Jack Rasmus

Listen to my interview with WBAI-NY on the issues in the GM auto workers strike that began yesterday, as 46,000 walked off their jobs to improve job security, plant shutdowns protest, end to two tier wage structures, stop shifting of rising health care costs to them, and hundreds of other unresolved issues. What’s behind the legal attack on the UAW national leadership.

TO LISTEN GO TO

:

https://soundcloud.com/user-879607737/091619-uaw-strikes-gm-war-powers-wheres-congress-militarization-guts-rights

Listen to timeline starting at about 4:00minutes to 11:00minutes.

Listen to my Alternative Vision radio show today, September 13, discussion of the European Central Bank’s decision to restart QE and lower interest rates further into negative territory. What are the consequences of negative rates? Why will the $17 trillion global negative rates mean for the pending global recession? Why is Trump demanding the US central bank drive rates into negative range as well? What are central banks worldwide cooking up as responses to the next recession, now that they’re ‘at the end of their ropes’? For this discussion, and first preview of the main themes of my forthcoming October 2019 book,’

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GO TO:

http://alternativevisions.podbean.com

SHOW ANNOUNCEMENT:

Today’s show focuses on the recent decision by the European Central Bank to re-introduce QE and drive Europe’s more than $7 trillion in interest rates further into negative territory. Another $22b per month in QE and rate reduction to -0.5% when, over the past 5 yrs QE and negative rates have not stimulated the European economy. Reasons why QE and neg rates have little effect. How $17 trillion in negative rates worldwide is a growing problem and won’t stimulate the Euro economy. Lower rates as exchange rate currency/ trade move. Why Trump is now calling for US negative rates. Why central banks (including Fed) now secretly discussing new tools and tactics for the next recession, including ‘bail ins’ and calls are growing by high level capitalists for the Fed and central banks to expand their authority into fiscal policy areas (as predicted in my 2017 book, ‘Central Bankers at the End of Their Ropes’). Consequences of such for US Constitution and fiction of ‘central bank independence’. Rasmus discusses US deficit now officially projected to exceed $1 trillion a yr. The Democrat Party latest debate and opposition to Medicare for All. And what’s behind the recent ‘softening’ of US & China trade war (and why a deal may now be closer with ‘decoupling’ of technology issue). Rasmus introduces the show with brief outline of his forthcoming book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, October 2019, and shares its main themes. (Review of chapters coming in following weeks of this show).

Watch my video interview with ‘Other Voices’ TV show in Palo Alto, CA, on September 11. The topics: the latest developments in the US-China trade war and why next generation technology is the key issue behind the trade negotiations. An eventual settlement will require both sides putting aside the tech issue for later negotiations and settling on the many concessions already on the negotiating table. (Trump now talks of a ‘two track’ negotiation, suggesting a deal on what’s agreed to date and address tech and other issues later). Questions also address the firing of Bolton and role of Neocons in US-China trade negotiations to date. What’s the real picture on US wages and jobs. And the likelihood of a US recession in the next year.

T

O WATCH the Youtube video

of the Interview GO TO:

https://www.youtube.com/watch?v=zOLV2qlu9js&feature=youtu.be

Just a short addendum here to recent posts here challenging the official government (Labor Dept.) view that wages rose 3.1% last year. And a commentary on what the recent firing of neocon, John Bolton, may mean for the US-China trade war.

Median Income vs. the 3.1% Wage Gain Spin

Yesterday the Commerce Dept. issued its report on quintiles (20% segments) on income inequality in the US. It showed that Median Household Income rose only 0.9% in 2018, which “officials said isn’t statistically significant from the prior year” (Wall St. Journal 9-11-19).

This corroborates my argument that the 3.1% (really 1.5% after government’s own inflation adjustment) represents wage gains skewed to high end wage earners, the 10% or so of the labor force who are tech engineers, professionals, supervisors, advance degreed health care, etc.). The vast majority of workers saw little if any wage gains. Only 0.9% per the Commerce Dept. at the median household level. (Unadjusted for inflation also?).

This also supports the findings of the various independent surveys noted in my prior posts (Bankrate,Payscale, McKinsey, etc.) that estimated median wage gains ranging from -0.8% to 1.1% as well as the finding that 60% of the workforce saw no wage increases at all in 2018.

