Working In These Times
Unemployment Toll: $1 Trillion in Lost Wages
That’s underscored by new research from John Schmitt and Dean Baker of the Center for Economic and Policy Research showing that American workers are likely to lose $1 trillion in wages before the job market recovers. And the biggest share of that loss is yet to come: since the downturn started in 2008, unemployed workers have lost only about a third of the total. Schmitt and Baker estimate total losses in 2009 and 2010 will be greater than in 2009.
Friday’s unemployment figures are not likely to affect the estimate by much. Baker writes:
On the whole, this report is much better news than what we have seen since the decline accelerated last September. Still, there is no evidence in this report of anything resembling a robust recovery. It is likely that the economy will continue to shed jobs for at least another month or two and it may be several more months before job growth is fast enough to keep the unemployment rate from rising. And there are many risks that could make this picture less pleasant.
The $1 trillion estimate of wages lost is quite conservative. It doesn’t count health insurance or pension payments employers previously made. It also doesn’t include cuts in hours or wages and benefits imposed on people still at work.
The loss would more than pay for a decade of health reform as now contemplated by Congress. Such a huge and growing damper on demand will depress the economy even more if there’s no further action to stimulate job growth.