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Future Work 2.0: Life after the Great Recession
William M. Rodgers IIIRutgers, The State University of New Jersey
March 2014
1
Prepared for the William A. Sandridge Lecture, 41st Annual Meeting of the Virginia Association of Economists.
Introduction• Where we work, how we work, and when we work has
changed (U.S. Department of Labor, Future Work, 1999).
– The primary causes:• Technology• Globalization• Diversity
• Over 14 years have passed, are Americans better off and have we harnessed these changes, such that – They enhance worker productivity, and– Allow workers to keep a greater share of their contributions
2
Since 2000, labor share’s downward trend has accelerated.
85
90
95
100
105
110
115
1947 1951 1955 1959 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011
Ind
ex,
Bas
e Y
ear
= 1
00
3Source: Bureau of Labor Statistics. Labor share is the share of output accounted for by employees' compensation.
Discussion Outline
• The macroeconomic context
• The greatest challenges facing American workers– Long-term unemployment and underemployment– Unsustainable income inequality
• What are the dangers? Meet ALICE.
• Sketch path to broad-based prosperity: preserving the future
4
MACROECONOMIC CONTEXT
5
The Great Recession• NBER Defined: December 2007 to June 2009
• Real GDP contracted by 5%
• 7.7 million (-6.6%) private sector jobs lost
• U.S. unemployment rate: – Official: 5.0% to 9.5%– Real: 8.7% to 16.6%
• Unique features:– “Mancession”– Disparate Impacts– Minorities, Millennials and Older Workers– Public Sector
6
During the “Great Recession” the contraction in Real GDP began to accelerate in the third quarter.
(Cumulative Loss in Real GDP)
-0.7%
-0.2%
-0.7%
-2.8%
-4.2% -4.3%
0.2%
-0.3%
-0.9%
-0.2%
-1.0%
-1.8%
-4.5%
-4.0%
-3.5%
-3.0%
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1 2 3 4 5 6
Pe
rce
nt
Ch
ange
Quarter of Recession
2007:4 to 2009:1 Median During the Previous 6 Recessions
Notes: Author’s calculations from BEA data on real Gross Domestic Product. 7
The cumulative loss in private sector employment surpasses losses during previous recessions.
(in Thousands)
-8,000
-7,000
-6,000
-5,000
-4,000
-3,000
-2,000
-1,000
0
1,000
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Loss
in 1
,00
0’s
Month of Recession
Great Recession Median of the 6 Previous Recessions
Notes: Author’s calculations from BEA data on real Gross Domestic Product. The Current Recovery spans from the second quarter of 2009 to the third quarter of 2011. “Average “ corresponds to the average of the growth during the 6 prior recoveries.
8
The “Jobless” and “Pothole” Recovery• NBER Defined: June 2009 to Present
• Two segments: – Jobless: June 2009 to February 2010– Pothole: February 2010 to present
• Modest Real GDP Growth– Jobless: +1.6%– Pothole: +2.7%
• Anemic Private Sector Job Creation– Jobless: -1.1%– Pothole: +8.1% (Average monthly growth: 177k)
• Consequences - Bifurcation– In vicinity of the +150k break even threshold– Unemployment rate has fallen from 9.8% to 6.7%– Employment-Population Ratio edged up to 58.8%, up from 58.5%– Labor force Participation Rate fallen from 64.9% to 63.0%
9
Since February 2010, unemployment rates have edged downward...
9.88.9
16.0
8.7
6.75.8
12.0
5.8
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
All White African American Ages 25 to 54
Perc
en
t of
Lab
or
Forc
e
Feb-10 Feb-14
Source: Bureau of Labor Statistics. Estimates are for 16 and over.
10
Although the Employment-Population Ratio has increased, jobless rates have fallen partly due to a
decline in labor force participation.
64.9 65.362.0
82.3
63.0 63.460.8
81.2
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
All White Black Ages 25 to 54
Pe
rce
nt
of
Civ
ilian
Po
pu
lati
on
Feb-10 Feb-14
Source: Bureau of Labor Statistics. Estimates are for 16 and over.
