House Financial Services Committee chairman, Rep. Barney Frank, D-Mass., made a interesting point today during a committee hearing with Federal Reserve Chairman Ben Bernanke.
Frank said "if the numbers of unemployment in the second half are no better than those for the first half, we are on track to lose nearly 1 million jobs this year. That’s losing 1 million jobs. 1 million fewer people in the official employment roles than at the beginning of the year. It s not only a case of jobs being lost. There is also continued erosion in the real earnings per hour of working people."
Frank said that on his committee it’s been debated, though now it’s conceded, that "even in those periods when we were generating wealth, and this continues to be a wealthy country with a great capacity to generate wealth through our free markets — the distribution was badly skewed. No one expects equality, equality is not a good thing, you can’t have an economy that works if everything’s equal. But too much inequality also has negative consequences."
There is, he said, "continued erosion in the real earnings per hour of working people."
Frank kept highlighting one section of this week’s Board of Governors of the Federal Reserve System’s Monetary Policy Report to the Congress.
On page 21, the report says that "Broad measures of hourly labor compensation have not kept pace with the rapid increases in both overall consumer prices and labor productivity, despite a labor market that, until recently, had been generally tight. The employment cost index (ECI) for private industry workers, which measures both wages and the cost to employers of providing benefits, rose 3 1/4 percent in nominal terms between March 2007 and March 2008 (the latest available data), the same gain as was recorded over the preceding 12 months."
In other words, Frank said, "working American are producing more wealth for this country than they’re being allowed to share, and that is then exacerbated by the fact that prices are going up." The Fed’s own report, he said, shows "workers have increased their productivity in cooperation with the employers and have failed to be compensated either to keep up with the productivity or to keep up with prices."
Frank said full participation in the global economy is a positive development, "but if it continues to go forward on terms which give a disproportionate share of the benefits to a relatively small number, And the great majority are…falling behind consumer prices, despite increased productivity, then we have to stop in get our own house in order before we can go further."
"That’s why they can’t get a trade bill passed," Frank told me in an interview after the hearing.
He said to me that beyond economic stimulus package, banking regulations and housing and energy proposals Congress is debating these days, Congress needs to provide more for American workers in terms of national health insurance and educational opportunities, not to mention revisiting the tax code.
Another interesting moment in our interview — for a piece that hasn’t aired yet — came when he Frank surmised why Bernanke in the hearing didn’t fully explain why the Fed was only now acting to try to get the sub-prime mortgage crisis under control.
"He was being very gracious because he was not giving the answer which was: it was Alan Greenspan who didn’t act," Frank said, since Bernanke only recently was appointed Fed chair. "If Greenspan had done it 10 years ago, it wouldn’t have happened."