Tuesday, May 10, 2011





How the McEconomy Bombed the American Worker

The Hollowing Out of the Middle Class

By Andy Kroll

Think of it as a parable for these grim economic times. On April 19th, McDonald's launched its first-ever national hiring day, signing up 62,000 new workers at stores throughout the country. For some context, that's more jobs created by one company in a single day than the net job creation of the entire U.S. economy in 2009. And if that boggles the mind, consider how many workers applied to local McDonald's franchises that day and left empty-handed: 938,000 of them. With a 6.2% acceptance rate in its spring hiring blitz, McDonald’s was more selective than the Princeton, Stanford, or Yale University admission offices.

It shouldn’t be surprising that a million souls flocked to McDonald's hoping for a steady paycheck, when nearly 14 million Americans are out of work and nearly a million more are too discouraged even to look for a job. At this point, it apparently made no difference to them that the fast-food industry pays some of the lowest wages around: on average, $8.89 an hour, or barely half the $15.95 hourly average across all American industries.

On an annual basis, the average fast-food worker takes home $20,800, less than half the national average of $43,400. McDonald's appears to pay even worse, at least with its newest hires. In the press release for its national hiring day, the multi-billion-dollar company said it would spend $518 million on the newest round of hires, or $8,354 a head. Hence the Oxford English Dictionary’s definition of "McJob" as "a low-paying job that requires little skill and provides little opportunity for advancement."

Of course, if you read only the headlines, you might think that the jobs picture was improving. The economy added 1.3 million private-sector jobs between February 2010 and January 2011, and the headline unemployment rate edged downward, from 9.8% to 8.8%, between November of last year and March. It inched upward in April, to 9%, but tempering that increase was the news that the economy added 244,000 jobs last month (not including those 62,000 McJobs), beating economists' expectations.

Under this somewhat sunnier news, however, runs a far darker undercurrent. Yes, jobs are being created, but what kinds of jobs paying what kinds of wages? Can those jobs sustain a modest lifestyle and pay the bills? Or are we living through a McJobs recovery?

The Rise of the McWorker

The evidence points to the latter. According to a recent analysis by the National Employment Law Project (NELP), the biggest growth in private-sector job creation in the past year occurred in positions in the low-wage retail, administrative, and food service sectors of the economy. While 23% of the jobs lost in the Great Recession that followed the economic meltdown of 2008 were “low-wage” (those paying $9-$13 an hour), 49% of new jobs added in the sluggish “recovery” are in those same low-wage industries. On the other end of the spectrum, 40% of the jobs lost paid high wages ($19-$31 an hour), while a mere 14% of new jobs pay similarly high wages.

As a point of comparison, that's much worse than in the recession of 2001 after the high-tech bubble burst. Then, higher wage jobs made up almost a third of all new jobs in the first year after the crisis.

The hardest hit industries in terms of employment now are finance, manufacturing, and especially construction, which was decimated when the housing bubble burst in 2007 and has yet to recover. Meanwhile, NELP found that hiring for temporary administrative and waste-management jobs, health-care jobs, and of course those fast-food restaurants has surged.

Indeed in 2010, one in four jobs added by private employers was a temporary job, which usually provides workers with few benefits and even less job security. It's not surprising that employers would first rely on temporary hires as they regained their footing after a colossal financial crisis. But this time around, companies have taken on temp workers in far greater numbers than after previous downturns. Where 26% of hires in 2010 were temporary, the figure was 11% after the early-1990s recession and only 7% after the downturn of 2001.

As many labor economists have begun to point out, we're witnessing an increasing polarization of the U.S. economy over the past three decades. More and more, we're seeing labor growth largely at opposite ends of the skills-and-wages spectrum -- among, that is, the best and the worst kinds of jobs.

At one end of job growth, you have increasing numbers of people flipping burgers, answering telephones, engaged in child care, mopping hallways, and in other low-wage lines of work. At the other end, you have increasing numbers of engineers, doctors, lawyers, and people in high-wage "creative" careers. What's disappearing is the middle, the decent-paying jobs that helped expand the American middle class in the mid-twentieth century and that, if the present lopsided recovery is any indication, are now going the way of typewriters and landline telephones.

