school–educated workers. …

Another too glib canard is that our education system used to be acceptable because students could graduate from high school (or even drop out) and still support families with good manufacturing jobs. Today, those jobs are vanishing, and with them the chance of middle-class incomes for those without good educations….

It’s true that many manufacturing jobs have disappeared. But replacements have mostly been equally unskilled or semi- skilled jobs in service and retail sectors. There was never anything more inherently valuable in working in a factory assembly line than in changing bed linens in a hotel. What made semiskilled manufacturing jobs desirable was that many (though not most) were protected by unions, provided pensions and health insurance, and compensated with decent wages. That today’s working class doesn’t get similar protections has nothing to do with the adequacy of its education. Rather, it has everything to do with policy decisions stemming from the value we place on equality. Hotel jobs that pay $20 an hour, with health and pension benefits (rather than $10 an hour without benefits), typically do so because of union organization, not because maids earned bachelor’s degrees….

It is cynical to tell millions of Americans who work (and who will continue to be needed to work) in low-level administrative jobs and in janitorial, food-service, hospitality, transportation, and retail industries that their wages have stagnated because their educations are inadequate for international competition. The quality of our civic, cultural, community, and family lives demands school improvement, but barriers to unionization have more to do with low wages than does the quality of education. …

In a paper recently posted on the National Bureau of Eco- nomic Research’s Web site, Massachusetts Institute of Tech- nology economists Frank Levy and Peter Temin wrote, “The current trend toward greater inequality in America is primarily the result of a change in economic policy that took place in the late 1970s and early 1980s.” They went on to say that “the recent impacts of technology and trade have been amplified by the col- lapse of these institutions,” by which they mean the suppression of unions and the abandonment of the norm of equality.

These are not problems that can be solved by charter schools, teacher accountability, or any other school intervention. A balanced human capital policy would involve schools, but would require tax, regulatory, and labor market reforms as well.”



10 comments to “Workers Face A Wage Deficit, Not A Skills Deficit” — Says Lawrence Mishel Of Economic Policy Institute

  • Bryan

    According to a 2011 DDN article, it sounds like the problem might really be a deficit in personal responsibility.

    “But the German auto parts producer — whose customers include General Motors, Ford, BMW and Mercedes-Benz — regularly encounters local applicants who can’t read at an eighth-grade level, can’t pass a drug screen or aren’t willing to put in eight hours on their feet, Baker said.

    Baker is not alone. Other state and local manufacturing industry insiders report similar problems finding workers with basic work skills or even a simple desire to work hard at a time when manufacturing in Ohio is rebounding.”

    In my personal family experiences, raises come often and regularly if people can last more than 90 days. The problem is that they don’t.

    Also from the article…”unskilled labor positions at starting hourly wages of $11.65, including benefits such as tuition assistance. After the first 90 days, there are raises, and bonuses, such as an additional $1.76 an hour for coordinator positions.”

  • Mike Bock

    Bryan, thanks for giving the link to the DDN article. The sentence that jumped out at me: “It’s the soft skills that are in shortage,” said Eric Burkland, president of the Ohio Manufacturing Association. “It’s things like passing a drug test. It’s coming to work on time.”

    What might be called “character,” generally speaking, is at the heart of the “soft skills” Burkland says is of crucial importance. Arguably, compared to having a foundation in Science, Technology, Engineering and Math (STEM), having a foundation in good character is much more important. The development of character, however, is much more complicated than the development of math skills. The development of character in children requires in-depth and positive interactions with adults who serve as good examples and who care about the child’s growth in character.

    A child is not going to grow in character via an on-line education, nor by experiencing a curriculum with “rigor,” but through positive experience from effective teachers. In the natural scope of things, the best teachers should be the child’s parents and other adults in a caring environment — as in, “It takes a Village” — but, the problem is, as our society is now ordered, such effective teachers are in short supply. In a “Little House of the Prairie” world, public education could focus on developing academic skills, and leave the development of character to parents and the community — but what should public education be doing in today’s world about developing character in children, arguably, the most important aspect of a child’s development?

