Schwarzenegger Economic Claims Contradicted by Data and New Reports

1. California added 172,000 jobs between July of 2005 and July, 2006. This represents a slight decline from the previous year. In contrast, between 1996 and 2000, Califonria was producing an average of 424,000 jobs. The unemployment rate in both the United States and California declined to 4.8% om 2006, virtually matching the lowest level of unemployment in California in the last boom period (4.7% in February of 2001). Bottom line: We have added jobs in our state, but in this regard, we are matching what is happening in the country as a whole—not performing uniquely due to some magical policies we have adopted.

2. In California, real wages (adjusted for inflation) grew until 2003, but have been stagnant since them. The average real wage is 0.2% lower in 2006 than in 2003.

3. Wage inequality is growing. Between 2003 and 2006, real wages declined by 1.2% for the bottom third, declined by 1.1% for the middle third, and rose by 0.6% for the top third of Californians.

Unless there is something unique about California, the Bush-Schwarzenegger Index used by Democratic gubernatorial candidate Phil Angelides and sometimes called by him the “BS Index,” seems to fit the facts. The UC study shows that as to the three findings above, California more or less matches the country as a whole—and the graphs and charts bear this out. These policies, nationally and in California, have in fact resulted in a squeezed middle class and a widening gap between the haves and have-nots.

The pattern, according to UC, is that productivity (output per labor hour) and corporate profits have posted strong gains. Pre-tax corporate profits have risen by a whopping 38.8% after adjusting for inflation since 2002. The gap between productivity and compensation is at an all-time high since 1947 (the first year for which figures are available). Labor’s share of the GDP is at an all time low.

The UC report asks and answers a question:

What is behind the apparent contradiction of low unemployment versus only moderate job additions? First, the payroll-based survey does not capture self-employed individuals. Moreover, there are still many “discouraged” workers who are simply out of the labor force. For these reasons, the unemployment rate paints a somewhat rosier picture than is warranted when it comes to understanding the tightness of the labor market.

They also ask and answer these questions as to the composition of jobs in California:

The falling wages over 2004 and 2005 period raise the following questions: Are jobs growing in categories that pay less? Or are wages generally falling within job types? As we will see, it is both, although over the past several years, it has been mainly the latter—i.e., falling real wages and not compositional shifts.

Maybe Governor Schwarzenegger would like to return to what he said in his January of 2005 State of the State address: “If a politician tries to take credit for job growth, don't believe it. ... I did not create this record number of jobs.” I still don’t know what he says about economics that differentiates himself from the Bush Administration’s national policies of trickle down economics, budget deficits, and tax cuts and favors for the rich. The corporations are not sharing their record profits with most Californians, that’s for sure.