European Tribune - Community, Politics & Progress.

Why are wages not increasing?

by Drew J Jones
Fri Dec 2nd, 2005 at 06:45:31 AM EST

back from the front page. Title changed. -- Jérôme

RDF jumped into the rat's nest of discussing why working people in the US have seen little gain in recent decades -- particularly since the 1970s, when the Great Productivity Slowdown took place -- and why the wealthy have made such enormous gains. I don't have any statistics at the moment, but let me jump (blindly, I might add) into a discussion of what I think may be happening. The hypothesis was that tax cuts, directed to the wealty, along with the deficits that inevitably followed, have financed the gains of the wealthy.

Now, to some extent, this is probably true. Without question, handing tax cuts to wealthy people will increase the well-being, financially, of wealthy people. That's reasonably straight-forward. But, historically, wages rise at roughly the same pace as productivity growth. The two are not increasing at the same rate right now. Why? I'm not going to attempt to give a definitive answer on this, but rather just lay out a few pieces of what I think is a very large puzzle.

Part of the problem may be the rise of the service sector. As rdf noted, the economy has changed. It is, I think, generally agreed upon that, circa 1975, unionized manufacturing jobs reached their peak in America -- towards the end of the "Great Keynesian Boom," as Brad DeLong called it, which lasted from the end of WWII until the '70s. (There were some signs of a slowdown in the '60s, too.) The productivity of an autoworker is easily measured. The productivity of a Wal-Mart employee is not. (Did Jim-Bo stock the shelves at a faster pace this year? How the hell should I know?)

:: ::

The aggregate measure of wage growth is nice, I suppose, but I suspect -- again, I don't have the figures -- that if we were to compare the middle-class with the working-class, we would find fairly large differences, as well. My point is that the service sector has helped to create a situation in which the wages of those at the bottom do not rise quickly, because there is little progress to be made. Those, in the middle and at the top, with opportunities unavailable to working-class people, can see huge gains because their skills are highly demanded and, therefore, cost more. (The average business economist in America makes over $150,000/yr. after gaining some experience, for example. And I'm the idiot choosing academia.)

Businesses need people to (say) help get the Beijing office up and running, and, at the same time, CEOs are thinking, "Holy Communist Party, Batman! Why am I paying Bob $25/hr. for a job that Hu can perform for $25/week?" It's the same job. Anybody can make a pillow. (Unfortunately, many of the people making these goods are kids, but that's a political issue, and one that we need to hammer whenever possible.)

Jerome has also touched on the fact that, with the rise of China and that of India, nearly three billion workers have now joined the labor market. The supply curve shifts out, and the wage falls. And that's one hell of a shift. This would also account for, at least in part, the huge corporate profits we're seeing -- helped by Bush and Reagan's tax cuts -- and the falling wages of the working class.

So we have strong market forces pulling down the working-class's wages. There were gains made in the 1990s. The internet allowed people to get a lot more done in the office, and, because goods like computers improve at such a rapid pace -- my Apple iBook has 512mb of RAM, and, already, the damned thing, at less than one year old, is beginning to look out of date -- those gains can, albeit to a lesser extent, continue at a brisk pace. But, again, this helps people in the middle. Working-class people don't work in offices, and while most working-class families are now online -- the fastest-growing groups getting on are blacks and the elderly -- it might not help them very much. (It might, however, help their children integrate into the modern economy, but that's another diary.)

If we look at productivity growth in the US (.pdf) -- in (1) Manufacturing, and (2) All Non-Agricultural -- from 1990-1999, we see that productivity growth in manufacturing was quite strong, while much less so for all other non-agro sectors. Remember that manufacturing, especially unionized manufacturing, is becoming a smaller and smaller sector of the economy. In 1999, productivity growth in manufacturing hit an astonishing 6.2%. (These figures are, I believe, taken from the Bureau of Labor Statistics, or BLS.) The growth in the other sectors was only 2.9% -- not bad, but nowhere near the former.

If I am correct in any way, the question then becomes, "How do we solve this problem?" On that, I'll have more later. In the meantime, let me know what you all think -- about both my hypothesis and about the policy implications.

