Is the US economy poised to enter a new era of shared prosperity? Is the American dream becoming a real prospect again for the average worker? And that too at a time when the US administration is conspicuously dysfunctional under a Trump Presidency?
Some indicators suggest considerable grounds for optimism about future economic prospects in the United States. The unemployment rate (at 4 per cent) is at its lowest level in decades. Growth has surged to more than 4 per cent in the most recent quarter.
Critics are not convinced. Nobel Laureate Paul Krugman dismissed the growth data as a temporary blip. He argues that one would need at least a decade of 4 per cent plus growth before an era of sustainable economic boom can be proclaimed.
Robert Reich, former Labour Secretary under the Clinton Administration and a distinguished Professor at Berkeley, draws on a survey reported in CNBC to highlight the fact that almost 80 per cent of Americans live from paycheck to paycheck. The same survey shows that the majority of Americans battle with the unsustainable burden of personal debt. These grim statistics can be combined with protracted wage stagnation, especially for low skilled workers, and what some leading analysts have called US-style ‘extreme inequality’. Reich makes the point that while jobs are plentiful, ‘good jobs’ entailing decent wages and secure working conditions, are scarce.
How can one explain these stylized facts that seem to be stubbornly persistent even as the labour market tightens in the context of an incipient boom? Reich highlights two aspects of the American labour market that are germane to our understanding of what is happening to the living standards of the average American worker. To start with, there has been a substantial erosion of the bargaining power of workers. In 1954, unionization rates were 35 per cent of the work-force. In 2015, it stood at a paltry 11 per cent. Reinforcing this loss of bargaining power is the rise of oligopolistic market power across a broad spectrum of American industries.
Reich is not the only one concerned about these stark structural realities of the American labour market. Other scholars have enunciated a similar narrative. Such scholarship suggests that reviving the American dream will require much more than a temporary surge in growth and low unemployment rates.