The End of Middle Class Growth (transaction, complaint, free market, credit)
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Didn't read the whole thing, but I agree with the premise. Also consider, productivity has been increasing without the need to hire more workers. In many cases, more is being done with less. Wages are a function of supply and demand. Wages don't rise based on growing productivity. They rise because they are in short supply, which has not been the case for quite some time. As expected, wages have been stagnating or declining in many sectors. Labor is nothing more than a commodity factored into the final cost of goods.
Globally, the middle class has grown in other countries like Mexico and China, but not in America. If COL would decrease, things might work out differently, but it doesn't appear that will be the case.
America will probably enter a phase of mediocrity.
I guess my only complaint is they don't seem to have any understanding of what the middle-class is... citing statistics for the bottom 90% and the top 1, 2, and 5% doesn't really give you any idea what the middle-class is doing. Nor does median income levels. Middle-class is (depending on who you listen to) usually the top 40 or 45% up to the top 5%. So we know the wealthy and extremely wealthy are doing very well (again, we knew that) and that the bottom 90% isn't doing as well as they are but still doing well. Again, we all knew that. The 90% needs to be broken up, however. The '80s and '90s were good for the middle-class (albeit not as good as for the wealthy), but not so hot for the working-class.
Technology's effect on productivity is profound. For example, in my field, computers have replaced more than of the work-force, all of them being the lowered skilled ones. You used to basically need a typist/secretary, now no one uses them.
Cost of living is really kind of a misnomer, especially if you look at it going back to the '50s. Houses are bigger, two- and three-car households are the norm, eating out, huge wardrobes, 200 channels of TV, vastly improved medicine... If you went back to a '50s standard of living, the COL really wouldn't be that high. Open heart surgery in the 50's was experimental cutting edge stuff, and even when successful people didn't make it much more than another 3-5 years. So yeah, modern medicine is more expensive. We're now sending robotic surgical suites into people's still-beating hearts. People that previously would have just died shortly after an AMI now routinely outlive the grafts which are good for 10-15 years and have to have the operation repeated. You have a new product that previously did not exist that costs around $60,000 that each year .1% of the population gets. Doesn't sound like a whole lot, but take that out over a 70-80 year lifespan and nearly 10% of the population has a CABG surgery, and that number has dropped substantially in the last ten years due to advances in pharmacology and PCI (stents, balloon angioplasty).
Interesting. A bit Robert Reich, a bit Charles Murray. Productivity growth actually helps if the economy is growing enough to absorb the surplus and de-skilled workers.
time. As expected, wages have been stagnating or declining in many sectors.
No. Take home pay after taxes is going down because the taxes on the middle class have been going up since the mid-1960s. I hope you aren't expecting your employer to give you a pay raise every time the politicians raise your taxes.
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Quote:
Originally Posted by ram2
No. Take home pay after taxes is going down because the taxes on the middle class have been going up since the mid-1960s. I hope you aren't expecting your employer to give you a pay raise every time the politicians raise your taxes.
Federal taxes on an income of $32,000 in 1960 were 50%~~~ that's actually quite a little more than the tax rate on $500,000 today! Yep~ taxes are WAY up in the time since the 60's
No. Take home pay after taxes is going down because the taxes on the middle class have been going up since the mid-1960s. I hope you aren't expecting your employer to give you a pay raise every time the politicians raise your taxes.
Compared to most developed nations, we pay very low taxes. Ironically, many of those higher taxed folks do bring home more bacon, and have weathered the storm quite well. Part of that involved investing that tax money wisely in education, infrastructure, and other 1st world nation necessities. We chose to cut funding, cut taxes, and engage in military quagmires. Not quite the shining beacon of opportunity these days for your average American.
This is a wonderfully well-reasoned, non-partisan article that is in concordance with how I see the changes in the US from my start as a 20yo programmer at the beginning of the tech revolution, to my retirement today.
For a truly in-depth analysis of the underlying forces that have shaped the state of our economic malaise, I advise one to read "The End Of Equality" by Mickey Kaus.