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Why are wages not increasing? | 33 comments (33 topical, 0 editorial, 0 hidden)

Service sector (none / 0)

I'm not sure I follow your logic exactly, but...

Manufacturing jobs stagnated because of pressure from foreign suppliers (let's assume).

Pink collar service jobs stagnated because of lack of scope for productivity improvements.

White collar service jobs in "highly skilled" sectors did well because their skills were in demand.

However, if you look at the paper I just cited in my most recent reply in the original thread from the Levy Institute you will see that most of the gains in wealth are due to the rise in value of the stock market and other assets owned by the top 1%. In addition there has been a large increase in the compensation paid to top executives in most firms. This group is too small to represent the total cause of the wealth distortion. 5000 companies with five key executives each, perhaps.

I think that international pressure may be a factor, but more important is the loss of labor power. Unions are no longer a serious factor and labor laws have been gutted so they are no longer effective. It would be instructive if someone could compare the situation in the industrialized EU countries where unions are still strong.

So I think the shift is due to a loss of labor strength and a gaming of the capital structure by the financial services sector. Read about the run up to 1929 to see where that leads.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Mon Nov 28th, 2005 at 02:59:30 PM EST

Re: Service sector (none / 1)

Ah, but where does economic growth fit into this? What I'm saying is that, due to the decline in sectors where productivity grows at the sort of rate we see in (say) manufacturing, and due to the rise of the service sector, in which those at the bottom -- eg., people who stock shelves at Wal-Mart -- haven't the opportunity to gain wealth due to the lack of need for investment in productivity, that executives are able to take a much larger share of the gains.

If Roy stocks dairy products for a living, his income is not going to change much, aside from the usually-automatic (computerized) raise he receives on, typically, an annual or twice-annual basis. So the result of the goods being cheaper to produce in Asia translates to (1)(a) lower prices for consumers, (1)(b) higher demand due to the change in purchasing power of those consumers, (2) large increases in profits for firms with some market power -- transferred to investors and executives (who are also investors, at least in good companies) -- and (3) little change in the income of service-sector employees at the lower level.

Again, I could be completely wrong. But I have to believe that the traditional mechanics of the economy have been changed greatly by the evolution of the past few decades.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (myfriends@thisispancakes.com) on Mon Nov 28th, 2005 at 03:51:46 PM EST
[ Parent ]

Re: Re: Economic hypothesis (none / 0)

It's not just Jim-bob at Walmart. Most service occupations are very difficult to measure productivity with. Thus, the only service industries where wages rise are those like medicine which have restricted workforces.

I'd like to add that "the middle" needs defining carefully. There are those who are much richer than before but, ancedotally at least, there are many who are finding it harder than before (particularly when faced with shocks in property or health insurance prices.)

This of course also suggests that if things have stagnated in aggregate, the working class is probably poorer overall.

When you start thinking about solving the problem I think it's worth considering my crackpot theory.

In essence, manufacturing productivity has risen far and fast enough that the majority of material desires can be satisfied with (in global terms) a tiny amount of employed people.

The next problem is the one you note. How can you increase wages for unmeasurable productivity in services.

The third problem is that a lot of real services, that provide happiness and well-being to people (which is I think where we go when material needs are met) are really hard to build economic systems around. Take the example of a local sports team. You can pay a full-time coach/caretaker but who pays? How do you build payment for community services into a private sector system?

by Metatone (metatone [a|t] gmail (dot) com) on Mon Nov 28th, 2005 at 03:46:45 PM EST

Re: Re: Economic hypothesis (none / 1)

CEOs are thinking, "Holy Communist Party, Batman! Why am I paying Bob $25/hr. for a job that Hu can perform for $25/week?" It's the same job. Anybody can make a pillow.

If Bob is 7 times more productive than Hu at making the pillow, then his job should be safe, right?

If Bob's job is not safe then why is Hu not being paid more, in line with his productivity? Because the authorities in China hold down wages? Allow firms to get away with poor working conditions, environmental practices, and so forth, that Bob's employer can't? Because Hu is not free to join a union?

I would rather see Hu's living standards leveraged upward than Bob's forced downward.

