| Author | Message | ||
     Tom Reingold Supporter Username: Noglider  Post Number: 15554 Registered: 1-2003  |
September 1, 2006 Op-Ed Columnist The Big Disconnect By PAUL KRUGMAN There are still some pundits out there lecturing people about how great the economy is. But most analysts seem to finally realize that Americans have good reasons to be unhappy with the state of the economy: although G.D.P. growth has been pretty good for the last few years, most workers have seen their wages lag behind inflation and their benefits deteriorate. The disconnect between overall economic growth and the growing squeeze on many working Americans will probably play a big role this November, partly because President Bush seems so out of touch: the more he insists that it’s a great economy, the angrier voters seem to get. But the disconnect didn’t begin with Mr. Bush, and it won’t end with him, unless we have a major change in policies. The stagnation of real wages — wages adjusted for inflation — actually goes back more than 30 years. The real wage of nonsupervisory workers reached a peak in the early 1970’s, at the end of the postwar boom. Since then workers have sometimes gained ground, sometimes lost it, but they have never earned as much per hour as they did in 1973. Meanwhile, the decline of employer benefits began in the Reagan years, although there was a temporary improvement during the Clinton-era boom. The most crucial benefit, employment-based health insurance, has been in rapid decline since 2000. Ordinary American workers seem to understand the long-term disconnect between economic growth and their own fortunes better than most political analysts. Consider, for example, the results of a new poll of American workers by the Pew Research Center. The center finds that workers perceive a long-term downward trend in their economic status. A majority say that it’s harder to earn a decent living than it was 20 or 30 years ago, and a plurality say that job benefits are worse too. Are workers simply viewing the past through rose-colored glasses? The report seems to imply that they are: a section pointing out that workers surveyed in 1997 also said that it had gotten harder to make a decent living is titled, “As usual, people say things were better in the good old days.” But as we’ve seen, real wages have been declining since the 1970’s, so it makes sense that workers have consistently said that it’s harder to make a living today than it was a generation ago. On the other side, workers’ concern about worsening benefits is new. In 1997, a plurality of workers said that employment benefits were better than they used to be. That made sense: in 1997, the health care crisis, which had been a big political issue a few years earlier, seemed to have gone into remission. Medical costs were relatively stable, and in a tight labor market, employers were competing to offer improved benefits. Workers felt, rightly, that benefits were pretty good by historical standards. But now the health care crisis is back, both because medical costs are rising rapidly and because we’re living in an increasingly Wal-Martized economy, in which even big, highly profitable employers offer minimal benefits. Employment-based insurance began a steep decline with the 2001 recession, and the decline has continued in spite of economic recovery. The latest Census report on incomes, poverty and health insurance, released this week, shows that in 2005, four years into the economic expansion, the percentage of Americans with private insurance of any kind reached its lowest level since 1987. And Americans feel, again correctly, that benefits are worse than they used to be. Why have workers done so badly in a rich nation that keeps getting richer? That’s a matter of dispute, although I believe there’s a large political component: what we see today is the result of a quarter-century of policies that have systematically reduced workers’ bargaining power. The important question now, however, is whether we’re finally going to try to do something about the big disconnect. Wages may be difficult to raise, but we won’t know until we try. And as for declining benefits — well, every other advanced country manages to provide everyone with health insurance, while spending less on health care than we do. The big disconnect, in other words, provides as good an argument as you could possibly want for a smart, bold populism. All we need now are some smart, bold populist politicians. Copyright 2006 The New York Times Company | ||
| Tom Reingold Supporter Username: Noglider Post Number: 15555 Registered: 1-2003 |
