Plan B Forum

One of the biggest factors in the destruction of real wages was the remedy for the inflation of the 70's. Paul Volker's hyper interest rates that shuttered many manufacturers taking good paying skilled labor jobs with them. The weakened US worker was no match for the Voodoo economic model of Reagan which was based on a supply side theory that said everyone benefits when the rich get richer. The rising tide floats all boats theory. Unfortunately the majority of people were never given or put into a boat.

It was great for Wall Street because the rising gap in wages fed profits on one side and debt on the other. Companies used the stagnant wages to fuel productivity and the increase in debt fueled the credit industry. The share prices grew faster than the GDP. Fueling another debt orgy when investors snapped up shares on credit.

Nobody questioned the sanity of a consumer economy (the US GDP is 70% consumer spending) where the consumers were not paid enough to actually buy the products they sold. They didn't manufacture them anymore the manufacturing was outsourced by the demands of the Wall Street analysts to trim labor expenses to fuel profits. Too bad they didn't outsource the CEO's or their own jobs.

People were now working in the new service industry and couldn't buy the products they sold without using credit, i.e. sinking deeper into debt. The economy grew because the new financial services industry made credit easy. People augmented their stagnant wages with debt. They were even told to go buy, remember Bush after 9/11? The entire consumer industry was constructed to enable people to continue to buy the products they wanted and needed using easy credit. What would have happened if they didn't? Many would be homeless today. That's what happens when wages don't keep up with the cost of living. Workers were not willing to see their living standards drop year by year in the name of corporate profits and outrageous CEO pay.

Workers were given only one option, acquire debt just to maintain the standard of living you had last year. Everyone knows that this is unsustainable. Everyone outside of the Federal Reserve, the banking industry, Wall Street, and the government it seems. When profits grow faster than real productivity gains, when real wages trail productivity, when debt is used to augment wages a bubble is generated and all bubbles burst. This should once and for all drive a stake in the heart of the Voodoo model of 'trickle down' supply side economics.

To be honest the current implosion of the banking sector isn't entirely due to the debt used to augment wages. At some point the banks, hedge funds and other financial industries decided that that debt bubble was growing too slowly to satisfy the demand for Wall Street quarterly profit growth. They tuned to derivatives to increase profits. They packed up the workers debts and sold those overseas then gave workers more credit. Wrapped the entire package in even more derivatives.

When the bubble finally burst the financial industry didn't do what it requires it's customers to do, pay up. It held a gun to the government's head and required the taxpayers to fill the void left by the bubble with cash. The taxpayers are now paying off their debt in the form of a financial industry bailout. The problem is the workers debts are not disappearing, just their houses in foreclosure proceedings.

The money trail is too long and torturous for people to see the con. This was their money that they never received in wages, their debt that they had to take on that they are now paying off with their tax dollars with wages that are still the same or lower than when they started working. Yet their debts remain and the CEOs walk away with hundreds of millions.

History has a way of repeating itself. This was part of Nikolai Kondratieff's long wave theory. The Kondratieff wave cycle is about the length of a human life span because the next generation of people would repeat the same mistakes the previous generation made. The mistakes maybe updated for the times with new technologies but the results would be the same, the 'Kondratieff winter' i.e. a Great Depression.

Mark Twain was quite correct when he said "History doesn't repeat itself, but it does rhyme."


[ 1 ] Chart constructed with data from http://numbrary.com/sources/aba5f80eff- ... ly-earning


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The Uncomfortable Truth About American Wages

By MICHAEL GREENSTONE and ADAM LOONEY


Michael Greenstone is director of the Hamilton Project and a senior fellow at the Brookings Institution. He is also the 3M Professor of Environmental Economics at M.I.T. Adam Looney is policy director of the Hamilton Project and a senior fellow at Brookings.


Job creation has rightly been the central economic issue of the last three years as the United States continues its recovery. But the problems with the job market are not entirely recent. The downturn also exacerbated longer-term challenges in the labor market that are driven by a variety of factors, including technological change, international trade and the decline of unions. Many of these forces have been around since the 19th century, but today, for what may be the first time in American history, we are failing to invest enough in our skills and productivity to stay ahead of these trends, and the impacts of this failure are reflected in the declining wages of many American workers.