We need some sort of minimal international labor standards to make that happen. At least a globally recognized right to organize so that workers can set their own standards.

Maybe also a more growth-oriented international financial system, along the lines of what Keynes originally proposed in 1944, to replace Washington Consensus austerity policies?

That may be too utopian.

by TGeraghty on Mon Nov 28th, 2005 at 03:58:36 PM EST

Re: Re: Economic hypothesis (none / 0)

I think the issue of productivity is one we need to be careful about. This is something many executives have pointed out. For example, if Hu can make seven pillows instead of one - well then we'll pay him seven times as much. There are several converging forces, with this however:

Hu is paid a bare minimum, so he can barely afford to pay for meals, housing, utilities, and other issues. Hu is paid a minimum wage (or sometimes below), but that is not enough for nutrition and support.
Hu works in a labor-intensive industry. You can't automate your way out of every single process, and believe me when I say those processes that could have been automated, have been. This is why productivity is a tough issue. Can we really compare productivity of a guy operating a welding robot with someone who is putting glue on the insoles of shoes?
Even if Hu managed to become productive through some miracle, there is one more problem. Many companies that supply to American companies are actual Tier 1 or 2 suppliers. They get cost targets from American firms, and they must hit those targets. You can guess where this goes I'm sure :)

Mikhail from SF

by Tsarrio (dj_tsar@yahoo.com) on Mon Nov 28th, 2005 at 07:23:30 PM EST
[ Parent ]

Re: Re: Economic hypothesis (none / 0)

US Household Income Percentiles (Median Plotted)

Poor amd middle class have not moved much since the 60's, upper 20% have done quite well.

by btower on Mon Nov 28th, 2005 at 04:26:56 PM EST

Re: Re: Economic hypothesis (4.00 / 2)

Hairdressers have seen little rise in their productivity and, yet, for some reason, their income has mostly followed that of society on average. I suppose that, as a non tradeable service, we'll always need people among us to do that job, and they will do it only if they get a decent standard of living - relative to people around with similar qualifications (i.e. not too many, but nevertheless some, slightly specialised ones).

Similarly, Wal mart employees are, for the most part, in the non tradeable sector of the economy. So why are their wage stagnating?

One reason is, as non qualified jobs, anybody can do them. So their stagnant wages reflect the fact that there is harsh competition at the bottom. Some of it comes from workers in the tradeable sector losing their jobs to imports and seeking positions where they can find them. Some of it also comes form immigration, which provides another group of people willing to work for pretty low wages. Another group are all the single parents who have become vulnerable and cannot be choosy in what job they take, because they need to feed their kids and put a roof on them.

Lower classes get squeezed from both sides (immigrants, and middle classes dropping down and putting pressure on their now common wage levels).

Middle classes see some amongst them dropping out (those in industries vulnerable to offshoring or imports. It's a minority, but it's a very visible one), and get nervous. Those that are not in jobs where their work can easily be valued (sales, specialised positions, self employed) feel threatened and are not inclined to fight for their rights. The silent majority then intimidates the rest.

So labout gets cheaper, and capital earns more, relatively speaking. And as Greenspan has deluged us with liquidity, the returns on capital are not great, so the returns on labors become even worse. Society fragments - hey, we're all free to pursue our individual dreams, and loses its ability to defend itself collectively.

You get the "winner takes all" logic in more and more sectors; a return to an increasing concentration of wealth (capital goes to those that already have it), and lots of vulnerable people which are easy to exploit, to scare, and to manipulate - and who are keen to find scapegoats. Pick your choice.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Nov 28th, 2005 at 05:17:44 PM EST

Your comments on Walmart jobs are (none / 0)

pretty disdainful, of the jobs, and those in those jobs. I'm just curious, is that a somewhat patrician view on your point, or do you have some data that those employees are very disgruntled in their jobs. do you know that the job satisfaction level at walmart is extremely low, for example? My personal experience on that question is an unbelievably small data base--but they like their jobs. And they are in the retail sector, so they know they are not going to make the money of a doctor. But they do think they might move up to a higher level retail job, in the sense of higher paying--or they may just appreciate incredibly flexible hours while they raise a family or work another job.

