Wednesday, March 13, 2013

If the Labor Market Is So Poor, Why Are Overtime Hours So Strong?


The last time U.S. factory workers put in longer weeks than they averaged in February, Rosie the Riveter was on the assembly line and American GIs were fighting Nazis in Europe. …

“The workweeks are very, very, very long right now, on a historical basis,” said Michael Montgomery, U.S. economist at IHS Global Insight in Lexington, Massachusetts. …

Production workers averaged 41.9 hours a week in February, Labor Department data showed last week. That tied December 1997 and January 1998 as the most since May 1944, when full wartime production was pulling more women into factories …

This is yet more evidence that we have a labor market that has split between those who are employed and employable at current labor costs, and those who are not. We don’t seem to be having any trouble at all with the first group. Therefore, high and lingering unemployment appears to be a problem with either the benefits that a person brings to their potential employer, or the costs that they impose upon them.

Many people regard the following as a description of what’s wrong with the economy:

Another potential nudge to raise hiring is that wages as a percentage of GDP are near a record low, Labor Department data show. From the early 1950s until 1975, wages were at least 50 percent of GDP. They hit a record low of 43.6 percent in last year’s third quarter and ended the year at 43.9 percent.

I regard that as less of an issue. Compensation of employees is near historical norms. If compensation is normal, and wages are down, then the difference — benefits — must have gone up.

“We’ve reached a point where they can’t really reduce wages anymore,” Howard Ward, chief investment officer at Gamco Investors Inc., said in a March 11 interview on Bloomberg Television’s “Surveillance.” …

Don’t bet on it. Most employee benefits are still healthcare costs, and no matter what the White House says, we do not and will not have those under control any time soon. Mark my word, the share of wages will continue to drop.

Via Marginal Revolution.

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