And now Trump’s tariffs are about to hit household consumption big time. Chase bank researchers estimate the tariffs that took effect Sept. 1, 2019 will result in a reduction of an average $1000 per household. That will whack consumer spending, two thirds of GDP, big time going forward. With construction spending, manufacturing, and business investment all turning negative now, only consumer spending has been holding up the US economy, based mostly on credit card and other debt based spending increases. Now that will be reduced by $1000. So watch for consumer spending to weaken over the coming winter.

Will Bolton Departure Weaken Anti-China Hardliners’ Opposition to a Deal?

That’s why Trump is now so desperate to force the Federal Reserve, Powell, to rapidly cut interest rates, as he is now demanding, to zero if necessary. But those cuts will have little, if any, effect on the real economy. The central bank rate cuts are instead about trying to slow the rise of the value of the US dollar, however, not about stimulating real investment and GDP. If that dollar rise continues, already up 10% this year, it offsets Trump’s tariff hikes and thus undercuts his hand in negotiations with China. That’s why a further slowing US economy and dollar rise, should they occur, will likely push Trump toward closing a deal on trade with China. But not yet. Wait until closer to 2020 election. The US economy will have to get worse. And it will.

Now that Bolton’s been thrown under the bus by Trump (with so many others), the influence of the neocons in Trump’s regime are reduced and chances of a trade deal with China are rising. Trump will eventually strike a deal, likely next year, take the major concessions China thus far has offered and has left on the table, and lie about the rest of his concessions to his political base. Trump desperately needs a deal on trade with China before the 2020 election in order to win next November. He also needs one or more ‘wins’ in foreign policy he can promote and exaggerate (Iran, So.Korea, etc.). Bolton was an obstacle who engineered the collapse of negotiations with So. Korea, the failed regime change and almost invasion of Venezuela, and the near war with Iran. (He may have also been behind the collapse of the Taliban meeting with Trump recently, which he, Bolton, adamantly opposed). With Bolton now gone, it will be interesting to see if Mnuchin and Pompeio are given the lead over the remaining neocon advisors–Lighthizer and Navarro–in the next round of China trade negotiations. If so, some kind of a deal grows closer with China.

In a post last week I took issue with the Trump administration’s claim–repeated ad nauseam in the media–that wages were rising at a 3.1% pace this past year, according to the Labor Dept. In my post I explained the 3 major reasons why wage gains are much lower, or even negative.

First, the 3.1% refers to nominal wages unadjusted for inflation. If adjusted even for official inflation estimates of 1.6%, the ‘real wage’, or what it can actually buy, falls to only 1.5%.

Second, the 1.5% is an average for all the 162 million in the US work force. The lion’s share of the wage gain has been concentrated at the top end, accruing to the 10% or so for the highly skilled tech, professionals, those with advanced degrees, and middle managers. That means the vast majority in the middle or below had to have gotten much less than 1.5% in order for there to be the average of 1.5%. More than 100 million at least did not get even the 1.5%. In fact, independent surveys showed that 60 million got no wage increase at all last year.

Third, the 1.5% refers to wages for only full time employed workers, leaving out the 60 million or so who are part time, temp, gig or others, whose wages almost certainly rose less than that, if at all. Other surveys noted in my prior post found wage gains last year only between -0.8% of 1.1%, depending on the study, and not the 3.1%.

But here’s a Fourth reason why even real wages are likely even well below 1.5%.

As I suggested only in passing only in my prior post, the 1.6% official US government inflation rate is itself underestimated. Not well known–and almost never mentioned by the media–is the fact that Labor Dept. stats do not include rising home prices at all in its estimation of inflation! Incredible, when home prices are among the fastest rising prices typically and always well above the official 1.6% or whatever. And the ‘weight’ of home prices in the budgets of most workers is approximately 30% or more of their total spending. So that weight means the effect on households is magnified even more. If appropriately included in inflation estimates, housing prices would boost the reported inflation rate well above the official 1.6%. How much more? Some researchers estimate it would raise the official inflation rate of 1.6% to as high as 4%. (see the discussion n the August 30, 2019 Wall St. Journal, p. 14).

If the inflation rate is higher, then the nominal 3.1% adjusts to a real wage even less than 1.5%.

If the inflation rate were 4%, not 1.5%, then real wages adjusted for inflation would be -0.9%. And when the ‘averaging’ and ‘full time employed’ effects are considered, real wages for the majority of US workers last year almost certainly fell by as much as -2.0% to 3.0%.