I'm not the only one who has talked to Walmart customers (or been one) who are thrilled with what they get, or Walmart employees, who love the benefits, pay, and flexiblity of the work place at Walmart. (disclosure--I've never invested, unfortunately, in walmart, or have any connection with the company).

PS: and let's not have some response from a disgruntled
Walmart employee, who might as well be a disgruntled investment banker--let's have some data.

by wchurchill on Tue Nov 29th, 2005 at 02:07:14 AM EST
[ Parent ]

Re: Your comments on Walmart jobs are (none / 0)

You seem in a strange mood today, wchurchill. Where was the disdain, apart from in your own mind? In particular, there is no discussion of job satisfaction at WalMart in Jerome's post, only the good capitalist-economist assumption that if people had the choice they would take a higher paying job, in general. (Pay used as a shorthand for pay+benefits.)

by Metatone (metatone [a|t] gmail (dot) com) on Tue Nov 29th, 2005 at 05:11:47 AM EST
[ Parent ]

Walmart (none / 1)

Walmart is now the focus of a national campaign for improvement of its business practices. This falls into three areas:

Employee relations
Outsourcing and supplier relations
Impact on local governments and business

I refer you to the recently started blog:
http://www.thewritingonthewal.net/
as a good entry point into the issues (lots of links to activists groups as well).

I'll just highlight some of the issues, if there is any interest we could have a separate thread on this topic.

Turnover is 50-70% per year. Not a sign of happy workers. Unionization is fought strongly even going so far as to shut stores which have voted to unionize. Many employees are on public assistance for health care or food stamps since full-time employment does not provide a living wage for a single wage earner family.
Demands on suppliers have forced many to migrate to China costing US jobs. There is also plenty of evidence of poor working and labor conditions for the foreign workers.
Walmart demands tax breaks and infrastructure development (like new roads) in communities where it opens new stores. This costs the tax payers money and unbalances the economy by putting existing retailers at a disadvantage. There is documentation that after Walmart's predatory marketing policies in a new area have been successful at driving out competition their prices rise.

Walmart has become the poster child for all the bad trends in corporate behavior and, being the biggest, is where the struggle is now being focused. The Walton family (Mrs. Walton and four children - one deceased) are among the richest people on the plant, while their workers and customers are in the lowest economic strata in the US. Each Walton is worth in excess of $4 billion.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Tue Nov 29th, 2005 at 11:14:06 AM EST
[ Parent ]

I suggest you look at both sides of the (none / 0)

case

WASHINGTON, D.C. (November 4, 2005) - One of the world's most respected economic research, analysis and forecasting companies, Global Insight, released an independent study today that found Wal-Mart saved each American household on average $2,329 in 2004. Wal-Mart also had a net positive economic impact in the form of a .9% increase in real wages and the creation of 210,000 jobs nationwide.

You have presented the "prosecution's argument", and here is part of the defence.

My own experience, admittedly very anecdotal, is their prices are great, their quality is fine, and they create jobs with benefits, that often replace Ma&Pa, with higher wages,--and ma&pa don't have benefits at all.

by wchurchill on Wed Nov 30th, 2005 at 03:26:30 AM EST
[ Parent ]

Metatone's criticizms of my remarks are (none / 1)

absolutely correct Jerome. I've developed a totally inappropriate hot button, I now realize, due to Walmart bashing articles I've read over the past several months (MSM articles, not on this site). I totally misinterpreted your comments, reading a ton into them that was clearly not there. My apologies.

by wchurchill on Tue Nov 29th, 2005 at 11:25:37 AM EST
[ Parent ]

You make great points on the service sector. (none / 0)

A couple of questions and comments: first, agreement that it is hard to measure productivity in the service sector, particularly at a macro level. At the micro level of the business, I think it can, and is, being measured by business--things like deliveries per day, items stocked per day, items checked out per day, etc., etc. etc . But it's incredibly challenging in areas like, say, health care. you don't just want to measure patients seen per hour, for example. You need to work in the quality dimension, which manufacturing has (generally), but is fairly challenging in terms of patient outcomes.

