Did working women make it impossible to support a family on one income?

Great Debates
81

Well yes, but this is largely due to the simple demographic fact that our taxpayer population is constantly growing over time.

I think maybe my use of “smaller revenue pie” was erroneous or at least confusing: I didn’t intend to imply that the amount of total federal revenues in absolute dollars necessarily decreases when taxes are cut.

I was just noting that tax cuts can change the proportions between the size of the total revenue pie and the contributions made to it by different groups of taxpayers. And as a result, a change in tax policy that is actually very beneficial to wealthy taxpayers can superficially seem more onerous than it is if we view it only in terms of how it alters the wealthy’s share of the total tax burden.

82

IMHO, it’s probably impossible to tell how women entering the workforce in large numbers effected the economy, because too many other things happened at the same time. The biggest was that the postwar boom that the US had enjoyed for the quarter-century or so after the end of World War Two ended in the early 1970s. Europe and Japans’ economies had recovered and were now competing with the US in previously uncontested areas such as cars, steel and electronics. Domestic oil production in the lower 48 states hit “peak oil” in the early seventies and the OPEC oil shocks hit the US economy harder than Europe or Japan, who had always had to import expensive petroleum all along. The big reserves of iron ore in the upper midwest became depleted and the industry had to switch to lower-grade alternatives such as taconite at the same time foreign steel was threatening domestic producers.

Given an entire generation that had grown up thinking the golden years of the '50s and '60s were the norm, the US struggled to maintain the status quo and it did so primarily two ways: first, by adopting government policies that conservatives touted as throwing off the shackles of an anti-business welfare state, and the left condemned as strip-mining the middle class to benefit the corporate class. However you regard it, it did lead to a (at least superficial) resurgence of the American ecomony, at least as measured by stock values and corporate competativeness. And secondly, by abandoning the (nominally) single-wage earner standard that had been the norm. It’s difficult to say whether economic necessity forced women to abandon the homemaker model or whether new technologies such as the microwave oven enabled them to do so. What is clear is that households became much less self-sufficient, trading home crafts such as cooking and sewing for wage-bought substitutes. It can be argued that this continued a trend where male domestic work such as carpentry had been phased out earlier in industrialization, when wage earning meant more men would hire specialists or buy mechanical devices than continue being home craftsmen.

83

Are you being sarcastic? I can’t tell. If the upper class is increasing, and the middle class is staying the same, that must mean that more people are migrating from the middle class to the upper class and more people are migrating from the lower class to the middle class.

As for being shorn, cite? Remind me what percentage of taxes the upper class pay?

84

I think that what EC meant is that the income levels for the upper class have been rapidly increasing while those for the middle class stayed roughly the same or rose only slightly. It’s not about the populations of the various classes, but their incomes.

As I’ve been discussing above with Martin, I think that the “percentage of taxes paid by the wealthy” metric isn’t particularly enlightening. It’s mostly used in a cosmetic fashion, to make it look as though the wealthiest taxpayers are unfairly burdened by having to supply most of the tax revenue.

But we need to bear in mind that the chief reason the wealthiest pay most of the taxes is because they have most of the money. As Martin’s figures show, the percentage of total taxes paid by the wealthiest taxpayers has risen in recent decades. But over the same period, the incomes of the wealthiest taxpayers have also increased, and much more steeply. Having to bear a larger share of the total tax burden is clearly not interfering with their increasing financial prosperity.

Of course, this doesn’t demonstrate that the wealthy are actually “shearing” or “looting” the middle class; that’s a question of class politics. But it does indicate that the economic and tax-policy developments of recent decades have been financially very beneficial to the wealthy.

85

ABC News has a story on this topic today: Men Earn Less Than Fathers at Same Age:

86

From the above, it seems to me that if the economy is growing, the middle class is not getting the benefit of it. So who is?

87

Um, the wealthy maybe?

88

Be careful with the numbers. While it’s true that wages have not increased much in the past few years for middle-class workers, it’s not true that income has stagnated. Other forms of compensation have grown, as people are increasingly trading wages for increased benefits in the form of stock options, 401(k)s, health insurance, more vacations, flex-time, other retirement programs, etc. To see how people are really doing, you have to look at overall compensation and compare it to how many hours they work. For example, the average hours worked for full-time employees has declined slightly since 2000, after rising through most of the 1990’s.

