Posts Tagged ‘Income and Productivity’

Pay, productivity and inequality

August 11, 2015

lawrence20150721-figure1

The chart shows the basic economic problem of the USA, and of other advanced countries as well.

Economic productivity continues to increase, but wages do not.

Economists Lawrence Mishel and David Ruccio reported recently on how pundits and economists have tried to explain it away, by re-defining employee compensation, re-defining productivity and re-defining the cost of living.

But, as Mishel and Ruccio both pointed out, none of the pundits were able to explain away the real cause of the problem—that the benefits of increase productivity are being siphoned off by the owners of financial assets and the upper-income brackets..

LINKS

Inequality Is Central to the Productivity-Pay Gap by Lawrence Mishel for the Economic Policy Institute.

Mind the gap—or else define it away by David Ruccio for occasional links and commentary.

Why doesn’t technology make us all better off?

March 11, 2015

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We Americans long enjoyed the world’s highest material standard of living, and we were told that was because of the superior productivity of American industry.  That sounds like common sense.  If you want more, you need to produce more.  Obviously.

Click to enlarge.

Click to enlarge.

But about 30 or so years ago, this changed.  Our productivity continued to increase, but our wages and salaries didn’t increase along with it.

Why?

Some say that the problem is technology.   Automation means that fewer wage-earners are needed, and our work had less value.   So naturally there are fewer jobs, and employers generally don’t have to pay as much to find people to take these jobs.

Fewer wage earners are needed.  Needed by whom?  Our work has less value.  Value to whom?

They are less needed, and of less value, to the corporate boards and wealthy stockholders who own the technology.  Or, to put it another way:  Capitalists, not workers, own the means of production.

Click to enlarge.

Click to enlarge.

It’s true that the average factory worker or retail clerk did not personally create the technological innovations that made it possible for them to do more with the same amount of work.  But neither did the average corporate executive or corporate stockholder.

If technology is owned and controlled by a small financial elite, then the applications of technology will be such to benefit that elite.

It is possible that, in acting in their own interest, the elite will do things that are good for society as a whole.  It also is possible that they will do things that are bad for society as a whole.

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Click to enlarge.

When that happens, we the people need to understand that their power and ownership is not based on divine right or impersonal economic laws.   It is the result of corporate structures and legal rights established by law, and laws can be changed.

Some radical thinkers, such as Stanley Aronowitz, David Graeber, Richard D. Wolff and Gar Alperovitz, are reviving the idea of worker ownership and public ownership of the means of production, which is not the same thing as government ownership.

More moderate reformers think it is just necessary to change the balance of power within society.

The important thing, as I see it, is to stop letting priorities be determined by the “job creators,” the ones who own the machinery, the research laboratories and the so-called intellectual property.   The question is not whether they need us.  The question is whether we need them.

LINKS

Of Flying Cars and the Declining Rate of Profit by David Graeber for The Baffler.

Why Wages Won’t Rise by Robert Reich.

The Great Decoupling of the U.S. Economy by Andrew McAfee on his blog.

Global lessons on inclusive growth by Jason Furman for Policy Network.

The Most Important Economic Chart by Atif Mian and Amir Sufi for House of Debt.

The wedges between productivity and median compensation growth by Lawrence Mishel for the Economic Policy Institute.

 

 

Germany on the same path as the USA

December 12, 2014
Wage and productivity growth in Germany

Wage and productivity growth in Germany

Via VoxEU

Some years back I wrote a post holding up Germany as a role model for the United States.  I said Germany’s policies showed that a nation can have a strong labor movement and a strong social safety net and yet have a growing economy and success in world markets.

I failed to recognize that Germany was and is following the same path as the United States—high profits, wage stagnation and financialization.  Germans are better off than Americans only because their starting point was higher when they started on the road to decline.

The chart shows that German productivity is increasing, just as in the United States, but German wage-earners aren’t getting the benefit of it.

Just like in the USA.

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The rising tide no longer lifts all boats

March 20, 2014
Click to enlarge.

Click to enlarge.

President John F. Kennedy used to say, “The rising tide lifts all boats.”  What he meant was that economic growth benefits everyone.   The chart above shows that this once was true, but is no longer so.  The links below give some possible explanations as to why this is the case.

http://houseofdebt.org/2014/03/18/the-most-important-economic-chart.html

http://www.nakedcapitalism.com/2013/08/productivity-rose-7-7-post-great-recession-workers-have-seen-none-of-it.html

Return on investment (of labor) is falling

July 11, 2013

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The United States officially has been in economic recovery in 2009.  Economic output, as measured by Gross Domestic Product, is up.  Corporate profits are up.  The stock market has reached new highs.  So, according to the law of supply and demand, wages should be rising, too.  Right?  Wrong.

Economics writer Felix Salmon has the figures.

NELP, the National Employment Law Project, has taken a detailed look at what happened to wages during the recovery — specifically, between 2009 and 2012.  They looked at the annual Occupational and Employment Statistics for three years — 2007, 2009 and 2012 — and created a list of wages for 785 different occupations.  They then split those occupations into five quintiles, according to income; the lowest quintile made $9.49/hr, on average, last year, while the highest quintile averaged $40.23/hr.  […]

The big-picture lesson that NELP draws is that between 2009 and 2012, real median hourly wages fell by 2.8% — and that the poorer you were to start with, the more your wages fell.  The top quintile didn’t do well: their wages dropped by 1.8%, in real terms.  But the fourth quintile did particularly badly: its wages fell by 4.1%, on average. 

To take one example, occupation 39-5012 — that’s Hairdressers, Hairstylists, and Cosmetologists — was earning $12.00 an hour, in 2012 dollars, in 2009.  But by 2012 they were earning just $10.91 per hour: a drop of more than 9%. 

Or look at occupation 51-6042 (“Shoe Machine Operators and Tenders”): that job saw wages fall 14%, in real terms, in just three years, with nominal wages falling from $12.69 to $11.69 per hour.

The charts show the large range of outcomes: some occupations are doing great.  At the top end, the highest-paid profession on the list, Psychiatrists, went from earning $69.48 per hour in 2007, to $83.33 per hour in 2012.  That’s a real increase of 8.3%.  But overall, everybody is doing pretty badly.

So what’s going on?

20120314-graph-the-1-percents-jobless-recovery-01

Click on Wage deflation charts of the day for Felix Salmon’s full article.

Click on The 1 Percent’s Jobless Recovery for the Century Foundation’s article.

Do the 1 percent carry the rest of us?

January 4, 2012

There are two ways to interpret this chart.  One is that 1 percent of the American population are John Galts who single-handedly have generated all the economic growth in the past 30-some years.  I’m sure that many people in this group think just that.  The other interpretation is that the system is rigged to redistribute the income of the 99 percent upward to the 1 percent.  That seems to me to be more plausible.

A wise economist told me once that economics is the study of how people respond to incentives.  There ought to be incentives to all the producers–and I don’t think this group is limited to 1 percent of the population.

Hat tip to Hullabaloo.