Second, we tend to assume "service jobs" are somehow "less than". But you give an excellent example of the business economist making $150,000 which I think would be considered service, and I guess my point/question is that aren't we missing something when we talk about moving to a service economy--in the sense that are not some of the most skilled jobs in our economy classified as service (this is a question). Are not doctors, investment bankers, lawyers, etc.--some of the jobs we all want our children to have--considered service? And not to degrade the sales person at Walmart, or an art store, or a gallery--sorry for the break from finance and economics here--but wouldn't Buddha say "right work", and might not some people love those jobs. (I did for years).

third, countries like Singapore have had a definitive country strategy of first getting manufacturing jobs, and then moving those jobs to Malaysia and Thailand while upscaling their jobs to prototype manufacturing, R&D, and higher level manufacturing. They see that as a victory--and we are crying about using "pillow manufacturing jobs" (from other comments).?? Geesh.

by wchurchill on Tue Nov 29th, 2005 at 01:51:19 AM EST

Re: You make great points on the service sector. (4.00 / 3)

Are not doctors, investment bankers, lawyers, etc.--some of the jobs we all want our children to have--considered service?

I would argue that nearly all jobs we would want our children to have are service-sector jobs. The ones you list are probably the best known.

I didn't intend to speak poorly of Wal-Mart employees, though I've had a few bad experiences with some of the more-obnoxious ones in the South. Or pillow makers, for that matter. Some people love those jobs, as you point out. I worked at Eckerd Drugs (now CVS Pharmacy) for over two years, and I loved nearly every minute of it. (It's the perfect job for lazy college students with nothing to do.)

Gaining those jobs in Asia has certainly been a victory for those people. I've always said that low-paying jobs which barely pay the rent are better than no jobs and no food.

At the micro level of the business, I think it can, and is, being measured by business--things like deliveries per day, items stocked per day, items checked out per day, etc., etc., etc.

But these are more measures of how well the business is performing in general -- demand, in particular. More demand means the business needs more supply, so more deliveries, items stocked, and so on. You could take your second piece, "items stocked per day," and use this to measure productivity -- if you have more goods on the shelf and have not increased your workforce, productivity has increased. But we can get into some discussion of this scenario and see why even this is not as nice and clean as the "Bob made the equivalent of five more Ford F-150s this year" manufacturing scenario.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (myfriends@thisispancakes.com) on Tue Nov 29th, 2005 at 12:48:48 PM EST
[ Parent ]

Re: You make great points on the service sector. (none / 0)

I'm in agreement with you on the difficulties of measuring in the service sector. It's just I've seen a start of that at the business level--for example home health care--delivery and some degree of care for the patient at home--having deliveries per shift as a productivity measure and increasing that measure through computer support on route planning, just as an example. and at the same time measuring the quality side, such as how many deliveries contain exactly what was needed by the patient (line fill), and phone surveys on customer satisfaction--just examples. But it is more difficult to measure than manufacturing, as you say.

by wchurchill on Tue Nov 29th, 2005 at 07:06:57 PM EST
[ Parent ]

Tax Cuts are a disincentive for competition (none / 1)

Perhaps it's absurd, but it has always seemed to me that giving the "rich" tax cuts took away their incentive to compete with one another. If the annual profit after taxes is your sole purpose in life and the government gives it to you (in the form of less taxes), why in gods name would you hire more workers, start up new factories or research new products? Just doesn't make sense.

Eventually, the "rich" will tire of the paltry tax cut and the competition will begin again - or the next "communism" will rise up and murder a large number of the "rich."

by David in Burbank on Tue Nov 29th, 2005 at 10:50:10 PM EST

Placeholder... (none / 0)

I'll get back to comment on this if I can.

by Metatone (metatone [a|t] gmail (dot) com) on Wed Nov 30th, 2005 at 04:31:51 AM EST
[ Parent ]

Re: Tax Cuts are a disincentive for competition (none / 0)

If your sole purpose, as a wealthy person, in life is to make profit, then the government giving you a tax cut has little or no effect on your willingness to work and invest in higher capacity (more jobs, research and equipment). It might make investment easier, and therefore produce a higher degree of incentive to get production moving again, but, on the whole, I don't think there is much difference.

