By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at Testosterone Pit.
The enormous number of people who work only part-time for economic reasons is one the tragedies of the unemployment crisis in this country. It didn’t even start with the financial crisis. Before the 2001 recession, there were a little above 3 million of them. By September 2003, as the economy recovered, there were 4.84 million. Gradually, part-timers got fulltime work, and their number zigzagged back down. In April 2006 dropped, it below 4 million, but only briefly, then edged up again. It never returned to the “normal” that was before the 2001 recession.
Then came the financial crisis, and as layoffs soared, some of the lucky ones who got to stay on were cut to part time. Many of the unemployed, once they found jobs, found part-time jobs. And the number of involuntary part-timers just exploded.
It peaked in March 2010 at 9.22 million. It had nearly tripled from the year 2000 and more than doubled from before the financial crisis. Since then, it has been declining in spurts and starts, as more part-timers found full-time work. In March, it reached 7.41 million. Nearly five years after the end of the recession, there are still 80% more involuntary part-time workers than there were in 2007, and 130% more than in 2000.
So the hope is that somehow – relying on a major miracle perhaps – this zigzag line will continue to trend down for the next 15 years! Because that’s how long it would take at this rate for the number of involuntary part-time workers to get back to where it was in 2000.
But that’s a pipedream. The number of part-timers jumps during every recession as companies are cutting some jobs entirely and are reducing hours for other jobs. And there will be more recessions over the next fifteen years, and each time, the number of involuntary part-timers will jump, and the chart will look uglier and uglier.
There are Other Forces at Play
It’s as if companies had been using the last two recessions as an excuse to make their workforce more flexible, using people only when absolutely needed, on irregular schedules, and keeping them on stand-by the rest of the time. This is a powerful tool in bringing payroll expenses down. It makes the company look awesome on paper. It wreaks havoc on the lives and incomes of workers and is terrible for the overall economy.
The same structural unemployment drivers are at work with temporary full-time workers. In September 2003, as hiring finally kicked off, there were 2.26 million temps of 130.3 million total nonfarm employees. By summer of 2006, the number of temps had jumped 17.8% to 2.66 million while total nonfarm employment had risen 4.9% to 136.6 million. Then the number of temporary workers began to decline, which was seen as a good sign as the total number of employees was rising; businesses were shifting to regular hires. Or so the story went. But businesses were already having demand issues. The housing construction bubble had started to implode. And for whatever reason, companies started to shed temporary workers.
And look what happened:
The chart (indexed to 100 for September 2003) shows that temp jobs disappeared firstest and fastest. Shortly after the recession, they bottomed out at 1.75 million while total employment bottomed out at 129.7 million in February 2010. So far so good.
Then the Structural Unemployment Drivers Became Apparent
Temp jobs have simply and relentlessly been rocketing ever higher and hit 2.84 million in March, up 62.4% from the post-recession low. Total employment grew as well, but at a stately pace, and reached 137.9 million, up a measly 6.4% from the low.
Now there are 3.4 million more part-time jobs and temp jobs than there were at the employment peak before the crisis. Temp jobs are still rising, and at a much faster rate than total nonfarm jobs. There are no signs of a letup. Temp jobs are booming for structural reasons: workforce flexibility and savings on payroll and employee benefits.
For Companies, It Looks Awesome on Paper
Analysts hype the associated lower costs when they’re trying to rationalize stratospheric earnings multiples. And executives get big fat bonuses for this sort of thing, however damaging it may be for the company and the economy in the long run.
Hoping that this trend would suddenly turn around, that temporary workers would suddenly and massively become regular employees is as much a pipedream as hoping that the number of part-timers could return to the halcyon days of 2000. These are structural shifts, brought about by how executives are being rewarded and by how analysts tout stocks. And no amount of Fed money printing and interest rate repression, despite the Fed’s endless declarations to the contrary, can overcome them.
The Fed’s policies have focused corporate efforts with laser intensity on financial engineering and thus are likely to encourage those trends. So here is a very inconvenient chart. Inconvenient for the Fed. It turns their rhetoric about wanting to boost the labor market upside down. Read…. This Chart Is A True Picture of How QE “Solved” The Unemployment Crisis In America
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Friends;
This trend is a double whammy for the “floor workers” of the economy. First, our lives are being fragmented by fractalized work schedules. I work under a “corporate schedule” at DIY Blue. Monday Tuesday off one week. Wednesday Thursday off the next. Saturday Sunday off the third week. Then, for s—s and giggles, Sunday Friday off. I’m lucky to have some paid vacation accrued. But, in the interests of something or other, only one week off allowed at a time. (There goes my dream vacation to Mikanos with Sergio!) The internal permanent temporary workers get it even worse. All of the above, at only four hours a day. Those four hours being the very middle of the day too. Trying to hold down two “part time” jobs simultaneously is now an order of magnitude harder.
