Tag Archives: economic crisis

The New Precariat and Electoral Politics

During the Presidential campaign, Americans have heard endless discussions about unemployment. But neither candidate has said much, at least not directly, about precarious employment or about the new precariat – that growing group (some would even say the growing class) of workers in temporary, part-time, and/or contingent work that often doesn’t pay a living wage.

Who is the precariat? According to Guy Standing, the author of The Precariat: the New Dangerous Class, all of us could be.  For now, the precariat involves largely women, the young, the disabled, retirees forced back to work, former prisoners, and migrants. It also includes large numbers of formerly middle-class professionals, skilled and semi-skilled people who have been displaced by economic change. While each of these groups has gotten some attention, Standing argues that as a group, the precariat is still “a class in the making,” united by an overwhelming sense of insecurity and vulnerability.

The growth of the precariat has its roots in globalization and technological change, which flooded flexible labor markets and advanced international divisions of labor.  These conditions coincided with changes in government regulation, corporate restructuring, reduced access to and distribution of social programs, and the creation of coercive social policies such as workfare, mass incarceration, and means testing.

Historically, precarious employment was associated with the informal economy.  But with economic changes in the last several decades, informality has moved beyond traditional practices of black market exchanges or services such as day care or tutoring. As workers have been displaced from the formal economy, many are turning to consulting, internships, and subcontracting to find contingent and intermittent work. In general, more and more people are involved in unregulated work characterized by irregular employment, short job ladders, substandard wages and working conditions, and increased stigmatization. During the current economic crisis, with declining standards of living and loss of public assistance, the new precariat – like the old precariat — survives by working longer hours, holding multiple jobs, and when possible relying on the kindness and generosity of friends and family.

While the growth of the precariat creates real social and economic challenges for workers in the informal economy, in places like Youngstown, where the cost of living is low, some mostly younger adults are making a virtue of the situation. As cultural anthropologist Hannah Woodroofe has argued, Youngstown is becoming home to increasing numbers of highly individualistic, anti-materialistic, entrepreneurial adults with episodic employment in largely deregulated work environments. While some define themselves as entrepreneurs, many also see their rejection of materialism as providing a measure of freedom and dignity that challenged capitalist and “older parental” values surrounding work.

Their economic conditions are anemic and often do not reflect their education and experience (many have college and even graduate degrees). They don’t earn much and have little savings, health care, or pension benefits. Their work experiences and the difficulties they’ve had in finding jobs in the formal economy have reduced their expectations about the future.  They have internalized their economic insecurity, and their personal lives tend to mirror their work lives, with contingent and episodic relationships and living situations. Many embrace sustainability and green values, starting urban farms or homesteading in abandoned houses.  Others are part of a contingent creative class, doing freelance work in the arts, web development, and education, but because of the precarity of their work, they don’t make the kinds of stabilizing contributions to the local economy that Richard Florida predicted.  Some just want to be left alone, comfortable with their inexpensive lifestyles.

Just how big is the new precariat? It’s difficult to measure, but the Federal Reserve Board of Cleveland suggests that the ‘Great Recession’ has resulted in increases in self-employment, and the Bureau of Labor Statistics reports that 35 million people work part time.  While the data on how many people have precarious employment is far from definitive, the precariat clearly seems to be large and growing.

That suggests that the new precariat could have a significant impact on the election. Most of them don’t believe that the government or other institutions can do much to ameliorate their situation.  Many consider themselves to be small business people. As Arun Gupta and Michelle Fawcett have suggested, “Republicans have turned small business into a catch-all group the way ‘working class’ once served that function for the left.” That suggests that the precariat may be persuaded by campaign rhetoric about taxes and economic development.  On the other hand, many see themselves as anti-capitalist, committed to green values and social justice. So will they vote like those who share their educational backgrounds, who are more likely to be politically independent and have socially progressive leanings, thus revealing themselves to be the fallen faction of the middle class?  Or do they, like much of the old white working class, vote on the basis of economic aspiration?  Or does the precariat now include so many Americans, from diverse backgrounds and in varied situations, that their political views can’t be easily predicted?  In 2012 in states like Ohio, the new precariat could determine the presidential election and America’s future.

John Russo, Center for Working-Class Studies

Working Hard? Or Hardly Working?

Are you a workaholic? According to the latest research there is more than one kind. Typical workaholics are “pushed” to their work and may suffer from poorer relationships at home and at work, as well as heart attacks and other illnesses caused by stress. But the latest discovery is people who qualify as “engaged workaholics,” who are “pulled” to their work because they love to work. According to Danish researcher Wilmar Schaufeli, these engaged workaholics “work because work is fun.” They also suffer less burnout, and perhaps fewer health deficits, than the typical workaholics.

I raise this question because Comedy Central just broke out its third season of Workaholics, an addictive show about three continuously baked twentysomethings who work as telemarketers. The three office mates/house mates are not “aholics” when it comes to work, but they are addicted to just about everything else: weed, rap, booze, porn, shrooms, acid, and wizards. Seriously, they love wizards.

The buddies on Workaholics have the same names as the actors who play them, Blake (Anderson), Adam (DeVine) and Ders (Anders Holm). Their boss is a woman—a barracuda with a soft spot for the slackers, and the plots usually revolve around a wild party, sometimes taking place at the suburban tract house they share, and sometimes taking place at work, like the time they camped out in the office while tripping on mushrooms, or the time they brought drugs on a business trip and were able to close an important deal by plying their client with acid.

