If Josh Barro’s first New York Times column is an example of what the new subsite “The Upshot” is going to produce, it’s going to be pretty valuable in, as it advertises, “demystifying politics, economics and other subjects.” Riffing from data showing that 57% of Americans think we are still in “a recession” nearly five years after the Great Recession officially ended, Barro boils it down pretty fast:
People don’t take this [Are we in a recession?] as a technical economic research question; they take it to mean, “Is the economy good?” And for much of America, despite years of modest gross domestic product growth and strong stock market gains, the economy isn’t good.
Two trends are responsible. The labor market is still slack, meaning millions who would like to work can’t, and those who do work have limited ability to demand higher wages.
Last year, Emanuel Saez — an economist from the University of California, Berkeley — made headlines with the finding that 95 percent of income gains from 2009 to 2012 accrued to the top 1 percent of earners. But this finding was not about the rich doing well; their incomes are actually growing a little more slowly than in the last two economic expansions.
Instead, it reflects the failure of most of America to recover at all, with real market incomes for the 99 percent rising just 0.1 percent a year. Higher corporate profits and higher stock prices have not translated into meaningfully higher wages.
The other trend is a long-term one: For four decades, even in stronger economic times, wage gains have not kept pace with economic growth. Wages and salaries peaked at more than 51 percent of the economy in the late 1960s; they fell to 45 percent by the start of the last recession in 2007 and have since fallen to 42 percent.
When the economy does grow, that growth disproportionately accrues to the owners of capital instead of to wage earners; and in the last few years, weak growth and abundant labor have made that pattern even stronger than normal.
Our economic policy “debate” doesn’t much deal with this abiding problem. Republicans don’t even try:
Our main economic policy debates still focus around what policies will improve overall economic growth, instead of the problem of growth not adequately translating into improvements in employment and wages. This is especially true among Republicans, but it also creeps into the Democratic perspective on the economy.
Republicans call for lower taxes, fewer transfer payments and less regulation. In some cases, they focus on the need to reduce the public debt or to tighten monetary policy. Regardless of whether these policies would bolster G.D.P. growth, they have little to do with tightening the labor market after a recession or with increasing the share of G.D.P. that goes to wages and salaries.
But while Democrats at least try, and are seeking to make economic inequality a major partisan differentiator, their actual proposals tend to focus either on people at the bottom of the wage scale, or on long-term personal productivity enhancers like better education that won’t do much for people struggling now.
Now that’s an observation that is often used to blast the Clintonite wing of the Democratic Party. But the fact remains:
The one period of really robust wage growth in the last 40 years was the late 1990s, when the labor market was tight and workers could effectively demand higher wages in exchange for their labor. Fiscal and monetary policies that aim to recreate that situation might finally get Americans to stop saying we’re in a recession. Yet that’s not the focus of the conversation in Washington.
Nor is it even the focus of conversation within the Democratic Party.
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