Americans have, in no particular order over the past 30 years:
Have some of the longest workweeks of most industrialize nations
Taken fewer and fewer vacations
Raised the IQ and SAT scores of everyone, including minorities, to the point where the SAT needs to keep being adjusted upwards in difficulty
Continually raised productivity to never-before seen heights
Have increasingly trended to two-income households
Have done more college and training than ever before, with the attendant increase in student loans
One thing we continually hear is that people need to make sacrifices and have cuts to services and work longer past retirement and stop being so lazy. Yet the current demographics of workers is much less lazy than those in the previous two generations. And despite all that they haven’t seen their incomes rise much at all. It’s not like the American economy isn’t producing wealth - it’s producing loads of it.
So… where’s the money going? Why isn’t the American worker seeing any of that? Wasn’t that the promise of capitalism, that is, you work harder and you get more of the wealth? Could someone explain to me why both income mobility upwards is stagnant and the average income is flat?
Do you have a cite that capitalism promises that? The capitalism I learned about said you get paid what you are worth to someone buying your services.
BTW, I searched, but could not find the hilariously funny SNL skit of the Japanese show where the guest were speculating on who is the laziest (raziest) American worker (workah).
Cracked.com’s John Cheese, Newt Gingrich, Herman Cain, Adam Carolla (see this forum even!)
I suppose that there’s no intrinsic reason why capitalism should do that, but really, why shouldn’t it? If people are busting their asses and not seeing a portion of the wealth pie rise relative to their increase in sacrifice and productivity, why are they working harder? I mean, disregarding the human-rights abuses, that is the most unworkable part about communism-in-practice; that if working harder does not result in a clear reward, then people just relax their work habits and/or steal from the till. Why does modern capitalism want us to march off that cliff, the disconnect between effort and rewards?
The American worker had a huge advantage over the rest of the world sixty or seventy years ago. There was a huge capital stock that he (or she, but henceforth I’m just writing “he”) was working with that was increasing his marginal product compared with the Chinese, Japanese, German, British, etc. worker. Plus he was relatively well educated. Even as the American worker has improved over the 1950 model, the Chinese and Korean (and Taiwanese, Indian, Brazilian, Indonesian, Russian, a couple billion people all together, excluding Africa and a few other countries that have stood still or even gone backward) has improved much faster, so the relative gap is smaller. I know that we look at the work that American kids are doing in high school, and compare it to what we did when we were at the same stage in the 1970s or 1980s and are impressed, but you should see the gap between what my wife did in China back then and what her nephews are doing now. It is just staggering. One of my neices (a 99th percentile type of kid, accepted at a couple of Ivy League schools, went to Stanford) went to Summer school in China between her sophmore and junior years in High School. She could not keep up with her Chinese peers in Math or Science.
So the relative advantage of the Amerian worker has fallen. Instead of being ten times more productive than the Chinese worker, he is now only twice or three times as productive.
Coupled with this is the vicious/virtuous cycle on which the American worker is on the wrong side. As the workers in emerging economies grow more competitive, businesses would rather invest there than in the US. So the ratio of capital to labor grows “over there”, and their workers become even more productive, so long as their wages do not rise so dramatically as to eat up all the gains.
Then there is the regulatory/business environment. As a friend of mine who manufactures and markets pens says, the cost of a pen is not so much the cost of the inputs that go into the pen (labor, chemicals and metals which are now remarkably similar between China and the US) but the cost of the outputs that do NOT go into the pen (the toxic disposal, energy costs, employee health care costs, workplace safety regulations, etc.) that kills you. In the last twenty years virtually 100% of his industry has moved to China. When you are selling a pen for 27 cents, an extra 3 cents a pen is a killer. But somehow the union representing his workers would keep saying that you can pass along an extra 3 cents A YEAR to the customer, until you have a 50 cent pen and no takers. And the local municipality who kept raising the taxes on existing commercial property. And, and, and…
Ironically, even as the regulatory environment has gotten more favorable to business in the US over the last 30 years, it is nowhere near as improved as it has been in China or India or Brazil. And the areas in which there has been the most deregulation, the financial sector, it has had the least impact on improving the competitive situation of 90% of the workers.