However poor the work ethic of the characters on Workaholics, their real life counterparts probably qualify as “engaged” workaholics. Blake and Adam met at Orange Coast College, a community college in Costa Mesa, and after they found Anders at The Improv they began uploading sketch comedy to the internet in their spare time. Before they made it big, Blake, the show’s front man, with a mop of orange ringlet curls and a caterpillar mustache, was simultaneously going to school, delivering pizza, and becoming an internet phenomenon.

Fortunately for the show’s 2.2 million viewers per episode, mostly men between the ages of 18-34, the comedy trio took off. A Comedy Central executive saw one of Mail Order Comedy webisodes and agreed to bankroll their pilot. Ironically, of course, Blake, Anders, and Adam hit it big making comedy from their own nerdy, druggy, loserish lives. Most Americans are not so lucky. Any real worker who came to work as drunk, hungover, and stoned as the boys on Workaholics would be terminated.

Season one of Workaholics debuted in 2011 and featured wacky workplace intrigue, peppered by drugs, a bitchy boss, indecent exposure, and potty humor galore. The hilarious pilot featured a sadistic work place drug tester who threatened to expose the merry band of bromancers for the druggies they were. In an action sequence inspired by the film Die Hard, Blake busted through the office’s ceiling tiles, crawled through the air ducts, and broke into the room containing the vials of urine waiting to be drug-tested.. Blake then contaminated the samples with his own stream. In the final scene, the bested drug tester fell for one of the boys’ favorite pranks, stooping down to pick up a rolled up dollar bill filled with dog poop.

You wouldn’t think that a comedy this juvenile would have much to say about real workers, but the employees of TelAmericorp can be devilishly wry in their commentary on the modern-day dead-end-job. Almost every episode involves a real life situation that workers face in the new recessionary economy, such as getting fired, being denied vacation time, being fired for striking, being denied a raise or  a promotion, losing health insurance, being evicted, and failing a drug test. While the resolutions to these conflicts are often wildly fantastic and hallucinatory, and would never resolve a similar situation in real life, the jokes in each episode have nearly as much bite as an episode of The Office, that short lived 1990s comedy, Working, starring Fred Savage, or the 1960s comedy I’m Dickens, He’s Fenster, which I reviewed last month.

During a memorable episode in the first season, for example, Blake, Adam, and Ders stumble across a group of strikers. “What are you on strike for?” The workers reply: “More pay, better hours, health insurance.” The boys are confused, but in a good way: “Now let me get this straight. You guys are standing outside, not working, and yelling? Strikes are awesome! Strikes are freaking cool!” Later in the episode the boys stage a strike of their own when their boss refuses to let them celebrate, as is their tradition, “half Christmas” in July.

Many television reviewers and interviewers have noticed that Workaholics echoes the current economy. MTV Geek observed that, “the show is…about these guys working these crappy jobs just so they can have enough money to party, and it’s all happening in the context of this pretty crappy economy.”

But is it possible that the recession is making some workers rethink the workaholic treadmill? American productivity, which has risen aggressively over the last decade, was down significantly last quarter. As the Associated Press reported, this could mean that “companies are struggling to squeeze more output from their workers.”

Tim Jackson, an Economics professor at the University of Surrey, took up this idea in a recent New York Times Op Ed, “Let’s be Less Productive.” He makes the radical suggestion that we try to loose ourselves from the vice grip of efficiency and productivity and revel in “slow work,” taking time to expand the professions that require craft and care for others—including hospital work, the arts, and education.

On Workaholics, the characters definitely revel in non-productivity, and they do care a lot for each other at the end of the day. As with most fraternities, theirs is built on fantasies of sexual exploitation, usually thwarted, of course, because they are wannabe players. Ultimately, their fraternity is closer to the old union brotherhood than you might think. Blunt in hand, they stick by each other, go on strike with each other, contaminate drug tests for each other, close business deals for each other, fight drug dealers, mean office mates, and cold-hearted ladies for each other. On Workaholics there is just enough brotherly love and slacker-class-consciousness to keep me coming back for more.

Kathy M. Newman

Welcome to the Informal Economy

It’s graduation season, and while commencement speakers encourage graduates to work hard and pursue their dreams, most new grads are worried about finding a decent job.  All their professors can suggest is that students use internships to gain valuable work experience and be prepared to have five jobs by the time they are 35.

Here’s the reality, grads: things are worse than you fear.  When you’re 35, you could still be looking for a good job. You’ll have a family to support, your salary could well be lower than you expect, and you’ll receive little or no pension contributions or health care benefits. Taken together, episodic work with little opportunity for advancement and poor wages and benefits reflect the characteristics of work life once found largely in the informal economy but now becoming all too common in the formal economy.

According to UNESCO, the informal economy involves the largely unregulated exchange of goods and services and is characterized by intermittent employment, short job ladders, and substandard wages and working conditions.  Historically, the informal economy has referred primarily to workers paid under the table, like many nannies or home health care aides, itinerant workers, and those involved in black market exchanges. But increasingly, the conditions of the informal economy are being experienced in the formal economy, though they are generally ignored or hidden by such glossy terms as consulting, internships, subcontracting, and privatization.

The economic crisis is pushing more people into the informal economy. USA Today reported that in 2010 only 45.4% of Americans and 66.8% of men had jobs. Both statistics are among the lowest on record, and now the United States has a lower share of prime age men in the work force than any other G-7 nation. According to David Brooks, writing in the New York Times, this is the result of early retirements, work disability, the decline of manufacturing jobs, and poor job fits in the new economy. Regardless of the reasons, the number of unemployed and underemployed people, who are most likely to participate in the informal economy, is growing in every sector and profession as the recession/regional depression continues. Many of those who do not have jobs are finding ways to support themselves, at least minimally, within the informal economy.  They have no choice.

