Erie Vital Signs

Labor Day

Economics professors are notorious for quiz-giving and it has been a long summer without anyone to quiz. Since you did so well on the Education quiz in our last EVS Special Report, you can celebrate the end of summer and honor labor on this Labor Day with a brief, but enlightening quiz. Just don’t labor over it too much!

1. Which of the four “factors of production” accounts for the largest share of income in the American economy?

A) Land and the natural resources in/on it, like oil, water, minerals, etc.
B) Labor, both physical and mental
C) Capital (i.e., income to the owners of factories, assembly lines, computers used in production, tools, etc.)
D) Entrepreneurship (i.e., profit)

If you need a hint: remember that this is the LABOR day special report!

Answer to #1: B. That’s right, labor is the productive input that accounts for the lion’s share of all income—not land and natural resources, not capital, and not even entrepreneurs. In Erie County in 2013, labor income accounted for 57.6% of all income earned. Nationwide the number was very similar: 57.9%.

So Harry Truman was right when he said “the nation's labor force is its most productive asset.”

Labor’s share of income has fallen through time, though, as the first graph shows. In 1969 wages and salaries accounted for 71.4% and 69.2% of all income in Erie and theU.S., respectively, significantly more than its 58% currently.

But during that same time, real income per capita (adjusted for inflation) has risen significantly—by nearly 65% in Erie and almost 80% nationally.

2. (essay) So are Erie workers better off now than in the past?

That’s an important question to ask on Labor Day, but the answer is not so simple. Fortunately, the data on Erie Vital Signs can help us answer it. Here are what the EVS data tell us about labor in the recent past.

Unemployment in Erie County has fallen significantly from a peak of 11.1% in January 2010 to a low of just 4.8% last December. Most recently, the rate stood at 5.9% in July. That’s a drop from nearly 15,000 people officially unemployed to about 8,000 recently. But 8,000 unemployed is still a lot of our neighbors who are struggling to pay the bills.

As you might expect, employment has risen since the bottom of the recession. In fact, it rose from a low of less than 120,000 in January of 2010 to about 128,500 in July. That’s good news for Erie workers!

But it’s not as good as we might like. The graph at the right shows that while the current employment level is well above recession levels, it is also well below pre-recession employment levels. Not such good news.

Labor Force
A curious characteristic of the latest recession is its impact on the labor force. The labor force includes everyone who has a job or who is actively looking for one—the total of the officially employed and the officially unemployed. As the graph shows, Erie has experienced quite a few labor force dropouts as a result of this recession. From 2000 through 2007 Erie’s labor force averaged about 140,000; since the recovery starting in 2010 it has averaged only about 136,000. So what has happened to the “missing 4,000”? If they have found a way to live happily without working--perhaps having retired or having found a way to eke out an acceptable standard of living without a job, then they’re not a “problem” for the local area. But if they fall into the ranks of “discouraged workers” who need the money from a job but have given up looking in despair, then they’re quite a different story. There are probably some of both in the local area, but we don’t really know the breakdown.

We should point out that Erie is not alone in this; the nation as a whole has seen a similar labor force pattern since the recession. And economists are split on whether this is a temporary aberration from the long term pattern, or the “new normal.” Stay tuned…

So we’ve seen some improvement in the raw number of jobs, but what about wages? Wages in Erie rose about 2.3% between 2007 and 2014. But we have to remember that there has also been some inflation during that period. Once we adjust for rising prices generally, we find that real average weekly wages in Erie have actually fallen by about 10.4%. So the average worker in Erie does not have a lot to celebrate, based on wage levels. In the same period, realU.S. wages rose by about 2.2%. Not stellar, but at least they were moving in the right direction. (In the graph above, the blue line is the U.S. and the red line is Erie.)

Answer to # 2: Erie workers are mostly better off than they were during the recession in terms of job-holding. But a significant number of Erie workers have left the labor force, and employment levels are still not up to pre-recession levels. And those that do have jobs are working at lower real wages on average. So it’s a mixed picture at best, and more than a bit discouraging for a Labor Day celebration.