11
The Greatest Challenges
• Absence of “robust” private sector job creation
– Part-Time Employment for Economic Reasons
– Long-term Unemployment
– Recovering from Disparate Impacts
• Unhealthy Levels of Income Inequality
– Stagnating income
– Three decades of growth: overall and within group
12
Part-time employment for economic reasons remains elevated.
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
1955 1959 1963 1967 1972 1976 1980 1984 1988 1992 1997 2001 2005 2009 2013
Nu
mb
er
(in
th
ou
san
ds)
Notes: Author’s calculations of Bureau of Labor Statistics data.
13
Long-term unemployment is a crisis.(Unemployed at least 27 Weeks)
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
1948 1952 1956 1960 1964 1968 1973 1977 1981 1985 1989 1993 1998 2002 2006 2010
Pe
rce
nt
of
the
Un
em
plo
yed
Notes: Author’s calculations of Bureau of Labor Statistics data.
14
Since February 2010, the public sector has contracted.(Cumulative Job Loss Since Start of Recovery.)
-800
-600
-400
-200
0
200
400
600
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49
Nu
mb
er
(in
th
ou
san
ds)
Month of Recovery
15Notes: Author’s calculations of Bureau of Labor Statistics data. The private sector has expanded by 8.1%, while the public sector has contracted by2.7%.
Employment-Population Ratios have not returned to Pre-Recession levels.
(Adults 25 Years and Older)
59.1
80.8
60.0
76.4
57.6
74.1
56.6
73.2
52.1
73.3
55.1
73.2
52.0
75.1
54.4
72.6
30
40
50
60
70
80
90
Black HS Graduate Black College Graduate
White HS Graduate
White College Graduate
Pe
rce
nt
of
Civ
ilian
Po
pu
lati
on
Dec-07 Jun-09 Feb-10 Feb-14
16Notes: Author’s calculations of Bureau of Labor Statistics data.
17
What does the future hold? Potential new surge in income inequality.
• Why? Seeds have been sown:
– Tepid GDP growth .
– Unprecedented long-term unemployment and part-time work
– Large portion of private sector jobs created in industries with below average earnings
– Shift to contingent work
– Sequestration:
– Public sector cutting back services and employment
– Diminished will to invest in people and communities
– $1.2 trillion across the board spending cuts over 10-year period
– $85 billion in automatic cuts started March 1, 2013
– Added more “systemic economic risk”. Job loss, natural disasters, and other economic shocks will have greater impacts.
• New idea: Creation of an a la carte society
17
Consequence of surge: Third slowdown in
human priority expenditures.
• Definition: Human Priorities Expenditures
• Government social benefits to persons
• Social insurance funds
• Housing and community services
• Health recreation and culture
• Elementary and secondary schools
• Higher education
• Libraries
• Income security
18
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013
Hu
man
Prio
rit
y C
on
cern
s/G
DP
Actual Federal and State Predicted (1959-1975)
U.S. Public investment in people has stalled, coinciding with the growth
in income inequality.
(US Human Expenditure Ratios: 1959 to 2013)
Trend Line: Based on Growth from 1959-1975
Trend Line: Based on Growth from 1959-2000
Notes: All human priority concerns are defined as government social benefits to persons, social insurance funds, housing and
community services, health recreation and culture, elementary and secondary schools, higher education, libraries and
other, and income security. 19
20
Sequestration: New Slowdown in Human Priorities Investment
(These choices demonstrate our conscious decision about the quality of life and economic growth we want as a nation.)
• Common thread: Extremely vulnerable Americans
– Stop 4m meals to seniors
– Drop 600k women, infants, and children from WIC nutrition program
– Halt services to 150k returning veterans
• Children
– Cutting teachers (e.g., special education, reading specialist)
– Shutting down, early closing (3 to 8 weeks) of Head Start Programs, one of most successful early childhood programs
• Lost employee income
• Children lost time in educational environments
• Parents must find alt child care arrangements
Source: National Council of Nonprofits.
