Rising Inequality

New data confirm that inequality is still rising:

Income-Inequality Gap Widens, by Greg Ip, WSJ: The richest Americans' share of national income has hit a postwar record, surpassing the highs reached in the 1990s bull market... The wealthiest 1% of Americans earned 21.2% of all income in 2005, according to new data from the Internal Revenue Service. That is up sharply from 19% in 2004, and surpasses the previous high of 20.8% set in 2000, at the peak of the previous bull market in stocks.

The bottom 50% earned 12.8% of all income, down from 13.4% in 2004 and a bit less than their 13% share in 2000.

The IRS data, based on a large sample of tax returns, are for "adjusted gross income,"... While dated, many scholars prefer it to timelier data from other agencies because it provides details of the very richest -- for example, the top 0.1% and the top 1%, not just the top 10% -- and includes capital gains, an important, though volatile, source of income for the affluent.

The IRS data go back only to 1986, but academic research suggests the rich last had this high a share of total income in the 1920s. ...

Who are the big winners?:

Inequality’s Roots: Wall Street, Not Board Rooms, Real-Time Economics: As income inequality has steadily risen in recent years, a lot of fingers have been pointed at rising corporate executive pay. Two scholars say the finger should be pointed elsewhere; specifically, at Wall Street. ...

In their study, Steven Kaplan and Joshua Rauh, who teach at the University of Chicago’s graduate business school, set out to identify who is represented in the richest of the rich. Surprisingly, they conclude CEOs have only marginally increased their representation. ... They surmise a sizable portion is “Wall Street”: executives of financial companies, employees of investment banks, hedge fund managers, venture capitalists and private equity investors. This group, they conclude, has significantly increased its presence among the richest of the rich. ...

Their results don’t refute the notoin that CEO pay has contributed to wider inequality; CEOs may not be much more numerous in the 0.1% richest of Americans, but they and the rest of the 0.1% have seen their income grow a lot more than the other 99.9% in the last decade. Rather, “These results .. strongly suggest that Wall Street and legal professionals have contributed at least as much as and probably more than top executives of non-financial public companies to the widening of the income distribution,” the authors write, though they note that well over half of the top earners come from somewhere else.

What’s behind Wall Street’s ascendancy? The authors consider some of the most popular theories for rising inequality. Some they reject, such as the increased demand for their skills in a globalized market: “For example, it is difficult to understand how trade has increased the pay of U.S. lawyers (most of whose human capital is country-specific) by a factor of four over the last twenty years.” They reject the notion that it’s increased social acceptance of wider income inequality, since many on Wall Street, such as hedge funds, VC funds and PE funds, have never been subject to much disclosure of pay. They do agree that “skill-biased technological change” and the “superstar” phenomenon may be at work: new technology may have enabled the top performers on Wall Street to leverage their ability over more assets than before. ...

Comments

[save_the_rustbelt]

David Brooks on the GOP debate:

" Yet at the Republican economic debate in Michigan this week, there was no talk of that. The candidates declared their fealty to general principles: free trade, lower taxes and reduced spending. They talked a lot about the line-item veto and the Chinese currency. But there was almost nothing that touched concretely on the lives of the ambitious working-class parents who are the backbone of the G.O.P.

Sometimes the candidates seemed more concerned with massaging the pleasure buttons of the Club for Growth than addressing the real concerns of the middle class. They talked far more about cutting corporate taxes, for example, than about a child tax credit for struggling families.

At other times, they sounded as if they were running for a ceremonial post. The person who is elected president will need concrete proposals, but the G.O.P. contenders scarcely have them. Mike Huckabee has some sketchy plans. John McCain answered one element of middle-class anxiety yesterday with his new health care plan. Others seem to have decided concrete proposals are for geeks.

In this way, the Republican Party has abandoned the Hamiltonian ground. It has lost intimate contact with the working-class dreamer who longs to make good.

Instead this ground is being seized by a Democrat. Over the past few months, Hillary Clinton has issued a string of specific policy programs aimed directly at members of the aspiring middle class. ..."

[save_the_rustbelt]

CEO pay is wretched symbolism, but in absolute dollars is not that significant.

