Researchers answer a question about the decline of the middle class
washingtonpost.com
washingtonpost.com
There's a lot of evidence to show that all of this was intentional and orchestrated:
http://www.laborrising.com/2013/07/union-organizing-and-the-...
Note, this was written in 1979, after about 10 years of the effects of the efforts of organizations like the Business Roundtable.
BTW, I can't help but add: the small hometown where I grew up in the midwest now has a pretty bad Oxy/Heroin/Meth problem on its hands.
The era also coincides with massive amounts of women entering the workforce.
On average, workers born in 1942 earned as much or more over their careers than workers born in any year since
The trend has also widened the gap between the rich and everyone else as, overall, the economy has continued to grow overall but the bulk of those gains have ended up in the pockets of the affluent.
While economists have been concerned about recent data on earnings, the new paper suggests that ordinary Americans have been dealing with serious economic problems for much longer than may be widely recognized.
The new research shows that in the past, a good guide to forecasting typical career earnings among Americans of a given age has been their average income they were 25.
Young workers’ incomes are still declining today, suggesting that their trajectories over the rest of their careers will be lower as well.
https://www.reference.com/education/percentage-americans-phd... says: "According to U.S. Census 2013 data, 1.68 percent of Americans over the age of 25 have a PhD. [...] [Adding in medical doctors], the total percent of Americans referred to as doctors equal to 3.16 percent."
I'm guessing only a small part of those will be what you would call "high value", so I don't think there's enough there to shift the statistics in the way you say.
1940s is also the time when US companies started offering health insurance, moving more of the compensation into non-monetary realm (health, dental, vision, life insurance policies, stock options and stock purchase plans).
The tax code also evolved to the point where it's extremely lenient on non-monetary benefits (e.g., health insurance is deductible for companies) and extremely punitive on monetary compensation (top-bracket 39.6% income tax rate, for example, is higher than cigarette tax or gasoline tax, which sends a rather interesting message to the public).
Looking at the charts and the analysis - one concern raised is that workers starting out in 2010 had lower real wages than their counterparts from 1969.
A really simple explanation might be that in 2010 we were still in the deepest part of the biggest recession in recent history. What do you think that would do to starting wages?
I know there is a narrative they are trying to tell, but in the past 12-24 months they are so obviously biased I simply don't believe anything they write anymore.
Edit: I might add that I worry very much about the decline of the middle class. The problem is I don't trust any news source to tell me objective truths, and the more I dig for this information the more the black and white rhetoric doesn't seem to fit.
I get your point about selecting data from any individual year, but the trend lines shown in the graphs cover entire periods.
Later, after the boom, they started to cut their overspending.
I am far more inclined to believe the Investor Class has been doing their damndest to widen the wealth gap at every opportunity since WWII, and wouldn't you know it, all the numbers add up. It's much more like there was a healthy dynamic between management, investors, and the working class, and it's all been shot to shit in the name of quarterly profiteering and Ayn Rand "bootstrap" delusions.
But the worldwide standard of living has massively increased over the past 50 years.
I have been to Germany and I can personally assure you that the life they live now is nothing like it was in 1950. So yeah, there's your rising standard of living worldwide. Key point _worldwide_, although some of it also happened to US.
I also wonder if two income earners are likely to earn more money than a single income earner for a given labor demand, considering overhead of employment, which I think has also increased over time (e.g. benefits). That couple explain some of wage stagnation, I'd bet.
What will be interesting is if the more recent trend of young men leaving the labor force will put upward pressure on wages, or if the jobs will just disappear.
I REALLY like the idea of looking the cumulative burden of employer-born costs of employees as the percentage of dual earners goes up.
my "bet" is that you'd find that the cost of those benefits have been growing at par with the women's labor force participation rate. Take a look at the charts in the Slate Star Codex post on Cost Disease, and overlay the growth in Women's labor force participation rate, and growing pay equality. The relationship is likely not perfectly causal, but there might be a meaningful effect in there.
wage stagnation is tied to the growing wealth of the top 1%, not working women.
Adding workers adds wealth per capita; it's not a zero-sum situation. Adding more workers to the economy grows the economy, by more than the salaries of those workers (if they cost more than they produced, they wouldn't be hired). Now all these women are producing value, they increase productivity, and they also can afford to buy things from you.