3. (short answer) So if I get a job, will I at least stay out of poverty?

Work and poverty:
There is some good news from the labor data in terms of poverty. One thing that is pretty clear from the data is that labor can help you avoid poverty. A job is not necessarily a guarantee of avoiding poverty, but in Erie County in 2013 only 7.5% of those employed were in poverty, compared with18.3% of all Erie Countians, and 34.4% of the unemployed. Moreover, of Erie workers who worked full time, year-round, only 2.7% were officially in poverty. That means that 97.3% of those with full time jobs wereNOT in poverty in Erie County.

By the way, the EVS site has other interesting—and enlightening—data on poverty broken down by several demographic characteristics.

Answer to #3: Most likely yes.

4. When was the first Labor Day parade? Just to make it challenging . . . Where was it held?

A) 1866, Detroit
B) 1876, Chicago
C) 1882, New York
D) 1901, WashingtonD.C.
E) 1976, Wattsburg

Answer to #4: Look at the picture at the top of this quiz. If you knew enough to look at it again before answering, that’s fine. It means you don’t waste your time and limited memory space on trivial details, but are good at finding resources to answer questions. You’re just the kind of person who will find the Erie Vital Signs website to be very useful. Go check it out.

5. What’s the best song ever, about labor?

A) Donna Summer: "She Works Hard for the Money"
B) Bruce Springsteen: “My Home Town”, “Youngstown”, “Born in theUSA” and any other song he did where the mill’s closin’ down.
C) Dire Straits: "Money for Nothing"
D) Johnny Paycheck: “Take This Job and Shove It”
E) Loretta Lynn: “One’s on the Way”
F) The Seven Dwarves: “Hi Ho, Hi Ho, It’s Off to Work We Go” (It was your first work song, wasn’t it?)
G) Dina and someone in the kitchen: “I’ve Been Working on the Railroad”
H) Billy Joel: “Allentown” (confer Bruce Springsteen, above)
I) Dolly Parton: “9 to 5”
J) Tennessee Ernie Ford: “Sixteen Tons”
K) Bob Dylan: “Maggie’s Farm”
L) Loverboy: “Working for the Weekend”
M) Bachman Turner Overdrive: “Takin’ Care of Business”
N) Harry Belafonte: “Banana Boat Song (Day-O)”
O) Lee Dorsey: “Working in a Coal Mine”
P) The Silhouettes: “Get a Job”
Q) The Vogues: “Five O’clock World”

Answer to #5: The answer to this one depends on your favorite genre and how old you are (“Tennessee Ernie who”?). But even though I’m not a country music fan I think it has to be E, since it refers to the hard work of being a mother, and that involves labor in two different ways, doesn’t it? Add one extra point for every other labor-related song you can think of--and text them to your friends on Monday.

P.S. You can find the hidden economic interpretation of dozens of songs on the ERIE Website. Educational and melodic, all at the same time, and a great way to avoid actually doing labor for a while.

For more information on these and other topics, visit the Erie Vital Signs website where you will find the data on hundreds of others of the most important Erie indicators in seven key fields.

Erie Vital Signs (EVS) is a leadership initiative of the Erie Community Foundation. In partnership with the Economic Research Institute of Erie in the Black School of Business at Penn State Behrend, EVS tracks indicators that measure our county’s well-being in seven topical areas: Cultural Vitality, Community and Civic Engagement, Economy, Education, Environment, Health, and Regional Cooperation. Each topical area is overseen by a committee of informed experts who select the indicators to monitor, and review the interpretation of those indicators. The goal of EVS is to inform and inspire. We believe an increased focus on data and evidence-based decision-making will help create positive community change.

This EVS Special Report was written by Dr. James Kurre, Director Emeritus, E conomic R esearch I nstitute of E rie, in the Black School of Business, Penn State Behrend.

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