Sometimes where there is smoke, especially in data, there is just a smoke making machine. Sometimes however, there is a raging fire inside a building that no one dare open the door to.
Case in point is Janet Yellen’s dire warnings about a housing bubble in the mid-2000s. There was a raging fire inside of that bubble, and then someone opened the door (most likely the Wall Street short sellers of Bear Sterns). No one listened to Yellen.
And now there is a different world. Econometrics no longer measures anything useful. We’re nearing “full employment” while 10 million people don’t have jobs that they otherwise should, and those that do are part-time at low wages. No one understands why GDP is stagnant with a booming stock market (bubble anyone?).
This isn’t just a U.S. phenomena; it’s happening all over the world. Even the European Central Bank, who have been inflationistas since the fall of Kaiser Wilhelm, are worried about deflation, and now, willing to try…(eh-hem)…stimulus.
It’s the labor markets that are showing this brave new world. People are working less hours globally. From the OECD data:
The other countries in the Eurozone are fairing exactly the same. However, let’s take a look at the countries where labor normally works tons of overtime, where labor is more exploited:
Just to be clear, 2000 hours per year = 40 hours per week on a 5 day work week.
So let’s assume for a moment that there isn’t any market bubble. After all, this has been going on since 2000, but took a real hit in 2008. This would mean that Capital is now capable of reproducing itself without the benefit of labor. Any economists or sociologist will tell you that this simply isn’t possible. Or is it? Could the very structure of Capitalism be changing?
And if there is a market bubble, at what point does it burst? With this much “under” exploited labor, and bubble burst would be a hit to investment (and thus to GDP); not a hit to people who are already suffering from stagnant wages and little hours.
Either way, “hours” is now being used as a mechanism to control wages, since wages have a price control (minimum wage). The more minimum wage goes up, the lower the hours the worker will receive. And that wage-price spiral that allegedly is supposed to get passed on to consumers as a result of increasing wages has never actually happened in history (the 1970’s price-wage spiral was about increasing wages specifically because of inflation, not the other way around).
While increasing minimum wage is a good idea overall, it’s not going to stop the smoke-making machine of less hours globally, or change the fundamental fact that Capital (with or without a bubble) is reproducing itself without the benefit of labor. An intervention in the very structure of Capitalism is needed to stop the smoke from turning into a raging inferno.