    I am rambling, but Burkland’s comment hit a nerve about a topic that has bothered me for some time. I write in, “The Education Of John Adams,” in a post from six years ago: 
”And so, how can character be developed in schools? Certainly not through dictatorial efforts nor through workbooks or classes. It seems to me that the question of how student character can be developed and strengthened in schools requires an answer, in fact, that goes beyond what is imaginable for schools as they are currently structured. But whatever the answer is, the first step is to acknowledge the importance of character development and to make a commitment to finding ways to make character development a central concern of schools.”

    Bryan, your comments emphasize the importance of personal responsibility. And my response, so far, is to contemplate how this character trait can be developed, starting in children. But the thrust of this article, you didn’t respond to, found in this quote: “American middle class living standards are threatened, not because workers lack competitive skills but because the richest among us have seized the fruits of productivity growth, denying fair shares to the working- and middle-class Americans, educated in American schools, who have created the additional national wealth.”

    We have a system problem, not a people problem — just as our grandparents had a system problem in the 1930’s when they suffered in an unnecessary economic depression. Our grandparents, let’s grant, were hard workers with great character — but they suffered from a system that failed them. The key question is how can we make our system work so that more people can benefit? Getting a $12 an hour job looks great if you are unemployed, but this results in $25,000 a year — almost a poverty rate for an individual and certainly for a family.

    Returning us back to a system in place in the 1920’s in not the answer — and it is simply wishful thinking to suppose that if only the free market once again had complete control, once again, if government was small and ineffective, everything would be wonderful. As a democratic society, we should be a thoughtful society and come together to look carefully at the system and we should find ways to improve the system so there is ever more freedom and justice — including economic justice — for more individuals.

  • Stan Hirtle

    These posts raise questions for me. Why is there so much substance abuse (whether or not it shows up on “drug tests)? Do people have attitudes toward employers that they believe reflect their employer’s attitudes toward them? Are employees expected to give more than they get? Why do we have a crisis with employment in America where employment is peoples’ entry to the economy, but there is less willingness to employ Americans?

  • Rick

    Why to people take drugs? Because they like it. They value the present pleasure over their long-term well being. Why is their less willingness to employ Americans? Because our society has become one of no values of consensus. Just like Britain, we have our Yobs.

  • Bruce Kettelle

    I remember reading this DDN article too. At the time my question was how much were these employers offering? If a manufacturer is trying to compete with say China here in the US they are probably trying to accomplish some sort of downward wage creep. As wages fall interest in these jobs by workers with good character also will diminish. A relatively small portion of our population would fail a drug test but they seem to be the ones getting all the attention. Estimates indicate about 8% of the population used illegal drugs in the past 30 days. Lets talk about the 92% that don’t.

    PS: Mike why don’t you start a Facebook page or group to help promote this site?

  • Mike Bock

    Rick, I agree that it seems there is a segment of our society with poor habits and poor character, and I agree that it seems the number of individuals in this underclass seems to growing. The question is: what are the public policies that might be implemented to bring individuals out of this underclass and help strengthen individuals so they may be productive and contributing members of our democracy? One place to start, it seems to me, is in how we define the aim / purpose of public education. Right now aim / purpose is centered on producing acceptable test scores, and it seems obvious that that aim should be changed to one of a more comprehensive definition of education. But there are plenty of individuals who have good character and good habits who, nevertheless, are left out of this economy. Blaming the victim makes no sense. The question is, what are the public policies that could work to create more opportunities?

    Bruce, thanks for giving that statistic about drug use. I agree, “Lets talk about the 92% that don’t” use drugs and again, how is it in a country as rich as ours that we tolerate a system where hard working citizens are still in poverty, still lack access to good health care, good housing, etc.? It’s a good question, “Where is the outrage?”

    There are answers to all of these questions an effective representative democracy would develop — the heart of the problem is that our republic is far from being an effective representative democracy.

    Thanks for the suggestion about starting a Facebook page for DaytonOS. I wonder if that would work to engage more participation or discussion?

