Return to Transcripts main page

Your Money

Low Wage Jobs Grow in U.S. Economy; Next Fed Chair Appointment Subject of Political Controversy; New Smart TV Vulnerable to Hacking

Aired August 03, 2013 - 14:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

CHRISTINE ROMANS, CNN ANCHOR: Well, record highs in the stock market. The biggest jump in home prices in seven years, but Americans walking off the job, protesting what they call poverty wages.

I'm Christine Romans, and this is YOUR MONEY. Are we one America with two economies?

ROMANS (voice-over): America is the land of opportunity, right?

BARACK OBAMA, (D) PRESIDENT OF THE UNITED STATES: You can choose policies that invest in our middle class and create new jobs and grow this economy so that everybody has a chance to succeed.

ROMANS: That was 2008. Four-and-a-half years later, the president's supporters are wishing for a little less hope and a little more change.

OBAMA: Doing nothing doesn't help the middle class.

ROMANS: So what's the president doing? Four speeches in seven days.

OBAMA: If folks in Washington really want a grand bargain, how about a grand bargain for middle class jobs?

(APPLAUSE)

ROMANS: But while Washington waits for a bargain, millions of American workers feel they're getting a raw deal. Fast food workers across the country who say they can't afford to live where they work, walking off the job to demand higher wages. Now the economy is adding jobs, but those new jobs pay less than the ones we lost during the recession. The president worries the growing income gap will fray America's social fabric.

Even the good news isn't as good as it seems. Amazon adding 5,000 warehouse jobs. The company's warehouse workers take home just $24,000 a year, barely above the poverty line. America may still be the land of opportunity, but those opportunities pay less and less.

(END VIDEO CLIP)

ROMANS: In Brazil, in Greece, in France, we've seen protesters take to the streets in those countries demanding economic reform, demanding workers' rights, financial fairness, in short, a better life. Could we see that kind of fervor here in the United States? It's not exactly Arab Spring, don't get me wrong. But fast food workers in several cities walked off the job this week to demand better pay.

University of Chicago School of Business Economics professor Austan Goolsbee is the former chairman of the president's council of economic advisers. Eduardo Porter is a columnist for the "New York Times." Austan, could we be witnessing the beginning of a movement, or is this moment destined to fade just like Occupy Wall Street did before it?

AUSTAN GOOLSBEE, FORMER CHAIRMAN, PRESIDENT'S COUNCIL OF ECONOMIC ADVISERS: I think this is probably more likely to fade. You know, Occupy Wall Street was more in the spirit of the protests in Europe and the Arab Spring, which are major, gut-wrenching changes, huge recessions, huge austerity, those things leading to mass protest. I think in this case you're seeing some of the natural tensions that arise as you're coming out of a recession. The economy starts getting better, workers start saying we want to see our wages go up more, and there's going to be a little tension among the employers.

ROMANS: Even when I look at this week's job report, I see bartenders, I see waitresses, I see home health aides, I see job growth in fast food workers. Austan, I'm seeing these kinds of jobs grow. These are the low, low-paying jobs. These are not ladder jobs. What's happening here, and could you really see a tipping point when people say, look, we're not creating good jobs?

GOOLSBEE: Well, you know, just be a little careful. Yes, that is true, we've seen a lot of temp jobs, we've seen a lot of part-time jobs, though that is somewhat natural as you come out of a deep downturn. Overall incomes in the country, if all that was happening was good jobs being lost and bad jobs being created, you would see incomes falling pretty significantly. And overall incomes are basically flat.

Now, we do need to get incomes up for consumer spending to come back to anything like normal levels. But, you know, with the growth rate as slow as it's been, it's really hard to see substantial improvements in the job market. That's just a reality.

ROMANS: All right, Eduardo, income equality is widening. The CBO says from 1979 to 2007 average household income for the nation's top one percent more than tripled, middle class incomes grew by less than 40 percent. Could this be a permanent structural change to the economy that no president, not President Obama or anyone before or after him can reverse?

EDUARDO PORTER, COLUMNIST, "THE NEW YORK TIMES": I think this is going to take a very long time to change because this has been a long time development. This trend is, I don't know, 30 years old.

I wanted to speak to what Austan said a moment ago, though. Even though we can expect jobs and incomes with to rise as we emerge from the recession, wages right now are lower than they were. The worker in the middle is earning less per week than he or she was 10 years ago.

So I would argue that there is a cyclical factor that as we emerge from the recession, we should see an improvement. There is also a longer term phenomena that have been keeping wages down, and you can see this in all sorts of statistics. If you look at the wage share, what part of the national income goes to wages, that's at its lowest point since we started measuring this stuff in 1929. And by contrast, the share going to profits is at a record high, again since 1929.

