On Labor Day 2009, many workers will have little to celebrate. Some 6.9 million jobs have been lost since the start of the recession, resulting in an August unemployment rate of 9.7%, and millions of other workers have seen their hours, wages, or health care benefits cut.
Furloughs on the rise
In The Recession’s Hidden Costs, a newly published Briefing Paper, EPI President Lawrence Mishel and Economist Heidi Shierholz discuss how stagnating wages, along with unpaid furloughs and the declining number of employers contributing to workers’ retirement plans, have lowered living standards even for those workers who have managed to hold onto their jobs.
Even as the pace of job loss has slowed in recent months, wage growth has fallen dramatically, the paper notes. Wages, which grew at an annualized rate of 4.0% between 2006 and 2008, fell to just 0.7% over the past three months. This wage deceleration has occurred among both high school and college graduates; among women with a college degree, wages grew by just 0.3% over the past year. Moreover, furloughs, in which workers are required to take an unpaid vacation, are on the rise: recent surveys have found that 17% of companies have imposed furloughs on their workers. More than 20% of companies have suspended their contributions to 401(k)s and similar pension plans. As Mishel notes, these lost wages do not just lower living standards, they threaten to further delay an economic recovery, which will hinge on higher consumer consumption.
In advance of Labor Day, EPI has also assembled a Fact Sheet with some statistics on workers and the compensation they receive. Some highlights: Nearly one in six workers are now unemployed or underemployed. The unemployment rate among men has already passed 10%. Many workers are losing health care coverage for themselves or their dependents. In fact, among people under 65, in the bottom 20% of all incomes, only 21.9% have employer-sponsored health insurance. Between 2000 and 2007, some 3.4 million children who were insured through their parents’ employers have lost coverage. Half of all people nearing retirement age have a 401(k) balance of less than $40,000.
More pain for children, minorities
On Sept. 8, Mishel will address a group of philanthropists and entrepreneurs at the Momentum Conference in San Francisco, where he will outline the human toll of high unemployment. Mishel forecasts that double-digit unemployment will increase the percentage of children living in poverty to 27%, from an already high 18% in 2007. Among African American children, the picture is even bleaker. As a result of the severe recession, Mishel projects that more than half of all African American children will be living below the poverty line, up from about 34% in 2007.
The State of Working America
For more detailed information on the impact of the economy on working Americans, visit StateofWorkingAmerica.org, which contains downloadable versions of all the tables and figures in the 2008/2009 edition of EPI’s flagship publication, The State of Working America. State of Working America, published every other year, offers an exhaustive look at trends in income, class mobility, poverty, health, and other areas. The current edition outlines how many workers failed to see economic gains during the past growth cycle and were already struggling at the start of the current recession.
Letter to Obama
With health care reform expected to take center stage when Congress convenes after Labor Day, EPI President Larry Mishel wrote an open letter to President Obama outlining why fixing the country’s broken health care system is key to fixing the economy and why a large public role in financing health insurance is the best way to increase competition and achieve better cost controls. The letter, which stresses that a public option is an essential piece of effective health care reform, is available on EPI’s Web site.
Also featured on EPI’s Web Site is Alexander Hertel-Fernandez’s piece, Seniors Need Health Care Reform Too, which outlines how many seniors are being squeezed by rising health care costs even as other consumer costs fall. For the first time in since 1975, when the government began automatically adjusting Social Security benefits for inflation, seniors in 2010 are expected to receive a “zero” cost of living adjustment despite the fact that many will be hit with higher medical bills, Hertel-Fernandez notes.
In an effort to identify a better system for building retirement savings, the Government Accountability Office (GAO) recently included EPI’s 2007 proposal, Guaranteed Retirement Accounts, as one of four proposals it highlighted. The plan, by EPI board member and New School for Social Research Professor Teresa Ghilarducci, proposes establishing a government-managed pension plan for workers who do not have access to an alternative plan, as a means to help prevent a sharp drop in living standards after retirement. Ghilarducci’s plan would guarantee a minimum annual return of 3%, adjusted for inflation, on worker and employee contributions.
On Sept. 9, EPI’s Bailout Analysis Project will host What to Do About Too Big to Fail?, an examination of the best policies for regulating and reining in the nation’s largest banks. The event runs from 10:00 a.m. until 11:30 a.m. at EPI’s headquarters.
On Sept. 10, EPI’s Global Policy Network will host Food Fights, a discussion of union struggles at two U.S. food manufacturers. The brown bag lunch time discussion runs from noon until 2:00 p.m. at EPI’s offices. Guests are welcome to bring their own lunch.