That you’re even asking these questions proves that you didn’t bother read the CBO report that you cited. It doesn’t even address some of what you write, and it contradicts the rest.
You cited it. You read it. It’s only 50 pages, much of that figures, and it’s written for a general audience.
The notion that improvements in productivity ought to be shared is a red herring, because thus far we don’t have a citation in this thread that shows that real total compensation is far off from increases in productivity.
We don’t, and it’s not because of a lack of organized labor. It’s a market consequence of having too many people for each job.
Look at it this way- if you really need to hire 10 guys to do a job, and there are 15 guys available, and a competitor who wants to hire 10 guys, you’ll either pay wages that ensure that you get your 10 guys, or you’ll go short a man or two. And when another guy comes into the market, you’ll have to make sure and out-compete your competitor, probably on wages. There’s very little wiggle room there to drive prices down, and a lot of pressure to drive them up.
Now if you need 10 guys, your competitor needs 10 guys, and there are 100 guys out there who desperately want jobs, you can set your wage as low as is reasonable- one of those 100 will probably take whatever low wage you want to pay.
That’s what’s happening now; where in the 1960s and before, there were plenty of jobs on the lower end of the wage scale, now there aren’t as many, so the pressure is more downward on wages, rather than upward. Put another way, if you need a guy to flip burgers in a restaurant, run a cash register in a store, or stock shelves, why would you pay more than minimum if there are multiple adequate people willing to work for minimum at that job?
You guys talk as if most people make widgets for a living. I don’t think I even know anyone who:
a) works in a job that actually “produces” anything besides meetings, spreadsheets, emails and Powerpoint decks.
b) makes less than $100k a year.
So at the very least, the relationship between what is produced and the standard of living is more complicated than people make it out to be.
How is it an effect of inequality? I’m really trying to understand that.
But your question brings up a valid point: In these debates, what tends to happen is that we find some statistic that seems to make the case for what we want to do politically, and then assign causes to it that fit our narrative.
For example, let’s take it as true that income inequality is rising, the rich are getting richer, and the poor are falling behind. Just knowing that does absolutely nothing to help us formulate proper policy, since we do not understand WHY this is happening. And given that the economy is a complex adaptive system, the ‘why’ may be a complex combination of effects that are causing this response. For example:
The rich could be getting richer because globalization is expanding the influence of top performers. If I make a widget that adds $1 in value to everyone who buys it, and I collect that value, I’ll make a lot more money if I can sell it to 2 billion people instead of 100 million people. Apple is a perfect example of that. In this scenario, the rich getting richer is not a bad thing, and isn’t coming at the expense of the poor - it’s simply the result of their products reaching a wider audience.
The rich could be getting richer because they are the prime beneficiaries of government policy intended to stabilize the economy. Artificially low interest rates, fiscal stimulus controlled by cronies, regulatory capture, monetary policy funneling cheap money to bankers, etc.
The poor aren’t gaining because we’ve increased social programs at the bottom end so much that we’ve reduced the incentive to get ahead. When Alberta reformed welfare, the rolls shrunk in half, and the evidence is that those people went back to work and are probably much better off today than if they had remained on welfare.
Our misguided expansion of student loans has had the primary effect of driving up college tuition, which forces people to into ruinous debt to get a college education. This debt delays family formation, house ownership, and lowers the freedom to move to where the jobs are.
The path upwards has been weakened by regulations which have stifled entrepreneurship, job regulations which have hampered employment or replaced income growth with benefit growth (benefits people may not need or want).
Pushing more people into college is lowering the signalling value of a college degree, creating a whole new class of people who took useless degrees and now cannot find work applying their skills in Feminist Critical Theory.
Federal, state, and municipal debt are high enough now that they are creating a drag on the economy, inhibiting business startups and restricting the wages of the working classes.
Preferences have changed, and the work people are willing to do does not pay as much as traditional labor. The rise of the internet and the new ethics of environmentalism and sustainability may have created a new class of people who are just not that interested in working hard to climb the corporate ladder, and instead would choose to live in a small apartment and spend their time on the internet.
As potential evidence for this, have a look at the median age of factory workers, which has been going up faster than the workforce in general. The left always says that it’s the loss of manufacturing jobs that’s causing this, but in fact surveys of factory owners shows that they are most worried about not being able to replace the workers they have when they retire. I personally visited a factory a couple of years ago that has shortages of workers they can’t find applicants for, and the median age of their staff was well over 50.
Decades of screwed up top-down ‘management’ of the economy has created malinvestments and distortions which are causing dislocation, bad investment decisions, gluts of workers in some areas and shortages in others, a mismatch between what students are studying and what the economy needs, etc.
The social surplus that used to go to improving wages is being increasingly swallowed up by the cost of new regulations on business.
Macro policy of very low interest rates is hurting savers, which lowers wealth mobility and forces people to save more of their income to meet retirement needs.
A lot of the ‘working poor’ live in very dysfunctional cities with crazy real estate prices, high crime, high regulations on business startups, etc. This inhibits their ability to get ahead.
I could probably go on listing 50 more possible causes, some of which fit the narrative of the left, and some which don’t. If we can’t figure out the causes, it’s hard to know what the right solution is. In fact, we can’t even agree on the nature of the problem, with different sets of ‘facts’ about the economy fitting different narratives.
This is the nature of complex systems and the debate around them. Everyone can pick and choose the set of emergent properties that ‘prove’ their case, and no one really understands what’s going on at a deep level.
There is a substantial economics literature on the subject, and that is among the questions that is still being grappled with.
I think the general theory that the causation might run in the other direction is that as the middle class shrinks and the divide grows between rich and poor, the social gap one has to bridge to marry across class is wider, and people become increasingly likely to marry their socioeconomic equals. In the past, an upper income earner, like a middle manager, might have run in the same social circles as lower-middle income earner, like an administrative assistant. That is less and less true with the changing nature of upper and lower income jobs.
