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The $1 Trillion Wage Deficit
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by snuffysmith | December 3, 2009 at 08:19 am
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The $1 Trillion Wage Deficit
Share December 2009, John Schmitt and Dean Baker
The strong rise in the U.S. stock market since the spring and the return to positive economic growth in the third quarter of this year have created a consensus among economists that the Great Recession is very likely over. Unfortunately, the end of the official recession will have little visible impact on U.S. labor markets until almost 2012. Within that time, this paper estimates that U.S. workers will have lost over $1 trillion in wages and salaries, $150 billion more than the 10-year costs of proposed health care reform legislation.
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Despite growing economic optimism in some quarters, a new CEPR report shows that the economy is still far from full recovery. According to John Schmitt, CEPR Senior Economist and author of the study, the US is not even one third of the way through the recession.and unemployment will cost workers more in terms of lost wages and salaries in 2010 and 2011 than they have in 2009.
The CEPR report examines recent data from the Bureau of Labor Statistics (BLS) and projections from the Congressional Budget Office (CBO) on economic performance through 2012. The analysis shows lost wages and salaries 25 percent higheror $310 billion in 2010billion) than in 2009. In 2011, losses will be an additional $252 billion, higher than losses for 2009. And by 2012, losses will still be three times higher than they were in 2008, the first full year of the recession.
John Schmitt concludes that to put this in context, "the total cost of the recession in terms of lost wages is substantially higher than the estimated ten-year cost of current health care reform."
This is a frightening economic analysis that does not bode well for the federal budget, tax revenues, and deficit reduction.
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Most RecentMost Recommended Comments (9)
at 08:32 on December 3rd, 2009
Job creation made hard by Robert Samuelson:
You have to be mighty isolated not to know someone who has been laid off, was forced into early retirement or -- just entering the labor market -- can't find a job. Unemployment of 10.2 percent is still below the post-World War II peak of 10.8 percent of late 1982, but by other measures, the job situation is the worst since the Great Depression. More than a third of the unemployed have been without work longer than six months, a postwar record. Counting those who involuntarily have only part-time work and those who would like a job but have stopped looking, the "underemployment" rate is 17.5 percent, another postwar peak.
at 09:54 on December 3rd, 2009
I believe unemployment rates are much higher than the government released statistics, possibly near or over 20% because as mentioned, statistics do not take into consideraton those who no longer (or inelligible) collect unemployment or are otherwise outside the system making it impossible to correctly determine the actual unemployment rate.
Government reports of lower unemployment rates only serve to facilitate the spread of inaccurate information where economic recovery is concerned.
at 08:35 on December 3rd, 2009
How Not To Increase Employment Obama's advisers have the wrong idea on job creation.
at 08:45 on December 3rd, 2009
From Robert Reich:
"But here's the real worry. The basic assumption that jobs will eventually return when the economy recovers is probably wrong. Some jobs will come back, of course. But the reality that no one wants to talk about is a structural change in the economy that's been going on for years but which the Great Recession has dramatically accelerated."
at 12:03 on December 3rd, 2009
Stimulus spending fails on jobs front
at 12:04 on December 3rd, 2009
White House warming to jobs-related legislation
at 12:04 on December 3rd, 2009
Putting people back to work and Obama's jobs summit
at 13:53 on December 3rd, 2009
Thanks for the good news...or not.
at 08:00 on December 5th, 2009
America Without a Middle Class -- It's Not Far Away As You Might Think
America today has plenty of rich and super-rich. But it has far more families who did all the right things, but who still have no real security.
Can you imagine an America without a strong middle class? If you can, would it still be America as we know it?
Today, one in five Americans is unemployed, underemployed or just plain out of work. One in nine families can't make the minimum payment on their credit cards. One in eight mortgages is in default or foreclosure. One in eight Americans is on food stamps. More than 120,000 families are filing for bankruptcy every month. The economic crisis has wiped more than $5 trillion from pensions and savings, has left family balance sheets upside down, and threatens to put ten million homeowners out on the street.