Because the role of women in the labor force has changed strikingly over the last 40 years, the problem is most evident in trends in male earnings. And, in fact, there has been a lot of talk about the stagnating wages of American male workers. Using conventional methods of analysis, the data show that the median earnings for prime-age (25-64) working men have declined slightly from 1970 to 2010, falling by 4 percent after adjusting for inflation.

This finding of stagnant wages is unsettling, but also quite misleading. For one thing, this statistic includes only men who have jobs. In 1970, 94 percent of prime-age men worked, but by 2010, that number was only 81 percent. The decline in employment has been accompanied by increases in incarceration rates, higher rates of enrollment in the Social Security Disability Insurance program and more Americans struggling to find work. Because those without jobs are excluded from conventional analyses of Americans’ earnings, the statistics we most commonly see — those that illustrate a trend of wage stagnation — present an overly optimistic picture of the middle class.

When we consider all working-age men, including those who are not working, the real earnings of the median male have actually declined by 19 percent since 1970. This means that the median man in 2010 earned as much as the median man did in 1964 — nearly a half century ago. Men with less education face an even bleaker picture; earnings for the median man with a high school diploma and no further schooling fell by 41 percent from 1970 to 2010.



Women have fared much better over these 40 years, but they started from a lower level, and the same problems faced by their male counterparts are beginning to have an effect. Since 1970, the earnings of the median female worker have increased by 71 percent, and the share of women 25 to 64 who are employed has risen to 71 percent, from 54 percent. But after making significant wage gains over several decades, that progress has slowed and even reversed recently. Since 2000, the earnings of the median woman have fallen by 6 percent.

Though these trends in earnings for American workers — men and women alike — are troubling and have many causes, the data do present some clear guidance for policy makers. Among the most robust findings in economics is that education reduces unemployment and increases earnings. But even with the remarkable capacity for education to produce growth, the rate of educational attainment in the United States has slowed, especially for men. The share of men 25 to 34 with a college degree, for example, has barely increased over the last 30 years. (The trends are much better for women.) The United States, once the world leader in educational attainment, has been surpassed by many countries.




Strengthening our K-12 education system and increasing college-completion rates are, therefore, imperative to improving living standards for future generations. It is also clear that changes in the global economy that generate vast opportunities for the American economy have created difficulties for many Americans; the continued pursuit of pro-growth policies will require the identification of policies that help these workers to remain active participants in the economy. These are difficult tasks, but the last four decades demonstrate that the stakes are high. Our children’s living standards are at risk, and with them the American Dream that each generation can do better than the previous one.

increasing college-completion rates are, therefore, imperative to improving living standards for future generations.

dgs49 wrote:Joining the Global Economy was not a choice, but a necessity, and there's no going back.

Gob wrote:Which are "your oceans" Andrew?

Andrew D wrote:Thanks, Gob for acknowledging that the U.S. patrols the world's shipping lanes voluntarily. Yet another example of the U.S.'s historically unprecedented magnanimity -- still more proof that the U.S. is the most benign superpower the world has ever seen.

We own the world's oceans in the most literal sense: We can do with them what we please.

Enforcement? There is an entire thread in which a serious discussion of that topic was attempted but repeatedly derailed.

Gob wrote:

We own the world's oceans in the most literal sense: We can do with them what we please.

Now you're just being silly again.

Andrew D wrote:

Gob wrote:

We own the world's oceans in the most literal sense: We can do with them what we please.

Now you're just being silly again.

Yes, you are.

The U.S. could obliterate the naval forces of any other nation. That does not mean that the U.S. should run around the world obliterating other nations' navies.

Of course no other nation wants to pay the U.S. for the protection which that nation receives from the U.S. Why pay for what you are getting for free?

But if the U.S. were to withdraw its protection from nations which could afford a modest fee (say, 2% of the gross value of the goods shipped under U.S. protection) -- which would amount to announcing to the world: "you want to pirate their ships? not our problem" -- those nations would soon be begging the U.S. to resume protecting their shipping.