Since we’re talking about housing, here’s another official government stat related to housing that should be reconsidered since it makes US GDP totals higher than they actually are:

US GDP is over-estimated because gross national income (i.e. the income side to which GDP must roughly equal) is greatly over-stated. How is national income and therefore GDP over stated? The US Commerce Dept., which is responsible for estimating GDP, assumes that the approximately 50 million US homeowners with mortgages pay themselves a rent. The value of the phony rent payments boosts national income totals and thus GDP as well. But no homeowners actually pay a mortgage and then also pay themselves an ‘imputed Rent’, as it is called. It’s just a made up number. Of course there’s a method and a logic to the calculation of ‘imputed rent’, but something can be logical and still be nonsense.

Government stats–whether GDP, national income, or wages or prices, or jobs–are full of such questionable assumptions like ‘imputed rents’. The bureaucrats then report out numbers that the media faithfully repeat, as if they were actual data and fact. But statistics are not actual data per se. Stats are operations on the raw or real data–and the operations are full of various assumptions, many questionable, that are explained only in the fine print explaining government methodology behind the numbers. And sometimes not even there.

Here’s another reason why US and other economies’ GDP stats should be accepted only ‘with a grain of salt’, as the saying goes: In recent years, as the global economy has slowed in terms of growth (GDP), many countries have simply redefined GDP in order to get a higher GDP number. Various oil producers, like Nigeria, have redefined GDP to offset the collapse of their oil production and revenue on their GDP. In recent years, India notoriously doubled its GDP numbers overnight by various means. Some of ‘India Statistics’ researchers resigned in protest. Experts agree India’s current 5% GDP number is no more than half that, or less.

In Europe, where GDP growth has lagged badly since 2009, some Euro countries have gone so far as to redefine GDP by adding consumer spending on brothels and sex services. Or they’ve added the category to GDP of street drug sales. But any estimate for drug spending or brothel services requires an estimate of its price. So how do government bureaucrats actually estimate prices for these products and services? Do they send a researcher down to the brothel to stand outside and ask exiting customers what they paid for this or that ‘service’ as they leave? Do they go up to the drug pushers after observing a transaction and ask how much they just sold their ‘baggie’ for? Of course not. The bureaucrats just make assumptions and then make up a number and plug in to estimate the price, and therefore the service’s contribution to GDP. Boosting GDP by adding such dubious products or services is questionable. But it occurs.

The US Commerce Dept. that estimates US GDP has not gone as far as some European countries by adding sex and illicit drug expenditures. But in 2013 the US did redefine GDP significantly, boosting the value of business investment to GDP by about $500 billion a year. For example, what for decades were considered business expenses, and thus not eligible to define as investment, were now added to GDP estimation. Or the government asked businesses to tell it what the company considered to be the value of its company logo. Whatever the company declared was the value was then added to business investment to boost that category’s contribution to GDP. A number of other ‘intangibles’ and arbitrary re-definitions of what constituted ‘investment’ occurred as part of the re-definitions.

Together the 2013 changes added $500 billion or so a year to official US GDP estimates. The adjustments were then made retroactive to prior year GDP estimates as well. Had the 2013 re-definitions and adjustments not been made, it is probable that the US economy would have experienced three consecutive quarters of negative GDP in 2011. That would therefore have meant the US experienced a second ‘technical recession’ at that time, i.e. a second ‘double dip’ recession following the 2007-09 great recession.

The point of all these examples is that one should not blindly accept official government stats–whether on wages, inflation, GDP, or other categories. The truth is deeper, in the details, and often covered up by questionable data collection methods, debatable statistical assumptions, arbitrary re-definitions, and a mindset by most of the media, many academics, and apologists for government bureaucrats that government stats are never wrong.

Dr. Jack Rasmus
copyright 2019
Dr. Rasmus is author of the forthcoming book, ‘The Scourge of Neoliberalism: Economic Policy from Reagan to Trump’, Clarity Press, October 2019. He blogs at jackrasmus.com and tweets @drjackrasmus. His website is http://kyklosproductions.com and podcasts from his Alternative Visions radio show are available at http://alternativevisions.podbean.com.