My first impulse is to agree with him, that keeping up is harder than ever. We do have a certain amount of inflation, and my wages, if I'm a good example, haven't even gone up numerically in five years. That is to say, my wages, adjusted for inflation, have gone down. But I may not be typical. Furthermore, the standard of living seems to be constantly increasing. Maybe keeping up with THAT standard is the challenge. A typical home is TWICE the size it was 50 years ago. Our closets have more clothes in them than they did in the past. We eat more, probably too much, but that's not because we can't afford to eat less. We consume more fuel, water, and just about everything else. How does Krugman take his measurements, and can we take them seriously? | ||
| Hoops Citizen Username: Hoops Post Number: 2080 Registered: 10-2004  |
Those are good questions Tom. I would like to know the answers as well. Given my age, in 1973 I was still in HS, I cant tell what wages were back then. I know that my first full time job earned me 9000 per year and I was able to get along. Since that time my wages have skyrocketed due to my schooling and career choice. But I can say that my wages have be flat for the past 6 years. I have received only modest increases the past 3 years that have not equaled inflation plus the increased cost of health insurance. I know that I can afford less in 2006 then I was able to in 2001. Between college tuition and real estate taxes I have very little disposable income at all. I agree that we have more stuff now then ever yet I know that I cant really afford to go on a vacation so there is some kind of trade off there. | ||
| Tom Reingold Supporter Username: Noglider Post Number: 15557 Registered: 1-2003 |
I'm 45, so I'm slightly younger than you. Of course, in many careers, you expect a sharp rise in salary up to a certain age or number of years of experience. Then you expect the curve to level off. That has happened to me, and, I gather, to you. Still, a sample size of two is not a good economic indicator. Anyway, if my wages are not going to rise any more, inflation is going to pinch me hard. And my older kid will be in college in a year, and I don't really know how I'll be swinging that. | ||
| Tom Reingold Supporter Username: Noglider Post Number: 15606 Registered: 1-2003 |
Lest anyone think that the NY Times has one bias, here is an opposing view by another of their columnists: =-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=- September 7, 2006 Op-Ed Columnist The Populist Myths on Income Inequality By DAVID BROOKS There are two schools of thought on income inequality. Members of the first school — populist politicians and a few economists — say the key issue is economic power. The haves exercise more power over the have-nots. As a result, corporate profits soar, while wages stagnate. Money-drenched politicians push through shareholder-friendly trade deals that outsource American jobs while job insecurity skyrockets. C.E.O.’s get absurd salaries while the 99 percent of earners enjoy few benefits from productivity gains. Unions are weakened while manufacturing wages tumble and the middle class suffers. In short, populists argue, the market is broken. The rules are rigged. The reigning ideology in Washington must be upended. Unions must be revived. Globalization needs to be reorganized. The problem with this narrative is that it doesn’t really fit the facts. First, workers over all are not getting a smaller slice of the pie. Wages and benefits have made up roughly the same share of G.D.P. for 50 years. Second, offshore outsourcing is not decimating employment. According to the Bureau of Labor Statistics, outsourcing is responsible for 1.9 percent of layoffs, and the efficiencies it produces create more jobs at better wages than the ones destroyed. Third, jobs are not more insecure. Workers are just as likely to hold a job for 20 years as they were in 1969. Fourth, workers are not stuck in dead-end jobs. Social mobility is roughly where it was a generation ago. Fifth, declining unionization has not been the driving force behind inequality. David Card of the University of California, Berkeley, has estimated that de-unionization explains between 10 and 20 percent of the rise in inequality, and that effect was probably strongest decades ago. These days the working class is not falling behind the middle or upper-middle class. Instead, the big rise in inequality is within the office parks, among people who were never unionized. Middle managers are falling behind top executives. The populists, who usually live in university towns, paint a portrait of unrelieved misery that badly distorts reality. It’s true that middle-class wages are lagging, but as Stephen Rose points out in The American Prospect, over the past 25 years the share of working-age adults in households making over $100,000 has risen by 13 percent while the share of households making less than $75,000 has dropped by 14 percent — after adjusting for inflation. The median household income of people in their prime