Because the shape of the workforce increasingly looks fat on both ends and thin in the middle, economists have begun to speak of "the barbell effect," which for those clinging to a middle-class existence in bad times means a nightmare life. For one thing, the shape of the workforce now hinders America’s once vaunted upward mobility. It’s the downhill slope that’s largely available these days.

The barbell effect has also created staggering levels of income inequality of a sort not known since the decades before the Great Depression. From 1979 to 2007, for the middle class, average household income (after taxes) nudged upward from $44,100 to $55,300; by contrast, for the top 1%, average household income soared from $346,600 in 1979 to nearly $1.3 million in 2007. That is, super-rich families saw their earnings increase 11 times faster than middle-class families.

What's causing this polarization? An obvious culprit is technology. As MIT economist David Autor notes, the tasks of "organizing, storing, retrieving, and manipulating information" that humans once performed are now computerized. And when computers can't handle more basic clerical work, employers ship those jobs overseas where labor is cheaper and benefits nonexistent.

Another factor is education. In today's barbell economy, degrees and diplomas have never mattered more, which means that those with just a high school education increasingly find themselves locked into the low-wage end of the labor market with little hope for better. Worse yet, the pay gap between the well-educated and not-so-educated continues to widen: in 1979, the hourly wage of a typical college graduate was 1.5 times higher than that of a typical high-school graduate; by 2009, it was almost two times higher.

Considering, then, that the percentage of men ages 25 to 34 who have gone to college is actually decreasing, it's not surprising that wage inequality has gotten worse in the U.S. As Autor writes, advanced economies like ours "depend on their best-educated workers to develop and commercialize the innovative ideas that drive economic growth."

The distorting effects of the barbell economy aren't lost on ordinary Americans. In a recent Gallup poll, a majority of people agreed that the country was still in either a depression (29%) or a recession (26%). When sorted out by income, however, those making $75,000 or more a year are, not surprisingly, most likely to believe the economy is in neither a recession nor a depression, but growing. After all, they’re the ones most likely to have benefited from a soaring stock market and the return to profitability of both corporate America and Wall Street. In Gallup's middle-income group, by contrast, 55% of respondents claim the economy is in trouble. They're still waiting for their recovery to arrive.

The Slow Fade of Big Labor

The big-picture economic changes described by Autor and others, however, don't tell the entire story. There's a significant political component to the hollowing out of the American labor force and the impoverishment of the middle class: the slow fade of organized labor. Since the 1950s, the clout of unions in the public and private sectors has waned, their membership has dwindled, and their political influence has weakened considerably. Long gone are the days when powerful union bosses -- the AFL-CIO's George Meany or the UAW's Walter Reuther -- had the ear of just about any president.

As Mother Jones' Kevin Drum has written, in the 1960s and 1970s a rift developed between big labor and the Democratic Party. Unions recoiled in disgust at what they perceived to be the "motley collection of shaggy kids, newly assertive women, and goo-goo academics" who had begun to supplant organized labor in the Party. In 1972, the influential AFL-CIO symbolically distanced itself from the Democrats by refusing to endorse their nominee for president, George McGovern.

All the while, big business was mobilizing, banding together to form massive advocacy groups such as the Business Roundtable and shaping the staid U.S. Chamber of Commerce into a ferocious lobbying machine. In the 1980s and 1990s, the Democratic Party drifted rightward and toward an increasingly powerful and financially focused business community, creating the Democratic Leadership Council, an olive branch of sorts to corporate America. "It's not that the working class [had] abandoned Democrats," Drum wrote. "It's just the opposite: The Democratic Party [had] largely abandoned the working class."

The GOP, of course, has a long history of battling organized labor, and nowhere has that been clearer than in the party's recent assault on workers' rights. Swept in by a tide of Republican support in 2010, new GOP majorities in state legislatures from Wisconsin to Tennessee to New Hampshire have introduced bills meant to roll back decades' worth of collective bargaining rights for public-sector unions, the last bastion of organized labor still standing (somewhat) strong.

