Thursday, August 05, 2010

Job insecurity and Stagnant Wages

Financial Insecurity in the USA

Insecurity in America is on the rise—and was even before the Great Recession.

The Rockefeller Foundation just released a study of economic insecurity in America, which was developed by Yale professor Jacob Hacker and measures harsh changes in circumstance: For example, it reveals how many Americans have been subjected to a staggering decline of 25 percent of "available household income," either from loss of income or sudden, unanticipated out-of-pocket medical costs, and how many were without the savings to buffer the damage. Brutal losses such as these take six to eight years to recover from, the report said.

A 25% decline in household income? Surely this can't be common.

Economic insecurity affected 12.2 percent of Americans in 1985 and spiked to 17 percent during the 2000 downturn. In 2007, when economists were celebrating "the Great Moderation," insecurity was higher than in 1985, affecting 13.7 percent of Americans. In 2009, after the downturn, Hacker estimates that one in five Americans was hit with a 25 percent decline in available household income. And the report estimates that between 1996 and 2006—before the collapse—fully 60 percent experienced such loss.

One in five families in 2009? That's pretty common.

But Ben Bernacke says:

Federal Reserve Chairman Ben S. Bernanke said rising wages would probably spur household spending in the next few quarters, even as weak job gains dragged down consumer confidence.

He never tells us where these rising wages will come from. Wall St. would be my guess.

On Main St. workers are actually being subjected to pay cuts:

The furloughs that popped up during the recession are being replaced by a highly unusual tactic: actual cuts in pay.

Local and state governments, as well as some companies, are squeezing their employees to work the same amount for less money in cost-saving measures that are often described as a last-ditch effort to avoid layoffs.

Let's be clear. These are not pay freezes - these are actual pay cuts.

It is impossible to say how many employers have cut workers’ pay, because the government does not keep such statistics. Economists say a modest but growing number of employers have ordered wage cuts, especially in the public sector. In a 2010 survey by the National League of Cities, 51 percent of the cities that responded said they had either cut or frozen salaries of city employees, 22 percent said they had revised union contracts to reduce some pay and benefits, and 19 percent said they had instituted furloughs.

Some businesses are also cutting workers’ pay, often to help stay afloat or to eliminate their losses, although a few have seized on the slack labor market and workers’ weak bargaining power to cut pay and thereby increase their profits and competitiveness.

Right now workers will agree to almost anything to stay employed and some businesses are willing to hold workers hostage by threatening their jobs.

At a time when the official unemployment rate is nearly 10%, it's shocking to learn that USAID (US Agency for International Development) is contributing to train offshore IT workers:

Despite President Obama's pledge to retain more hi-tech jobs in the U.S., a federal agency run by a hand-picked Obama appointee has launched a $36 million program to train workers, including 3,000 specialists in IT and related functions, in South Asia.

Following their training, the tech workers will be placed with outsourcing vendors in the region that provide offshore IT and business services to American companies looking to take advantage of the Asian subcontinent's low labor costs.

Roger Smith spoke with the CEO of Engine Yard, Lance Walley, about their Ruby and Rails deployment platform.
Under director Rajiv Shah, the United States Agency for International Development will partner with private outsourcers in Sri Lanka to teach workers there advanced IT skills like Enterprise Java (Java EE) programming, as well as skills in business process outsourcing and call center support. USAID will also help the trainees brush up on their English language proficiency.

USAID is contributing about $10 million to the effort, while its private partners are investing roughly $26 million.

This is one unholy partnership. USAID is working with US companies (using some of our tax dollars) to help them avoid paying US labor costs by training overseas workers to get jobs, at a time when so many Americans are out of work.

The mind boggles.

Originally posted at MainSt/

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