The other evil effect is a steady and relentless wage suppression. Everyone “knows” that part timers aren’t worth what permanent workers are worth. Thus, they should just quit their bitching and thank the “Bosses” for any work at all. I have seen just this sentiment explicitly expressed at commercial jobsites in the past. There, with a “rough and ready” ethos in place, such a pronunciamento can gain traction. (Only the Strong survive! We’re Big Boys now. Quit yer bitchen! Etc. Ad nauseum.) This insidious meme is infiltrating the previously genteel retail trades. (I have a tendency to make CEO jokes at work. More than once I have been admonished to stop such because; “It’s bad for morale. It could hurt the bottom line.” [Translation: Our bonuses depend on you drones not questioning the ways this store are run. Shut up.])
For the country as a whole, including the lower half of the top 10%, all this is leading us down to Third World status. I’m beginning to wonder though; is there a Fourth World status in the wings? One inhabited by former First World countries that have slipped back into Feudalism? (I can imagine a state where Feudalism can exist in a “soft” version. The substance without the form.)
Anyway; “Don’t call us, we’ll call you.”
I’m sorry that this has been done to you. It’s all choices by the PTB.
I have a policy of asking employees in a place where I’m about to buy something or contract some business:
“Do you get treated OK here?” “You get all the hours you want? Benefits?”
Most are willing to admit that they don’t. Occasionally I am surprised that some are perfectly happy. From garbage men to clerks to sales, am seeing far far fewer Hispanics and a lot more Whites, many in their seventies working around here.
The big question is: “Do you know anyone who has obtained a full time job with benefits in the last five years or so? Anyone?”
Only one “yes” to that question since I started asking over a year ago.
Jeff Sessions is trying to get a bill through congress to make all employers use E-Verify. His reasoning is beautifully outlined and it’s worth a listen on Youtube.
Three applicants for every job and *some people* want to legalize tens of millions more workers and allow as many or more to immigrate here and seek whatever jobs there are. That doesn’t make sense.
Google
jeff sessions e-verify
E-Verify is a joke. It only confirms the SS# is associated with a particular person (which it does poorly, sometimes they come back as false positives or false negatives). Also, it does NOT cross check against the SS# being used in several locales at once. For example, Puerto Ricans – with valid SS#s, work permits, etc. – rent their ID to another person who uses it to get a job. The E-verify will confirm the number is legit, but won’t say anything if it is used simultaneously in several locations.
“Since then, it has been declining in spurts and starts, as more part-timers found full-time work”
Do we know that’s the case? How many have given up entirely?
Indeed.
More evidence that the trickle-down economic policy being followed by the O-Bush-ma administration has been an utter failure – for workers. For their actual constituency – the plutocrat set, corporate insiders, Wall St and the zombie mega-banks – its been a resounding success. Mr. Hopey-Changey may like talking about “inequality” but his actions, beginning with hiring of Wall St insider Tim Geithner to crush any semblance of progressivism or fairness in economic policy and corporate toady Eric Holder to look the other way in the face of perhaps the largest and most destructive white-collar crime wave in history and ending with his wholehearted embrace of austerity speak louder than his words.
As one of the forgotten long-term unemployed (second time I’ve been through this in the past 8 years; plus one other shorter duration experience) I have to say that the Democrats are dead to me.
The Republicans won’t be any better. Both parties exist at this point to do the bidding of their Fortune 500 masters who bankroll the campaigns. Mitt Romney could be President right now and not one damn thing would have changed because those who’s business models and profit margins depend on the status quo don’t want them changed.
I haven’t gone over to the Republicans pal. You’re right though – they won’t be any better. They’re dogs with different fleas. The real story is how and why the Democrats have chosen not to offer a convincing alternative and have instead trapped themselves inside a box where they dare not differ by more than a few degrees (or minutes) from the Republicans.
