Wage Deficit, Not Skills Deficit

Times Argus letter published Jul 11, 2007
Don't blame the victims

The article, "One third of Vermont youth drop out of work force," gets it wrong, blaming the victims — working Vermonters — instead of low-road employers. The article quotes Mr. Stenger about "good-paying, open positions," but provides no facts to back up his assertions. You report that Rep. Kupersmith claims that "employers have the jobs, but Vermont lacks the trained workforce to take those positions."

The so-called "drifters" may take advantage of new training opportunities, but most simply need livable wage jobs. Many of us used to find such work in factories or the building trades. Although factory jobs have declined, and wages too, the building trades could still offer a decent life. However, anti-union campaigns and policies have succeeded in depressing wages. We now have major employers using the H2B program to bring in hundreds of aliens to work (what are now) low-wage construction jobs, while some of our skilled trades-people leave the state for better pay.

As for the departing college grads, they're following the money. Many professional jobs in Vermont pay less than in other states. Actually, if every adult in Vermont had a graduate degree, many would still leave because 40 percent of the jobs require nothing more than short-term on-the-job training.

About all those "good-paying open positions." Where are they? Most entry level jobs in Vermont for new college grads are not "good paying" compared to other areas (let alone jobs for those with skills other than a degree). Mr. Stenger may be referring to mid-level professional positions, but many of those jobs are filled by in-migrants from other states.

Wage problems faced by the working Vermonters do not come because we have skill deficits, or because of skill shortages that hamper our competitiveness. We have had rapid productivity growth for the last 10 years with the very same workers who now do not participate in economic growth. Moreover, it is hard to claim that the stagnant wages of college graduates and the failure of new college graduates to locate jobs with benefits is the result of deficient skills.

No, Vermont's workers do not face a "skills deficit," rather we face a deficit in the wages and benefits that employers provide. This gap between pay and productivity growth is the result of policies that shift bargaining power away from the vast majority of us and toward big employers: the steep drop in unionization rates; unfettered globalization and off-shoring that increasingly puts us in competition with workers around the world; economic deregulation and the privatization of government services; and escalating pay for CEOs.

Unless and until Vermont employers raise wages, the exodus will continue.

Traven Leyshon

Check out VPIRG's new Rap on Global Warming

The minds behind the popular '802' rap video have struck again, and this time they're targeting Governor Douglas, the global warming legislation he vetoed and the state legislature. Click here to see the serious and seriously funny YouTube video 'CO2'.

Wal-Mart's reliance on Chinese imports costs U.S. jobs

Economic Snapshot for June 27 by Robert E. Scott

China's entry into the World Trade Organization was supposed to improve the U.S. trade deficit with China and create good jobs in the United States. But those promises have gone unfulfilled: the total U.S. trade deficit with China reached $235 billion in 2006. Between 2001 and 2006, this growing deficit eliminated 1.8 million U.S. jobs (Scott 2007). The world's biggest retailer, U.S.-based Wal-Mart was responsible for $27 billion in U.S. imports from China in 2006 and 11% of the growth of the total U.S. trade deficit with China between 2001 and 2006. Wal-Mart's trade deficit with China alone eliminated nearly 200,000 U.S. jobs in this period (See Chart).

The manufacturing sector and its workers were hardest hit by the growth of Wal-Mart's imports. Wal-Mart's increased trade deficit with China eliminated 133,000 manufacturing jobs, 68% of all jobs lost. Overall, the Wal-Mart trade deficit displaced and 308,100 jobs in 2006. On average, 77 U.S. jobs were eliminated for each one of Wal-Mart's 4,022 U.S. stores in 2006. (See The Wal-Mart Effect for more details.)

Wal-Mart's huge reliance on Chinese imports illustrates that many powerful economic actors in the United States benefit from China's policy of maintaining an undervalued yuan, its abuse of labor rights, and other fair-trade norms. Wal-Mart's benefit, however, is not the country's gain, as these policies have contributed directly to the ever-growing trade deficit that imperils future economic growth.

Scott, Robert E. 2007. Costly Trade with China: Millions of U.S. Jobs Displaced with Net Job Loss in Every State. Briefing Paper. Washington, D.C.: Economic Policy Institute.

Paul Krugman: we can cover everyone at negative cost

Correcting Douglas Administration Misinformation on VT Job Losses

Response to Kevin Dorn, Vermont’s Secretary of Commerce and Community Development's defensive outburst in Seven Days regarding job losses and the Douglas administration signing onto failed trade policies:

Thank you for the recent article on trade and jobs ("Labor Department Links Free Trade to Vermont Job Losses", Seven Days, 5/30/07).

It reminded us of the human costs of globalization as thousands of Vermont families are suffering from trade-related job losses. It exposed the hype about the purported benefits of international trade by providing facts instead of anecdotes. And it called the Governor to account for committing Vermont to "free" trade agreements without any input from the Legislature.