Trump has announced a new plan to radically change residential housing market in the US to benefit investors at the expense of home buyers. At the core of his plan is the privatization of the quasi-public housing finance institutions, Fannie Mae and Freddie Mac. Both originated as government agencies to ensure lower cost 30 yr. mortgages. Now Trump wants to sell them off to hedge funds and other investors. They’ll issue new IPOs and reap hundreds of billions of speculative profits. Then they’ll continue to acquire the billions in operating profits from them for years to come, instead of the profits now going to the federal government to help offset US budget deficits and $1 trillion plus annual additions to the US national debt.

Listen to my 12 minute Loud & Clear radio show interview on the topic below

GO TO:

https://www.spreaker.com/user/radiosputnik/trump-works-for-wall-street-pushes-housi

I very seldom post a 3rd party’s contribution to this blog, but Benl8, who often comments on this blog, and is an excellent researcher and quantitative analyst, has offered an explanation that I hope Henwood bothers to read. Ben has dug up what is the most likely explanation for the millions of workers who have dropped out of the labor force and don’t show up in official BLS stats.

Ben offered his explanation as a comment to my blog posts. Many readers may not get to read it there. So I’m re-posting it here. Do read it. It’s the kind of research we all should be doing, instead of just blindly accepting or apologizing for government stats and interpretations, which Henwood always insists on doing. Here’s Ben’s comment: (and you read it too, Henwood, I know you read this blog).

benl8

I have thought about this. I regularly go to njfac.org, and take their figures. But then I also do this: The Social Security Administration publishes a wage income report. The latest is for 2017 and the next comes out in mid October. Here’s 2017: https://www.ssa.gov/cgi-bin/netcomp.cgi?year=2017 — It shows 165,438,239 workers in 2017. While the BLS shows a labor force of 160,320,000 with average employment of 153,337,000 working. (I took that from https://www.bls.gov/web/empsit/cpseea01.htm) Now let’s agree that the SSA is correct, 165mn worked, and usually 153mn were at work, it indicates that 12 million were not working on average, that’s a U3 of 7.3%. Now I will go to National Jobs for All Coalition and add on the involuntary part-timers, 4.4 million in August, 2019 (and it was higher in 2017, but I don’t want to look it up). Therefore the U6 will be around 12mn plus 4.4 mn, or 16.4 mn, or about 10%. I agree that the BLS is much understated, and my method incorporates the SSA data, and is not dependent on phone surveys. Also, it must be stated, the SSA data shows that the collective income of the lower-earning half, or 82 million workers, is just over $1.1 trillion. The national income, which I take from the Joint Committee on Taxation (Overview, 2017), was about $14.4 trillion. So, the lower half earned in wages less than 8% of all income. Who received the other 92%? This is pre-tax income. The “State of Working America” has a table on the sources and distribution of income, Table 2.4, Income. It showed that the lower-earning 80% took in wages about 28% of all income. It was difficult to figure that out, but my memory serves me pretty well. See here: http://www.stateofworkingamerica.org/index.html%3Fp=29591.html —
You can check, the lower 80% earned 50.2% of all wages, and wages were 54.3% of all income, therefore their wage income was 27.3% of all income. And this is post-transfer assessment, so the social security is taken out and transferred. Complicated. The end take away: low income workers make very little relative to total income, and the unemployment numbers don’t accurately show the huge number who are marginally employed, yet still submitting W-2 forms to SSA. My first blog (http://benL8.blogspot.com) has a graph showing that income for the lower-earning 90% held steady around 55% from 1940 to 1980, and since then has dropped to 38%, a drop of 17%, which comes out to about $23,000 per household in the lower-earning 90% of households. My current blog: http://benL88.blogspot.com, and the first one: http://benL8.blogspot.com where the graph is easily located. It comes from data by Saez and Piketty. Hope this helps. It’s a messy comment/answer. Is it really important that the BLS U3 is wrong? Definitely. And is it important to know how little the lower-earning half or 80% or 90% are earning. Yes, it’s a huge inequality that is disabling the economy and people’s lives.

Well,here we go again. Henwood, preferring to attack anyone who dares challenge the veracity of government statistics, and whoever might suggest that maybe, just maybe, the labor department’s methodologies have been lagging the dramatic changes that have been impacting the labor markets in recent years, has challenged my recent post on jobs…again. Rather than challenge his good buddies in the government bureaucracies, he prefers to play attack dog against those who do.

Let’s take a look at what he’s saying, and how he cherry picks and distorts my points.