That is the issue that fascinates me most, here and globally: the fact that electoral strategies, despite everything I learned getting my MA in PoliSci, have so little to do with actually winning elections. Getting elected and staying elected by keeping 51% of your voters happy and doing their bidding just isn’t part of the equation. The Dems would rather lose than move to the Left and attract disaffected voters.
For the parties as organisms, I can almost understand this, but for individual politicians, it makes little sense. And it makes less sense still in Parliamentary states like those in most of Europe, where in countries like Britain adopting a convincing populist platform need only sway a few percent of the population in order to swing an election. Given that rich and reactionary people tend to vote more than poor, disaffected, and demoralized people the lure of swinging Left to grab those votes should be overwhelming. But it doesn’t happen–anywhere.
We need an entirely new understanding of politicians, parties, and elections, because what we tell ourselves does not mirror reality.
Maybe there’s no politics left and it’s all business. The Shirky Principle would then explain why neither party is interested in vanquishing the other. As for why individual politicians don’t, they need the Party more than the Party needs them. This is America, after all — you can barely swing a cat without hitting someone whose self-interest can be bought whole for six figures.
It’s so bad in the UK that we may see a massive protest vote for UKIP at the end of May. Hardly anyone knows what UKIP is, but they have a fairly charismatic leader (we don’t know any other candidates), Farrage. Even I’m thinking of voting for them because there is no ‘stuff the lot of you lying creeps’ spot on the ballot.
It’s a good point James. We’ve had a lot of talk on proportional representation. We need deeper changes.
The answer to how and why is summed up in two words: campaign contributions.
In order to compete with the Reps financially, the Dems have to raise equal amounts of money. There is no way out for the Dems because they need money to compete. There is no way out for the Reps because they need extremist voters that push them further and further away from the mainstream. Both parties are trapped – and we the citizens are screwed as a result.
Hey, no problem. The more aggressively people are driven out of the workforce, the more quickly they are dispirited and cease declaring themselves “looking for work”. And then, voila, they are no longer unemployed and the unemployment rate goes down.
I can remember after the 87 crash when some newscasters got on the air and were in almost a state of panic because it was turning into a “jobless recovery.” The stock market came back because it showed higher profits because corporations cut so many jobs. The same thing is still happening now. I think it has been the game plan since the 70s “stagflation” which was followed by supply-side boondoggles when jobs were decimated to prevent inflation, ushering in corporate raids, and this trend was not helped when Clinton paid down the federal deficit which probably brought on the recession which was made worse by Bush’s war years and his push to make everyone a homeowner. That clown. Then naturally this long rolling recession turned into a full blown depression and we are yet to figure out how to get out of it profitably. Something there is that does not like non-profit.
To say that for companies it looks great on paper is a serious misunderstanding of the situation which would lead to ignoring best policies to combat the situation. Saying “on paper” implies that companies do not understand what makes them profitable and are pursuing bad employment strategies. But all one would need to do then is to wait a little when the hidden truth of the situation is revealed and companies start changing employment strategies. No, companies generally understand well what strategies make money for them and pursue those. Their current profits levels are absolutely as real and solid as the profits they took pre-2008. They are not deluding themselves that the choices they make with employees hours, status, and the like are increasing profits. External forces need to be brought into action so that their more profitable strategies involve more hiring. What they are doing is working for them well enough that admonitions that it is only “on paper” are pointless. It is working for them “on paper” and in reality and conditions need a big change so that having more permanent workers starts working better.
It may be working out short term, but it won’t do so long term.
The simple thing is that one company’s employee is another’s customer.
Appeal to karma is usually a sign of misunderstanding that motivations are orthogonal to justifications. It’s much more predictive to assume that those who amass world-changing hoards of resources are at least smart enough to understand their long term value and hold on to them, or they would have spent them all partying in Rio already, and to simply treat their policy proposals as assertions of interest in the outcomes that flow naturally from them.
So, beyond the obvious diagnosis of timing the market and harvesting yet more wealth, what kind of long-term endgame could possibly work out well with indifference toward long-term microeconomic health? Perhaps one where microeconomics doesn’t play much of a part, which implies one where most people have little need to hold or spend money very often. What sorts of relationships to production might that entail? Perhaps, as is amply precedented, employers might provide directly for their “workers'” needs via company stores, strictly policed dormitories, and not-quite-unconscionable debts (which are just curses as far as the average inmate knows). Of course, plain chattel slavery is also an option with broad precedent, but it really is best to wrap it in some meat so the dogs will swallow it.