At the same time, employers are taking advantage of desperate, young, less expensive workers, often hired on a temporary or contract basis, who are displacing older professional and non-professional workers or simply allowing companies to avoid committing to permanent hires.

As companies resist hiring full-time workers, and as young workers clamor for any possible job opportunity, internships have become increasingly significant in American business, and informal economy conditions apply to many internships.  According to the Economic Policy Institute, 1 to 2 million people today work as interns in the United States, and most are either unpaid and poorly-paid. In his book, Intern Nation, Ross Perlin reports that internships usually don’t conform to labor regulations, contribute to socio-economic inequalities, and rarely provide a useful job ladder – conditions that are typical in the informal economy. Offering college credit in lieu of an hourly wage does not necessarily mean that employers are free to ignore wage and hour restrictions. The U.S. Department of Labor has begun to take note of these problems and plans to increase regulation of unpaid internships nationwide.

Another growing category of informal workers is home-based caregivers. While some work through employment agencies, home-based employment is largely unregulated and dominated by non-white and female workers who earn low wages and no benefits. As more families need help caring for young children, disabled family members, and aging parents, demand for home-based care services has grown. Personal home and health care employment now exceeds 3 million and is projected to be the largest sector of new job growth between 2008 and 2018, with 1.1 million new jobs.  In the last decade, these workers have won union organizing and bargaining rights, but Steve Early reports that there is bi-partisan support among many current governors to rescind executive orders or pursue legislation undermining these workers’ attempts to improve their working conditions.  As a result, their wages will decline, their working conditions worsen, and they will sink even deeper into the informal economy.

So what is to be done? A number of labor and social justice organizations have formed the Excluded Workers Congress with goal of organizing workers in the informal economy, connecting them with grassroots movements, and developing strategic responses to informalization. They aim to challenge discrimination in the current labor market, build support for ongoing campaigns to improve working conditions, expand labor rights for excluded workers, and advocate for policies that support all workers’ right to organize.

Acorn International’s founder Wade Rathke suggests that there is no quick fix for the informal economy.  Rather than offering programs to retrain informal workers to enter the shrinking formal economy, he argues, we should “embrace the informal economy and engage in survival strategies that provide sustainable livelihoods and community redevelopment.” With short timelines and low investment, communities could organize  “localized informal workshops, training, production, marketing, and sales that can provide dignified, remunerative work for millions.” The work would range from home repair and rehab to food and bio-diesel production to recycling and technical repair services. He also advocates social networking to facilitate the sharing of job information, dispatch, and distribution and micro-lending adapted to broader social and community purposes. Put differently, he thinks the solution to the problems of the informal economy lies in changing the conditions of the work, not the workers.  Rathke wants to make work in the informal economy legal and formalized.

Most certainly, Rathke’s ideas may seem out of the box in advanced economies that often look for quick fixes. But as we in Youngstown know from more than 30 years experience, large-scale, structural economic problems don’t have easy solutions. On the other hand, the solutions Rathke advocates have helped alleviate poverty in developing nations. They may offer a more sustainable model of economic recovery, one that acknowledges significant structural and social changes.

That doesn’t offer much immediate hope for this spring’s graduating class or those being displaced within the formal economy.  The jobs outlook remains bleak.  But their long-term prospects might be better if, instead of normalizing the poor working conditions of the informal economy, we organized to ensure decent wages, reliable pensions, good health care, and greater opportunities for workers across the spectrum.

John Russo, Center for Working-Class Studies

Empathetic Indifference: Why the Democrats Lost

In 2008 white working-class voters in Wisconsin and Iowa gave Barack Obama 52% of their vote – and that was pretty important because in both states, working-class whites were a majority of all voters.   In 2010 they were even larger majorities, but they gave Democratic candidates  only 40% of their votes in Wisconsin and 32% in Iowa.

Though especially striking, these huge swings are pretty typical of Midwestern states – where, except for Illinois, whites without bachelor’s degrees (the reigning definition of the electoral “working class”) constitute a majority of all voters.  In the Great Lakes states over the past two decades, there has been a slow but substantial drift of white voters, including working-class whites, toward the Democratic Party.  That drift halted (or at least paused) big time this year.  Why?

First, as Democracy Corps has documented (see “Graphs,” p.7), nearly every demographic group swung against Democrats in 2010, including declines of 3 and 4 percentage points among the core of the Party – African-Americans, Latinos, and union households.  The swing was just larger, more dramatic, and potentially more damaging among working-class whites in the industrial Midwest.  Given the ubiquity of the swing, any explanation needs to focus on large overarching causes that affect the entire electorate but have special force in the Midwest where the working class of all colors is such a large majority.

The consensus causal explanation among analysts and pundits on this score is, of course, the state of the economy.   But there are several variations of this explanation with important differences.

One variation is arithmetical mechanics:  an official unemployment rate of nearly 10% automatically leads to whoever is in charge being thrown out by voters, regardless of what they have or have not done.   With the inauguration of President Obama, the Democrats were clearly in charge in January 2009.  The official unemployment rate then was “only” 7.7%, and it steadily rose to 10% by the end of the year, where after a very slight improvement it has remained.   That economic number and its trajectory are highly predictive of electoral outcomes.  Period – end of story.

There is wisdom in the simplicity of this mechanistic explanation, and it should not be forgotten.    I am among those who think that Democratic economic policies in 2009 averted a much worse economic situation than would have occurred had the Republicans been in charge – or if there had been complete, instead of partial, gridlock.  That’s why I voted for Democrats, but I can understand why the “wisdom of crowds” might see voting as a kind of thumbs up – thumbs down affair, and not a comparison.  Indeed, as I voted for Democrats (a few of whom, like my Representative Danny Davis, are actually very good),  it felt like I was saying “everything is okay.”