There are many confounding variables that make it hard to draw conclusions about the plight of the average worker by looking at one statistic like annual salary. For example, consider the baby boom ‘bubble’. As boomers aged, you would expect their wages to go up as they gained experience and seniority. But as they begin to retire, suddenly their income changes to retirement income, and you see a sharp drop in annual income. If the population was evenly distributed in age, this would balance out - the new retirees would replace the old ones who die off, and their jobs would be filled in equal measure behind them. But when you have a large bubble in the population, the numbers become distorted.

So it might be a better idea to get away from annual income, and look at at other factors such as personal wealth, leisure hours, income mobility, durable goods purchases, access to health care, life expectancy, and other important measures of personal happiness and try to draw a more comprehensive picture.

89

Please tell me you’re not seriously suggesting that the average American worker today has a better benefits package than the average American worker of 1974.

Sam, the study is comparing the incomes of men in their 30’s in each era. So a drop in income upon retirement doesn’t enter into it. Apples are being compared to apples.

Now why doesn’t it surprise me that you would think so? But this is an elephant in your philosophical living room.

90

The movies also had to stand in as a proxy not only for the panoply of entertainment and news sources (newsreels, anyone?) that we have now but didn’t have then, but also as a place to go in the days before video arcades, day-care, etc. My dad, who grew up with very little, used to spend all day at the movies with his siblings during the Summer – principally because that and the department stores were the only places in town with air-conditioning during sweltering Summers, and my overburdened (stay at home) grandmother needed a way to get the bigger kids out from underfoot while she cared for the littler ones.

91

Maybe he is. And I doubt you could disprove him, because the two are to some extent incommensurable.

Let us posit that in 1974 every worker had the Cadillac of health plans (this was not true for my father, but so be it). Said health plan would not, even so, entitle him to: (a) MRIs; (b) arthroscopic surgery; © anti-retroviral drugs; (d) fertility treatments; (e) statin drugs; (f) mental health care, (g) hip implants; etc. – because all of these things either weren’t around or in common use, or weren’t covered. The state of the art in medicine has increased and, not surprisingly, so has its cost (and so has employers’ reluctance to write a blank check for such treatment). People who do have health plans generally have a lot more options than anyone had 35 years ago.

Martin’s statistics on tax burdens are interesting. It is notable that they mostly end in 2004, presumably the last year for which comprehensive figures have so far been compiled. I strongly suspect that the numbers for the intervening three years would show that the “rich” have paid an even greater share of taxes, as the AMT has really begun to sock it to even the upper middle classes, increasing their actual tax burden beyond what the notional marginal rates would suggest.

92

In addition, preventive measures were often not covered. My kids were born in 1972 and 1976, and I paid for every single checkup and vaccination myself. Prescription drug coverage came on the scene not too long after that. Previously we were out of pocket for the amoxicillin, etc., for their ear infections.

Back then, you didn’t get employer contributions to 401k accounts, either.

93

Some of the other benefits Sam Stone mentioned were pretty unheard of, as well…things like flex time and more vacation time. In the 70s my dad, who was a vice president of his company, got 2 weeks of vacation. These days, someone at the VP level is sure to get at least 4. Additionally, a lot of companies pay for maternity leave and even paternity leave…including many that are not required to by law (all companies must give family leave, but small ones are not requried to give paid leave). I believe these developments were partially caused by having so many women in the work force…when both parents work, the need for more time off is much more pressing than when one parent earned the money, and the other one ran the household.

And these kinds of benefits do have value…recently, I turned down a job that would earn me more money, but give me less flexibility in my hours. Not worth it to me…my time is much more valuable at this point in my life than the extra dough.

94

I’ve not made the point that the wealthy are being unfairly burdened, just that the idea that the wealthy don’t pay their fair share is more or less unfounded and ludicrous. The total share of Federal tax receipts paid by the top 1% has consistently been a much larger share than the top 1%'s share of income.

I also have seen no credible evidence to suggest that middle class income has not increased or has only decreased slightly. Adjusted for inflation it income in the middle quintile (after taxes) has increased by 20% over the past 25 years.

95

Economics is weird like that. Oddly enough, the people doing the investing and the risk taking are the ones who reap the biggest profits. One would almost think that was a good thing.