First, how about the labor force participation rate, that’s his main topic. At the beginning of 2000 it was 67.3. It hit a low at 62.4 four years ago. That’s 4.9 percentage points. Or roughly five percent of the 164 million US labor force. Today, four years later it’s only 63.2 or 4.1 points. That’s still 6.7 million potential entrants to the labor force who aren’t in it. Presumably they’re adults and supporting themselves some way. Why then aren’t they in the labor force numbers. Better ask the bureau of labor statistics buddies of Doug, but they have no answer. Their explanation for the falling participation is that more workers are taking longer maternity leave or more of them are in jail. I don’t buy any of that. Nor do I buy other economists’ arguments that it has to do with decline of job training by companies. More likely, the BLS is simply not picking up the status of those not officially in the labor force because their methodologies for data collecting are deficient. The BLS doesn’t know where these workers are, just as they have no accurate picture of the undocumented and underground economy employment/unemployment.

More importantly, the falling participation rate reduces the labor force and thus understate unemployment. I believe I said in my article (not quoted by Doug) that it means more than 5 million are thus not counted. Doug can quibble about whether it’s 2015 or 2007 or 2000, but the point is there’s a dramatic decline in the participation rate and the BLS refuses to adjust its employment numbers to reflect it. Result: unemployment is under-stated.

My point about undocumented and underground workers is of course many are working but it is highly likely more are not working and the vast majority are working part time and temp jobs. That’s a net negative for the U-6 unemployment rate. Again, because the CPS conducts a phone survey that doesn’t pick up these groups (who don’t answer I’m sure), it under-estimates the net underemployment/unemployment of these groups.

What Doug refuses to address is how I estimate the real unemployment rate is likely 10%-12%. He just says it’s not accurate. I guess he thinks the ‘discouraged’ worker, ‘missing labor force’ worker, and ‘involuntary part time worker’ numbers offered by the BLS are accurate. I don’t. And I suppose he doesn’t believe that the million more who went on the SSDI roles after 2009 should not be counted as unemployed either.

Really Doug, you should stop trying to call people names and acknowledge that maybe the government is not always telling the facts. It’s not that they are outright lying. It’s just that the labor markets are changing faster than their methodologies can keep up and that they’re bureaucratically conservative. Or even purposely obfuscating, as in their latest report on the number of Gig workers, where they excluded Uber drivers as well as anyone for whom gig work was not their primary job.

A reader of this blog recently asked an important question: what do I think is the actual unemployment rate in the US today, not the media’s 3.8% that is almost always quoted. Here’s my reply as to why I calculate the real, actual unemployment at minimum to be 10%-12%.

“The real unemployment rate is probably somewhere between 10%-12%. Here’s why: the 3.7% is the U-3 rate, per the labor dept. But that’s the rate only for full time employed. What the labor dept. calls the U-6 includes what it calls discouraged workers (those who haven’t looked for work in the past 4 weeks). Then there’s what’s called the ‘missing labor force’–ie. those who haven’t looked in the past year. They’re not calculated in the 3.7% U-3 unemployment rate number either. Why? Because you have to be ‘out of work and actively looking for work’ to be counted as unemployed and therefore part of the 3.7% rate.

The U-6 also includes what the labor dept. calls involuntary part time employed. It should include the voluntary part time as well, but doesn’t (See, they’re not actively looking for work even if unemployed).

But even the involuntary part time is under-estimated, as is the labor Dept’s estimate of the ‘discouraged’ and ‘missing labor force’.

The labor dept. also misses the 1-2 million workers who went on social security disability (SSDI) after 2008 because it provides better pay, for longer, than does unemployment insurance. That number rose dramatically after 2008 and hasn’t come down much (although the government and courts are going after them).

The way the government calculates unemployment is by means of 60,000 monthly household surveys but that phone survey method misses a lot of workers who are undocumented and others working in the underground economy in the inner cities (about 10-12% of the economy according to most economists and therefore potentially 10-12% of the reported labor force in size as well). The labor dept. just makes assumptions about that number (conservatively, I may add) and plugs in a number to be added to the unemployment totals. But it has no real idea of how many undocumented or underground economy workers are actually employed or unemployed since these workers do not participate in the labor dept. phone surveys, and who can blame them.