The political calculus behind the war on public-sector unions is obvious: kneecap them and you knock out a major pillar of support for the Democratic Party. In the 2010 midterm elections, the American Federation of State, County, and Municipal Employees (AFSCME) spent nearly $90 million on TV ads, phone banking, mailings, and other support for Democratic candidates. The anti-union legislation being pushed by Republicans would inflict serious damage on AFSCME and other public-sector unions by making it harder for them to retain members and weakening their clout at the bargaining table.

And as shown by the latest state to join the anti-union fray, it's not just Republicans chipping away at workers' rights anymore. In Massachusetts, a staunchly liberal state, the Democratic-led State Assembly recently voted to curb collective bargaining rights on heath-care benefits for teachers, firefighters, and a host of other public-sector employees.

Bargaining-table clout is crucial for unions, since it directly affects the wages their members take home every month. According to data from the Bureau of Labor Statistics, union workers pocket on average $200 more per week than their non-union counterparts, a 28% percent difference. The benefits of union representation are even greater for women and people of color: women in unions make 34% more than their non-unionized counterparts, and Latino workers nearly 51% more.

In other words, at precisely the moment when middle-class workers need strong bargaining rights so they can fight to preserve a living wage in a barbell economy, unions around the country face the grim prospect of losing those rights.

All of which raises the questions: Is there any way to revive the American middle class and reshape income distribution in our barbell nation? Or will this warped recovery of ours pave the way for an even more warped McEconomy, with the have-nots at one end, the have-it-alls at the other end, and increasingly less of us in between?

Andy Kroll is a reporter in the D.C. bureau of Mother Jones magazine and an associate editor at TomDispatch. The son of two teachers, he grew up in a firmly -- and happily -- middle-class household. His email is andykroll (at) motherjones (dot) com. To listen to Timothy MacBain’s latest TomCast audio interview in which Kroll discusses what grim news lurks under the monthly unemployment figures, click here, or download it to your iPod here.




From Two Breadwinners to One

Louis Uchitelle

This article appeared in the May 23, 2011 edition of The Nation.

Keith Baudendistel counts himself lucky. The reason is convoluted. He is, after all, unemployed, having lost his factory job in East St. Louis nearly three and a half years ago.That puts him easily among the 6.1 million Americans labeled by the government as long-term unemployed. What makes Baudendistel lucky is that his wife works. And her second income, which once made the couple comfortable, is now in effect their unemployment insurance.

Louis Uchitelle writes on economics for the New York Times and other publications.

Born of the women’s movement and the income stagnation that started in the 1970s—soon making one income inadequate—the two-income family became a means of staying in the middle class or striving for that status. Now, one of those incomes is rapidly disappearing as more and more husbands or wives lose a job and, in a period of minimal job creation, can’t get back into the workforce. Once the unemployment benefits expire for the jobless husband or wife, the working spouse’s income then becomes the couple’s jobless pay, sustaining them, but at a lower—sometimes much lower—standard of living.

“We started out after World War II telling people that one person could support a family, and after a while that one income was not enough,” notes Heather Boushey, senior economist at the Center for American Progress, in Washington. “Then we said that if the husband and wife both worked, they would get into the middle class. And now more and more the second person is not working.”

It is painful to note that the Government actually stops counting these longer term unemployed people in its overall employment numbers. They do not deserve to disappear.


Keith and Rhonda Baudendistel, in their late 40s, fit this pattern. They married as teenagers twenty-nine years ago, raised three daughters (the youngest is 15) and for much of their married life, he worked on the assembly line at Cerro Flow Products, a pipe and tube manufacturer not far from the family home. His pay had risen to $17.50 an hour when the company started furloughing workers. At first there were callbacks; then in 2007 the callbacks stopped. “I look for factory work; that’s all I’ve ever done. But I can’t find any,” Baudendistel says.

The army of the unemployed, in the Great Depression, would undoubtedly have included Baudendistel. He might have ended up on a bread line, one of the expressionless faces in the bleak photographs from that era. The formal designation did not exist in those days, but like many of those forebears, Baudendistel is “long-term unemployed,” which the Labor Department defines as being out of work for at least twenty-seven weeks. The modern-day army of the long-term unemployed rose a bit in March, to 45.5 percent of the nation’s 13.5 million jobless workers. Rarely since the 1930s has the percentage been so high. Still, Baudendistel is better off than his ’30s counterparts. He at least collected a year’s worth of unemployment pay, which was nonexistent until 1935. And perhaps most important, his wife has a job, a common fallback now—and a crucial one, given that men are falling out of work more frequently than women.