Companies are laying off workers, resulting in increased profits. Fine.
But they are taking these profits and paying excessive CEO wages, buying back shares, and paying high dividends.
Instead, they should be lowering the prices of their goods, but they are not. If they lowered their prices, we could all afford to be making less money. I don’t really care if I make $50.00/hour or $10.00/hour, as long as I can afford to live.
Only buy what you need, nothing more. Starve these bastards until they lower their prices!!!
The same trends are clearly seen in Spain with a difference: since 2000 temporary jobs account for about 90% of jobs created. We should dismantle the old, unable Unions that have been domesticated by the top managers and restart the much needed counterweigth role that unions used to have in the past.
I would take issue with calling these issues “structural”. They are conscious decisions taken by capital as a class, i.e. the rich and elites, to loot labor. Structural is one of those words that conveys both a lack of agency and inevitability. Along these lines, we should be leery of weasel words like flexibility, efficiency, and productivity which are really code for looting and mistreatment of labor as well.
Involuntary part timers account for 7.4% of the labor force. Voluntary part timers are those defined as working part time for “non-economic” reasons. They account for 12.3% of the labor force. Together these two groups comprise nearly 20% of the labor force, that is one in 5. It is important to understand that many voluntary part timers really aren’t voluntary at all. Reasons for non-economic/voluntary status include those with child care needs (such as lack of affordable daycare) and those trying to make ends meet under Social Security income caps. “Voluntary” part timers dropped a couple of million from their peak in June 2007 (20.044 million) to their trough in May 2010 (17.871 million). Since then, they have been trending back up (19.216 million in March).
While it is true that temporary help services have been sharply trending up (2.8375 million), they still only account for 2.4% of all private sector jobs and 2.1% of all nonfarm (includes government) ones.
What gets lost in all this is that corporations are socially sanctioned entities, that is they are allowed to exist as long as they serve a useful social purpose. In our kleptocracy, this knowledge is willfully and deliberately suppressed. Corporations we are told have no responsibilities to us whatever. They are there only to maximize profits for their investors. (A lie.) Of course, more and more they no longer even do that as these companies are being looted by their C-level executives by means of lack of investment, cutting labor, bonuses, and stock buybacks.
Yes, huge, unconscionable bonuses, huge salaries for upper management, cutting labour, stock buybacks, paying high dividends, borrowing cheaply, reducing content in packaged goods, off-shoring jobs, and refusing to cut their prices (in most cases raising them).
The only way to stop them is to stop buying their products, using their services or investing with them. Otherwise, we are part of the problem. Starve them!
The structural issues concern modern productive capacity and what we should be constructing. Economics ignores this.
Class war? I don’t buy that as analysis, but otherwise agree with Hugh completely. I’d join Backwards cavalry charge towards the volcano too (we’d steal the horses). They are lying as a matter of routine on unemployment now.
I’d ask people to work out what the structure of work around them is. Frankly, I think we have to start with basics. No one I know gets paid to sleep, so we are all one third definitely unemployed. So what do we do in the other 16 hours a day? Now log what you do.
If we are ever going to get away from the control-freaks of institutional data I think we are going to have to get this basic. We have to cry naked on the whole of economics and start again.
OUR TRICKLE-UP ECONOMY
On a higher level we should look at labor income share across countries. For example, this OECD info-graphic here.
Yes, of course, manufacturing is just one sector and services is the major employer in the US. Can you imagine that the return on labor in services is more important than manufacturing? I can’t.
Why should anyone be surprised with the low percentage of the US vis-a-vis other developed countries. And, even if we raise the minimum wage to $15 per hour, as our esteemed Nobel Laureate economist George Stiglitz suggests, I doubt it will make for a significantly different change on that graphic.
Let’s face it folks, since Reckless Ronnie Reagan tinkered with the upper-income tax rates (see how they fell off a cliff in the 1980s here), the US has created a Trickle-up Economy.
Resulting in a Plutocrat Class that has encrusted itself into the “status-quo” of taxation by purchasing influence in Congress (on the Left and Right) by means of its election funding.
Ask yourself, is that the sort of country I care to live in, or care that my children should live in? One that is intrinsically unfair?
Now, answer the question …
i think a better term than trickle down or trickle up might be: Suck it up.