Another variation of the it’s-the-economy explanation holds that the Obama administration was simply ineffective in explaining its various economic policies.  Endless punditry about “messaging” and “narratives” ranges from the mildly insightful to the disgustingly superficial and manipulative, but there is undoubtedly truth to the general proposition.  In particular, the President bragging on his accomplishments (which, as Rolling Stone has comprehensively summarized, are many) as life got palpably worse for workers and homeowners, not to mention the poor and unemployed, was certainly counterproductive when it was not outright maddening.

The third it’s-the-economy analysis points to the actual Obama macroeconomic policy, the “stimulus plan”: it was not big enough and too much money was spent on the wrong things to get the economy growing vigorously enough to bring down unemployment.  This is tricky territory, and I’m not competent to make the kinds of combined economic and political judgments that politicians have to make.  But if the mechanistic relationship between unemployment rates and electoral outcomes is as important as decades of statistics indicate, then a President and his party have to actually move the numbers – or at least try.

They did try in 2009.  Indeed, the Obama mistake was not in the original stimulus plan, which we now know averted a Great Recession but was not sufficient to move the economy forward.  Rather, the key mistake was later, in the President’s first full budget at the beginning of this year. After promising “to focus like a laser” on jobs and the economy when health care reform was passed, the President presented a budget that accepted 9% or 10% unemployment as the best he could do.  Eschewing a second stimulus plan, he rejected an economically robust and politically shrewd stimulus plan that was developed for him by the labor movement and its allies.

That plan would have invested $400 billion of borrowed money in job-creating activities, paid for over time by a permanent Financial Transactions Tax designed to reduce the kinds of speculative activity on Wall Street that helped drive our economy into the ground.  After the $400 billion stimulus was paid for, that tax on Wall Street would have produced more than $100 billion a year in government revenues, which could have been used to reduce the national debt.

It was not too late then to make a significant dent in unemployment, and it is not too late now.  The President could pursue a similar plan outlined by some of his most important allies.  Even the Federal Reserve Board is now pleading for a large deficit-financed job creation program in the short term that will reduce government deficits and debt in the long term, in part by growing the economy faster and stronger.

It’s true that Republicans will form a phalanx of opposition to any such plan, and even with a full-throated, whole-hearted effort by the President and his party, the chances of passage are well south of 50/50.  But the alternative for Democrats is to do what they did this year: to do next to nothing about unemployment and to be seen again as doing nothing as the jobless rate edges down to a projected 9.2% by the end of next year and not much below that in 2012.

The white working class, in the Midwest and elsewhere, swung decisively against Democrats in 2010 for pretty much the same reasons as almost everybody else did:  As they went to vote, there were not enough jobs for one of ten people who want to work and need to work, and the governing politicians in charge, all Democrats, didn’t seem to give a shit.  It’s not just the fact of such outrageously high and painful rates of unemployment.  It’s the passive acceptance of them, the serene, if empathetic, indifference.

Jack Metzgar, Chicago Center for Working-Class Studies

 

 

 

Welcome to the Working Class

As the financial industry celebrates its recovery from the Great Recession with huge bonuses, attention has turned increasingly to jobs.  But that’s not a new concern: over the past three decades first the working class and then the middle class faced unemployment caused by economic restructuring and globalization.  Back in the 70s and 80s, when working-class people were losing thousands of blue collar manufacturing jobs that paid middle-class wages, many economists brushed the problem aside, insisting that new forms of work would soon replace disappearing blue-collar jobs.  Industrial workers and their unions knew better 30 years ago.  They’ve long warned that economic restructuring, globalization, and unfair trade laws would result in the loss of the middle class.  Today we’re learning that they were right.

With the jobless recovery of the early 2000s and the ongoing unemployment crisis of today’s recession, the middle class is discovering that sociologists Richard Sennett and Jonathan Cobb were accurate when they suggested that what it means to be middle class is to be just one job away from poverty.  In Fear of Falling, Barbara Ehrenreich explored the impact of this decline on individual consciousness.  But it is only within the last decade that people who thought they were safely middle class have come to understand the episodic, anxiety-ridden, contingent, low-wage-and-benefit life of many in the working class.

And that experience seems likely to become permanent reality for many.  Unlike in past business cycles, the middle class has not been able to recover so far, despite increases in productivity and stock prices. In “America Without a Middle Class,” Elizabeth Warren documents how the de facto unemployment rate, credit debt, “underwater” mortgages, increased use of food stamps, personal bankruptcies, and the loss of pensions and health care have all dramatically increased.  Middle-class households have depleted their savings and are increasingly accruing debt to pay for college, health care, and other expenses.

The situation continues to worsen.  The latest monthly Bureau of Labor Statistics Employment Report shows an additional 85,000 jobs lost. As the U.S. population grows, the need for jobs increases.  The economy would need 100,000 new jobs just to keep up. In other words, the net effect puts us 185,000 jobs behind where we need to be to stay even with current misery.  To make matters worse, 600,000 gave up looking for work and so were not even counted in the official unemployment rate.  Over the last decade, the data shows no net creation of new jobs.

Some experts believe that the decline in jobs will only continue. For example, Alexandra Levit predicts significant losses in a number of key industries between 2008 and 2018:  semiconductor manufacturing(33.7%), motor vehicle parts manufacturing (18.6%), printing and related jobs (16%), apparel manufacturing (57%), newspaper publishers (24,8%), mining support jobs (76,000 or 23,2%), and the postal service (13%). Corporations are moving many of these jobs offshore or replacing them with technology rather than paying middle class wages and benefits. The economists are right that new jobs are being created in place of these.  But as Jack Metzgar discussed last week, most of the new jobs offer even lower wages and benefits and require less education.