The SSDI, undocumented, underground, underestimation of part timers, etc. are what I call the ‘hidden unemployed’. And that brings the unemployed well above the 3.7%.

Finally, there’s the corroborating evidence about what’s called the labor force participation rate. It has declined by roughly 5% since 2007. That’s 6 to 9 million workers who should have entered the labor force but haven’t. The labor force should be that much larger, but it isn’t. Where have they gone? Did they just not enter the labor force? If not, they’re likely a majority unemployed, or in the underground economy, or belong to the labor dept’s ‘missing labor force’ which should be much greater than reported. The government has no adequate explanation why the participation rate has declined so dramatically. Or where have the workers gone. If they had entered the labor force they would have been counted. And their 6 to 9 million would result in an increase in the total labor force number and therefore raise the unemployment rate.

All these reasons–-i.e. only counting full timers in the official 3.7%; under-estimating the size of the part time workforce; under-estimating the size of the discouraged and so-called ‘missing labor force’; using methodologies that don’t capture the undocumented and underground unemployed accurately; not counting part of the SSI increase as unemployed; and reducing the total labor force because of the declining labor force participation-–together means the true unemployment rate is definitely over 10% and likely closer to 12%. And even that’s a conservative estimate perhaps.”

(Addendum Note: The Labor Dept. monthly survey counts ‘jobs’ not workers employed. If in its survey it is counting 2nd and 3rd part time jobs for a single worker, then it is over-estimating employment levels and thus under-estimating the unemployment rate still further since the unemployment rate is a ratio of total employed to unemployed).

What’s the condition of the US working class on this Labor Day 2019? Wages and Jobs are of course the best indicators of that condition. So let’s look at wages and jobs today in America.

What we see is that—contrary to Trump, US government, and mainstream media hype and reporting—a growing number of independent surveys show that wages have not been rising as they claim. And 500,000 fewer jobs were actually created last year than initially reported.

The media’s oft-quoted figure for rising wages is about 3.1% over the past year. But there are at least five reasons why 3.1% is not accurate and in fact grossly over-estimated. First, the 3.1% is not adjusted for inflation. Second, it represents an average only, which reflects higher wages for the top 10% of the workforce and higher salaries for professionals, managers, and supervisors. Third, it applies to full time workers only and therefore leaves out the 60 million or so part time, temp, and gig workers. Fourth, it does not factor into the 3.1% average the fact that the millions of unemployed are getting no wages whatsoever. Fifth, it defines wage narrowly, excluding the lack of any increase in deferred wages (pension payments) and social wages (social security pay for retirees).

Why Wages Are Not Rising 3.1%

Considering the first point, the 3% figure is what’s called a ‘nominal’ wage. If adjusted for the 1.6% inflation rate, then the real wage gain is only 1.5% a year. (It’s even less real wage gain for workers at the median household income level ($50K/yr.) and below—where inflation is even higher than 1.6% due to housing and rent cost, local utility fees and taxes, medical insurance premiums and drugs costs escalation, education and other costs escalation).

The second problem overestimating the wage gains for the vast majority of workers in the ‘bottom 80%’ of the workforce is that the 3.1% represents an ‘average’. Averaging means the highest paid wage earners (which include most salaried workers) are getting more than the 1.5% and therefore, in turn, those at the median or below are getting much less than 1.5%. And in most cases they’re not even getting that 1.5%.

A survey by the finance site Bankrate.com found that “more than 60% of Americans said they didn’t get a pay raise or get a better-paying job in the last 12 months”. So if 60% didn’t get any wage increase at all, how could wages be rising 3.1% or even 1.5%? Unless of course workers in the best paid 10% of the labor force are getting 10% or more in wage increases last year. These are occupations like software engineers, data scientists, physicians assistants, professionals with advanced degrees, and of course middle and upper managers paid mostly by salary. Perhaps they were getting 10%+ last year, but that’s highly doubtful.

Here’s another mainstream respected survey that challenges the 3.1% wage increase myth peddled by the government and media: Focusing on the median wage—not the average wage—“according to figures from the PayScale Index…the median wage increases, when adjusted for inflation, were only 1.1% since last year and 1% over the past year”.

The Payscale survey is corroborated further by a recent study by McKinsey Global Institute which shows that median wages have not risen at all since 2007. By 2017 they were the same level as in 2007, rising less than 1.1%.