21
Sequestration, cont.: New Slowdown in Human Priorities Investment
• Unemployed
– Cuts in benefits (CA, AK, MA, PA, UT, WA)
• Retirees
– Cuts in energy and heating assistance programs
– Meals on wheels (Cuts in services, NC, MI, OK, TX)
– Cut back on transportation services used for food shopping and getting to doctors appts (OK)
• Others
– Domestic Violence Centers (NC, OR) NC – Salisbury - $205k cuts associated with serving 800 fewer victims
– People w/ Disabilities
• Meals on wheels
– Federal Public defenders required to take furloughs
Source: National Council of Nonprofits.
22
What are the dangers to American families? Let me introduce you to ALICE.
• ALICE: Asset Limited, Income Constrained, Employed
• Def.: Households don’t earn or receive enough assistance to afford: Housing, Child care, Food, Transportation, and Health care
• Who is ALICE?
– All Age groups, senior households are the largest group
– During the recession, biggest increase occurred in ALICE families with children
• What’s the gap between ALICE’s household income and the cost of basic expenses? In New Jersey:
– Only earn 38% of the income needed to reach the ALICE Threshold
– Even with $16.7 billion in NJ public assistance,
– NJ ALICE faces a 24% resource shortfall.
22
23
Dangers of ALICE’s Insufficient Income
HOUSING Impact on ALICE Impact on Everyone
Substandard Inconvenience & safety Lower local property values
Far from job Longer commute, higher cost
More traffic on road, late workers
Homeless Disruption to job, family, education
Cost for shelter, foster care, health care
CHILD CARE
Substandard Safety and learning risks, health risks
Future burden on education system
None One parent cannot work –foregoing immediate income and future promotions
Future burden on education system and other social services
23Source: ALICE: Study of Financial Hardship in NJ. United Way of Northern New Jersey, 2012
24
Dangers of ALICE’s Insufficient Income, cont.
FOOD Impact on ALICE Impact on Everyone
Less healthy Poor health, obesity Less productive worker, future burden on health care system
Not enough Poor daily functioning Even less productiveworker, future burden on social services
TRANSPORTATION
Old care Unreliable transportation and risk accidents
Worker late/ absenteeism
No insurance Risk of fine, accident liability, license revoked
Higher insurance premiums, unsafe vehicles on the road
No car Limit job opportunities/access to health care
Cost for specialtransportation
24Source: ALICE: Study of Financial Hardship in NJ. United Way of Northern New Jersey, 2012
25
Dangers of ALICE’s Insufficient Income, cont.
HEALTH CARE Impact on ALICE Impact on Everyone
Underinsured Forego preventive health;more out of pocket expense; less healthy
Workers sick in the workplace, spread illness, less productive
No Insurance Forego preventive health care; use emergency room; less healthy
Higher insurance premiums; burden on health care system
INCOME
Low Wages Longer work hours; pressure on other family members to work
Tired or stressed worker; higher taxes to fill the gap
No Wages Frustration of looking for work and social services
Less productive society; higher taxes to fill the gap
No savings Low credit score, bank fees, higher interest rates
Less stable financial system; more public resources need to address ALICE crisis
25Source: ALICE: Study of Financial Hardship in NJ. United Way of Northern New Jersey, 2012
26
How do we preserve the future? Invest in ALICE!!!
• Macro economic growth: Jump start aggregate demand
• Infrastructure investment
• Investment in non-profits
• Human Priority Investments (Best hedges against uncertainty)
– Economic literacy
– Education and training
– Social Capital
• Parks and community centers
• Unemployment Insurance
• Social Security
• Medicare and Medicaid
– Safe and fair workplaces
26
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Summing Up Phrases• “All economics is local.”
(William M. Rodgers III, Star-Ledger Op-Ed)
• “Empowering ALICE.”
(United Way of Northern New Jersey)
• “Advancing the Common Good.”
(United Way World Wide)
• “Create Lifelong Learners, Independent Thinkers and Responsible Citizens.” (Williamsburg-James City County Public Schools)
• “You can pay me now, or pay me later.”
(1980s Phram oil filter commercial)27
28
NJ Voices Guest Blogger/For NJ.com .The Star-Ledger on August 19, 2012 at 8:15 AM