Finally, the desegregation of the workplace and the increase in illegal immigration has also weakened the competitive position of the white, male worker over the last fixty years. When people think about the glory days of the American worker, that is often who they are thinking of. That is the group whose real wages have really taken a huge hit, in good economic times and bad.
Pardon me, but I think that for the lack of a better word that this is bullshit. The wealth in the country has been increasing. It’s not like the United States’ economy is suddenly uncompetitive and some other workers have been getting the dough. There is wealth in the economy even within the U.S.'s borders, it’s just that the American worker has not been getting a share of it.
To be fair, the one percent, especially in the financial sector, has been working really hard at stealing from the till! Very successfully, too! The rest of us are just slackers in that respect!
There is the essence of your post, right there. Now, thought experiment: how would Russia and China respond if their businesses started exporting jobs to the US in a massive sort of way? I’m thinking a lot of CEOS would wind up locked up in prison cells, if not dead. Just sayin.
Can we have to quotes where they “continually” say this. And I’d classify Carolla and Cain as cranks.
They are working harder because they generally have to compete globally. Capitalism only rewards you in terms of what you’re worth in the market. Want more money? Do something that people value more than what you are doing now.
Do you complain when you get lots of cheap goods? Do you wish you were paying more for them? If you were making more and paying more for your goods and services, what difference would that make?
That’s all well and good, but it doesn’t even start to work with the actual numbers. We’ve gone from a GDP of $500B in 1960 to a GDP of $14.5T (source) – a clear rise in productivity – while on the wages side, we have… this:
The middle class does get more than they used to. There is no social mobility because what it means to be middle class has changed to reflect it. 30 years ago, people didn’t need smart phones with expensive plans, a subscription to HBO, a TV in every room, a new computer every couple years, cars with computers built in etc. The middle class works more and makes more, but it has more to spend its discretionary income on, so it seems to be making less.
However, I would agree they don’t make proportionally more. More technology means more expenses for the workplace too, and they don’t necessarily mean more money due to increased competition (due to increased output by competitors). Also, those in charge of the money have increased expenses (and they’re working harder, too) so don’t think they aren’t going to take a bigger cut of the income.
What are you “just saying”? That we should model our legal system after China and Russia? And I question your ability of what would happen in China or Russia.
Did you just mix nominal aggregate GDP and real per capita wage growth and expect to get some meaningful analysis out of it?
Hint: You just blew away the impact of 50 years of inflation and population growth, and grossly exaggerated the result.
Yes, incomes have become more skewed. When you have free trade, one of the impacts is wage equalization between countries, in those cases where the workers are implicitly competing. Eventually their wages tend to converge on a productivity and capital intensivity basis. And capital migrates toward the best ratio of wages to productivity. One of the first rules in analyzing trade is that even if the benefits of trade are positive on both sides, the gains from trade will not be distributed evenly. There are winners and losers. Low skilled workers in high wage economies are losers, unless they can get ongoing redistributive payments from the winners. I think in the US we have sucked at this.
There is also automation. Think of this as competing with a really high-wage, but super-productive worker (the robot or at least automated factory). You have 100 line workers replaced by a couple of engineers. The engineers make three times what the line workers used to make, but in aggregate the value equation shifts to those who design and build the robots and who own the factory, the trademarks, etc. You can try to tax them to compensate the workers, but that might cause them to shift the factory to another country. You need a VAT rather than an income tax to fix that problem.
I am giving you an economic explanation. If you want a moral one, that’s two doors down on the right.
If they were made in America, the unemployment rate would be better and the balance of trade with China would be better. Our economy would be stronger, our debt load lighter. But … you know that.