This is one reason for why I refuse to take Supply-Side economics seriously. (No one, that I know of, denies the existence of some sort of "Laffer Curve". The question is, "At what point are tax rates too high?" I submit to you that they were not too high when the recession began.)

The incentive to compete depends on the opportunity to turn a profit. I think you're portraying it a bit too much as a game to wealthy people. Production only began increasing because of the expectation that business would be able to start making money again. Bush's tax cuts simply shifted money, that was already in the system, to different sectors. The tax cuts, unfortunately, weren't designed to fight the recession.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (myfriends@thisispancakes.com) on Wed Nov 30th, 2005 at 11:06:54 AM EST
[ Parent ]

Laffer curve (none / 0)

I think you will find that the opposite is true. No mainstream (that is, not affiliated with at rightwing think tank) economist thinks there is any such thing as a Laffer curve effect. There is also no empirical evidence to support the effect.

At various times in history tax rates have been as high as in the 90% bracket and the society did not come to a halt.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Fri Dec 2nd, 2005 at 10:29:28 AM EST
[ Parent ]

Re: Laffer curve (none / 0)

At various times in history tax rates have been as high as in the 90% bracket and the society did not come to a halt.

That's certainly true. However, I submit to you that the evidence would suggest the economy performed better when rates were at a more reasonable level (35-40% in income taxes -- not counting payroll, which pays for Medicare and Social Security in America -- for the top bracket), which is why I brought up President Kennedy's tax cuts.

No one, in my opinion, should have to pay 90% of their income in taxes.

I think you will find that the opposite is true. No mainstream (that is, not affiliated with at rightwing think tank) economist thinks there is any such thing as a Laffer curve effect. There is also no empirical evidence to support the effect.

Paul Krugman is about as mainstream an economist as I think you'll find. (He was nominated for the Nobel this year, and, at about 50 years old, that's a very young age to be nominated.) As is Brad DeLong. Both of whom, I believe (not entirely sure on DeLong), will tell you that there is a Laffer Curve, but that no one knows where, exactly, is it.

There's a difference between society coming to a halt and the economy not maximizing its potential.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (myfriends@thisispancakes.com) on Fri Dec 2nd, 2005 at 11:07:39 AM EST
[ Parent ]

Re: Laffer curve (none / 0)

No one, in my opinion, should have to pay 90% of their income in taxes.

Why not? If someone is fantastically wealthy but is just sitting on their capital without making productive use of it, a modest wealth tax might come to 90% or more of their income. If they sell part of their assets to pay the tax, 1) the sold assets are more likely to be put to productive use by the buyer; 2) the wealth tax in the future will be a smaller fraction of this person's income.

This is all straight out of the writings of 19th-Century English market liberals.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

by Migeru (migeru at eurotrib dot com) on Fri Dec 2nd, 2005 at 11:16:07 AM EST
[ Parent ]

Re: Laffer curve (none / 0)

You're working with two assumptions that I disagree with: (1) That the wealthy are just sitting on their money and not using it productively, and (2) that those who benefit will put it to more productive use. No one can afford to just sit on their wealth. If they don't reinvest it in their businesses, or in other companies, it's just going to be wasted. And people don't become wealthy by wasting money.

There's a difference between taxing people out of need for something -- food stamps, health care, education, whatever -- and taxing them excessively because one group doesn't believe they're putting their money to proper productive use.

Better to stick with the 18th- and 20th-Century liberals. ;)

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (myfriends@thisispancakes.com) on Fri Dec 2nd, 2005 at 12:29:15 PM EST
[ Parent ]

Re: Laffer curve (none / 0)

Many people become wealthy by being born.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

by Migeru (migeru at eurotrib dot com) on Fri Dec 2nd, 2005 at 12:37:53 PM EST
[ Parent ]

Re: Laffer curve (none / 0)

Actually, the economy performed best during World War II, when top marginal tax rates were 94%.