Since private sector jobs cannot or will not be replaced in significant numbers, working people will have to rely on government spending to fill the gap.  The first Obama stimulus, while important (see The Stimulus at Work), has clearly proven insufficient. The limits of this approach can be seen in California, Illinois, and New York.  No wonder business leaders like Warren Buffet, economists like Paul Krugman, and others are calling for second stimulus directed more at creating new jobs.

While many approaches have been offered, the Economic Policy Institute has outlined a simple plan to create jobs and stem the unemployment crisis. It contains five major themes: strengthening the social safety net (including unemployment compensation, COBRA health coverage, and nutrition assistance); providing additional fiscal relief to state and local governments; making renewed investments in infrastructure including transportation and schools; supporting direct creation of public service jobs; and establishing a new tax credit to employers who create new jobs.

No doubt, we need stronger government leadership in creating the jobs that will expand the so-called recovery from the financial sector to the jobs sector.  But making real, lasting change requires something more:  a reexamination of the neoliberal ideology that has been responsible for current economic crisis that is moving so many from the middle class to the working class.  As a recent Special Report in The American Prospect suggests, nothing short of an complete overhaul involving industrial, trade, and foreign policy will do, especially involving the revival of American manufacturing.

Why manufacturing? As Richard McCormack has found, the loss of a single manufacturing job in a single large manufacturing plant, such as the GM Moraine Assembly in Dayton, can result in the loss of 15 additional jobs in the local community and through supply chains – job losses that affect both working- and middle-class workers.  But it’s not just that lost manufacturing jobs have wide-ranging effects.  It’s also that manufacturing jobs, unlike the low-wage service jobs Metzgar wrote about last week, are more likely to pay a liveable wage and provide decent benefits.  Manufacturing jobs can be good working-class jobs, working-class jobs that can in turn help rebuild the middle class.

With a new stimulus package and a revitalized manufacturing sector, the Great Recession may – like the Great Depression before – provide the ideological stimulus to create a more humane economy that is supportive of the working class.  We need such a shift now, especially as the working class increasingly includes thousands who once thought they were solidly middle class.

John Russo

Jobs, Ideology, and Policy: Putting Workers First

During the 1980s recession, as steel mills closed and auto plants began downsizing around the country, neoconservative economists insisted that the jobs lost to deindustrialization would soon be replaced by new jobs.  In Youngstown then, we knew better.  And as we wrote seven years ago in Steeltown U.S.A., Youngstown’s story in the late 70s and early 80s has not only persisted here, where unemployment is among the highest in the state and the poverty rate hovers around 30%, but has become America’s story today.

Youngstown learned then how real economic shifts could be exacerbated by ideology: the idea that businesses and investments matter more than ordinary human beings and the notion that we should just get used to economic patterns that create long-term hardship for those with the least power and resources.  Youngstown learned more than 30 years ago how damaging such ideas can be.  Once again, the rest of America is learning that lesson today.

The gap between the Wall Street recovery and the continuing jobs recession was highlighted by Friday’s jobs summit.  Communities around the country understand that we are in another jobless recovery that leaves hundreds of thousands of American families vulnerable.  While markets have stabilized for the moment and investors are feeling more confident, the economy isn’t improving for most Americans.

So is the current situation just like the earlier recession? No. It is worse. As Peter Edelman and Barbara Ehrenreich note in Sunday’s Washington Post, the current economic crisis reveals the glaring problems left behind by the welfare reform of the 1990s, a policy change that reflected the long-standing assumption that poverty is a “voluntary condition” and that every able-bodied adult should simply find a job – “even when there are obviously no jobs available.”  When we removed the safety net because of conservative and neoliberal worries about “fostering dependency,” we created the economic conditions that left 17.1 million Americans living in extreme poverty in 2008 – and no doubt even more today. As we learned last year, we’re willing to bail out corporations but not working people.

The current recession is also worse because it isn’t just a matter of jobs.  It’s a matter of ideology.  Blaming the victim and normalizing long-term economic struggle were part of the discourse at the jobs summit, during which Jan Hatzius, chief domestic economist at Goldman Sachs, acknowledged that unemployment will likely remain high for a long time.  She suggested that we may just have to get used to it.  Why?  Because those who have been unemployed for a long time are losing their skills and their work habits.  No doubt, long-term unemployment affects people, but the idea that unemployment will last a long time because workers won’t be prepared to return to work represents the most absurd, cruel version of blaming the victim.

On the other hand, Hatzius is not wrong that we’re in for long-term unemployment and underemployment– problems which are far worse than the official unemployment rate suggests. No doubt, business takes the cautious path during economic downturns, often by adding hours to workers’ schedules rather than by hiring additional workers. But as we learned in Youngstown, the reality is that those jobs may never come back as businesses, especially manufacturers, continue to disinvest in the United States.

At the same time, as we have argued before, we’re also witnessing long-term shifts in the nature of the jobs available.  Promises about a new “creative worker” economy or green jobs that will someday provide some former steelworkers and autoworkers with new versions of manufacturing jobs fall short when we remember the latest predictions of the Bureau of Labor Statistics:  that the job categories predicted to grow most over the next few decades involve primarily low-wage, low-education service positions.  Many of these jobs pay less than $21,000 a year.  That means that poverty is going to be a long-term problem for American workers.