working years (25-59) is $63,000. More than half of Americans have no credit card debt, and half of those who do owe less than $2,200. Workers continue to see their wages rise as they age. The typical male worker with some college but no degree has seen his income rise from $34,000 in 2000 to about $40,000 today. Members of the second and much more persuasive school of thought on inequality say the key issue is skills. Lawrence Katz, formerly of the Clinton administration, now of Harvard, puts it this way: Across many nations, the market increasingly rewards people with high social and customer-service skills. A contractor who can work with customers, design kitchens and organize jobs may earn five times as much as one of his workers who has identical cabinetry skills. An office worker who is creative, charismatic and really good in fast-changing interactive settings now gets paid much more than a disciplined middle manager who excels at routine tasks. Katz describes a polarized economy. Wages are rising in the bottom quartile for workers who provide personal services. The middle is lagging. The real rewards are going to the top 10 percent, especially to those relative few who have the skills to transform organizations from the top. In other words, the market isn’t broken; the meritocracy is working almost too well. It’s rewarding people based on individual talents. Higher education pays off because it provides technical knowledge and because it screens out people who are not organized, self-motivated and socially adept. But even among people with identical education levels, inequality is widening as the economy favors certain abilities. In short, government policy is not driving inequality and wage stagnation. But government hasn’t done much to effectively address the problem either, even though per-capita education spending has more than quadrupled since 1950. What’s needed is not a populist revolt, which would make everything worse, but a second generation of human capital policies, designed for people as they actually are, to help them get the intangible skills the economy rewards. What would a set of second-generation human capital policies look like? I’ll come back to that in a few days. Copyright 2006 The New York Times Company | ||
| tom Citizen Username: Tom Post Number: 5792 Registered: 5-2001 |
so much nonsense, so little time... Um, doesn't that wage and benefit number include the wages and benefits of that top 1% that is grabbing a bigger share? It makes perfect sense -- if GDP is $100 and 50 years ago I made $20 and my CEO $40, our wages made up 60% of GDP. If today the GDP is $1000 and I make $100 and my CEO $500, it's that same 60%. But the income inequality is growing, just like we complian about. To expand the metaphor, there are five people in the race, Alfred, Bert, Carl, Dennis and Earl. They are spread out on the course in that order, with Alfred in the lead, and Earl at the back. Brooks is saying that "It's not Earl that's falling behind Carl, it's Bert is falling behind Alfred." In other words, Alfred is still increasing his lead over everyone else. Whether it's a meritocracy is precisely what we're disputing. The "individual talent" seems to be in many cases the talent to put your own compensation committee into place so you can grab more dollars as they go by. | ||
| Tom Reingold Supporter Username: Noglider Post Number: 15611 Registered: 1-2003 |
He does say, "almost too well" which seems to me like an admission that it's too skewed. I don't mind a meritocracy. Those who do more valuable work should get bigger rewards. The difference, however, is widening. The difference in productivity is not widening. It might even be narrowing. I haven't heard any rationalizations for the widening differences in rewards. Not one. Not even a lame one. | ||
| mjc Citizen Username: Mjc Post Number: 1309 Registered: 10-2004 |
When Brooks says, "Wages and benefits have made up roughly the same share of G.D.P. for 50 years," I wonder how that "same share" was distributed 50 or 25 years ago vs. how it's distributed today. And when he says, "The real rewards are going to the top 10 percent, especially to those relative few who have the skills to transform organizations from the top," I would like to know how he tracks whether those top 10 percent, or some subset of them, really are transforming organizations in a productive way, vs. simply raking in the bucks while the organizations stagnate or tank. I'd hesitate to assume that if a person is well-paid, then s/he is productive/transformative, esp. with compliant boards and bandwagon compensation committees. How about some measures? I don't have the wherewithal to find out the answers; hope someone who does will provide rebuttal or confirmation of the Brooks piece. | ||