ROMANS: The focus on raising wages for some of these jobs, we need more jobs that pay better wages that more people have access to on the skills floor, and that's kind of a bigger problem. The low wage recovery is going to be hard to fix. Education is a costly but essential step. The president says it's worth it.

(BEGIN VIDEO CLIP)

OBAMA: If you think education is expensive, wait until you see how much ignorance costs in the 21st century.

(LAUGHTER)

(END VIDEO CLIP)

ROMANS: Google Chairman Eric Schmidt agrees.

(BEGIN VIDEO CLIP)

ERIC SCHMIDT, EXECUTIVE CHAIRMAN, GOOGLE: The core problem in America is the educational system is still not producing quite the right people.

(END VIDEO CLIP)

ROMANS: We know the problem. We agree on the solution. So what will it take to make America sure that it remains the land of opportunity? We're going to tell you next.

(COMMERCIAL BREAK)

ROMANS: And 163,000 U.S. jobs created in July, but a lot of those positions will barely pay the bills while unemployment is still a problem, underemployment and low wages are a real problem for the middle class.

Check out the jobs lost during recession, mostly mid-wage jobs, companies large and small cut payrolls. What kinds of jobs are coming back? Take a look at this. Mostly low wage positions. You see jobs coming from here and going right down here in the recovery. Hourly rates of $7.69 to $13.83 an hour, that is all according to National Employment Law Project. This is from 2010 to the second quarter of 2012.

Here is the median hourly wage for top five occupations for the most hires during the recovery. Look at this, retail salespeople, $11 an hour, food prep, waitresses and waiters, $7.60 an hour, personal home and health care aides, about $10 an hour.

What about looking into the future? What about the next few years? The government projects these jobs will be in high demand through 2020. Home health care aides top the list. Registered nurses here, take a look at that, $64,000 a year. Growth for this field, but that's growth that's going to take more education, training, and probably some investment.

Look, most of these put a family of four under the poverty line if it's their only income. Registered nurses again, this bright spot here, also office clerks 26 grand a year -- look, you have to really, really know where you're putting your investment in an education and in planning for a career. Are we becoming the United States of low wages, or is this just a rough step on the path to renewed prosperity?

Eduardo Porter and Austan Goolsbee are back with me. Eduardo, is education the solution to this low wage problem. Is it that simple?

PORTER: Yes and no. Education is a necessary condition. We need to improve our education and expand our education. We used to be the nation with the highest level of college-educated kids, and we have now slipped down those ranks and we need to get back up there.

But there is also a question of what kind of education. When we start investing in education, we invest very, very little in educating very young kids from say zero to three years old, and research has proven that that is absolutely crucial for their future development. And so I think we need to rethink how much we invest in education.

ROMANS: We just can't fix the economy unless you fix education. We can talk about early childhood, K through 12, college. I sat down with Google Chairman, Eric Schmidt, you guys, this week, and he actually says that education is what's holding the economy hostage right now.

(BEGIN VIDEO CLIP)

SCHMIDT: The American renaissance in manufacturing, in oil and gas production and energy and technology, is being held back by the lack of Americans who can do this. The way you fix this is by fixing education.

(END VIDEO CLIP)

ROMANS: Here's an example of this growing skills mismatch he's talking about. Computer and IT jobs grew 13 percent from 2003 to 2012. But degrees in those areas fell 11 percent during the same period. Austan, is the education fix up to the government? Is that up to the private sector? Here I was with Eric Schmidt on the eve of a jobs report that was going to show more low-wage jobs, and all of these tech entrepreneurs are telling me we cannot find people, we cannot find qualified workers.

GOOLSBEE: You got two issues going there. The first is there are certain sectors where the skills mismatch is an issue. But that is not the overwhelming reason that we have high unemployment in the United States. The overwhelming reason thus far has been we had a horrible recession and there's not enough demand.

Now, normally once you're a few years into an expansion, the people remaining in the unemployment pool don't have the skills to match to the industries where they're growing. But let's remember, there is a data set that measures job vacancies as well as how many unemployed people there are, and there are still more than three unemployed people for every job vacancy. So thus far it's only in particular sectors where this mismatch is through.

I think, to your question about is that government or private sector, I think the answer is both. And if you look at the community college system in the U.S., it's actually one of the unsung heroes of our training and education system. And it's a shame that we aren't investing more in that because that's a place where they're trying to link employers to people who are trying to get jobs, and the government is involved but in facilitating that partnership.

ROMANS: Guys, we could talk about this for hours, it's so fascinating. Eduardo Porter, Austan Goolsbee, it's nice to see both of you. Have a great weekend.

