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Unemployed cut off for the holidays
Another kick in the teeth

January 3, 2003 | Pages 6 and 7

GEORGE W. BUSH had the nerve to show up at the Capitol Area Food Bank in Washington, D.C., a few days before Christmas for a photo op. "I hope people around this country realize that agencies such as this food bank need money," Bush lectured. "Contributions are down. They shouldn't be down in a time of need."

Unbelievable! This from the man whose inaction last month will cause untold numbers of people to turn to food banks to feed their families. Bush could have ordered House Republicans to take up legislation to extend emergency federal unemployment benefits before Congress adjourned. But he sat on his hands--and so did Congress. And so, on December 28, 830,000 people got a very personal holiday present from Washington: They were cut off.

Yet as ALAN MAASS shows, this is only the latest slap in the face for millions of working people who are facing the nightmare of unemployment in an economy that has nothing to offer them.

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TWO LONG years. That's how long it's been since Kimberly lost her job at a Los Angeles restaurant. She's looked for work ever since. "But there's nothing going for me," she says. "I was on my way to a job at Los Angeles International Airport. Then all of a sudden, September 11 happened, and that was it."

Eight months ago, Kimberly moved back to her hometown of Chicago with her kids. "I rely on family now, and it's wearing them down," she says. "There's no income at all for me, so they have to work harder for my family, when they're supposed to be working harder for them."

That's a story that millions of other working families know well. Kimberly is one of the 1.7 million people classified by the government as long-term unemployed--out of work for more than 26 weeks. Despite the media talk about light at the end of the economic tunnel, that number continued to grow throughout last year, and at a faster pace than the overall jobless rate.

And last month, the hardest hit got another kick in the teeth--when Bush and the Republicans refused to extend an emergency program of federal jobless benefits for workers whose state unemployment has run out.

Members of both parties claim that they'll make emergency benefits their top priority when the new Congress convenes in January. But even if the program is extended--and some Republicans claim that it's too costly--workers who were cut off will face a four- to six-week gap in checks. That can be the difference between barely scraping by--and hitting bottom.

More than 8 million people are unemployed in the U.S. today--about 6 percent of the labor force, according to government statistics, a relatively low number compared to previous recessions. But that's just the official count. Economists agree that there are a substantial number of "discouraged workers" who don't figure in the statistics--people who've given up looking for work.

Thus, the growth of the U.S. workforce began slowing in early 2000--a sure sign "of a weak labor market in which potential job seekers avoid even attempting to enter the workforce," according to the newly published State of Working America 2002-03. Plus there's the underemployed--people who make do with part-time work because they can't find full-time jobs. All told, the real jobless rate is significantly higher that the official figure.

The overall statistics also mask another trend--the destruction of good-paying jobs with benefits. The manufacturing sector of the U.S. economy has been hardest hit by the recession--and responsible for the brunt of job losses. According to Economic Policy Institute economist Jared Bernstein, between March 2001 and November 2002, 1.5 million manufacturing jobs were lost--accounting for almost all of the net total of 1.6 million jobs lost over the period.

People like William Blaine are taking the hit. He took a job in North Carolina with Nortel at the height of the telecommunications boom a few years ago. But when the boom went bust and he was laid off, the 54-year-old William found that jobs in his industry had dried up. Now he makes ends meet with a part-time position at a boating store--run by his son. The other job "opportunity" that he's considering? Security guard. "You feel like someone has pulled the plug on you," he told the Chicago Tribune.

For the victims of the layoff ax, there's not much help available. In most states, unemployment benefits cover just half of lost wages, or less--and they only last for 26 weeks. Compare that to France, where jobless workers get around 80 percent of their earnings for up to two years. And this is for the lucky few who qualify.

During the mid-1970s recession, three-quarters of laid-off U.S. workers got jobless benefits. Last year, only 43 percent of the unemployed got checks. Over the past three decades, politicians have only added to restrictions on the unemployment insurance system--requirements for hours worked, length of time on the job and so on.

Thus, Chicago restaurant worker Rodney Wilson has been out of work for a year. But he fell a couple hundred dollars short of qualifying for benefits--so he's gone empty-handed the whole time. "There isn't anything out there," he says. "I'm looking for anything I can get. But it's real tough."

The unemployed themselves aren't the only victims of unemployment. Employers know very well that job insecurity strengthens their hand with workers still on the job. Wage growth has slowed at all income levels, but especially at the lower end of the scale, as a direct result of increasing competition for scarce work.

And employers now take it for granted that they can provide fewer benefits to workers. Health care is an especially popular target for "cost-cutting." Indeed, workers are less likely today to have employer-provided health insurance than they were 30 years ago--and those who do have it pay a bigger share of the cost.

Meanwhile, Corporate America is using the recession to undermine the power of unions. For example, telecommunications equipment maker Lucent Technologies claimed poverty when it slashed nearly 1,000 union jobs at its North Andover, Mass., plant this year. But at the same time, management hired a labor contractor, Solectron, to fill jobs at the factory. Masking tape on the plant floor marks the dividing line for union and nonunion workers.

