Precariat: a new social class in America’s new normal | #Economics on Blog#42

I’ve been writing and commenting on the new economy for the better part of the last six years. I’ve had a few “aha” moments here and there. But none as profound as the one I had yesterday when a light-bulb flashed bright white as I clicked through on a tweet by law professor Sheryl Cashin of an odd, but familiarly titled article from the National Catholic Reporter. The word that caught my eye is precariat. I’ve been writing about the precariat for some time, without knowing its name.

Precariat. Derived from the word “precarious,” the term describes me as a writer. It describes my husband, an IT professional and technical writer. It describes most of my friends who are IT professionals in a range of fields. It does not describe those who are developers who live in the Bay Area, and didn’t lose their job to the Great Recession. Those who did lose their jobs and were in their 40’s are now amongst the struggling precariat strata and includes engineers and non-technical professionals. That describes only a portion of what constitutes the Precariat. What we all have in common is the precarious economic position we all find ourselves in. Here is a general definition:

Precariat: a class of people who live just above the poverty line when, according to their professional experience or training, they should be well above it, somewhere along the spectrum we know as the middle class.

Examples of precariat are the people we refer to as 99ers. 99ers are those who were laid off at the start of the Great Recession and never resumed their former careers. Precariat are also young college graduates who cannot find full employment in the careers for which they trained or are working in their fields but not as employees of a company but, rather, as freelancers in the new gig economy. But they can be people who are employed full-time at low-wage jobs who, in the pre-Great Recession economy, earned a middle class wage.

We don’t have a number by which we can quantify the precariat in the US. Because of the way we track unemployment, for example, we only know for sure how many people who are eligible for unemployment insurance and receive it. But those who get counted get kicked off the rolls as soon as their eligibility ends, regardless of whether or not they’ve found sufficient work. There is a figure, the U6, which the Bureau of Labor Statistics publishes along with unemployment figures each month. That figure is an estimate of those who are working part-time or have given up looking for work, but wish to work. There is no available statistic that counts the number of people who’ve given up looking for work. The difference between the official unemployment figure and U6 is about five percentage points. Real unemployment in the US is currently 11.3%.

BLSJuly15

BLS unemployment data U6 measure
BLS unemployment data U6 measure

The new post-recession recovery has brought to the fore, along with low wage jobs, the deepening of a bevy of social issues that were associated with a certain underclass. The Washington Post reports that nearly a quarter of women return to work two weeks after childbirth. Housing, its cost and availability is at near-crisis level, with millenials unable to afford to move from their parents’ homes. The sharing economy includes young couples with children who share homes with multiple families, well-past the after college first job stage, in order to afford the rent. Very little has been written about the group that probably should be talked about the most: those who were laid off from career jobs in their mid-to-late forties, early fifties and have yet to find equivalent employment in the new economy. Not only is ageism a much bigger problem, so is discrimination against those who were laid off in 2008-09.

There are those who have attempted to suggest that automation explains why so many have been unable to reintegrate into the workforce, but that theory has been largely debunked by the who’s who in economics.  In, “Minimum wages and capital/labor substitution,” Jared Bernstein explains:

On the other hand, who are you going to believe, me or your lying eyes? That is, I’ve seen, and DePillis documents, the increase in tablet-based ordering or, in a different part of the food industry, auto-checkouts in supermarkets. But remember, point 1 decidedly does not argue that there’s no cap/labor substitution. It simply says there’s no evidence that it’s speeding up.

Finally, when it comes to unintended consequences and the minimum wage, if you just go with the theory—or with the anecdotes—you’re going to get it wrong in a big way. You’ve got to look at the evidence of job losses associated with minimum wage increases, and here, recent work by minimum wage scholars (Dube, Lester, Reich) is highly instructive.

Tapping the extensive variation of minimum wages across different localities, they ask: when county X has a higher minimum wage than bordering county Y, what happens to restaurant workers in X compared to those in Y? The nice thing about this research is that by comparing employment outcomes across contiguous borders, you’re controlling for economic factors that influence job growth on both sides of the border, and thus better isolating the differential impact of the higher minimum wage.

Dube explains their results:

Comparing across these neighboring counties, we showed that there was no evidence of job losses for high impact sectors such as restaurants and retail. This was true even considering four or more years after the minimum wage hike. In follow up work, we used the same cross-border methodology to study the effect on teens—a high impact demographic group…Again, we found no discernible impact on employment.

So, based on both the evidence and the idea that it is mistake for economies to avoid pay increases in the interest of dis-incentivizing capital investment, I don’t think we should worry too much about the impact of moderate minimum wage increases on labor substitution. Or, perhaps a better way to put it: we should worry a lot about the impact of falling real minimum wages on low-wage workers, many of whom are adults, minorities, parents with kids, and so on.

Raising the minimum wage is the only way to bring equality back to workers who work in traditionally low-wage industries. That is one huge step. But, when it comes to the precariat, measures like these do not offer the relief needed in order to reconstruct the middle class.

Rebuilding the middle class by shrinking the precariat will require a change in philosophy when it comes to how the US economy is managed. The winning philosophy and prescriptions of the winner between the two main contenders on the Democratic side of the primary fight will be essential in predicting how the middle class will return to its former glory, or not at all.