Coming up, it's the biggest guessing game in Washington right now. Who will replace this man? That's the Fed chair, Ben Bernanke. His term ends in January. You cannot believe the politics right now behind choosing his replacement, white hot in Washington. That's next.

(COMMERCIAL BREAK)

ROMANS: He or she is the most important person in the world when it comes to your money. I'm talking about the chairman of the Federal Reserve. Ben Bernanke's second term wraps up the end of January. So who will Obama pick out to replace him? Maggie Lane breaks down the big name battle.

(BEGIN VIDEOTAPE)

LAKE: It is the guessing game in Washington this summer. Will it be Janet Yellen or Larry Summers to fill in one of the most important and demanding jobs? The battle on both sides to influence the White House on the next Federal Reserve chairman has been intense and highly unusual.

RYAN LIZZA, WASHINGTON CORRESPONDENT, "THE NEW YORKER": In the old days, if you campaigned for it or people on your behalf campaigned for it, it looked bad. This whisper campaign on behalf of Yellen and Summers is really something new in Washington.

LAKE: On Capitol Hill some Democrats have sent a letter to President Obama urging him to pick Yellen. But Summers has supporters in high places, too. Former treasury secretaries Tim Geithner and Bob Rubin is reported until his corner.

One thing is certain, Bernanke's shoes will be big ones to fill. Wall Street loves the tens of billions of stimulus he pumps into the economy each month. Summers has been skeptical about continuing stimulus while Yellen is believed to be in favor.

STEPHEN OLINER, AMERICAN ENTERPRISE INSTITUTE: Yellen would be seen as complete continuity with Bernanke. She's been at Bernanke's side for the past two years as a vice chair. They coordinate policy together.

LAKE: As second in command, Yellen has deep respect inside the Federal Reserve. She's no stranger to politics, serving as chairman of the White House council of economy advisers under Bill Clinton. And while she's not as well known on the international stage, Yellen would be the first woman to lead the Fed.

Summers, on the other hand, is a world-renowned economic superstar. He was director of the National Economic Council under President Obama and a former treasury secretary under Clinton. He was also part of the team that "TIME" magazine called "The Committee to Save the World" during a financial crisis in the late '90s. But he does have baggage.

LIZZA: Summers is a controversial person. He is abrasive and brilliant.

LAKE: Some say his brash style may not fit well in the Fed's consensus-building culture. He is also faulted for supporting for supporting financial deregulation which many economists feel helped trigger the most recent financial crisis.

The debate over Yellen and Summers is crucial to the financial markets, but it could last a while. President Obama is not expected to announce his choice for the fed until the fall.

Maggie Lake, CNN, New York.

(END VIDEOTAPE)

ROMANS: And the president has made it clear to Democratic lawmakers that he hasn't decided who will replace Ben Bernanke just yet. He had separate closed door meetings with House and Senate Democrats on Wednesday. He defended Larry Summers as a possible pick. He also mentioned a third name he's considering for the position, Donald Cohn. Cohn, a former Fed vice chair, is now a senior fellow with the Brookings Institute. He spent 40 years at the Fed and was adviser to Ben Bernanke during the financial crisis of 2008.

I want to bring in my good friend John Berman, co-host of "EARLY START." John, this is not a political position, the chairman of the Federal Reserve. This is not a political job, but the politics, white hot politics in Washington right now about who is going to get that job.

JOHN BERMAN, CNN ANCHOR: We've never seen anything like that. The Federal Reserve chair is usually filled by someone who is one of the most boring people in Washington, D.C. Now we have, as you say, this white hot battle with lobbying like we've never seen before. Ryan Lizza calls it a whisper. It's more like a shouting campaign. You have senators writing letters, you have editorial boards weighing in months before a decision will be made. And now, most remarkably, you have the president out loud, in front of members of Congress, defending someone that he hasn't even picked yet. It is really staggering here. Until now, it's really been a one-sided debate with critics of Larry Summers and supporters of Janet Yellen, them being the most loud and vociferous, because most of Larry Summers' supporters are White House insiders who don't talk to the press very much.

ROMANS: Part of this whisper campaign or shouting campaign, now you're hearing people talk about the gender and also the gender of Larry Summers. There actually was this whisper of don't count out Larry Summers just because he's a man, because so many think the president needs to promote a high-profile woman to this job.

BERMAN: That's right. It's one of the high profile positions left in Washington that the president hasn't appointment yet. He's often been accused of running a men's club there, so obviously picking a woman would be a huge move for him.