They stayed there until Kennedy/Johnson cut them to 70% in the 1960s. The 1981 Reagan tax bill cut them to 50%, and the 1986 tax reform cut them to (around) 33%. Clinton put them back up to 40%.

Since the economy performed better during WWII (and during the subsequent postwar boom), and during the Clinton boom years than they did in the Reagan/Bush I years, on the surface there seems to be little correlation between marginal tax rates and economic performance.

You may be right, though, in that few people probably ever actually pay tax rates in excess of 40% or 50% due to loopholes and evasion.

by TGeraghty on Fri Dec 2nd, 2005 at 11:39:28 AM EST
[ Parent ]

Re: Laffer curve (none / 0)

Actually, the two longest expansions in US history came in the 1960s (Kennedy, Johnson, and early-Nixon) and the 1990s (Clinton). World War II is a bit of an odd case, though you're right that the economy did grow rapidly during it. Part of that is due to the full employment that inevitably resulted from massive spending and a contraction in the labor market due to people going over to Europe and the South-Pacific to fight in such large numbers.

The economy was fairly strong during the Truman and Eisenhower eras, but nowhere near the expansion of the 1960s.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (myfriends@thisispancakes.com) on Fri Dec 2nd, 2005 at 12:19:41 PM EST
[ Parent ]

Re: Laffer curve (none / 0)

Yes, but the fact that the Truman and Eisenhower years were still better than the Reagan-Bush years (Truman more so than Eisenhower) was my point.

by TGeraghty on Fri Dec 2nd, 2005 at 01:38:26 PM EST
[ Parent ]

Re: Laffer curve (4.00 / 2)

True.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (myfriends@thisispancakes.com) on Fri Dec 2nd, 2005 at 02:03:18 PM EST
[ Parent ]

Short and to the point (4.00 / 2)

Have a 4.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

by Migeru (migeru at eurotrib dot com) on Fri Dec 2nd, 2005 at 02:08:03 PM EST
[ Parent ]

Re: Short and to the point (none / 1)

¡Gracias! Likewise.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (myfriends@thisispancakes.com) on Fri Dec 2nd, 2005 at 02:23:09 PM EST
[ Parent ]

Outsource threat to high tech jobs (none / 0)

Here is an interesting take on the jobs issue by the former secretary of labor under Clinton. He is a well known liberal commentator and a professor.

http://www.msnbc.msn.com/id/10206251/site/newsweek/

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Sun Dec 4th, 2005 at 10:06:14 AM EST

Re: Outsource threat to high tech jobs (none / 0)

I'm going to do a rather nasty diary on this, as a response to Reich, for whom I have almost no respect. He's a liberal voice whom I believe the Left does not need and should avoid if we wish to make decisions that will, yes, win elections, but also allow us to govern well.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (myfriends@thisispancakes.com) on Sun Dec 4th, 2005 at 02:45:51 PM EST
[ Parent ]

Re: Outsource threat to high tech jobs (none / 0)

While you are refuting Reich, you might also take your time to refute Paul Craig Roberts, who was "Assistant Secretary of the Treasury in the Reagan administration". It seems neither liberals not conservatives are happy with the march of the economy under Bush.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

by Migeru (migeru at eurotrib dot com) on Sun Dec 4th, 2005 at 03:54:15 PM EST
[ Parent ]

Re: Outsource threat to high tech jobs (none / 0)

Roberts is a bit too alarmist for my taste, but he's one of many people who have warned against a flight from the dollar -- Paul Volcker, the former Fed chairman, being perhaps the best known and most respected. He brings up some important points.

He's got one of the figures wrong: The US has not lost 760,000 jobs, net. The number is much higher, when you take the growth in the labor market into account.

Roberts, like me, takes a steep decline in the dollar as a given, as I think most of us do. (However, the dollar has been gaining against the euro and pound.) Where he and I disagree is on how painful that will be. Not that I don't think it will be painful. I certainly do. But I don't see an "End of the World" scenario coming.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (myfriends@thisispancakes.com) on Sun Dec 4th, 2005 at 10:55:27 PM EST
[ Parent ]

Why are wages not increasing? | 33 comments (33 topical, 0 editorial, 0 hidden)

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