The Wall Streeters though are literally drowning in money, and the successful hedge and private equity funds are blowing through money at an astounding rate (and the shopping spree is a little scary).

Pension plans, including government and union plans, are jumping on board the private equity bandwagon. Looks like a storm brewing tome.

[ken melvin]

They, the investor class, have won the war. They fought in the trenches and in the press and they won. Labor, immobile, is nothing, can be found cheaper lots of places, but capital, ah sweet capital at last free its bonds, can go anywhere.

STR, Brooks' claims to constituencies, like his telling us what to think, are amusing.

[anne]

While the issue is not an individual executive salary as such, the issue is that we are a management dominated economy in which mangement costs are increasingly accounting for a portion of national income at the expense of workers and even corporate owners. While an individual salary may not be a problem even though grossly excessive, billions on billions of dollars drained by management are a terrible strain on owners and workers and that is what we are dealing with.

[anne]

No; the investor class has won nothing. This is an absurd comment. Define the issue properly. We are all investors through pension and health care funds and university endowments and individual savings. Investors are being taken advantgae of by management. Simply look at investment costs for hedge funds or for common mutual funds and understand what is happening. Understand what managment costs as a whole are doing to workers and owners or general investors.

[save_the_rustbelt]

Ken: I'm not signing up for any Brooks fan club, just find his epiphany (and the timing) interesting. Rat jumping ship?

Anne: True, but in raw dollars the management class are tiny pigs compared to the big piggies in the Wall Street class.

Next scandal, I predict, will be private equity firms stripping and flipping nursing homes. Working on the background research now.

[anne]

Understand what it means for management to charge from 2% to 4% on invested assets and 20% and more on profits. Understand what a drain this is on investor returns, even on institutional investor returns let alone individual returns.

Understand what it means for private health care insurers to pay management salaries not just in million or tens or hundreds of millions of dollars but in billions of dollars. What does this mean for individual health care costs?

[anne]

The problem is failing to understand that by managment class we are talking management whether from General Motors to Goldman Sachs to what private equity or pension fund we might look to. Money managment is evidently most draining, but what is evident is the dominance of managers as opposed to workers-consumers or even corporate shareholders.

[juandos]

Hmmm, cutting corporate taxes... Great idea...

Why should corporations be taxed excessively to finance the programs they don't use?

BTW when has a poor person ever given a job with a paycheck to anyone?

BTW ken melvin, anyone investing in a 401k or an IRA is in the investor class...

All unions invest money for union financed retirement plans in the market - hence unions are part of the investor class...

[ken melvin]

Anne, juandos,

The investor class are the parasites. They do naught but live off the efforts of others. Where in the hell do you think it comes from?

[SanFranciscoJim]

Corporations use the public infrastructure, just like everyone else, so your comment about cutting corporate taxes makes no sense juandos.

The bottom line is that labor's share of the national income has fallen to a record low, while capitals share is at a record high. This is the statistic that underpins this whole discussion.

How did this happen? Isn't there supposed to be a glut of "liquidity" because of things like Chinese savers. Shouldn't a glut of liquidity depress returns on invested capital. Why isn't this happening?

I think technological change is one factor, as is the fall of The Union, but there must be more to it than that.

Perhaps capital's mobility, compared to the plight of the poor worker, stuck in his nation-state, explains it, but I suspect not.

[Peter Schaeffer]

SanFranciscoJim, says...

“Shouldn't a glut of liquidity depress returns on invested capital. Why isn't this happening?”

That’s a good question.

Here is one partial answer. The liquidity glut makes spread products, including LBOs, CDOs, the spread trade itself, etc. quite profitable.

However, there must be more to the story. My guess is that labor arbitrage is a critical factor. At some point, the gains from replacing American employees with Chinese workers should be competed away. However, in the transition period transition (10 – 20 years) it is presumably very highly profitable.

Take a look how fiercely outsourcing, the RMB peg, and the astounding US / China trade deficit are defended tooth and nail by the WSJ (and others). Is altruism at work here or economic interest?

Of course, domestic labor arbitrage should not be overlooked. Replacing Americans with illegals is clearly a profitable, and once again, fiercely defended business.