Commerce Sec. Dorn's letter in response criticized Sen. Ginny Lyons, Dan Brush, and myself for being "partisan" and for "selectively us[ing] statistics". But there's nothing partisan about Vermonters losing their jobs. And while we referred to data from the Vermont Dept. of Labor, Sec. Dorn referred to a biased report by the U.S. Business Roundtable that used outrageous methodology. It counted jobs related to receiving goods shipped into the U.S. as "trade" jobs. And by the way, the Dept. of Labor only reported jobs lost to trade since 2003 (1,700). This trend began long before then.

And Secretary Dorn is wrong to suggest that the Governor has no authority in matters of federal trade agreements. The law allows a governor to opt out of trade provisions regarding state procurement laws. Indeed, only 19 governors signed their states onto CAFTA's procurement provisions. The Governor effectively gave away an important piece of our sovereignty without bothering to consult with the Legislature.

Trade can be beneficial but it is certainly not without risk. Many economists are fond of saying that lower prices at Wal-Mart are worth the cost in lost jobs and lower wages. Easy for them to say, we haven't outsourced their jobs yet.

Doug Hoffer

Productivity-Pay Gap - Reality check for VT CFED

excerpt from:Testimony before the Labor-HHS Education Subcommittee, Appropriations Committee, U.S. House of Representatives
By Lawrence Mishel

The Productivity-Pay Gap
...our policy discussion must be situated in the reality that our nation is not generating broadly shared prosperity even though we have seen relatively fast productivity growth that provides the basis for rapidly rising incomes. It is easy to see that the group that has benefited most from economic growth has been the top 1%, who obtained about 10% of all market-based incomes in 1980 but who by 2004 (the latest data) had doubled their income share to about 20%.1 Income inequality has certainly risen substantially since 2004, so we probably have the most income inequality since before the great depression, seventy-seven years ago. In contrast, the typical working family has less income now than it did in 2000, as their incomes have fallen $3000, or 5.4%.

This disparity of results reflects the fundamental economic challenge of our time: to repair the disconnect between growing productivity and the pay of the vast majority of the workforce. Since 1995 we have enjoyed a historically fast growth in the goods and service produced per hour worked­or productivity. As Figure 1 shows, the hourly wages for the median worker (who earns more than that of half the workforce but less than the other half) grew in the 1995-2000 period as did the hourly wages of high school and college –educated workers (those with a bachelors degree but no further education). The momentum of the late 1990s wage growth carried over until about 2002 but stalled thereafter. In particular, the inflation-adjusted hourly wages of the typical median worker as well as those of both high school and college-educated workers have been stagnant over the last four years while productivity grew by 11.5%.

Middle-class economic anxieties are also being fueled by an erosion of employer-provided health and pension benefits. In 2005, only 44.1% of the workforce had an employer-provided pension plan, a drop from the 48.3% who did so in 2000. The share of the workforce that had employer-provided health insurance in 2005 was 54.9 % in 2005, lower than the 58.9% share in 2000 and far below the 69.0% who received such coverage in 1979. The extent of the erosion of benefits can most readily be seen in the fact that only about a third of the jobs obtained by recent high school graduates provide health insurance; in contrast, in 1979 about two-thirds of recent high school graduates received health insurance in their early jobs. This erosion of benefit coverage can also be seen among recent college graduates: only 63.5% of recent college graduates received health benefits in their entry level jobs, down from over seventy percent (70.6%) in 2000. This erosion of benefit coverage is at the core of the eroding quality of jobs for the vast majority and signals that we can no longer develop health and retirement policies as if we are building on the employment based systems for the simple reason that these systems are unraveling.

‘Wage Deficits’ not ‘Skill Deficits’
It is important to note that these wage and income problems faced by the vast majority do not come because they have skill deficits or because of skill shortages that have hampered our competitiveness. After all, we have had rapid productivity growth for the last ten years with the very same workers who now do not participate in economic growth. Moreover, it is hard to claim that the stagnant wages of college graduates and the failure of new college graduates to locate jobs with benefits is the result of their deficient skills...false claim that a growing wage gap between college-educated and other workers is somehow responsible for the recent growth of income inequality.

No, America’s workers do not face a “skills deficit”: rather, they face a deficit in the wages and benefits that employers provide. This gap between pay and productivity growth is the result of economic and employment policies that shift bargaining power away from the vast majority of us and toward employers and the most well-off. A multitude of factors have contributed to stagnant wages and growing inequality: the steep drop in unionization rates (from 25% in the late 1970s to under 13% today); the failure to raise the real value of the minimum wage, let alone raise it in accordance with productivity (its value has declined by over 25% since the late 1960s); macroeconomic policy that has kept the unemployment rate too high for most of the last 30 years; unfettered globalization and offshoring that increasingly puts U.S. workers in competition with workers around the world; economic deregulation and the privatization of government services; and escalating pay for CEOs. An agenda of accelerated globalization and greater national saving, as some urge, or simply improving skills and education will neither bring the growth needed nor reconnect pay and productivity.

