South By North Strategies, Ltd.

Inequality as Public Policy

In a new paper, John Schmitt of the Center for Economic and Policy Research documents the deliberate public policy choices that have helped fuel rising levels of income inequality in the United States over the last 30 years. Argues Schmitt:

Each of the major policy initiatives of the last three decades claims to offer important efficiency advantages. The long decline in the inflation-adjusted value of the minimum wage was supposed to correct a distortion in the low-wage labor market. The deregulation (more accurately, re-regulation) of the airline, trucking, railway, financial, and telecommunications industries was supposed to lower consumer prices in those markets. The liberalization of foreign trade through a plethora of bilateral and multilateral trade agreements was similarly supposed to lower consumer prices on imported goods. The privatization of many federal, state, and local government functions – from school bus drivers to the administration of welfare policy and even much of the U.S. war in Iraq and Afghanistan – was supposed to lower the cost of government. The steady, policy-enabled, deterioration of unionization in the private sector – from over one-third of workers in the 1950s to about eight percent today – was supposed to improve the competitiveness of U.S. firms.

These policies, sold as ways to enhance national efficiency, however, also have another common thread. They all work to lower the bargaining power of workers relative to their employers. In many cases, the alleged efficiency gains have not materialized. In every case, the negative impact on workers has been obvious and substantial.

Weekend Wonk Out

A round-up of policy reports from the week ending on 10/23:

• The Workforce Strategy Center profiles highlights ways of helping low-income youth earn college credentials.
• The Center for Economic and Policy Research shows how to make Medicare drug benefits more cost efficient.
• Demos analyzes how adults in their 20s and 30s are faring in the recession.
• The U.S. Department of Labor studies the Trade Adjustment Assistance Act.

Local Employment in NC

September saw few changes in local employment conditions across North Carolina. Last month, 64 counties posted double-digit rates of unemployment; of these, 28 had unemployment rates of at least 12 percent.

In September, every part of the state wrestled with weak labor markets. Unemployment rates exceeded 10 percent in 64 counties, and in 28 counties, at least 12 percent of the labor force was jobless and actively seeking work. County unemployment rates ranged  from 5 percent in Currituck County to 16.5 percent in Scotland County.

Unemployment also remained at elevated levels in all 14 of the state’s metropolitan areas. Six metros posted double-digit unemployment rates. The Hickory-Morganton-Lenoir area had the highest unemployment rate (14.1 percent) followed by Rocky Mount (13.4 percent). The lowest metro unemployment rate was 7.7 percent in Durham-Chapel Hill.

Click to read South by North Strategies’ analysis of the latest employment report.

Housing Market: September Starts/Permits

From the latest issue of the Center for Economic and Policy Research’s Housing Market Monitor:

After rebounding from the extraordinarily low levels of last winter, housing construction seems to have stabilized over the last three months. Starts were at a 590,000 annual rate in October, the same level as June and also the average for the last two months. Starts of single-family homes have increased slightly over this period, rising by 4.8 percent from their June level. Starts in buildings with 5 or more units fell by 22.8 percent.
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On a more encouraging note, it appears that the pace of foreclosures may finally be slowing. According to MDA Data Quick, notices of default in California were down by 10 percent compared with the second quarter, although they were up 18.5 percent from the third quarter of 2008. Actual foreclosures were down by 37 percent from their year ago level, although they have been rising modestly in the last two quarters. These figures present a mixed picture on mortgage modification plans. The modification plans probably have slowed the rate of foreclosure slightly in California, one of the hardest hit states in the country, but foreclosures are still occurring at a rate of close to 200,000 a year.
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It is likely that house prices may see renewed downward pressure with fewer first-time buyers in the market. Also, many sellers who had delayed putting their homes on the market may no longer have the ability to delay selling further. And there continues to be a large supply of foreclosed homes.

Around the Dial – Oct. 22

Economic policy reports, blog postings, and media stories of interest:

• The Economix documents soaring college costs.
• Naked Capitalism wrestles with the problem of “too big to fail.”
• The Economic Policy Institute analyzes flawed tax incentives for retirement savings.
• The National Journal asks if the American dream is still alive.
• The Charlotte Observer revisits the Wells Fargo-Wachovia merger.