  • Bruce Kettelle

    Mike to be honest I have not checked in here for quite some time and just assumed the page was not very active. Not sure what made me take a look but here I am. I have a couple of sites myself and yes they do get traffic from my Facebook links. Try it for a couple of weeks and if it doesn’t work then ….

    There is outrage. The Occupy movement central arguments revolve around wage disparity. The solutions are not simple. We all need to reset our mindset on what makes sense. Should we raise minimum wage or get rid of it alltogether? Do targeted tax breaks really help drive business growth? If so where is the proof? Is government subsidized training helping us to gain ground or is it being abused and costing too much? Should we worry about falling housing prices in the midwest or let it run it’s own course to help lower the cost of living so working for lower wages is affordable? Mabe a little overall deflation could be a good thing.

    Maybe the whole US interior will become the China of the US to support the explosive economies on both coasts. Have you been to DC lately? There are multiple high rise buildings under construction in the urban core and new housing construction continues in the suburbs. Visiting there this spring I kept asking myself where is the recession?

    The day of the $30 an hour union job seems to be a distant memory in the rear view mirror. But there seems to be plenty of 50k plus jobs at Caresource. How does the rust belt make this transition? There is a lot to consider as we go forward. I am as liberal as they come but I think we need moderation from both the left and the right to come through this successfully.

  • Rick

    What? How can you be a liberal and not believe that government should spend money even if it accomplishes nothing?

    Seriously,nice to have you back. I am not sure those in the midwest want to become the China of the US (does that include an authoritarian government, very restricted rights, and slave labor?) Please expound on that.

  • Rick

    Mike, you state, “Bruce, thanks for giving that statistic about drug use. I agree, “Lets talk about the 92% that don’t” use drugs and again, how is it in a country as rich as ours that we tolerate a system where hard working citizens are still in poverty, still lack access to good health care, good housing, etc.? It’s a good question, “Where is the outrage?””

    Your paradigm is out of date. Home prices have fallen drastically over the last several years. Rents are low to. Here on the east side of Dayton you can rent a reasonable house for $550-650 per month.

    Medical care-for emergencies you cannot be turned away and you get top medical care. There are free clinics as well.

  • Bruce Kettelle

    Rick that is still a lot of rent at $10 an hour. And yes there is ‘complimentary’ emergency care available but preventitive car is what really hurts work attendance and performance.

    But the bigger question is how do we design a world competitive workplace in the US? We are alrady seeing a few jobs come back from China citing logistics and patent protection issues (Caterpillar comes to mind) but the mass production high tech jobs don’t appear to be returning any time soon. How can we better market our inherit american innovation skills to bottom line CEO’s that want to guarantee their multimillion $ bonuses? They are the ones making these decision and lobbying lawmakers to provide a trade culture that makes it possible.

    The excuse that corporations do it for their shareholders is crazy. Executive compensation schemes entice these leaders to make decisions that benefit the short term results without thought of what may be best long term for their employees, customers or even the country. Government provides the infrastructure that allows capitalism to succeed. But heaven forbid they might have to pay more taxes to improve roads and bridges that connect them to their customers.

    I just once would like to see a CEO say thank you for keeping the roads open during a snowstorm by sending the city a little extra for the overtime effort. Or getting their watermain repaired over the weekend so they can open for business Monday.

    Fortunately there are some bright spots. For instance GE shareholder recently rejected their CEO’s new compensation proosal. I expect we will see more disgrunteled shareholder try to hold executives more responsible. This van be an effective way to cause all companies to reset their view on compensation practices that have created an ugly disparity between them and the lower paid masses of employees.

    I am in no way saying the owner/CEO does not deserve more but there should be a limit. Our country and probably the world experienced modest executive pay increases through most of the last century. But something hapened in the late 70’s that caused a cycle of excessive pay growth. We now have ceos making 30 times or more than the average wage paid by a company. What good does it do to consolidate all that wealth with so few people. I just read that Irv Azoff is being paid $35-million a year by Live Nation. He’s a nice guy and well connected to just about every musician out there but 35, really? Now at least we know part of the reason concert ticket prices have risen faster than inflation.

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