For African Americans, race-based discrimination is an added dimension to an already complicated situation. In a recent study reported on by the Chicago Tribune:

While unemployment is falling to its lowest level in years, recent college graduates across the country are nonetheless struggling to find work. A new report found that, for young African-Americans with a four-year degree, the job search has been especially brutal. They are having a harder time than whites finding a job, are more likely to be in a job that does not require their college degree and are being paid less than white workers with the same experience.

Even African-Americans who study science, technology, engineering and math — majors that have been winners in the job market — have had a hard time finding work, said John Schmitt, a senior economist with the Center for Economic and Policy Research, who co-authored that recent report, “A College Degree is No Guarantee.”

“We are looking at a group of people who did everything right,” Schmitt said in an interview. “They graduated high school like they were told. They went to college and graduated. They entered the labor market. But they are more likely to be unemployed than their white counterparts.”

The precariat is even more precarious for African Americans than it is for the rest of us. The jobless in this category of African Americans is 12.4% as opposed to 5.6 percent for everyone else. As I’ve written elsewhere in these pages, redress of this situation cannot be left to the osmosis of a return to full employment. Bernie Sanders addresses precisely this issue in his Plan for Racial Justice. Hillary Clinton has yet to address this specifically. All candidates in this election cycle should be confronted on the issue.

While the mainstream media has kept us entertained by the shenanigans in the Republican party, the real fight has been taking place on the left, with only two candidates being serious contenders. While Vice President Biden might enter the race, forecasters don’t predict he will upset the current trend. Both Clinton and Sanders have modeled their prescriptions from Professor Joseph Stiglitz’ work, “Rewriting the Rules of the American Economy.” The devil, its implementation, if you will, will be in which of the two candidates win. Will it be Hillary Clinton’s vision with her natural tendency toward the neoliberal, and advisers who will try to stick as close as possible to Bill Clinton’s legacy policies and approaches, or will it be the fundamental change in approach Bernie Sanders has been advocating for decades? If the latter, will he be able to run a presidential campaign that includes the kind of strategy that puts a sufficient number of democrats back in the lower house and, among them, a large and vocal enough number of progressives to avoid the mistakes of 2008-2010?

Guy Standing, the London School of Economics professor who coined the term “precariat” says this in an interview with The National Catholic Reporter:

Angry supplicants

In a variety of ways — economic, political and cultural — Standing says, “people in the precariat are reduced to being supplicants, supplicants in the sense that they have to ask or satisfy their authority figures; they have to plead, they have to beg.”

“People in the precariat are insecure,” he said. “They’re alienated. They’re anomic,” or socially disoriented, “in the sense that they don’t feel there’s any escape from their circumstances. They’re anxious. Above all, they’re very angry. And this sense of anger is growing all over the world.”

It can be seen in the rise of “outsider” political candidates in the U.S. like Donald Trump and Bernie Sanders.

I submit that, regardless which Democrat wins, how well that eventual president does for the precariat will largely depend on the strength of progressives in Congress. In past analyses, I have pointed to the overly neoliberal bent of the Democratic leadership; one that failed to keep the Obama administration more firmly on the left side of the tent when it had control of both houses, and didn’t show enough resolve in its negotiations with the GOP, once it lost legislative control. The budget that was passed at the end of 2013, has had a greatly deleterious effect on the precariat. It is my hunch that this deleterious effect is what is behind Bernie Sanders’ surge in the polls and the overflow crowds that are the norm at events, including the Deep South.

Real victory will be measured in terms of the backing and cooperation the incoming President of the United States will have won for him or herself. The GOP is so well practiced in the game of obstruction and suffocation of government and the middle class, that it will undoubtedly continue as it has when a new Democrat moves into the White House. This time around, victory will be as shallow as defeat if winning the White House comes without winning back control of the House of Representatives. The winner must take both.


References:

The shocking number of new moms who return to work two weeks after childbirth

“In the United States, nearly a quarter of employed mothers return to work within two weeks of giving birth, according to a new report from In These Times, a nonprofit magazine, which analyzed data from the Department of Labor and collected stories from mothers who kept working through pain and grief.

It’s not because they recover at a supernatural pace. Or because they value their jobs over their babies.

Some simply can’t afford the pay cut. Buying groceries for many American women trumps resting for as long as the doctor advises. So, they go back to the office — even if the C-section cuts haven’t yet healed or a premature baby remains in the hospital.”

Read the rest of “The shocking number of mothers who return two work two weeks after childbirth” at the Washington Post’s WonkBlog.


Chicaco Tribune: Study: Even for college-educated blacks, road to full-time work is rocky


Salon:  Down and out in Portland: Lean seasons had always been part of my writing life, but this time I was dead broke

“A content creators‘ advocacy lawyer I know told me that by 2022 there will be 31 percent fewer writers and authors in publishing as we think of it than there were in 2012. Journalism school had been a safe choice when I came up in the ’80s. In good times, I was an $80,000-a-year magazine and book writer who did some digital, working out of L.A. and Brooklyn, New York. Then the business of “real writing” fell off a cliff. According to a Society of Newspaper Editors Survey, in 2007 there had been 52,600 newsroom positions. By 2009 there were 20 percent fewer.”


Text and video of Hillary Clinton’s economic speech.

Text and video of Bernie Sanders‘ speech to the Southern Christian Leadership Conference

Jared Bernstein: Minimum wages and capital/labor substitution | On The Economy

Prof. Avis Jones-DeWeever: The Recovery That Left Black Women Behind