| Tom Reingold Supporter Username: Noglider Post Number: 15612 Registered: 1-2003 |
mjc, it's pretty plain already. 30 or 40 years ago, the CEO made about 30 times the wages of the average worker. Now he makes about 300 times. If you consider this to be a productive transformation, then the CEO is earning at least part of his pay well. If not, then, well, not. I think Brooks's reasoning sounds like, "if he's making more money, then he's earning it, so it's good." Sounds like total laissez-faire to me. | ||
| Southerner Citizen Username: Southerner Post Number: 1498 Registered: 2-2004 |
A thread started and 6 of the 9 posts are from the thread originator. It looks like someone is striving to give Foj a run. | ||
| mjc Citizen Username: Mjc Post Number: 1311 Registered: 10-2004 |
Tom R, I agree with you, I just don't have numbers. tom, you said it faster than I did, and better too. Brooks' stats look like so much that the administration and its apologists put out - quotable but deeply misleading. Sorry if I sound like a mirror image of Straw, but their policies and justifications make me nuts. | ||
| Tom Reingold Supporter Username: Noglider Post Number: 15615 Registered: 1-2003 |
Southerner, the fact that you're commenting on the players and not the play, so to speak, must mean you have nothing to add on the subject. I hope you're not trying to impress anyone. | ||
| cjc Citizen Username: Cjc Post Number: 5880 Registered: 8-2003 |
The reason people at the top earn disproportionately more is because they've negotiated that level of compensation, and the company feels (rightly or wrongly) that they're worth that level of compensation. If it was the case that businesses could easily find a person to accomplish the tasks of a person making 200K-and-beyond, then those people wouldn't command that kind of salary. Business obviously feels it can't, and that's why they're willing to paying what they do. Quality/merit has to eventually enter the picture or the business will do poorly. | ||
| Tom Reingold Supporter Username: Noglider Post Number: 15616 Registered: 1-2003 |
Sure, but top executives are being rewarded heavily whether or not the companies succeed. Lucent is an example. I worked there. Those guys get obscene salaries and justify it by saying they're the only people who can turn the company around. Well, that's what they said in 2002. They haven't managed to turn the company around. The company is now a tiny fraction of what it used to be, with little hope of it being respectably profitable. They told me that, for me, rewards would come after I prove my performance. It doesn't work that way for the executives. They reward before performance. And if they don't meet their expectations, there is no punishment. So there goes your theory of pay matching accomplishments. Would you like to offer another explanation? Anyway, as I said before, it's fine for folks at the top to earn more than those under them. Always been that way, always will be. What, pray tell, justifies the change in the difference between the average worker and the guys at the top? As I said, I haven't even seen a lame justification for that, much less a good one. | ||
| Foj Citizen Username: Foger Post Number: 1803 Registered: 9-2004 |
Tom R... is that the Enron model being applied to Lucent? To me - whats important, is that when this income inequality reaches a certain point, Its economically, Politically, Socially, destablizing, ala the Russian Revolution, French Revolution, American Revolution. So Party on.... | ||
| Southerner Citizen Username: Southerner Post Number: 1499 Registered: 2-2004 |
Reingold, You're correct. I have nothing to say on this subject but did enjoy your conversation with yourself. | ||
| cjc Citizen Username: Cjc Post Number: 5882 Registered: 8-2003 |
Tom -- I realize some executives are overcompensated. That's why I put in "...(rightly or wrongly)..." The market and shareholders will eventually punish the company with such behavior. | ||
| Tom Reingold Supporter Username: Noglider Post Number: 15622 Registered: 1-2003 |
We can hope that will happen. It's been a long time coming. The trend over the last 40 years or so is not encouraging. Given the trend we're observing -- and it's not entirely recent --, what do you think will turn it around? | ||
| dougw Citizen Username: Dougw Post Number: 860 Registered: 3-2005 |
You are all wrong to focus on wages for the top 1%. What is really important is not wages but wealth. That is net worth. Most wealth generation comes not from wages but from invesment. That said the two richest men in America, Gates and Buffett were worth nothing 50 years ago. They are examples of what is best in America. There is not an elite class in America that you need to be born into. Just work/invest/invent your way into it. I bet the two richest men in the year 2056 are worth zero right now. |
