It s the economy stupid! (and it doesn t have to be this way!) October 28, 2011 Alameda, CA Sylvia A. Allegretto, PhD Center on Wage & Employment Dynamics University of California, Berkeley
The critical role of unions Unions Corporate power & the wealthy U.S. Economy: Workers & citizens Allegretto 2011
Wealth Policies Political access Allegretto 2011
Econ 101 (in very colorful but not so pretty pictures) The mess we are in today is man made: it was an Inside Job Wall Street, K Steet & PA Avenue Ayn Rand is popping bennies & partying like it s 1929! Those at the alter of the free market are kidding themselves at best. Greenspan (Rand fan) didn t know banks wouldn t regulate themselves what? Plutocracy: of the 1%, by the 1%, for the 1% Allegretto 2011
Top priorities Effective regulation Reasonable tax policy EFCA & unions Fix the ongoing housing crisis Fair trade policies Allegretto 2011
The only deficit that matters 2% CA 2001 CA 1990 0% 0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69-2% -4% US today (as of Sept. 11) -4.8% or -6.6 million -6% -8% CA today! (as of Sept. 11) -7.2% or -1.1 million -10% Source: Sylvia Allegretto s analysis of Current Employment Statistics data.
These numbers represent people, forever lost output & heartache 12% 12% 10% United States California 10% 8% 8% 6% 6% 4% 4% 2% 2% 0% 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 0% Source: Sylvia Allegretto s analysis of BLS Current Population Survey data.
Incomes of typical households in California plunge back to 1998 levels $70,000 Real Median Household Income ( 2010 Dollars) $65,000 $60,000 $55,000 $50,000 $45,000 $40,000 $35,000 $46,202 $56,042 $49,076 $59,274 $59,821 $53,252 $52,823 $54,459 $49,445 $30,000 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: Sylvia Allegretto s analysis of U.S. Census data 2011.
I am trying to enjoy the fruits of my labor... ~Lucinda Williams 450.0 400.0 Productivity Index (1973 = 100) 350.0 300.0 250.0 200.0 Average hourly compensation 150.0 Average hourly wage 100.0 1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 Source: Economic Policy Institute s stateofworkingamerica.org
Union decline and middle-class woes 30 54 25 52 20 50 15 48 10 5 Union Membership Rate Middle-Class Share of Total Income 46 44 0 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 42 Source: David Madland, Karla Walter, Nick Bunker, April 4, 2011, Center for American Progress. Allegretto 2011
We need a plan to restore manufacturing 35% 32.0% 30% 28.4% 25% 25.1% 20% 15% 20.7% 16.2% 13.1% 10% 10.1% 9.8% 9.1% 8.9% 5% 0% 1950 1960 1970 1980 1990 2000 2007 2008 2009 2010 Source: Sylvia Allegretto s analysis of CES manufacturing data. Allegretto 2011
We need an economy that makes things (the financial industry makes $ from $) 20000 19000 18000 17000 16000 15000 14000 13000 12000 11000 10000 Jan-79 Jan-80 Jan-81 Jan-82 Jan-83 Jan-84 Jan-85 Jan-86 Jan-87 Jan-88 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Source: Allegretto analysis of CES manufacturing data. Allegretto 2011
Widening wedge of wage inequality 140.0 130.0 120.0 Guys 95th 90th 80th Index (1973 = 100) 110.0 100.0 90.0 50th 10th 20th 80.0 70.0 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 Source: Economic Policy Institute s analysis of CPS data downloaded from stateofworkingamerica.org Allegretto 2011
Widening wedge of wage inequality 170.0 160.0 150.0 Galz 95th 90th 80th Index (1973 = 100) 140.0 130.0 120.0 110.0 50th 10th 20th 100.0 90.0 80.0 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 Source: Economic Policy Institute s analysis of CPS data downloaded from stateofworkingamerica.org Allegretto 2011
Retirement risk shift 70% Defined contribution 60% 50% 40% 30% 20% 10% 0% Defined benefit 1983 1986* 1989 1992 1995 1998 2001 2004 2007 Source: Munnell, Alicia H., Golub-Sass, Francesca & Muldoon, Dan. 2009. *Note: Data for 1986 is not available. The data were estimated using the midpoint between 1983 and 1989 downloaded from EPI.
