Lost Decade for US Workers

Here’s an article about the recession and it’s effect on the people who work:

Lost Decade for US Workers

Some of the more interesting quotes:

So…

Does this article hit the mark, or is it off base? It seems to be based on actual figures, and is not simply an opinion piece. How long can the disparity between the rich and poor keep increasing? How long can corporate profits keep increasing while employment and incomes keep decreasing?

It is very on the mark.

There are many articles exploring this.

The rich are getting richer and everyone else is stagnating.

Apparently to the conservatives this is fine because the wealthy deserve the money and everyone else are sponging off of them.

I submit to the very wealthy that this cannot continue forever. If we assume the pace of the last decade there has to be an end to it. Resources are ultimately finite.

Perhaps they do not care, some very few will have made their fortune and can afford to put 30 foot walls around their house with private security.

The vast, vast majority will be screwed.

It will continue to increase until those “employed” realize there is profit to be made and decide to compete.

If there is profit, there is room for increased competition.

The other massive gap in logic is not realizing that when you say “family income has gone down” you neglect to consider that maybe it shouldn’t have been so high to begin with.

People on this message board love to bitch about lost auto jobs, but the US should never have had those jobs to begin with. They were an anomaly, not a God Given Right ™. I’m sorry to be the one to tell you this, but there is nothing unique or special about The American Family or The American Worker that entitles them to more than anyone else.

As the economy continues to be more global, family income in the US will continue to fall until it lines up with reality.

This is nice in theory, but in the United States, there is a problem with employment mobility due to health care being tied to jobs. Ask yourself this - if Joe has a great idea for a new competitive business, how likely is he to quit his job and lose all his families health benefits? In other countries, the health insurance problem is taken out of the equation of entrepreneurship.

Well to begin with “I” did not say that. The US Census Bureau said it. So if we agree with your thesis, how low should it go? How much do you think the standard of living should drop? Should the median household income for the US drop from $31,111 to the OECD average of $19,229? Down to Mexico’s at $4689? Or all the way down to the average for the world? Do you think that this is acceptable, particularly in light of the fact that a small minority are seeing their incomes skyrocket, and corporations are seeing increased profits?

I don’t mean to be crass, but “duh.” I’ve been telling Americans this for years, and they don’t seem to agree with you that it’s enough of a problem to need fixing.

Normally I’d agree with you, except that health care has been tied to employment for decades now, with plenty of entrepreneurship. How do you explain that?

To me it simply suggests that the profits to be gained need to be high enough to cover the costs of health care. Would you agree?

Until the rest of the world (read as corporations) stop viewing Americans as overpriced, and stop viewing America as too costly to operate in. Before auto jobs moved to Mexico and China they were moving to Ontario where the exchange rate, favourable tax policies, and UHC made it cheaper to do the same work.

Median household income in the US is much higher than $31k, I’m not sure where you go that number.

Like I said before, if corporations are seeing increased profit and some people have skyrocketing incomes, it means there is room for more competition. Do you disagree?

You’re correct, I misread a table from the OECD. Those numbers were what each equivalent adult in a household in the middle of the income distribution earns in a year. Although this wikipedia cite is a table of mean and median disposable household incomes, adjusted for differences in household size for various countries.
If you have a cite that shows it is “much higher”, lets see it.

I agree with you that there is more room for competition in theory. In reality though, you and I know it is not that easy to start up a competitive company, in the face of huge corporations that will crush you like a bug.

This is a good thing. The issue with recessions and depressions, as Keynes puts it, is that people continue to ask the same wage even though no one is worth that much anymore. Until they are willing to go back down in asking price, the economy can’t right itself.

With all due respect, that’s something you should be able to look up on your own.

Real median household income in the United States in 2010 was $49,445, a 2.3 percent decline from the 2009 median.

That’s a lot more than $31,000. The wiki page talks about disposable income as a way to compare income between countries.

What’s not easy about it? What are the hurdles?

