Why Business Wants a Recession

           Give Jerome Powell credit for candor: the Fed chairman admits that his policy of increasing interest rates to fight inflation might push the economy into a recession. “No one knows whether this process will lead to a recession or, if so, how significant that recession would be,” he recently told reporters.

            If it does, one sector won’t be entirely displeased: employers.

            According to the Deloitte accounting firm, a typical Fortune 500 company spends $1 to $2 billion a year on payroll, averaging between 50% and 60% of total spending. Controlling labor costs, unsurprisingly, is a top priority for employers.

            In the boom-bust cycle of labor-management negotiations, the post-pandemic Great Resignation has triggered a labor shortage, a phenomenon we rarely witness and tends to fizzle out fast. Workers are quitting and retiring early, tanking the labor force participation rate. Those who remain enjoy the upper hand at interviews that feel like the job prospect is sizing up the company rather than the other way around. Labor shortages are driving up salaries, shortening hours, prompting signing bonuses and forcing bosses to accommodate people who prefer to work at home. Just 8% of office workers in Manhattan are back in the office a full five days a week.

            The most recent data published, for June, finds that wages and salaries soared 16.8% on an annualized basis as benefit costs went up 14.4%.

            Workers, angry and resentful after decades of frozen real wages and merciless downsizing, are becoming demanding. This reversal of a power dynamic in which workers were supplicants and bosses called the shots has also strengthened labor unions that had been losing membership for years.

            This, some CFOs may be thinking, calls for a recession.

            Company profit margins are at a 70-year record high, up 25% each of the last two years as the result of raising prices during the pandemic. Which means that, even allowing for an 8% inflation rate, a generic S&P 500 corporation should easily be able to ride out the average 26% earnings decline suffered in the most recent typical recessions that took place in 1990, 2000 and 2020. (A bigger crisis like the 2008-09 Great Recession, which reduced earnings by 57%, is another matter.)

            No corporate officer would voluntarily reduce earnings. Or would they, in order to get something more valuable: regaining leverage over labor?

            Traditional conservative allies of big business are openly arguing in favor of higher unemployment. “The recent drop in work and labor force participation—particularly among young workers—is troubling [my emphasis],” writes Sarah Greszler in a white paper for the Heritage Foundation, the right-wing think tank. “Job openings, at 11.3 million, remain near record highs, and record percentages of employers report unfilled positions and compensation increases.”

            Greszler summarizes: “Continued low levels of employment [sic] will reduce the rate of economic growth, reduce real incomes and output, result in greater dependence on government social programs, require higher levels of taxation, and exacerbate the U.S.’s already precarious fiscal situation.”

            Workers, of course, feel like they can finally breathe. High demand for labor means that they can quit positions where they feel unappreciated and/or undercompensated, pack up and move to another state and create a healthier balance between their family and work lives. The current situation is anything but “troubling.”

            Executives at employers like Apple, Tesla and Uber have had enough of workers calling the shots. They’re demanding that people get back to work — at the office — or find another job. “A quickly shifting employer-employee dynamic could give companies the ammunition to take a harder line against the full-time work-at-home arrangements that many employees have pushed for, according to corporate policies experts. In fact, they say more companies are likely to start pressing staffers to come back to the office — at least a few days a week,” reports CNBC. “The hybrid workforce is not going to go away, but the situation where employees refuse to come to the workplace at all is not likely to hold,” Johnny C. Taylor Jr. of the Society for Human Resource Management tells the network.

            Perhaps no one has told CEOs that at-home work empowers them too. Rather than hiring security goons to escort laid-off workers past their terrorized colleagues, companies can memory-hole the condemned by deactivating their remote-access passwords. Who’ll notice one less square on the Zoom screen?

I’m not subscribing to a dark Marxist suspicion that CEOs, the Fed and other powers-that-be are conspiring to slam the brakes on an economy that would otherwise be coming in for a soft landing as pent-up consumer demand from the pandemic naturally ebbs, in order to return their recently empowered employees to their rightful status as wage slaves. Powell and his fellow governors are doing what comes naturally to government, treating a disease based on a diagnosis that is close to a year out of date and, reasonably, including wage increases as part of their calculus of what constitutes a major driver of the inflation rate.

Business, however, does see what’s coming. If the captains of industry aren’t worried enough to be calling their pet politicians to demand an end to interest-rate hikes, one reason might be that they see a silver lining to the next recession.

(Ted Rall (Twitter: @tedrall), the political cartoonist, columnist and graphic novelist, co-hosts the left-vs-right DMZ America podcast with fellow cartoonist Scott Stantis. You can support Ted’s hard-hitting political cartoons and columns and see his work first by sponsoring his work on Patreon.)

Labor-Management Non-Relations

The clash between labor and bosses used to be so violent that it sometimes resulted in deaths. Now no one wants to talk to one another. Remote workers slack off as quiet quitters, employers scheme as quiet firers and some disgruntled employees slink off to unionize while no one is watching.

Labor Surplus / Labor Shortage

When jobs are scarce, workers are told to make big changes in their lives to adjust to reality. Now that workers are scarce, however, whiny employers are offered sympathy rather than given advice to change their obsolete business models.

It Isn’t Easy Being a Democrat

Many Democrats fantasize that a recession or other economic downturn will hurt Donald Trump’s chances of reelected. But of course they would be affected too.