96

Average American productivity is higher today than it ever was so you might think that the average American would make more than ever but they are not, here are a few reasons other than working women that might explain it.

Productivity gains are not enough to bridge the wage gap between Americans and skilled laborers in China.

The labor market is steeply tilted in favor of employers (a large labor supply in the form of working women probably contributes to this).

The labor market is not efficient. For any job there is high price that employers would be willing to pay (or employees could conceivably extract) and there is a low price that employees would be willing to accept (or employers would be able to get away with). With the death of unions, we are getting closer to the lower number.

Martin seems to agree that there is a point below which taxcuts just don’t do much for the economy. Martin also seems to spport the idea of progressive taxation. What Martin is trying to say is that the Bush tax cuts have been equitable because they have resulted in the wealthiest members of society carrying an even larger tax burden than before the tax cuts. I will address the capital gains and dividends tax rate, the topic of most of the criticism of the Bush tax cuts (the flattening of the tax structure is within the realm of reasonable policy calls, although some people would have said the tax structure was already too flat).

Martin’s tax statistics are no surprise to anyone that knows taxes. Everyone knows that the Bush tax cuts generally cut taxes for everyone and that the wealthiest have always borne the largest share of the tax burden… but the tax cuts were unevenly spread. Its not the top 50% against the bottom 50%; its not the top 10% against the bottom 90%; its not even the top 1% against the bottom 99%; it is the top .01% against the other 99.99%.

Earned income is taxed at 35% while dividends and capital gains are taxed at 15%. Earning income is not nearly as elective as earning capital gains income or dividend income. You want to know where all the increases in high income taxpayer taxes have come from? Look at the components of income taxes and you will note that after the 15% rate went into effect, there has been a spike in capital gains and dividend income as people sell their stock or pull money out of their companies in the form of dividends. Where does the money go? Much of it is put to new productive uses but much of it is also invested in government securities (so that the government can continue in deficit spending), so there is a class of people that have converted their taxes into loans. Most people pay almost no taxes on capital gains or dividends (mostly because they put their money in IRAs and 401Ks and other stuff like that): the average taxpayer earning 100K earns less than 1% of their income in the form of taxable capital gains or dividends; the average taxpayer earning 500K earns less than 10% of their income in the form of taxable capital gains and dividend income; the average taxpayer earning 10 million earns over 50% of their income from taxable capital gains and dividends. The rate they pay on that capital gains and dividend income was basically cut in half.

Another example of the sort of things that have been used to increase the tax base while undermining its long term collections is the 5% taxes on repatriation of foreign profits. Normally our tax system taxes American companies on their worldwide income and give them a credit for taxes paid in other countries, however there is a way to keep your money from being taxed (but trapped in a foreign subsidiary) until the money is paid up the the parent companies. There was a lot of money that would have been subject to a 35% tax rate that was taxed at 5%, this increased our tax base for that year but probably lowered it over the long term (of course you can argue that we shouldn’t be taxing worldwide income but thats a different issue).

At some point our taxes have to pay for the budget and the question is how is that burden distributed. When you have across the board tax cuts but concentrate those tax cuts in the wealthiest .01% of the population at the same time you are running recor deficits, you are effectively raising taxes on 99.99% of the population for the benefit of .01%. Of course its not quite that stark but take a look at the underlying numbers and the picture looks a little different.

97

The problem with the pure capitalist model is that the greatest economic benefits go to those that are already wealthy, economic mobility effectively gets capped at the professional level. Sure a few will leak through every year but the truly wealthy will continue to outstrip the rest of the population by a healthy margin purely by virtue of how wealthy their parents were when they died. Is it really best that we tax investment income at lower rates than earned income? Investment decisions are rarely effected by the tax rate (its not like you will let a million dollars sit in a savings account because it is taxed at 30% instead of 15%), money tends to seek the most productive use regardless of the tax rate (tax shelters are an entirely different matter).

I don’t propose that we move to a socialist system and I have every desire to encourage entrepreneurial activity but just like the estate tax never drove a family off its farm (after all the first 2 million dollars don’t get taxed at all), these policies are not structured to promote entrepreneurs so much as they are structured to promote economic dynasties.

98

I’m not sure how it works, but I think you’ve hit on the key factor here.