What we need, in other words, is not a single jobs summit. We need long-range policy planning aimed at creating a better system of supports for the working poor and unemployed.  We need to recognize that as much as education matters, it won’t necessarily overcome long-term employment trends and growing income inequality.  We need economic policies that focus on the poor and working class and that treat them with respect, rather than blame.

Too often, economic theory has provided a distraction from the real struggles of real people.  Jan Hatzuis and her colleagues might do well to stop worrying about the work habits of the unemployed and start learning about what it’s like to lose a job after you spent years doing everything right, about the indignities associated with applying for government aid as you struggle to survive job loss, about how limitations of K-12 education, urban transportation, limited access to fair banking, overcrowded housing, persistent hunger, and lack of health care make finding a steady job that pays enough to support a family incredibly difficult.   A little moral education might help as well.

We need to stop thinking about the current crisis as a temporary recession, and we certainly have to stop talking about the economic crisis as part of an inevitable shift we can’t do anything about.  We have to recognize and act on the situation as what it is: a moral crisis.

The Obama administration must take the problem as a moral imperative, acknowledge that the private sector simply won’t solve the problem on its own, and like Franklin Delano Roosevelt, create a jobs-centered stimulus that is environmentally sound, improves the national infrastructure, and provides an economic foundation for working Americans and rebuilding the American economy.

The economy isn’t a game, with winners and losers who deserve what they get, because the players don’t occupy a fair playing field and the rules are biased.  Inequality has long been and is becoming more deeply engrained in the American system.  We cannot continue to view long-term high unemployment rates, minimal public supports for the poor, and a permanent and increasing gap between rich and poor as normal much less acceptable.  We can do better.  “Yes, we can.”  And we must.

John Russo and Sherry Linkon

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Fixing the Foreclosure Problem

One of the sad legacies of the housing and mortgage securitization bubble and the subsequent collapse of the economy over the past two years is the virtual devastation of working-class neighborhoods throughout the United States.  Thousands of homes sit vacant and deteriorating after foreclosure or are listed for sale at a price half or less than their value just 18 months ago.

Foreclosures aren’t hitting just the working class, but The New York Times reports that workers in the manufacturing and distribution sectors were keeping up mortgage payments until they found themselves unemployed and unable to pay for their homes, complicating efforts to stem foreclosures.

Even as the Treasury Department appears poised today to announce efforts to force more banks to modify loans, increasing evidence suggests that the federal government’s efforts are floundering.

Rather than focusing their efforts on the complicated Homeowner Affordable Modification Program (HAMP), or on bailing out banks in the hope that they will loan more money to homeowners and small businesses, federal policymakers can accomplish more  for those facing foreclosure, not to mention their neighbors and American taxpayers, by making relatively modest changes to the business practices of the Federal Housing Administration and HUD.

The story of an Ohio worker and homeowner illustrates how the federal government is missing easy opportunities to play a meaningful role in reducing the impact of the foreclosure crisis and the recession on real people.

In 2007, Bob was employed by DHL as a driver earning over $20 per hour. He bought a modest house in a middle-class suburb of Cleveland for a fair market price of $90,000 to live in with his son.  When DHL shut down its U.S. operations in 2008, Bob, along with thousands of others nationally, was laid off.

Meanwhile, back on Bob’s street, for sale signs proliferated and one of six homes in his community is in foreclosure.  As a result, the market value of Bob’s home has dropped to less than half of what he paid for it.

Bob and his son were able to survive on his unemployment benefits but couldn’t pay the monthly mortgage.  Bob recently took a job with FedEx paying less than half of what he earned at DHL and less than his unemployment benefits, because he simply couldn’t stand “not working any more.”

His mortgage, which was insured by the FHA, is being foreclosed. With the costs of foreclosure and 18 months of late fees included, the lender claims to be owed $120,000 on a house optimistically worth $50,000.

Bob requested that his foreclosure case be sent to mediation, and he provided the lender with extensive documentation of his income and expenses and the current value of his home during the course of those negotiations. The loan servicer has refused to agree to a modification of the terms that makes any sense to Bob. They are completely unwilling to consider any modification that reduces the principal balance at all, let alone bring the figure anywhere close to the current value of the home.

Bob does not qualify for the H.A.M.P program, the centerpiece of the Obama Administration’s effort to assist homeowners in default and foreclosure, because his loan (like the loans of most people in foreclosure) is more than one year behind. That program actually pays cash to lenders and mortgage services who agree to modify loans.

During the course of the negotiations it became increasingly clear that the lender or loan servicers have no incentive to enter into any kind of meaningful modification.

Why?

Because after foreclosure, FHA stands ready to pay the lender 100 percent of its loss on the loan, including the cost of foreclosure. If the lender were to agree to modify the loan, it would be paid far less.

Here is the outrage. If the lender proceeds to foreclosure, Bob and his son will be thrown out of their home and the lender will be made whole at the cost to FHA — and ultimately the taxpayers — of $80,000 or more.

This scenario is repeating itself in mortgage foreclosure cases throughout the country, putting the solvency of the FHA at risk while throwing thousands of working people out of their homes. The New York Times recently reported that FHA itself might be in need of an infusion of cash.

If FHA were included in the negotiation and would agree to pay lenders some amount –say half of what they are likely to lose, $40,000 — to allow the principal to be reduced, Bob could refinance at competitive interest rates and stay in his home, the federal Ggvernment and ultimately the taxpayers would save $40,000, and the lender would have an interest-paying borrower (who can afford the lower payment) and earn profits from the interest.

Everybody wins under this scenario.

