Dec 27 2013

Take this job and shove it.

The Fear Economy

By PAUL KRUGMAN, The New York Times

Published: December 26, 2013

Some people would have you believe that employment relations are just like any other market transaction; workers have something to sell, employers want to buy what they offer, and they simply make a deal. But anyone who has ever held a job in the real world – or, for that matter, seen a Dilbert cartoon – knows that it’s not like that.

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We can actually quantify that weakness by looking at the quits rate – the percentage of workers voluntarily leaving their jobs (as opposed to being fired) each month. Obviously, there are many reasons a worker might want to leave his or her job. Quitting is, however, a risk; unless a worker already has a new job lined up, he or she doesn’t know how long it will take to find a new job, and how that job will compare with the old one.

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Now think about what this means for workers’ bargaining power. When the economy is strong, workers are empowered. They can leave if they’re unhappy with the way they’re being treated and know that they can quickly find a new job if they are let go. When the economy is weak, however, workers have a very weak hand, and employers are in a position to work them harder, pay them less, or both.

Is there any evidence that this is happening? And how. The economic recovery has, as I said, been weak and inadequate, but all the burden of that weakness is being borne by workers. Corporate profits plunged during the financial crisis, but quickly bounced back, and they continued to soar. Indeed, at this point, after-tax profits are more than 60 percent higher than they were in 2007, before the recession began. We don’t know how much of this profit surge can be explained by the fear factor – the ability to squeeze workers who know that they have no place to go. But it must be at least part of the explanation. In fact, it’s possible (although by no means certain) that corporate interests are actually doing better in a somewhat depressed economy than they would if we had full employment.

What’s more, I don’t think it’s too much of a stretch to suggest that this reality helps explain why our political system has turned its backs on the unemployed. No, I don’t believe that there’s a secret cabal of C.E.O.’s plotting to keep the economy weak. But I do think that a major reason why reducing unemployment isn’t a political priority is that the economy may be lousy for workers, but corporate America is doing just fine.

3 comments

    • on 12/27/2013 at 15:29
      Author
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    • on 12/28/2013 at 00:39
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    here:

    Why corporations might not mind moderate depression:.

    Profits took a hit during the financial crisis, but have soared since then, and are now 60 percent above pre-crisis levels; meanwhile compensation has grown hardly at all, and indeed fallen in real per capita terms.

    The point is that we have a depressed economy for workers, but not at all for corporations. How much of this is due to the bargaining-power issue is obviously something we don’t know, but the disconnect between the economy at large and profits is undeniable. A depressed economy may or may not actually be good for corporations, but it evidently doesn’t hurt them much.

    Now, about the political economy: I don’t think we have to believe in a cabal of CEOs trying to keep the economy depressed. All that we need is for the big money to find the state of the economy OK from its point of view, so that politicians who listen to that money lose interest in the unemployed. You can round up a who’s who of CEOs for Fix the Debt; you can’t even get started on a power-list drive to Fix the Economy.

    Sad to say that the only bright spot for us average folk is that our retirement accounts are growing nicely…but given the house-of-cards that I, at least, still think this economy is, I worry that right around the time I’ll want to start drawing from mine, things will go to hell in a handbasket.  Like what happened to so many people in 2008.

    • on 12/28/2013 at 02:27
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    Many of these workers, and the unemployed, have drunk the Fox News, et al, Kool-Aid and continue to vote against their own self-interests.  

    I despair.

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