Rhonda Baudendistel joined the workforce while her husband’s job seemed secure. She still works for her first employer, a company that repairs and services vending machines in a St. Louis suburb, across the Mississippi River. For a while, his pay and the $9 an hour she earned in the shipping department lifted the family’s income to more than $50,000 a year. When he lost his job, her boss allowed her to go to fifty-five hours a week from forty, with the additional fifteen at time-and-a-half pay. It meant a twelve-hour workday, including the commute, to bring home just $400 a week, after deductions, the largest of which covered the health insurance her husband once got on the job. “After Keith lost his job, I begged my boss for the overtime,” Rhonda says.

They scrape by on her meager pay, but all the extras and some of the basics are gone—the occasional night out, meat for dinner more often than pasta, a used car that is newer than the 1996 Pontiac she drives on her long commute, a warmer house in the winter. “I work the thermostat to use less fuel,” he says.

Yet for all the family’s hardship, Keith resists additional help from the government, beyond the unemployment insurance he has already exhausted, and perhaps disability pay, if he qualified for it because of a bad knee. (He hasn’t applied, preferring to use the knee, as is, in another factory job, if he can get one.) Like millions of Americans, Keith Baudendistel subscribes almost reflexively to the view—promoted by Democratic and Republican administrations and many economists—that the victim is somehow responsible for his unemployment. “The only solution is to get another job,” he says, arguing in effect that the unfilled jobs are out there and the responsibility is his to land one.

Meanwhile, Rhonda’s long working days—she leaves at around 5 am and is gone until early evening—have altered her role in the family, not to mention his. She still views him—and he views himself—as the chief provider, if not today then in the long run, when her income, they hope, will once again become secondary. Until that happens, covering just the necessities leaves roughly $5 a week for him to spend on himself; and lacking pocket money, he rarely leaves the family’s two-bedroom house. (Bunk beds in one bedroom accommodate the two daughters living at home, the youngest a high school freshman, the other attending a nearby college on full scholarship.) Rhonda manages to cook a lot, mainly because she is better at it, her husband says, but Keith does the shopping and the rest of the housework.

“He sweeps the floors, makes the beds, does the dishes, takes out the trash—the kind of stuff that helps me out,” Rhonda says. “I’m gone all day and the children are in school, so basically he’s the mom and I’m the dad. He takes the 15-year-old back and forth to school.”

When Ruth Milkman, a sociologist at the City University of New York, noticed this role reversal in data from the 1930s, she thought it was a move toward gender equality. “But because the role reversal was strongly associated with economic deprivation, it was not welcome,” Milkman says. Seventy-five years later, Keith Baudendistel certainly does not welcome it. “I want to be the head of the household again,” he says, “but until that can happen, we have to manage as best we can.”

There were more than 58 million “married-couple families” in the United States in 2007, on the eve of the recession, and in more than 30 million of those families, or 51.7 percent, the husband and wife both worked, according to the Bureau of Labor Statistics. Since then, the percentage of two-earner families in which either the husband or wife became unemployed in a given year has doubled, from roughly 1.5 percent in 2007 to 3.1 percent in 2010 for wives and 3.7 percent for husbands, according to analysis of government data by Boushey at the Center for American Progress. In 2010 alone, more than 1 million two-earner married couples were reduced to one earner. That loss helps to explain the rise in mortgage defaults and home foreclosures, and the likelihood that both will continue at an abnormally high rate well into the recovery, as the unemployed in two-earner families re-enter the workforce, in many cases not at their old wages but at jobs that pay less.

An accurate census of two-earner families would almost certainly produce more lost jobs than the published numbers, which cover only those husbands and wives who listed themselves as unemployed. There is another layer of data that count men and women (some married, some not) who are out of work but no longer searching for jobs and therefore no longer qualify as “unemployed.” In many cases, they have given up the hunt and dropped out because of the widespread reluctance of employers to hire until they are more confident that the mild upturn in the economy won’t give way to another recession. Indeed, with so many out-of-work Americans no longer trying to find a job, the labor force participation rate—the percentage of the population either employed or actively seeking work—dropped to 64.2 percent at the end of March, its lowest level in over twenty-five years, according to the Bureau of Labor Statistics.