Comparing McKinsey with Payscale, there’s been no wage change under Trump. In fact, the Payscale survey concluded that real wages from June 2018 to June 2019 have shrunk by -0.8% and by 9% since 2006.

But that’s still not the whole picture.

There’s another adjustment necessary, even to the 1.1% real wage. Whether 1.5% or 1.1%, that figure applies only to the full time employed workers. It therefore does not take into account the lower wages, and more typical lack of any wage increases, for the 60 million plus ‘contingent’ (part time, temp, gig) workforce that exists now in the US. That’s 37% of the total workforce of more than 160 million who are not factored into the 3.1% estimate at all!

And the numbers for the part time/temp/gig part of the total work force may be much larger than the government is estimating. US Labor Dept. statistics count part time, temp and gig workers for whom their work is a primary job. It doesn’t accurately account those who have a primary part time job (or a primary full time job) AND who have also taken on second and even third part time, temp, or gig jobs to make ends meet. The aforementioned Bankrate survey showed, for example, that while the government data estimates less than a fifth of all workers are part time, the Bankrate survey found 45% of all US workers had second or third jobs. That included 48% of Millennials, 39% of GenXers, and even 28% of Boomers.

The real picture that appears, therefore, is NOT one of traditional full time workers getting annual 3.1% wage increases in their base pay every year. That’s the US labor force of the 1950s and 1960s, not the 21st century.

The real picture is little or no wage increases for the vast majority those workers, especially those below the 80th percentile of the US labor force, and especially those at the median and below, who are being increasingly forced to take on second and third jobs to make ends meet. Meanwhile, a small percentage of the total workforce, likely well less than 10%, comprised of professionals, managers, tech, and advanced degreed special occupations are realizing wage gains well above the average. In fact, those at the very ‘top’, earning more than $150,000 a year may be getting exceptionally large wage increases. That’s because the US Dept. of Labor employs a methodology in which it ‘top codes’ weekly earnings. Top coding means any raises for those earning above $150,000 a year are not being recorded at all.

What all the foregoing analysis strongly suggests is that wages under Trump have not been rising anywhere near close to 3.1%, or even near the inflation adjusted 1.5%. They are not rising at all for the vast majority of the US workforce since 2016.

To repeat the Payscale survey: real wages have actually fallen by -0.8% between 2018-2019.

The disjoint between the 3.1% and the -0.8% is due to the averaging in wages and salaries for the very top occupations and salaries of managers and professionals; due to accounting for only full time employed; and by ignoring most of the part-time/temp workers—the numbers for whom are also much larger than the official government data now indicate.

Add to these reasons for the gap between 3.1% and -0.8% the fact that monthly pension benefits and social security retirement payments—i.e. deferred wages—are never included in the 3.1% figure by the government. They are really wages as well. They are ‘deferred’ wage payments which are foregone by workers while they were actively in the labor force, to be paid out upon retirement. These wage payments are fixed and are therefore constantly declining in real terms. Nor of course have official wage statistics ever considered calculating wages the millions of unemployed workers who, without jobs, get no wages and therefore no wage increases whatsoever. If deferred wages and unemployed with no wages were included in calculating total wage change for the working class, the Bankrate, Payscale, McKinsey and other independent surveys would show annual wage gains—for all but the very highest paid—have been contracting ever faster than -0.8% under Trump.

Business-Investor Tax Cuts Haven’t Created Jobs

A hallmark claim of Neoliberalism in general is that business tax cuts create jobs. This is part of the economic ideology notion called supply side economics. Cutting business taxes raises business disposable income, which it is assumed business then spends largely and instantaneously on new investment that boosts production and therefore hiring. But this is a deceptive misrepresentation (i.e. ideology) of reality. Businesses don’t necessarily spend the tax windfall on investment. They may divert the tax savings into investing in financial markets that don’t produce any jobs. They may distribute it to shareholders in the form of stock buybacks and dividend payouts. They may use it for buying up competitors via mergers and acquisitions. They may simply hoard the savings to boost their balance sheets. Or they may invest it on expanding production—but in their offshore subsidiaries. All this is what in fact actually happens, not that business tax cuts create jobs.