[Callahan]

Looks like we need to redefine the American Dream, not a nice house with a two car garage, two cars, 2.5 kids, a 90 inch tv and other such old "Middle Class" trappings, but instead a dry tent, no tv, no kids, no cars, but a good portfolio, while trying to cling to the UNPOOR status, until such time that the portfolio can buy our way out of the tent.

[anne]

The hateful term parasite is not only a hateful legacy of dread 1930s but entirely wrong. There have always been financial specialists needed and they are needed now and will be needed, and are to be respected as any occupation group. I deeply resent the hateful shameful term. Shame.

[richard]

"Pension plans, including government and union plans, are jumping on board the private equity bandwagon. Looks like a storm brewing tome."

STR: Your throwaway comment is one of my larger concerns. While traditional defined benefit programs are on the decline in terms of new enrollments, there is still a very large pile of traditionally managed pension money out there.

Excess funding to a pension plan is a company asset, not a plan asset. The PBGC is a government run insurance provider of last resort for protecting plan benefits. In many some cases pension plan assets dwarf the capitalization of the business they are nominally tied to.

Mix these observations together, add in an opaque investment or three in hedge funds and private equity, and you've got the perfect recipie for moral hazard.

I don't worry about one or two companies with large pension plans failing -- I worry about a whole slew of them, all at once, dragging down businesses and pensions alike.

[juandos]

ken melvin says: "Where in the hell do you think it comes from?"...

The English language not your strong suit, eh?

Reread it, people who work for a living and invest in their retirements are the investor class...

SanFranciscoJim says: "Corporations use the public infrastructure, just like everyone else, so your comment about cutting corporate taxes makes no sense juandos"...

Sure, why should corporations pay more than you pay?

BTW corporations are paper entities, right?

Its the people working at the corporation that use infrastructure...

Note I didn't say eliminate taxes...

Then SanFranciscoJim goes onto say: "The bottom line is that labor's share of the national income has fallen to a record low, while capitals share is at a record high."...

And your credible source for this is what?

Top 1% Pay More Taxes Than The Bottom 90%

[kthomas]

juandos...aspiring capitalist, hopeless ideolouge, true believer....heluva job, Brownie!

[Patricia Shannon]

anne says...

The hateful term parasite is not only a hateful legacy of dread 1930s but entirely wrong. There have always been financial specialists needed and they are needed now and will be needed, and are to be respected as any occupation group. I deeply resent the hateful shameful term. Shame.

Actually, for most of human history, we didn't have financial specialists.

[Meh]

anne is correct, but should refine her terminology.

It's not the "management class" or even the "investor class" who are making out like bandits, it's three groups:

1) The "financial management class" which is those running and some of those working in the firms on Wall Street.

2) The "high net worth investor class" who by virtue of having very large amounts of capital are able to earn (despite losing a percentage to class (1)) extraordinary "absolute returns" which then allow them to buy all sorts of political power, which they use to enrich themselves and safeguard their position.

3) The "CEO class" a group of managers who have entered collusion with the "financial management class" to enrich themselves and the other classes. It should be noted that the CEO class isn't that large and doesn't contain the "average US manager" so shouldn't be termed "the management class."

Further, quite a few people have a position in all 3 classes.

Finally, the domination of financial specialists in economic policy debates is a real problem and like it or not, these guys need some cutting down to size, hateful as it may sound, it's a fact.

[kthomas]

Let's not forget the legions of attorneys protecting this class.

....who ever said kill all the attorneys?

(What's the difference between an attorney and a lawyer? A lawyer is the one that actually shows up to court.)

[Icarus]

Juandos...

Kudos to you...I'm glad to see there's another voice on this blog who doesn't throw out the tired, intellectually barren, yet consistant barrage of vitriol agains corporations, capital, and all else technologically modern.

I'm not sure where our leftist bloggers want to take us? Protectionism to save the proverbial 'rustbelt'? Abolish private property and redistribute it evenly? Perhaps a guaranteed minimum wage to all, without work requirements. I think they even want every child in america to be guarnteed everything they need from the govt (school, healthcare, food, soccer camp, a sticker collection, etc).