Given the stresses—particularly the stress inflicted on couples who had come to accept their two incomes as the norm—couples might be expected to be divorcing more, but the divorce rate isn’t higher. Tension and stress, yes; there is plenty of that and irreversible damage to many marriages, particularly when the husband remains out of work for a long time. But not divorce, with its promise of a plunge into poverty for husband and wife as the two go their separate ways.

The Baudendistels, in fact, say his extended unemployment has brought them closer together, and there is some academic research suggesting this is true for other couples as well. “When a husband can’t get work,” says Kerwin Charles, an economist at the University of Chicago’s Harris School of Public Policy, the wife “learns, or believes she learns, something about him—in particular his discipline and his ability to snap back.”

By that standard, Gordon Stevenson in Westford, Massachusetts, like Keith Baudendistel, is adjusting. A pilot, he worked for a management company that supplied crews for privately owned jet aircraft—the sort of luxury jets the chief executives of the Big Three automakers flew in to Washington to plea for a government bailout. The imagery—corporate chieftains stepping out of royal coaches holding tin cups—produced a public backlash, and in response some companies cut back on the use of corporate jets. That was in November 2008. Six months later, the fallout reached Stevenson and he lost his job.

His $100,000 salary disappeared and now, at 62, he finds his unemployment pay—$628 a week; $32,656 a year—is about to run out. Except for a couple of short stints as a pilot, he hasn’t found work in his profession, he says, mainly because too many pilots are unemployed, most of them younger than he is.

Fortunately, Stevenson’s wife, Helen, is employed, and has been for twenty-three years. She earns in the mid–five figures as the director of a music school in a Boston suburb. The Stevensons’ two grown children are successful in their professions and, if necessary, they could subsidize their parents in old age. The parents don’t want that. But their resistance comes at a price. Stevenson calculates that when the layoff came, he and his wife were five years shy of having enough saved to afford retirement. Now the savings have stopped. “That was the most significant impact of my job loss,” Stevenson says.

But not the only one. “We don’t go out to eat very often anymore,” he explains, “and we seldom travel now.” On the one recent trip they did take, to Puerto Rico, their children paid the airfare and the hotel bill, as a sixtieth-birthday present for their mother. “We wouldn’t have been able to pay for that,” their father says.

Now his concern is that his wife, too, could lose her job. “She is aware that she serves at the pleasure of a board of directors,” he says, “and she has seen music school directors who were seemingly serving with great approval from their boards being asked all of a sudden to leave.”

Her schedule is 9-to-5, but student performances, which she attends, are mostly in the evenings and on weekends. Stevenson usually doesn’t accompany her, staying in the background in his new role as “Mr. Mom,” as he puts it. “Gordon will help put lunch together for me,” Helen says, “and he helps me out to the car with all my paraphernalia—my computer and such—and when I get home he has dinner waiting.”

There is in this role reversal a significant upside in her eyes. Her husband is home, which he often wasn’t as a commercial pilot. “I tend to be open about my emotions,” she says, “and I wondered whether we would fight more than when he was employed. I asked him that, and I think we both feel that we fight less, that we are pulling together more. Our big disagreement was that he was gone so much.”

Still, Gordon Stevenson, like Keith Baudendistel, yearns to work again. “The solution is to find work,” he says, rejecting the idea of state or federal supplemental income programs as “too subject to abuse.” Without his pilot’s income, however, the Stevensons say they might sell their three-bedroom house sooner than they had intended, moving to smaller quarters. And then there are the lost conversations with other pilots. “You have a social interaction,” Stevenson says, “and you don’t get that alone at home.”

The isolation pushes him to keep up his search for a job, preferably as a pilot but if not, then at something less prestigious and lower-paying. “I have a cousin,” Stevenson says, “who was a corporate lawyer for years and was working as a lawyer for a Florida real estate firm when it went out of business. He is a well-trained, intellectually capable individual. And he couldn’t find work. So he is working as a clerk in a Home Depot. I might have to do that, too.”

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