In January 2018, once again, Trump and Congress ‘sold’ the economic lie that business-investor tax cuts create jobs. But there is no empirical evidence that such tax cuts causally result in job creation. In fact, even a correlation between Neoliberal tax cuts and job creation does not exist. Witness Trump’s massive $4.5 trillion tax cuts of 2017. (Yes, $4.5 trillion, not his reported $1.5 trillion). What has actually happened to investment in expanding plant and equipment and therefore employment? After a very brief boost in early 2018, business investment in the US fell to only 2.7% (10% rate is historically average). In 2019 it fell further into negative territory by mid-year, as ‘Business investment contracted in the second quarter for the first time since the first quarter of 2016”. That means if investment—i.e. the mechanism for job creation per the supply side theory—has not risen, then the claim cannot be substantiated in turn that business tax cuts, by creating investment, in turn create jobs.

But hasn’t there been actual job creation since Trump took office? Yes, there has. 1.1 million according to government official stats. However, its causation cannot be attributed to the tax cuts. So where have the 1.1 million jobs come from?

Are ‘Contingent’ (Part-Time/Temp/Gig) Job Greater Than Reported?

US Labor stats do not really report the number of workers finding employment when the Dept. reports job gains each month. It reports jobs—not people—growth. So jobs can be increasing (as second and third jobs added) but employment by real people may not be actually growing by the same number of jobs that were created. Jobs may be increasing by 1.1 million but those newly employed may be far less. Why? Because most of the 1.1 million jobs may represent already employed taking on second and third part time jobs. Recall the prior Bankrate survey which reported that 45% of all American workers indicate they are working second and third jobs to make ends meet! Or the Marketwatch survey that 33% need a gig side job in order to meet living expenses! But the Labor Dept. shows numbers not rising as high for part time and temp work. That may be due, however, to its reporting of part time/temp as the primary job of part time/temp workers. They may be working second and third additional part time jobs and the government is not picking that up—its only accounting for part time/temp jobs that are primary for the person.

Labor Dept. Revises Jobs Down 500,000 for Last Year

The confusion in the Labor Dept.’s job stats is perhaps further suggested by recent revisions in its job creation numbers. Annually the Labor Dept. adjusts its past year job numbers after more data is made available from States’ unemployment insurance records. In its just latest report, prior to the Labor Dept. downward revisions, the Dept. indicated it had over-stated 2018 jobs by no less than 500,000. That brings 2018 monthly job creation numbers well under 200,000, which is about the 180,000 monthly creation in 2017. In other words, no actual increase due to Trump’s tax cuts introduced in January 2018.

The Labor Dept. stats indicate employment rose from July 2018 through July 2019 by 1.1 million jobs. Does that mean the Labor Dept. had erred by nearly 50% in its job growth numbers? If so, it’s such a gross margin of error it makes Labor Dept. job reporting under Trump highly suspect or else something is fundamentally wrong with US job creation stats. What’s wrong is that the stats are failing to accurately reflect contingent job creation as second and third jobs.

Conclusions: A Much Different Wage & Job Picture Than Reported

A deeper look at the official wage and job numbers shows wages rising no where near the official 3.1%. In fact, most of the wage gains are highly skewed to the very top. At the median they’re barely rising, if at all. And certainly contracting below the median (except perhaps for the few millions in blue states where minimum wages have been adjusting some). When defined more broadly and therefore accurately, wages have been contracting under Trump—as they have been since 2006. Various independent surveys that are not based on the Labor Dept.’s questionable assumptions or definitions, or even errors, in its estimation bear this out that wages are not rising.

Reliability of official jobs data is also a growing concern. Changes in the US labor market structure in recent decades means the growing number of contingent and gig jobs that are second and third jobs are not being reflected in the official job numbers. The Labor Dept.’s recent adjustment reducing last year’s job gains by a whopping 500,000 raises further concerns about the methods by which it reports out monthly job gains. And actual job gains, after its adjustment, suggest that most of these may actually represent part time/temp/gig jobs that are second and third jobs taken on by workers who just can’t make ends meet any more with the first contingent job, or even current full time job. Yet Trump and friends keep peddling the myth that more business-tax cuts are needed to create jobs.

Jack Rasmus is author of the forthcoming book, ‘The Scourge of Neoliberalism: US Policy from Reagan to Trump’, Clarity Press, October 1, 2019, of which the preceding material is an excerpt. His website is https://kyklosproductions.com and twitter handle, @srjackrasmus. He hosts the Alternative Visions radio show on the Progressive Radio network weekly, podcasts available are available at http://alternativevisions.podbean.com.