Consider it this way: Where would you rather open your store, a town where only the men work, or where both the men and the women work?
OK. Why? Is the ratio of young/old different from before? Were those living on social security included in those stats? What does that have to do with wages? Is it because men are choosing different jobs? Is it because they are working fewer hours? Is it because they are choosing to earn less, because cable TV and internet connection are enough? Is it because cars cost less? Is it because, generally over the population, men are choosing activities other than work? Is it because feminists have changed women who have changed men into deciding not to marry women, generally over the population, which reduces the drive or opportunity to pursue larger incomes? Is the pay hidden somehow, more now than before, going to medical costs instead of salary?
The conclusions in the news article depend heavily on definitions for "middle class" and "workers" and seem to assume that wealth equals money and that income equals wages.
Between increased domestic supply of workers, increased supply of foreign workers, globalization and demographic drag as we need to pay the pensions of the baby boomers with smaller cohorts of workers. Combine that with anti-labor policies and its a no brainer why earnings are dropping.
I recently read that Warren Buffet made the point in 2006 that in order for America to continue growing as it has for the last century, the Dow would have to surpass 2,000,000 by 2099, and during the years 2000-2006, it didn't grow at all from its place at roughly 11,000 (but now it appears to be growing again).
Sidestepping the question of whether or not it has peaked, and when that peak was/is, it seems to be in everyone's best interest to at least pretend that it has not, and perhaps, will never.
I assume you mean, the size of the economy has peaked. The rate of growth was never thought to be increasing (i.e., it didn't grow 4% one year, 4.1% the next, etc.).
This question is answered by well-known data, GDP growth. That popular number represents, effectively, the increase in the economy's size every year. The U.S. economy has grown and continues to grow every year since 1950, with the only exception being 2008, the worst year of the Great Recession.
In the case of economic growth, it's productivity (which is a function of automation), and monetary supply (which is a function of fiscal policy guys playing chicken with the banks). It's not clear that there is a hard physical limit on either of these quantities.
In fact: the innovation represented by automation, might also be seen as similar to the factors against peak oil: as fracking and shale oil are also technical innovations.
You've only illustrated my point. Everyone is very highly incentivized to believe that the growth of the economy is infinite. I mean, just look at the numbers! It only grows, never shrinks.
Is it really possible for economic activity in a country to grow forever with no upper limit? If not, then what's the upper limit?
Fundamentally, the size, i.e., the output of the economy is easy to compute: Inputs (resources, such as labor and capital) x Productivity (how much benefit is wrung from the same resources).
The inputs generally increase. One major input that increases is labor. As the population grows, there are more people doing productive work. Productive workers, which is almost everyone with a paying job and very many without one (homemakers, volunteers, etc.), produce more than they consume - an important point. It's not a zero-sum situation; adding people doesn't reduce everyone's slice of the pie, it makes the pie bigger.
Productivity also increases. You see it in SV every day, with better and better software, as one simple example. Every improvement in knowledge and technology, in every field, adds to productivity. Is there a limit to productivity? It's hard to imagine, but if there is then we're nowhere near it.
> Everyone is very highly incentivized
Or maybe the evidence is very strong. For example, is everyone is incentivized to believe the theory of gravity, or is the evidence very strong?
Call me Chicken Little but I don't see how economists can be optimistic about growth until all or at least some of these trends start going in reverse. Economic growth doesn't just result from coming up with snazzier software - it requires citizens to acquire and deploy capital.
* 14 million is a big number, but it's less than 5% of the U.S. population. I do agree that it's a serious concern, but because of the welfare and economic opportunity for those people, and because of the social disruption of economic inequality; the economy in aggregate is doing well. For those interested, you can find the numbers here (you can adjust the years at the top): https://data.bls.gov/timeseries/LNS11300000
* Debt is a bad word colloquially, but in finance / business / economics, it's actually a great efficiency: Instead of useful resources (e.g., money) sitting around unused (e.g., in a vault), they are lent out to others to make productive use of. Financial institutions are like Airbnb for money - others get to rent your asset while you don't need it, and you make something from it. Borrowing is fine as long as you are generating more income from the borrowed funds than it costs you - e.g., as long as the software you build with the borrowed funds earns a better return than the interest you owe. Generally, that works out well or people wouldn't have a reason to lend or borrow.