Bernie Sanders Is the Best on the Minimum Wage and It’s Not Near

On the issue of the minimum wage, no top contender for the presidency has been as aggressive as Bernie Sanders. But for workers, that’s not nearly enough. For the last six years, Sanders has been pushing a $15 an hour minimum wage. That’s a major improvement over the current rate but it’s not nearly enough to keep up with inflation. Even under Sanders, workers would, at best, fail to lose more ground. They wouldn’t gain anything. Just another case study of how capitalism is not reformable.

The Boom-Bust Cycle of Capitalism

With salaries representing the biggest expense for employers, it’s not paranoid to suggest that, as soon as workers begin to gain advantage in a tight labor market, bosses are ready to tank the economy to keep workers’ wages in check.

SYNDICATED COLUMN: Here’s How Democrats Could Win This Fall and the One After That and the One After That

Image result for workers strike

Democrats are optimistic about their prospects for this November’s Congressional midterm elections. But, as I argued in The Wall Street Journal last week, the party’s growing (and increasingly powerful) progressive base may well decide to sit on their hands, staying home on Election Day — just as a determinative number of Bernie Sanders’ supporters did in 2016.

Don’t be mad at them. Would you vote for a party that promised you nothing whatsoever?

To avoid again snatching defeat from the jaws of victory, Democratic leaders must energize their long-neglected base. They should take their cue from Newt Gingrich in 1994 by nationalizing the election with an unapologetically left-leaning platform promising substantial change if they take back the House and/or Senate. Item one seems obvious: they should promise to impeach Donald Trump.

But anti-Trumpism wasn’t enough to win in 2016 and it won’t be enough this year either, especially in races featuring incumbents defending gerrymandered districts. Democrats should set aside identity politics in favor of a class-based agenda that leverages the low unemployment rate in order to restore some of the power workers have lost to decades of downsizing, outsourcing and deunionization.

If not now, when? True, many employers are deploying monopsonic tactics like non-compete and no-poaching clauses to keep workers toiling at their firms without giving them a raise. Even so, there are so many new jobs that corporations are complaining about labor shortages. Working Americans are never going to have a better chance to pressure their bosses to treat them better.

What should the Democrats’ pro-worker platform for 2018 include?

Let’s start with a $25-an-hour federal minimum wage. Sounds radical, but it’s what the lowest-paid workers would earn if Congress had tied the rate either to increases in worker productivity since 1960 or to the official inflation rate (the real one is higher) since the end of the Vietnam War. Going forward, the minimum wage should be indexed to the (real) inflation rate. Bosses say they’d have to lay people off but studies show that’s a bluff. As a concession to employers, the minimum wage could be adjusted downward if there’s deflation.

The United States is one of the few countries on earth — perhaps the only country — with “at-will” employment. Under U.S. labor law, employers can fire workers for any reason that isn’t specifically illegal, such as discrimination by gender or race, or retaliating against a whistleblower. In Europe, there are no independent contractors. All employees get a contract. Unless it’s for good cause (like a worker caught stealing), bosses can’t lay you off without paying you months, or even years, of severance pay. American workers too deserve to be treated with dignity. Democrats should end the obscenity that is at-will.

Under a Clinton-era law, American workers get up to 12 weeks of unpaid leave for events like the birth of a baby. Talk about cheap! According to the Organization for Economic Cooperation and Development, the U.S. is the only one of 41 countries that doesn’t offer at least two months of paid leave. Estonia gives more than a year and a half. Paid. Are Estonians better people, more deserving of time with their kids, than Americans? Germany offers more than 40 weeks — so who really won World War II?

Employers often fire workers because they want to join or organize a union. This is already illegal. But that law is toothless because employers simply make up some other reason to get rid of pro-union workers. Getting rid of at-will employment would solve the problem.

These fixes address issues that have long afflicted workers. Going forward, after this fall, Democrats should also take on the big systemic shifts in the workplace that are leaving even more working people underpaid and underprivileged despite putting in a hard week’s work.

Freelancers and independent contractors currently make up more than a third of American workers. They don’t get an employer-matched 401(k), much less a pension. They pay for their own healthcare. The 1099 set needs and deserves paid family leave, protection from fickle at-will employers and a nest egg for retirement.

Just shy of 20% of workers work part-time; many people hold multiple part-time jobs because they can’t find one full-time position. The system needs to take care of their health, retirement and worker-protection requirements as well.

No one is talking about the looming Generation X retirement — or lack of retirement — crisis. Nevertheless, it’s coming. Gen Xer retirement saving rates are terrifyingly low. An obvious solution is beefing up Social Security, but Republicans are slashing benefits instead.

Based on their record of inaction and subservience to corporate interests, I don’t expect Democrats to roll up their sleeves and take on the pocketbook issues progressives — and many swing voters — care about. But if I’m wrong, and they get serious about the stuff that matters most, they’ll win.

(Ted Rall’s (Twitter: @tedrall) brand-new book is “Meet the Deplorables: Infiltrating Trump America,” co-written with Harmon Leon. His next book will be “Francis: The People’s Pope,” the latest in his series of graphic novel-format biographies. Publication date is March 13, 2018. You can support Ted’s hard-hitting political cartoons and columns and see his work first by sponsoring his work on Patreon.)

Non-Competes

One out of six American workers, including manual and low-level laborers, are forced to sign non-compete agreements. It’s abusive, it’s strange, and studies say wages are 10% lower on average as a result.

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