If as you suggest there is so much profit to be made, do you really have to be that competitive? And I don’t think you have to worry about being squashed until they actually notice you, at which point you’ll have made money.

They don’t call it “Supply Side” for nothing.

Are you saying that the cause of the recession is entirely due to workers demanding salaries that are too high?

How far should the people go in accepting lower wages, particularly when the corporations are sitting on huge amounts of cash that they refuse to spend?

To be fair about it, though, nobody with a service or commodity to sell wants to lower the asking price if they can help it. It isn’t just working people who do this.

According to economic theory, yes. Various metrics should rise and fall to stay in equilibrium, but they do not due to human nature. Largest of these is that during a recession, corporations lay people off rather than reducing their wages, and then people continue to ask for their old wage who have been laid off.

I would personally argue that they have to, due to contracted values which can’t change with equilibrium – i.e. my car loan payments are going to stay the same regardless of how the economy is doing. Thus the solution is to make contracted values operate on an exchange rate based on the date of the document being signed. But eventually, things will come into equilibrium on their own – it just takes far far too long.

No, I doubt that’s what he’s saying (upon review that is what he seems to be saying). But it’s part of the reason the recovery has stalled. Companies today can look at any place in the world to do business, and the US just isn’t as attractive as it was post WWII.

Like I said earlier, Americans were making too much before the bubble, and unemployment was too low. Companies hired people they really didn’t need*, and has unemployment gets lower you end up having to hire two people to get one competent worker. Back before the crash there was enough money to justify that. Now there isn’t.

*We know this statement is true because after layoffs companies continue to make “increased profits.”

Asked and answered.

But that’s exactly what happened as inflation fell and went briefly negative.

You may have noticed that this problem began before the recession, in a time of nominal prosperity. So there is something else going on. We also know the reason for the recession, which had nothing to do with salaries.
It might be true in some cases that excessive salaries hold down profits and this investment - this is certainly not true today, with excellent profits and lots of investment money waiting to be used. In fact, in a demand driven recession, cutting wages is a pretty stupid way of improving things - just like cutting the hell out of government spending.

This is a bimodal recession, with those on the top doing very well and those on the bottom suffering more and more. Thus, the numbers.

So what’s stopping new companies?

You misunderstand. Economic theory doesn’t say that recessions don’t happen or happen due to improper salaries, just that they can’t self-correct easily due to salaries which haven’t adapted to the recession.

Lack of demand.

You may have the money and the capacity to manufacture 1000 widgets but if only 100 are bought you are not going to hire people to make 1000. Since those people have no job (or income if you prefer) demand for widgets goes down.

Vicious circle which is why you need the government to step in to push the economy.

Why no new companies?

Can you think of any products or services that are desperately needed in your community? How many banks does your area have? How many shoe stores or fast food joints? There are abandoned store fronts all along my route when I walk down Main Street. Perhaps back in the day, they supported small hardware stores or pharmacies or hat boutiques. But if you want a nail, you just drive down to Home Depot or Lowes. You can get your drugs filled anywhere now. Target and K-Mart sell pretty servicable hats. Hell, you can get the nail, the drugs, and the hat in one fell swoop at Target or K-Mart! And anyway, who’s going to drive to shop downtown, where you have to pay for parking, when everyone knows the “good” malls are on the edges of town, with ample parking and a bountiful food court to take care of your hypoglycemic needs.

Innovation used to be an individual thing. Now it happens in corporations. Google, Apple, Microsoft, GE, GM, Merck. They aren’t going to generate new companies from their innovations. They will just put their namebrand on it and market it along with their other goods and services. The profits go up to the top. No new jobs need be created. The guy with the idea doesn’t even get a bonus.

So if there is a lack of demand where is all the profit coming from?

If profits are increasing, there is by definition excess demand, which means there is room for more competition.

So where is the new competition?

And what would you like the government to do that will push rather than drag? Would you like reduced regulations to lower the cost of doing business?