Another problem that could be fixed by a more realistic approach by HUD and the FHA was detailed in a recent Cleveland Plain Dealer Story about problems created by HUD’s failure to demolish or fix homes they own (mostly as a result of FHA insured foreclosures) in greater Cleveland.  Dilapidated houses drive down housing values for entire neighborhoods.  Making it tougher for guys like Bob to sell or refinance their homes and making community problems worse. Local communities are struggling to maintain housing stock in aging neighborhoods, and HUD’s failure as a homeowner has devastating effects on entire communities.

The Federal Government has a chance to raise the bar for responsible homeownership, yet instead they appear to be lowering it. HUD should be a model community citizen, collaborating with local housing officials on neighborhood wide efforts to improve home values.  The agency should hire local consultants or even contract with local governments and empower them to make quick and honest assessments of the likelihood of selling any particular piece of real estate with an eye toward the best community use for the property.  For houses that will not realistically sell in a reasonable timeframe, HUD should require that the houses be demolished within 30 days.

Increasing evidence suggests that the new programs being created by Congress and the Obama administration are not having a significant impact on the foreclosure problem. Only 1711 homeowners nationally had completed a modification by September 1, 2009 under the HAMP Program.

Bob’s story suggests that a better approach may be to find ways to make the existing machinery of the federal government’s mortgage programs work in the interests of homeowners and taxpayers.

Marc Dann

Marc Dann is a Cleveland lawyer who represents homeowners in foreclosure.

Budget Cuts Threaten the Working Class

Last fall, I drove to Columbus for a one-day unconference with library technologists. We each took turns writing topics on the board about which we wanted to learn or to share. The attendees separated into small groups according to interests: open-source content management systems, blogging and social media (Facebook, Twitter, etc.).

It turns out that librarians are passionate about technology, and for good reason. Since card catalogs gave way to searchable online directories, everything about information has become digitized. Government has likewise been turning everything over to the Internet: any and all forms that can be filled out and submitted digitally must be submitted online. From unemployment to workers’ compensation, the process begins with and is fed by virtual forms.

The connection of all this to working-class issues may not be immediately apparent, but think for a moment about the effect of these changes on access to information and to basic services. In order to apply for unemployment benefits, one completes online forms. Not only does this require some level of computer savvy, it also requires Internet access. How many unemployed working-class families can afford Internet access?

The Pew Internet & American Life Project reports that of the 25% of adults who do not use the Internet at home: 13% can’t get access, 7% can’t afford it and 4% don’t have a computer. Pew Internet further cites 43% of Americans in households earning less than $30,000 per year and 23% of Americans in households earning less than $50,000 per year as non-Internet users at home. The most obvious points of access for these and other users are public libraries.

I spoke with Diane Vicarel, Digital Services Manager at the Public Library of Youngstown and Mahoning County. I asked about the popularity of public Internet access and whether she could provide any statistics on how much their computers were used throughout the day. She wasn’t sure such statistics existed, but that’s only because the computers are always in use from when the doors are opened in the morning until the last user leaves. She said the sight of lines of people outside waiting to use the computers is common.

The library also provides a number of databases to support adult education, resources for job searches, audio-visual assets and links to additional information across the Web. Of course, libraries still serve the fundamental purpose for which they began: massive catalogs of books on every topic, for recreation or reference.

Ohio has made news in the last month by proposing to slash hundreds of millions of dollars in library funding from its annual budget. Funding for Ohio’s libraries is determined by a formula that ties a percentage of the state’s general revenues. Revenues have plunged in the current economy, leaving libraries wondering what lies ahead. Compared with 2008 funding levels, 20% of state revenue has been lost since January of 2009. Another 30% cut has been proposed on top of that for this year, with further expected cuts of 47% in 2010 and 45% in 2011. As state revenues fall nationwide, Ohio is certainly not the only state whose libraries are facing crippling cuts at a critical time.

This double whammy is the sad story facing American workers today. Economic decline means lost jobs and fewer state dollars to support libraries where the unemployed can both get temporary assistance through unemployment benefits and access to tools to hopefully get another job.

The success of the stimulus package, as has been discussed several times on this blog, will be determined in part by the foresight to continue providing a safety net of tools and services for those who have fallen. The strain our society will face if those with temporary financial setbacks lack the resources necessary to get back on a road to recovery will be far greater than if we identify and continue to financially support those resources, such as libraries, that are needed as a critical link between workers and the government.

-Tyler Clark

Tyler Clark is a technology and Web marketing consultant who writes about Youngstown .

The Future of the Working Class, Part II

Graduation season has drawn to a close, and given the economy, both high school and college graduates now face uncertain futures.  For generations, American parents expected their children to achieve greater economic and social status than they did.  Surveys show that few families believe that this is likely any more.  After decades of widespread belief in upward mobility, Americans no longer see a perpetually brighter future.

Our economic pessimism is well-earned, and that has significant implications for young adults from working-class and middle-income blue-collar families.   The old model of following a parent into the steel mill or auto plant has been a doubtful dream for a couple of decades now, and the current economic crisis makes it even less realistic.  As Bob Herbert pointed out in a recent op-ed, workers under 30 have been the hardest hit in this recession.  So what will become of the rising generation of working-class kids?  What does their future look like?

In Friday’s New York Times, Steven Greenhouse highlighted one option:  college.  Perhaps ironically, community college enrollments are swelling, much as they did during the 1970s, when the higher education system significantly expanded the community college option in part as a way of keeping young adults out of an overcrowded workforce for a few more years.  Of course, today most students remain in the workforce while going to school, often working 30 or more hours a week at low-wage jobs to scrape up enough for tuition.  While college increases an individual’s lifetime earning potential, it doesn’t in itself ensure a strong economic future.  Among other things, young people seeking educational escape routes too often choose for-profit schools that offer training for jobs that don’t exist.  Others take on debt that will undermine their economic stability for years after graduation.  Meanwhile, as I noted a few months ago, most of the fastest-growing occupations don’t require a college degree, and many recent college graduates are struggling to find work.