Whether they're working or laid-off, Lucent workers are paying a steep price. But according to Ed Peters, chief investment analyst for the Boston firm PanAgora Asset Management, that's the way the free market is supposed to work. As he told the Chicago Tribune, "We overinvested not only in technology, but also in people."

"Fewer people get in the game"

JARED BERNSTEIN is an economist with the Economic Policy Institute and co-author of the newly published State of Working America 2002-03.

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THE OFFICIAL unemployment rate is around 6 percent, which is relatively low compared to previous recessions. Does this statistic reflect the reality for working families?

Those numbers are fine if you're interested specifically in the number of people who are actively but unsuccessfully seeking work. That's the definition of unemployment as far as the Bureau of Labor Statistics is concerned.

But there are other groups of people who deserve to be considered, especially if you're trying to get your finger on the actual difficulties that this recession--or slow-growth recovery--is causing for people.

So there's about 8.5 million unemployed right now--about 6 percent of the labor force. But there's another 4 million who are part-time for economic reasons. They would rather work full-time, but they can't find full-time jobs. Then there's another group of workers who aren't even in the labor force. To be counted as unemployed, you have to be looking for work. Folks who've given up aren't counted.

And in fact, the labor force is growing half as fast as it did a couple years ago. That's not because the population has tailed off or anything. It's because fewer people are even getting into the game, because they're not interested in competing given how scarce job opportunities are right now.

Then there's an interesting wrinkle that I don't really hear talked about too much. For folks who've actually kept their jobs, their wages are rising more slowly because of the increased insecurity in the labor market. So here's another group who is touched by this problem, even though they show up as employed.

You hear people say that it doesn't seem like unemployment is that high relative to past recessions. That's absolutely true. But at the same time, it's pretty high relative to where it was a couple years ago. And what really matters for people out there in the labor force is how tight the labor market is now, relative to how tight it was--because that's what really affects their bargaining power.

Victims of the free market

"IN THESE crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity--the epidemic of overproduction…[I]ndustry and commerce seem to be destroyed. And why? Because there is too much civilization, too much means of subsistence, too much industry, too much commerce."

That was Karl Marx and Frederick Engels' comment on economic slumps in The Communist Manifesto, published in 1848. It could have been written last week. Ask any mainstream economist about the main challenge facing the economy worldwide, and chances are good that their answer will involve the issue of "overcapacity."

In one sector after another, businesses have built more factories and offices and acquired more machines and equipment than they can profitably use. In short, they have the capacity to produce more goods than can be sold for a decent return on investment.

This "epidemic of overproduction" is most obvious in telecommunications, where corporations made huge investments during the 1990s in fiber-optic cable and other equipment that was supposed to be the backbone of the "Internet Revolution." But now that the Internet bubble has burst, only 5 or 10 percent of this capacity is being used, and the telecom giants, once the toast of Wall Street, are drowning in debt, slashing jobs and closing plants.

Other industries are in the same bind. Worldwide, automakers can produce 20 million more cars each year than consumers can buy. In the deserts of California and Arizona, more than 800 commercial airplanes sit in long rows, unused by U.S. airline companies that have laid off 120,000 workers in the past 12 months. The Chicago Tribune summed up the reality in the title of its recent four-part series: "The Economics of Glut."

In any rational society, the idea of "overcapacity" would be absurd. How could anyone believe that there's a glut of telecommunications equipment when a quarter of the world's population has never made a telephone call? Why do dozens of floors in downtown office buildings remain vacant while the homeless population grows? How can steel mills be closed down when there's a crying need for steel products?

The only world where "overcapacity" makes sense is one ruled by profit. For the small minority of people who control the banks and corporations, this is the guiding principle. During good times, they plough money into new investments in the hopes of pumping up the bottom line. But when the boom goes bust, they look for ways to make workers pay--and they stop investing until they see new opportunities for profits.

Thus, in the two years of economic slump beginning in October 2000, business investment in the U.S. dropped by 18 percent. As Paul Kasriel, an economist at Chicago's Northern Trust, put it, there aren't many ways out. "Either firms go out of business, they merge, or they mothball," Kasriel said. "That's what needs to happen."

No wonder this recession has seemed immune to traditional government methods to kick-start the economy--like interest rate cuts to make the cost of corporate borrowing cheaper and spur investment.

The Federal Reserve has reduced rates 12 times in the last two years. But it doesn't matter to a telecommunications boss how low interest rates are. They won't make major new investments until they work off their "excess capacity."

The priorities of capitalism itself are what cause recession and crisis. Our struggle has to challenge those priorities. We need to expose the corporate greed at the core of a system that throws so many millions out of work. We need to stand up for our right to good jobs. And we need to organize for a socialist alternative--where people come before profits.

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