Poverty, Inequality, and the GDP: The Economy of Good Jobs

Poverty, Inequality, and the GDP: The Economy of Good Jobs

photo: Anna Wolf

Proposals to reduce poverty and inequality by such measures as raising the minimum wage, improving work conditions, assuring extra pay for overtime and raising taxes on the 1 percent of wealthiest Americans are useful actions, but they do not address a fundamental source of economic undoing for many Americans—the composition of America’s gross domestic product (GDP), or what is produced in the United States. Percentage gains or losses in the GDP or changes in the unemployment rate are significant but inadequate reflections of the general state of the economy and unreliable indicators for policy making.

If the American economy continues to produce higher-paying positions and a much larger number of lower-paying jobs, inequality and poverty are likely to remain high and even rise because what is produced in this country affects the well-being of most Americans by developing jobs of various pay and benefits qualities. The fact that more than 30 percent of total business profits were recently reported by financial companies is a disturbing fact about the American economy, perhaps indicating that financial industries need more regulations and limitations, while employment-producing enterprises require more help and stimulation.

An important shift in the composition of the GDP has been the great reduction in manufacturing employment from almost one-third to one-tenth of all jobs. This has led to a high rate of unemployment and low wages in many locales that formerly depended on better-paying manufacturing jobs for their economic well-being. One result is the Democratic Party’s political concern about “the white working class,” unemployed or lower-paid white citizens who formerly were dependable party voters.

Currently, low-paying service industries constitute a sizable share of all employment. If that situation continues, the offsets to it of current proposals would make a dent in poverty and inequality but not catalyze a transformation. Certainly, the standard remedy of increasing the number of college and post-college graduates would do little to overcome today’s American economic challenges if the number of good-paying jobs requiring higher education did not dramatically increase.

Needed are efforts to change what is produced in the United States, for that situation determines, to a considerable extent, the level of both employment and wages. What is produced in America is more significant over the long run than direct governmental efforts to enhance wages through legislative efforts.

The needed improvement and expansion of America’s infrastructure could provide many jobs over quite a few years, but the number of jobs added per year might not be very great since this is dependent on political and physical conditions, and the wage levels of such jobs would be an issue. Attempts to win back manufacturing jobs lost to other nations would require difficult political and economic changes in the United States and abroad and thus is not a likely scenario.

Of more importance than restoring displaced production is developing new industries and forms of production in the United States. The possible growth of space travel and the likely discovery and utilization of new minerals may lead to new economic activities and produce good-paying jobs. Technological developments are also likely, perhaps in the provision of personal services. Further, assuring that companies’ products are made in the United States may require providing financial and other incentives, perhaps for a specified period or circumstance.

Moving beyond fixation on the GDP as an indicator of economic health may also entail other major challenges, such as reducing the negative environmental impact of production and considering to what extent the content of the GDP is shaped so that it particularly benefits racial-ethnic groups, women, and low-income locales.

A variety of actions are needed to improve the composition of America’s GDP. The politics to bring them about will increasingly become central if good-paying jobs continue to decline and are replaced by low-paying jobs. A useful step would be annual estimates of the number of good jobs created, where they were created, and who stands to benefit as a result.

M. (Mike) Miller, an economic-political sociologist and activist, has been a senior fellow of the Commonwealth Institute; former chair of Boston University’s Sociology Department; cofounder and board member of United for a Fair Economy; recipient of the 2009 American Sociological Association’s Award for the Practice of Sociology; a former member of the staff for the Ford Foundation and board member of the Poverty and Race Research Action Council. Miller has consulted with poverty organizations in the U.S. and around the world and has worked with Dr. Martin Luther King. In addition, he has authored, coauthored, or edited ten books and more than three hundred articles and has blogged for Nation of Change, Dissent Magazine, Classism, and Social Policy. He is currently at work on a book identifying new ways of thinking about, and acting on, American society and politics. His article entitled “America’s Go-To Economic Indicator Is Blunt and Obsolete” recently appeared in The Atlantic.


One Response to "Poverty, Inequality, and the GDP: The Economy of Good Jobs"

  1. benleet   July 1, 2016 at 6:14 pm

    Olivier Giovannoni at Univ. of Texas' Inequality Project, paper #66, shows that the lower-earning 90% have lost "labor share" of national income. It's common knowledge that wages and productivity separated in the 1980s, but by how much? Giovannoni shows that Labor share of the lower 90% dropped by 15% of national income, about $1.8 trillion in 2012. Now $1.95 trillion, about $20,000 a year for all workers' families in this category. This finding is also shown in a paper by Levy Economics Institute, Destabilizing the Unstable Economy, 2016. Presently the Congressional Joint Committee on Taxation, Overview, 2015, shows that the top-earning 1% takes in 18.7% of national income, the lower-earning 55% take in 16.2%. The lower-earning 45% of workers, all with income under $25,000, and average income of below $11,000 a year, collectively take in less than 6% of national income ($794 billion of $13 trillion). Politically and economically this is a crisis. I think the People's Budget at EPI.org, the proposal of the Progressive Caucus, holds the best remedy, most practical for the time being of restoring a lost balance. Certainly greater labor rights would help. My blog: http://benL8.blogspot.com.