Work Vs. a call to your broker 40% The rise of the plutocracy 35% Top Capital Gains Tax Rates 30% 25% 20% 15% 1945 25.0% 2011 15.0% 10% Source: Citizens for Tax Justice Allegretto 2011
Pre- & post- tax income shares, 2007 45% 40% 35% 38.6% 35.6% 30% 25% 20% 19.9% 19.0% 21.3% 17.1% 15% 14.0% 12.2% 10% 5% 2.5% 5.1% 7.3% 9.2% 0% Lowest quintile: <20% 2nd quintile: 21%-40% 3rd quintile: 41%-60% 4th quintile: 61%-80% 81st-99th percentiles Top 1% Source: Congressional Budget Office 2011. Allegretto 2011
Astonishing picture of income growth (Growth in inflation adjusted after-tax income from 1979 to 2007) 300% 277.5% 250% 200% 150% 100% 65.0% 50% 18.3% 27.5% 35.2% 43.3% 0% Lowest quintile: <20% 2nd quintile: 21%-40% 3rd quintile: 41%-60% 4th quintile: 61%-80% 81st-99th percentiles Top 1% Source: Congressional Budget Office 2011. Allegretto 2011
The very rich are pulling away 1,600,000 1,400,000 Top 1% 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 Bottom 90% 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 Source: CBO $2008 Allegretto 2011
350 CEO's distance themselves from the average worker (Ratio of average CEO compensation to average worker compensation, 1965-2010) 300 298 277 250 243 200 185 150 126 143 100 100 50 24 35 70 0 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 Source: EPI analysis of Wall Street Journal/Mercer, Hay Group (2011). Note: Point markers denote where ratio is known. Allegretto 2011
The not so invisible hand (share of income growth 1979-07) 36.0% Top 0.1% Bottom 99% 40.1% increase 59.9% Rest of Top 1% 23.9% Source: EPI analysis of Piketty & Saez IRS data 2009. Allegretto 2011
The rich are getting richer! Trickle up economics. Wealth1983-2009 0.5 0.4 41.5% 40.2% 0.3 0.2 0.1 5.7% 9.8% 10.2% 0-0.1-4.1% -2.0% -1.4% Lowest quintile: <20% 2nd quintile: 21%-40% 3rd quintile: 41%-60% 4th quintile: 61%-80% 81%-90% 91%-95% 96%-99% Top 1% Source: Allegretto 2011 EPI briefing paper The State of America s Wealth 2011
The Dow ain t gonna save you 100% 90% 80% Top 1% 70% 60% 50% 40% Next 9% 30% 20% 10% Next 10% Bottom 40% Middle 20% Next 20% 0% 1989 1992 1995 1998 2001 2004 2007 Source: Allegretto 2011 The State of America s Wealth 2011
What/Who is to Blame for State Budget Gaps? The Housing Bust & the Great Recession!!!
CEOs of Bell. Robert Rizzo, former city manager of Bell, California, was making $787,638 per year in that position.
Educational attainment of California s workers 40% 35% 30% Private sector workers State & local government workers 34% 25% 20% 22% 20% 17% 24% 21% 15% 10% 12% 13% 9% 12% 11% 5% 3% 0% Less than high school High School Some College Associates degree Bachelors degree Advanced degree* Source: Allegretto & Keefe CWED Brief October 2010. Allegretto 2011
Comparison of CAs public vs. private sector earnings and total compensation 2.00% 1.00% 0.89% 1.07% Annual Earnings Annual Total Compensation 0.00% 0.01% -1.00% -2.00% -3.00% -4.00% -5.00% -6.00% -7.00% -8.00% -7.77%** -7.55%* -7.86%** -9.00% State & Local Government State Government Local Government Note: **1% and *5% significance levels. Source: Allegretto & Keefe CWED Brief October 2010. Allegretto 2011
Teacher pay 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 0.0% -5.0% Females -6.6% -10.0% -12.1% -15.0% All -20.0% Males -25.0% -23.3% -30.0% Source: update of Allegretto, Corcoran, & Mishel 2011
80 Number of State and Local Government Employees Per 1,000 Residents 70 60 50 40 30 20 The States With The Lowest Public Union Density The States With The Highest Public Union Density 10 0 Source: U.S. Census Bureau and the U.S. Bureau of Labor Statistics. From Allegretto, Jacobs & Lucia, 2011 Allegretto 2011
18% 16% 14.7% 14.4% 14.5% 15.2% 14% Share of State and Local Workers 12% 10% 8% 6% 4% 14.6% Aug-11 2% 0% 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Source: U.S. Bureau of Labor Statistics, Current Employment Statistics. From Allegretto, Jacobs & Lucia 2011 Allegretto 2011
The Housing Bust Specifications (1) (2) Controls: Public sector union density coeff 0.245* 0.114 se (0.097) (0.082) House price decline coeff -- -0.561** se -- (0.11) Set of union dummy variables N N Adjusted R 2 0.096 0.421 Note: **1% and *5% significance levels. FHFA State house price change 2005-10 From Allegretto, Jacobs & Lucia, 2011. Allegretto 2011
Largest Shortfall on Record Last Recession 2002 2003 2004 2005 2009 2010 2011 2012 2013 Total state budget shortfall in each FY, in billions -$40 -$75 -$80 -$45 -$110 -$191 -$130* -$103* -$46** *Reported to date ;** Preliminary. From Allegretto, Jacobs,& Lucia, 2011 Source: Center on Budget and Policy Priorities 2011 Allegretto 2011
What the hell has been going on? The Free Market is BS rhetoric
Oh, Oh, Oh, Oh just like a YoYo ~The Osmonds 1971 smash hit #3 Billboard Hot 100! Rise & fall on merit or luck Doubling down on free market ideals Dismantling of public services & goods Shrinking social & worker safety nets Anti-labor sentiment & regulation Erosion of workers rights Shifting the tax, health care & retirement burden to workers Vilified public sector workers & government Allegretto 2011
A question of ideology A century of change in reverse: Unions leveling the playing field Progressive tax structure Investments in education Workers compensation Unemployment Insurance Social security & Medicare Child labor laws Pension plans & dignity in retirement Employer provided health care Allegretto 2011
The United Corporations of America? A Plutocracy of the 1%, by the 1%, for the 1%