The Journal reaches too far for a silver lining this morning, writing that, hey, even if tons of people are out of a job, productivity may go up and increase corporate profits.
In the long run, strong productivity growth should drive profits, and, potentially, real wages higher.
Productivity gains this decade haven’t driven real wages much higher for the middle class. Most of the wealth created by this increased productivity this decade has gone to the top 1 percent of earners.
Here’s what the Financial Times had to say about the problem in October:
“You have to question whether conventional measures of economic growth mean anything when most people’s incomes have either been stagnating or declining for many years,” says Jared Bernstein, an economist at the liberal Economic Policy Institute and an adviser to Mr Obama. “The fact that wage earners are no longer getting the benefits of their improving productivity in the workplace is something we have never experienced [before] in modern America.”
The data are stark and go some way towards explaining why so many Americans felt so disaffected even during the most robust years of economic growth under the Bush administration. Between 2000 and 2006, the US economy expanded by 18 per cent, whereas real income for the median working household dropped by 1.1 per cent in real terms, or about $2,000 (£1,280, €1,600). Meanwhile, the top tenth saw an improvement of 32 per cent in their incomes, the top 1 per cent a rise of 203 per cent and the top 0.1 per cent a gain of 425 per cent.
Part of this was because the latest period of economic growth failed to create jobs at nearly the same rate as in previous business cycles and even led to a decline in the number of hours worked for most employees. Unusually for a time of expansion, the number of participants in the labour force also fell. But mostly it was because the fruits of economic growth and soaring productivity rates went to the highest income earners.
At least the Journal notes the obvious: That squeezing more out of workers by laying them off and making the holdovers work harder is bad for workers:
Mass layoffs, fewer overtime hours and eliminated production shifts are fundamentally bad news because they mean workers are suffering. But it also means the economy is adjusting to the shock of the financial crisis — and the crisis can’t end until an adjustment has taken place.
Just to prove that real middle-class income is not on the paper’s mind, the last paragraph (which, by the way, implies that Bush is to blame for a recession that was already under way when he took office) doesn’t mention it in its list of woes:
A rise in productivity would be a potentially positive mark on the economic record of President George W. Bush, who has presided over two recessions, a dismal stock market and a housing bust. In the 30 full quarters that Bush has been president, through the third quarter of last year, nonfarm business productivity grew on average 2.6% at an annual rate. That is compared with 2% for Bill Clinton and 1.6% for Ronald Reagan.
That’s what you call bending over backwards for a positive angle.