I’m not really up on the details, but my understanding is that the direction of causation is one of the big debates in this area of research.
Its not the only report I cited. I’m going by the CBO executive summary (I didn’t read the 63 page report) but:
Where in the CBO report does it contradict the notion that income growth for the middle class is slowing (slowing growth, not shrinking)?
Where does it contradict the fact that real income for the poor are going down (the fact that it has gone up over the last 50 years does not mean it is not going down now (and has been over the last decade or so).
Where does it contradict the fact that capitalistic income growth is accelerating?
For fuck’s sake, how about answering the question. Cite something in that 63 page report if you can find anything that helps you but don’t just say “the 63 page report says otherwise” when the fucking executive summary points to nothing of the sort.
I didn’t realize this was a controversial proposition.
Sure, at a global level but I don’t recall labor being particularly represented at the negotiating table during free trade talks.
And what if 81 of those guys are working in factories in China?
The reason there are multiple people looking for jobs flipping burgers is because there is a lot of domestic consumption that is driving job growth in China. If we had a more vigorous labor movement, many of those jobs might be here in America and there wouldn’t be enough adult burger flippers to go around because they would all be making iphones and we wouldn’t have this glut of low skill labor. Domestic demand is more than enough to provide jobs for all the low skilled people here with a low but living wage.
I don’t WANT The low skill jobs but until we can start exporting the low skill people to the same places we are exporting the low skill jobs, I say we keep those crappy jobs for people with crappy skills.
Obviously. Despite it being nearly two weeks since I posted a link, and five days since you did.
How about reading the report that you cited, instead of asking someone else to answer questions about your citation. I’m happy to discuss the report. Spoon-feeding, not so much.
Observant readers will note that the linked summary is pulled from the very same report I used as an example of a sloppy apples/oranges comparison that, due to mishandling of data, shows nothing at all.
Observant readers will also note that the Economic Policy Institute is a left-wing think tank roughly equivalent to the Heritage Foundation on the Right, and therefore can be expected to frame issues in their preferred narrative.
Oh, I’m sure if you dug really hard you could find some government industrial plan somewhere that sort of did what they said it would do, if you didn’t look too closely at the costs and the alternatives. But by and large, the era of government industrial policy peaked in the 1970’s and then declined because the results were not good.
Because the test should be whether or not there is a functioning market with competition, reasonably low barriers to entry, etc. That’s very different than trying to tweak or improve a well functioning market through regulations and mandates.
By ‘well functioning’ we generally mean a market where prices move due to supply and demand, where companies enter and exit the market as demand changes, where externality costs do not dominate, where information about a transaction is available to all parties of the transaction, etc. It’s not a statement that the market is meeting all the social needs of society - just that it’s doing what markets are supposed to do.
Yes, and this is a case where the market is not functioning due to several factors:
Government involvement. You cannot possibly analyze the problem of securitized debt without considering the role of Fannie Mae and Freddie Mac. You cannot look at the real estate bubble issue without considering the influence of government mandates to drive down real estate mortgage requirements for social justice reasons. You cannot look at excess risk in the markets without considering the moral hazards of implicit or explicit government interference to mitigate the risk through FDIC and other guarantees and protections. Fannie Mae and Freddie Mac increased systemic risk by decreasing individual risk by trading on the faith and credit on the U.S. government. Likewise, you cannot look at excess risk taken today without considering the moral hazards created by the last bailouts of the financial and auto industries.
Asymmetrical information. Securitizing mortgages into baskets of derivatives had the effect of hiding the true risk the entire system was taking on. Everyone thought that so long as there was a diversified mix of mortgages in a package, the overall risk would be significantly lower than the risk on any individual mortgage. No one considered the systemic risk of the entire market declining. But mostly, the practices in place had the effect of masking the risk in the system. Their independent variables turned out to be pretty dependent after all.
Complexity. You’re right about this. The system is incredibly complex and may have taken on a life of its own. But it’s baffling to me how you think that a bunch of regulators are somehow better able to handle this complexity than the market itself. By their nature, complex systems are rather opaque and unpredictable. Sometimes their failures are easy to see in hindsight, but impossible to predict beforehand. This is not an argument for government regulation, but rather for decentralization to keep failures of the system compartmentalized. Putting everyone under the same regulatory umbrella increases systemic risk, because if the regulations are wrong they can take everything down.
I would accept the need for some regulations in the financial markets, but those regulations should be aimed at making the market work properly, and possibly at preventing ‘too big to fail’ scenarios by either breaking up big financial firms or by legislation that makes it clear that once you go over a certain size, you become responsible for your own risk and the government will not provide security. Make it all transparent so that better decisions can be made. But the government should never get involved in the micro-management of the system. It’s not competent to do so. Attempts to do things like cap credit card interest charges, bank fees, and other reforms aimed at social justice rather than market performance are just bad ideas that will lead to unintended consequences.
I prefer to criticize the methodology over the motivations. If you use mismatched deflators and ignore sources of compensation, the conclusion is flawed, regardless of alleged lefty-loosey intent.
FWIW, I’ve found many useful analyses from both EPI and Heritage. This one has obvious flaws.
I wouldn’t say that everything the EPI, Heritage or Cato has to say are wrong or should be discredited, but that the bias of the institution should be considered when looking at the assumptions they make, the data they choose from, etc.
Personally, I like to read analyses from both sides then draw my own conclusions, rather than just stick to the side that tends to support my priors.
But my priors are the bestest prior!
OK I read the report and it doesn’t support anything you say.
Please cite to where you think it does.
Certainly! Which of my assertions about the CBO paper would you like me to support?