Labor Department Links Free Trade to Vermont Job Losses

From Seven Days
VERMONT — One of the pillars of the Douglas administration’s economic development strategy turns out to be made of cardboard. Rather than generating abundant opportunities for Vermont workers, the state’s plunge into the global marketplace is resulting in extensive loss of livelihoods.

Free-trade agreements cost Vermont nearly 1700 jobs in the past three years, the state Labor Department reported last week. And there’s more: The business sectors that account for nearly all of Vermont’s exports suffered a combined loss of about 9000 jobs between 2000 and 2005. That means one of every five Vermonters employed by export-oriented companies was thrown out of work as the state got pounded by the forces of globalization.

These figures were requested by the Vermont Commission on International Trade and State Sovereignty — three months ago. The Douglas administration delayed release of the damning data until the state legislature had adjourned in order to avert a political firestorm, suggests Dan Brush, a trade union leader who serves on the commission.

Chittenden County State Sen. Ginny Lyons, the commission’s co-chair, says she’s “astounded” by the findings. “We’ve heard so much from the business community that international trade is going to save Vermont’s economy,” Lyons observes. “But we’re seeing the opposite.”

The data on trade-related job losses indicates that Gov. James Douglas’ planned prospecting trip to China next month will be “a waste of time and resources,” Brush declares. He finds it “outrageous,” he adds, that the Vermont Chamber of Commerce has been operating a trade-development office in Shanghai for the past three years.

“It’d be a lot better if we worked on establishing a strong creative economy in Vermont instead of spending money on international trips when it’s proven that international trade is very whimsical,” Brush continues.

Other players and analysts are skeptical of the Labor Department’s numbers.

Chris Barbieri, director of the state chamber’s Shanghai office, says Vermont has no choice but to participate in the global economy. “That train left the station some years ago,” Barbieri remarks. “And I’m glad we were on it when it left.”

Barbieri says that in maintaining a trade-promotion office in China, Vermont companies are making a modest investment — much less than $200,000 a year — that could yield big dividends. But the head of the chamber’s Asia division says he has no statistics on job gains in Vermont attributable to his networking efforts in Shanghai.

“I don’t make the sale,” explains Barbieri, who lived in China for most of the past three years but now spends three-quarters of his time in Vermont. “We set up the environment so others can make the sale. And private businesses don’t usually reveal how well they do in overseas markets.”

Short-term job losses should not lead to “absolute conclusions” about Vermont’s export opportunities, Barbieri adds. “You’ve got to look at it over the long haul in assessing exports and jobs.”

Today, the paychecks of about 78,000 Vermont workers are drawn to at least a small degree on their companies’ involvement in foreign trade, Barbieri says. He acknowledges, however, that a single company — IBM — accounts for roughly 80 percent of Vermont’s export-linked economic activity.

Doug Hoffer, an economic consultant who conducts studies for the Peace and Justice Center, agrees that international trade does provide good jobs for some Vermonters. Legislator Lyons holds that view as well, noting that Douglas’ efforts to capitalize on China’s growing investments in environmental-engineering technology “could prove very lucrative for a few Vermonters.” But, she points out, Vermont firms that land clean-up contracts in China will most likely hire Chinese workers, producing few or no employment opportunities back home.

Hoffer says he’s not surprised by the data on job losses, because the increased mobility of capital allows corporations to fatten revenues and trim expenditures by shifting production to low-wage countries. Despite all the attendant risks and shortcomings, “I’m not suggesting that Vermont companies shouldn’t trade,” Hoffer says. But he warns that the state “should be prepared for the downs as well as the ups of the global market, and there’s a lot of downs.”

Vermont officials and business leaders should respond to these dynamics with eyes wide open, Hoffer advises. “This state accounts for 0.2 percent of the U.S. economy, and every other state is trying to do the same thing we are by looking for trade opportunities in huge markets like China. Imagining we’re somehow positioned to do a lot in China is just ludicrous.”

Hoffer emphasizes that the Douglas administration must also “stop giving away our sovereignty. The free-trade agreements that the governor has made Vermont a party to are making it harder to use tools to develop our own economy.”

Lyons points out that free-trade agreements such as NAFTA make Vermont potentially vulnerable to rulings that would prevent it from favoring local companies when making state purchasing decisions. “All it would take is an objection from another nation saying we’re giving preferential treatment to a Vermont company. We’d then have to open up to purchasing from companies in other countries,” she says.

“That hasn’t happened yet,” Lyons adds, “and it may never happen.”

But to better safeguard Vermont’s economic assets, Lyons wants the legislature to have an equal say to the governor in deciding whether the state should enter into free-trade agreements. The commission she co-chairs will most likely push for such a sharing of responsibility, Lyons indicates.