It is one of the most insightful articulation of the trends that are engulfing our economy and, by extension, our society, that has been written to date, and perhaps the most seminal statement of the root causes of our distress that I have read in this century.
Financial industry skyrocketed in the past decades, thanks to "privatize the profits, socialize losses" paradigm backed by the tax collecting might of the Federal government, this lead to economy where really big money is made in speculating on various financial derivatives. Real (physical) economy is for the losers if "wealth" can be created in credit swap trade.
Big money buys a lot of power, bought up politicians pushed for low taxes on capital gains. Low taxes on capital gains + deregulation + skyrocketing derivative trading (that exceeds "physical" GDP many times over) = mushrooming super rich class of absentee investors, as well as the rise of the class of CEO mavericks and financial wizards who (supposedly) can deliver superb returns on investments, rain or shine, and thus they deserve their 100 millions + compensation packages. The rise of the financial wizards with their 100+ millions plus compensation packages imposed upward "pressure" on compensation packages of the "real economy" corporate brass. Since the bulk of "growth" was happening in the financial sector, "real" industries had to squeeze their workers harder to ensure 13%/year raises for their top management.
Excellent article summarizing the disconnect between labor and output and distribution of output wealth (i.e. wages / income buying power per capita).
This why the whole "Workers share of output" disconnect that some economists (Steve Keen) emphasize is especially important.
Technology innovation has always been for the express purpose of doing more with less labor. At some point in time this trend reaches a tipping point whereby the incremental gains from human labor get usurped by technologies accelerating efficiencies and ability to get exponential output. Andrew McAfee and Eric Brynjolfson's, Race Against The Machine, expresses this trend well.
Hypothetically as tech efficiency gains work their way through the economic system people should gain more leisure time and sustain a 'reasonable' level of worker's share of output. When the benefits of tech efficiency gains (or pseudo wealth gains via casino financial vehicles that add no real value to the commonwealth: Collateralized Mortgage Backed Securities, Credit Default Swaps, etc...) accrue only to a few you have greater extremes of socio economic bifurcationa and a recipe for civil / social unrest. The government knows this and this is likely why they've purchased millions of rounds of ammo for various federal agencies along with 9300 bulletproof checkpoint booths - but I digress.
Free markets, as espoused by many championing them as solution, are very rarely 'free markets' (outside of perhaps a micro example such as a bazaar in Marrakesh) as it is a fallacy. Every business enterprise tries to maintain an assymetry of information and seeks competitive advantage (with perhaps few exceptions such as those with extremely low barriers to entry which render the efforts negligible). And we all know, of course, those who excel in the system are so eager to help others acquire the knowledge to compete with them - right? Just see robber baron examples of late 19th century who while promoting 'Horatio Alger' stories, shot workers in contentious labor disputes, and did everything imaginable to create the ultimate 'assymetry' i.e. monopolies. Or the modern equivalent massive corps who buy out every small potential competitor they can or block via patents new disruptive technology to maintain their 'cash cow' margins as long as possible.
The weighting of the 'benefits of a competitive advantage' are invariably skewed to achieving a greater marginal share of return to those producing an output, rather than passing on the marginal competitive gain to the purchaser / consumer ( with a few notable exceptions: Henry Ford being a classic example, in that he realized paying his workers enough to readily purchase the product they manufactured was good all around). This is another fundamental reason for the trend lines shown in the article. This is generally achieved in today's system through global labor arbitrage and eliminating human labor (the highest fixed cost in any business) and replacing it whenever,and however they can via automation: robotics, dark factories, enterprise software etc.....
I don't see the trends in article ending until the current system is allowed to crash (or overhauled via a major reset calibration, say, debt jubilee concept due to Odious Debt) and a new one that measures variables for success besides: unit growth, unit cost increase, transaction volumes, and velocity as the holy grail, and is replaced with one that considers environmental and quality of life concerns for the many as beneficial to the overall health of the commonwealth.
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