One of the big issues, as one political scientist pointed out, is Larry Summers is an acquired taste. But the problem is that it's a taste that not many people have acquired. He has been abrasive. He has made a lot of enemies over the years during his work in government at the time he was president of Harvard University. There are people who haven't approved about his comments about women. So he has all of that baggage. And there is a very real policy debate about monetary policy where some people see Janet Yellen more in line with the current policies of Ben Bernanke than Larry Summers.

ROMANS: Larry Summers has said he thinks these current Fed policies are adding to the income inequality. Maggie in her piece called him brash. I have been on the receiving end of some of the brashness before as has any reporter who has covered him. He is brash.

BERMAN: Brilliant.

ROMANS: Brilliant, but brash, but he seems to have the ear of the president at this point. Thanks so much, John Berman.

Up next, watching the watchers -- is your television watching you?

(BEGIN VIDEO CLIP)

LAURIE SEGALL, CNN MONEY TECHNOLOGY CORRESPONDENT: What this means is I could be sitting here watching TV from my bedroom and you could be anywhere in the world looking at this image of me watching.

JOSH YAVOR, SECURITY ENGINEER, ISEC PARTNERS: Yes. I could be sitting at a laptop in a cafe in Paris.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

ROMANS: All right, when you're watching TV like right now, right this very moment, you probably don't think someone could be on the other side watching you back. An alarming security flaw in Samsung's Smart- TVs makes this scenario possible. CNN Money's Laurie Segall has more. Laurie? LAURIE SEGALL, CNN MONEY TECHNOLOGY CORRESPONDENT: Hey, Christine. Here at this hacker convention, it's called Black Hat in Las Vegas, we've spoken to a lot of folks and they're saying there are major vulnerabilities. Check it out.

(BEGIN VIDEOTAPE)

SEGALL: What's really eye opening here is you watch your TV, but with this hack, your TV can watch you. Show us how that works.

YAVOR: One of the things we were able to do with the Smart-TV platform was abuse the browser so that we could actually gain access to the camera that's built into the TV. What we can prove here is that with a little bit of extra code, we can turn the camera on in your browser.

SEGALL: Wow.

YAVOR: And while this is evident to you because we designed it that way, this is something we can do invisibly and actually have it run behind the web page you're looking at.

SEGALL: So what this means is I could be sitting here watching TV from my bedroom, and you could be anywhere in the world looking at this image of me watching.

YAVOR: Yes. I could be sitting at a laptop in a cafe in Paris, and as long as I have a web connection, I would be able to get into your TV and access your camera.

AARON GRATTAFIORI, PRINCIPAL SECURITY CONSULTANT, ISEC PARTNERS: The scary thing about it is that it doesn't give an indication that the camera and on and there is no LED that shows up when the camera is on. So they could actually be watching you and you would never even know.

SEGALL: What is a Smart-TV, and why is it a playground, essentially, for hackers?

GRATTAFIORI: It's a computer. So instead of being a tube and some other electronics, now it has a web browser and it has a lot of devices of running Linux.

YAVOR: But the real danger is when people start using Smart TVs for things like online banking, we can take a popular bank address and translate that into a web address to a site that we control. So you're actually entering a user name and password that goes to us instead of your bank.

SEGALL: In a statement to CNN Money, Samsung says it takes consumer privacy very seriously. The camera can be turned into the bezel on the TV so that the lens is covered or disabled by pushing the camera inside the bezel. The TV owner can also unplug the TV from the home network when the Smart-TV features are not in use. "As an added precaution we also recommend that customers use encrypted wireless access points when using connected devices."

For those of us who are a little freaked out and may don't trust all these updates, what's the easiest fix?

YAVOR: One of the things you can do with the Smart-TV, which you can also do with your laptops, is just cover up the camera. Put a little post-it note or a piece of tape, and next time you want to Skype with your family, just take it off.

(END VIDEOTAPE)

SEGALL: And Christine, Samsung says they fixed this, but as a customer, it's not exactly that comforting when you think a hacker had to go out and find this vulnerability in order for Samsung to wake up a little bit. Christine?

ROMANS: If there was only something exciting happening in living rooms across America that you didn't want anyone to see. Thanks, Laurie Seagal.

Coming up Sunday at 3:00 p.m., I take Les Gold from "Hardcore Pawn" out on the streets of New York for a very good lesson for me in negotiating.

(BEGIN VIDEO CLIP)

ROMANS: We're going to see what kind of deal we can make.

LES GOLD, "HARDCORE PAWN": How much are the waffles?

UNIDENTIFIED MALE: They're $4 to $8.

GOLD: It's $8 for a waffle? Why?

(END VIDEO CLIP)

(LAUGHTER)

ROMANS: We bought waffles, we bought lots of waffles. We didn't actually pay $8 apiece for them. That's coming up tomorrow at 3:00 on YOUR MONEY.