Bizarre year ends in harsh reality for millions in US

We are approaching the first anniversary of the most amazing presidential election in recent US history. Just as the election campaign itself was bizarre in the extreme, subsequent political developments have been even more so, writes Jim Power. 

Prior to his election, Donald Trump was an incredibly polarising figure, but the sense of polarisation since his electoral success has to be seen to be believed.

Right now, US society seems to be frighteningly divided at both a political and societal level, and it is very hard to see how these divisions can possibly be remedied even after President Trump is confined to the dustbin of history.

Trump is a symptom rather than the sole cause of these deep divisions.

The divisions are many and varied, ranging from racial to social to geographic and much more besides. This cannot be blamed on Trump alone as the legacy goes back to Presidents Bush senior and junior, Clinton and Obama, but they have obviously been exacerbated by the arrival of Trump on the scene.

Overall it is not healthy, but it does not look remotely likely that the deep divisions will dissipate and the only real question is how much worse they are going to get and what the longer- term repercussions will be for the US in general.

Amid all of the opprobrium being directed at President Trump, and I have witnessed much of it first hand over the past few weeks, the economy is holding up well and the real economic indicators are still evolving in a positive fashion.

The equity markets also still seem to believe that he will be good for the US economy.

On the surface at least, the labour market is the most visible manifestation of the success of the economy. The unemployment rate is down at 4.4%, which in theory is close to full employment.

However, one does not get the sense that the apparent strength of the labour market is having a meaningful impact on the lives of the majority of US citizens.

China has a business tax rate of 15%. We should do everything possible to match them in order to win with our economy. Jobs and wages!

— Donald J. Trump (@realDonaldTrump) September 14, 2017

Income growth is very muted, which is the reason why the US Federal Reserve is proving quite reluctant to tighten monetary policy. In the past, the relationship between the labour market and inflation was quite clear cut, meaning that as unemployment declined, wage pressures built up and the Federal Reserve would move to tighten monetary policy.

It is not clear why this relationship is breaking down, but there are some obvious reasons. Many of the jobs being created are low paid and lack benefits such as pensions, healthcare and basic job security.

The massive impact of Uber and the general growth of the gig economy is also a marked feature. It is also conservatively estimated that around 30 million Americans are either out of work or severely underemployed.

The American Dream traditionally involved having a good job, with various benefits and security of tenure.

.@POTUS: I want to work with Congress, Republicans, and Democrats on a plan that is pro-growth, pro-jobs, pro-worker, and pro-American. pic.twitter.com/BFZTKGogbB

— GOP (@GOP) August 30, 2017

However, this social contract between employers and employees is steadily breaking down with many employers not demonstrating any real loyalty to their staff and in turn, employees are becoming increasingly disillusioned and loyalty to the employer is being eroded.

Benefits are being eroded and security of tenure is very tenuous as a result.

While the dismantling of the social contract may be good for the balance sheet, it remains to be seen what the real long-term implications will be.

A US labour economist Guy Standing has coined a term to describe such workers — “the precariat”.

He describes this group of people as those whose lives are defined by economic and financial insecurity and who are falling further and further behind in terms of standard of living and access to vital public services.

Those in occupations such as technology, finance and the professions are in a stronger position, but for millions of Americans the reality is a harsh one that Trump exploited last year.

However, despite these realities, it is still a fact that millions of migrants around the world still view the US as the place to aspire to.