* As of December 2015, of the total U.S. federal government debt, 40% was held by foreigners. Interest paid was $94.9 billion that year. The U.S. economy was ~18 trillion that year, so the debt service was ~1/180th of U.S. income; not a problem. Source: https://fas.org/sgp/crs/misc/RS22331.pdf
I'm of the mind that the recent jump in indicators like GDP and the Dow are more likely a result of corporate stock buyback programs than any real recovery. Corporate America spent about 4% of GDP on buybacks just last year. Meanwhile the GDP grew by half that amount. Stock buybacks are specifically designed to move stock prices higher.
I understand that debt can be used strategically, but America is running consistently in the red. So although the part of the national debt that's foreign-owned is small, it represents wealth that has permanently left the country.
It's possible to make money with fewer and fewer employees, and it takes less money to meet our basic needs and entertain ourselves. The result is declining birth rate and income. It is going to continue in this direction and we don't know what to do about it.
Edit: and 120k/yr is nowhere near "upper-class"
http://www.taxpolicycenter.org/statistics/household-income-q...
1: http://www.nytimes.com/2003/01/12/opinion/the-triumph-of-hop...
Additionally, if the wealth distribution curve for the country is basically a backwards "L" with the bend at the ~99th percentile, the difference between the 60th and 80th percentiles isn't really meaningful since the "upper class" is clearly the 99th percentile.
Edit: obviously there are also social caste connotations that used to be applied here too, but I'm only interested in the economic definition.
From Merriam-Webster: a social class occupying a position above the middle class and having the highest status in a society
Many of the HN regulars are upper income, but very few would qualify as upper class (most of us lack the political and social connections).
Citation needed.
What, exactly, is the magnitude of the effect of single-parent homes on the size of the middle class? Without answering that, your "gut instinct" explanation, if that's what it is, is meaningless.
One major conclusion of their research is that the family income of children whose parents divorce and remain divorced for at least six years falls by 40 to 45 percent.
http://www.nber.org/digest/jul02/w8786.html
As per the Census Bureau (table F-10), in 2014, married couple families with one or more children under 18 years, earned an average income of $111,278. In other words, traditional two-parent families earned an income that was more than three times higher than for households headed by a single mother.
http://www.forbes.com/sites/aparnamathur/2015/11/18/the-cost...
Saying that the income of a single-parent family is lower does not remotely answer the question of "What is the magnitude of the effect of single-parent homes on the size of the middle class?"
I actually went and looked up the tables in the census: https://www.census.gov/data/tables/time-series/demo/families...
We have the same percentage of single parent families now as in 1995 (29%). That's over 20 years, the number has barely budged. So how does your answer relate to the question of the decline of the middle class since then?
Besides, two salaries won't move you from middle class to upper class.
Certainly, there is some fuzz and overlap there. A retiree earning $50k/year on dividends and capital gains meets that criterion, while a top-shelf skilled professional or DINK couple earning $400k/year solely from working 40 hours per week (each) does not. The latter could certainly become upper class rather easily just by paying off debt, avoiding unnecessary expenses, and dumping excess cash into index funds, but as long as that plan can be cut short by two simple words ("you're fired") they haven't crossed that class boundary yet.
Generally, when the middle class shrinks, it isn't because a significant portion of them are becoming upper class. More often, it is because expenses rise faster than prevailing wages. The mark of the middle class, to me, is being able to comfortably pay all living expenses with all adults in the household working no more than one full-time job (probably salaried, but not necessarily) at 40 hours per week. You can get everything you need with just one job, and some of what you merely want.
The instant you cross that line where you have to abandon desires and work longer to make ends meet, you're in the lower class. There are certain needs in the US that are not actually survival-level necessities, but rather mandatory to meaningfully participate in civil society. Those have expanded. In earlier decades, you essentially just needed a motor vehicle, a location-based telephone number, and a mailing address. Now, you also need one or more person-based telephone numbers, an Internet connection, and various forms of insurance. Expense categories expanded, even as costs for each expense rose. Median wages stayed stagnant. So people drop out of the middle class. They stop going to the movies and take on more hours or a part time job in order to pay their phone bill.
But we can get that "side-hustle" now, so that makes it all right?
One person's second job may be another's primary source of income.