As Greenhouse notes, some recent high school graduates are choosing college because they don’t like the jobs that are available.  They simply don’t want to work for $7.50 an hour, and who can blame them?   And even those jobs are becoming more scarce.  That’s why many young adults are entering the informal economy, off-the-books jobs that include legal work that is not formally reported, such as mowing lawns or caring for children, as well as illegal work such as prostitution.  According to recent reports, the informal economy is growing as the formal economy shrinks.  Some off-the-books jobs might pay more than $7.50 an hour, but they also bring the potential for exploitation, poor working conditions, and intermittent employment.   Not exactly the foundation to build a comfortable life.

All of this occurs against a backdrop of what is likely to be a very slow economic recovery and at a time in their lives when young adults should be developing the work experience upon which to build a secure future.  As Louis Uchitelle reported last week, even in this bad economy, some employers are struggling to fill jobs, because they want experienced workers.  Tomorrow’s experienced workers can only come from the ranks of today’s beginners, but with so few good entry-level jobs open now, how will we develop the kind of workforce we will need in another decade?  As Uchitelle’s article suggests, college alone won’t do it.  Nor will low-wage jobs in the formal workforce or off-the-books work in the informal economy.

Securing the future for the working class, much less preserving the promise of upward mobility that has been so central to American culture, requires big thinking and integrated policy.  We must connect educational policies (and funding) with policies related to business, employment, wages, health care, and pensions.  We must begin to think about the long-term consequences of policies directed at solving current problems.  We must also demand that policy makers look beyond business and even beyond the middle class to consider the opportunities and conditions of the working class.

Sherry Linkon

New Survey Results: What the Working Class Thinks about Obama and the Economy

During the 2008 election and since the start of the economic crisis, I’ve spoken with dozens of journalists from around the world who all want to know one thing:  what do working-class people think?  It’s standard practice for journalists to ask experts to speak for the working class, and while years of studying working-class life and issues gives me a pretty clear perspective, at the Center for Working-Class Studies we also believe in going to the source.

That’s why we’ve started an online survey project aimed at finding out what people think about current issues facing the working class.  Our initial survey, focused on the economy, was distributed in April.  More than 900 people responded.

Results show strong support for President Obama, with approval ratings in the high 80s, despite pessimism about economy and uneasiness about the future.  Working-class respondents—defined as those between the ages of 30 and 60 with annual incomes of $10,000 to $50,000 who lack college degrees—gave the President an 87% approval rating, although a slightly smaller number, 46%, strongly approve of his performance. Seventy four percent of this group believes the country is moving in the right direction.

Those positive numbers contrast with the 94% of working-class respondents who said the economy is bad or very bad.  They are also pessimistic about the prospects for a speedy recovery. More than 78% said they believe the recession will last one year or more with more than 46% saying it will last for two years or longer. Only six percent say they see light at the end of the economic tunnel this year.

The dichotomy between respondents’ view of the President’s performance and their concerns about the economy is underscored by their uncertainty about whether the administration’s stimulus plan will be effective. While 42% said they are confident the stimulus proposals will work, 44% said they are only somewhat confident, and 14% said they are not confident at all. Working-class respondents were slightly more optimistic with 48% expressing confidence in the President’s plan, 38% saying they were somewhat confident, and 13% saying they were not

confident at all that the stimulus package would turn the economy around.

The contrast between people’s optimism about the president and their pessimism about the state of the economy and its future can be explained by a number of factors.  First, the President is clearly in a honeymoon period. The people who voted for him, and that includes 85% of the respondents who revealed their choice when asked, are confident he can lead the nation out of the economic morass he inherited.  To a lesser extent, they probably don’t want to admit that they may have made a mistake last November, so they are willing to give him the benefit of the doubt for the foreseeable future.

At the same time, no one can ignore the economy, and for the working class, the bankruptcy declarations of two major American automakers feels especially significant.  The value of existing homes continues to erode, jobs are hard to find, gas prices are rising, the stock market’s falling, and despite all the talk about stimulus the economy appears to be stuck in neutral at best.  So while people remain hopeful that the President’s plan will work, it’s not at all surprising that they’re also very worried about the future.

That uncertainty about the future is underscored by the survey data:  only 35% of all respondents believed their children’s standard of living would be somewhat or much better than theirs, while 41% believed it would be somewhat or much worse, and 24% believed it would be the same.   At the same time, the working class appears to be considerably more optimistic overall: 48% of working-class respondents believe their children will do better, 42% believe they will do worse and seven percent believe their children’s standard of living will be about the same as theirs.  I’m not sure how to explain that optimism, especially given the decline of the auto industry.

The CWCS survey also revealed that respondents approve of the President’s plans to bail out the troubled domestic automobile industry by a margin of 75% to 21%. This clearly demonstrates that the President’s supporters want the government to take the steps necessary

to help GM survive.  A number of Republicans and conservative pundits believe that GM may become President Obama’s Iraq.  They predict that Obama’s popularity will begin to slip when the American people grow weary of throwing money at a hopeless cause, just as President Bush was dragged down by the war.  But our survey shows that an overwhelming majority are willing to give him the time needed to save GM and the tens of thousands of jobs it provides in Ohio and across the country.

How long will that patience last?  Will the continuing recession and rising unemployment generate more activism and anger among the working class?  Stay tuned.

The CWCS will issue a second survey later this summer.   To participate, visit our website, or contact me to join the survey mailing list.

John Russo