Mar
24
Class 16- Blog Post #10
March 24, 2015 | Leave a Comment
The effects of the Great Recession are still being determined. Without a doubt, it has had harrowing consequences on the lives of many. Many jobs were lost, others were cut, and many jobs just disappeared. As we are recovering now, it is clearer to see the results of a bleak time in our economy.
In the New York Times article, the author points out one of the effects as the low labor participation rate. Three million Americans dropped out of the labor force and remained outside. They could be older baby boomers leaving the force but it is more likely that these are discouraged workers. When you’re actively looking for a job but unable to find one within a few months, how long until you feel that your effort is futile? For me, personally, even now when applying to internships, I get discouraged after I apply to a few with no response back. I can only imagine the plight of those who are actively looking and trying with no awards for their effort. The only thing they could do is give up and collect unemployment benefits.
Another interesting thing that they point out is the slow wage growth. It has grown only 0.2%. This discourages current workers. Hours and stress levels stay the same while wages barely see growth. If there is no room for improvement, workers may take the mindset of Theory X workers. They see no motivation in working with no incentive. In the end, they may dislike working and turn into less efficient workers and ultimately a less efficient economy.
In the press release of the United States Conference of Mayors, they point out another result of the Great Recession: the wage gap. Average wages have decreased about $20,000 which have resulted in $93 billion in lost wages. They also point out that wage gaps are not uncommon after a recession but what is daunting is that they increase with every recession. In the 2001-2002 recession it was only at 12%, not it is at 23%. I think it is a great thing that this is from a conference of mayors from very different states and cities. Contrary to popular belief, I don’t believe that only raising the minimum wage will help states close the gap and raise job growth. In the article in CEPR, they state that most of the 13 states that raised the minimum wage had increased job creation. While the stats may bolster this statement, it doesn’t exactly pinpoint causality. It could very well be that job creation can be attributed to the growing industries in those states instead. Maybe those states were more equipped to handle a higher minimum wage because of job creation.
I think Boston Mayor Martin Walsh got it right when he says “that each city has both universal and unique challenges” in the press release. An overall increase in minimum wage may benefit some states but harm many other ill equipped to handle it. I think there should be a small increase in wages bolstered by other local government policies determined by each state or city.
Stella Kong