They point to those who succeed in capitalist america, and scream cruelty. They hate the ethic of individualism, and, they point to instances of corruption as evidence that their social-collectivist ways are correct. They also worship the social democratic model of europe, which, in all likelihood is evaporating, and, never really included the minorities in its model.

So, yes...another voice which embraces the creation of wealth, respects the right of the market to determine wage rates, and, will push to develop strategies which acutally help the poor (steps to get educated and not have children irresponsibly would be a great start), are dismissed.

I think rustbelt, anne, and all the others simply want redistribution of wealth, and continued villification of 'corporations'.

[kthomas]

Icarus, good sheep. Good.

[kio]

DRAFT

How to explain of the difference between income inequality estimates based on data from the IRS and Census Bureau: Methodological notes

Original (real gross) income distributions are reported by the IRS. Corresponding tables “All Returns: Sources of Income, Adjustments, and Tax Items in Constant 1990 Dollars” are available at http://www.irs.gov/taxstats/indtaxstats/article/0,,id=96679,00.html . These tables provide numbers of people in the following income bins (in chained 1990 dollars):

No adjusted gross income
$1 under $5,000
$5,000 under $10,000
$10,000 under $15,000
$15,000 under $20,000
$20,000 under $25,000
$25,000 under $30,000
$30,000 under $40,000
$40,000 under $50,000
$50,000 under $75,000
$75,000 under $100,000
$100,000 under $200,000
$200,000 under $500,000
$500,000 under $1,000,000
$1,000,000 under 1,500,000
$1,500,000 under 2,000,000
$2,000,000 under 5,000,000
$5,000,000 under $10,000,000
$10,000,000 or more

These income bins are fixed over time and not adjusted for real economic and total population growth. The lowermost income bin contains zero income and net loss reports, whatever it means. The highest income bin includes those income reports which exceed $10,000,000. This is an open-end bin without any estimates of average income. Fortunately, only several thousand people have incomes above $10,000,000 – the number which should not influence income inequality estimate much. Moreover, these people also have to be distributed according to the Pareto law, i.e. measured and estimated total income in this bin should not differ much.
The IRS income tables provide the basis for current estimates of economic inequality in the USA, which are massively discussed in economics-related media and numerous web-logs. General conclusion about income inequality is very consistent among the media – income inequality rises fast during the last 20 years. At first glance, this conclusion is correct, but I will argue later on that this conclusion its wrong due to unacceptable mistakes in methodology and misinterpretation of quantitative results.
Figure 1 compares (gross) income distributions for 1990 and 2004, as reported by the IRS. Since the income bins, presented above, are of increasing width one can observed some spikes in the distributions. They are obviously related to those income bins, which are wider than their predecessor. For example, the bin between $25,000 and $30,000, i.e. $5000-wide, is followed by the bin between $30,000 and $40,000, i.e. $10000-wide. Therefore, one can expect a higher number of people in the latter bin as in the former one. This effect in clearly observed in Figure 1, where the enumerated populations are assigned to the centers of corresponding bins. Here and below, we use log-log scale in order to present highly changing population distributions in a very wide range of income. Thus, the lowest income bin, corresponding to zero and negative (loss) reported incomes, is artificially associated with $1 income. The bin with incomes above $10,000,000 is not shown because of the absence of mean income estimate in this bin.
General conclusion from Figure 1 is obvious: there are more people with lower, middle and high incomes in 2004 than in 1990. This is a mechanical result of increasing population – more and more people get income as working age population growth. One should normalize the curves to total population (with reported income) in given years in order to obtain population independent results. In addition to this normalization one can use population density instead of original population in changing bins. Income bin width would not be a problem for constant widths. Therefore, if the measured populations are normalized to corresponding income bin widths one obtains density of population as a function of income, i.e. the number of people in $1 bin. As before, we assign population densities to the centers of corresponding bins. This may be a problem when income bins are wide and income distribution is described by a power (Pareto) law.
After normalization to the total population (with IRS reposted) income, which includes people without income and those with incomes above $10,000,000, and to widths of corresponding income bins one obtains the curves depicted in Figure 2. The most prominent feature of the curves is the increasing deviation between them staring at $62,500 and the fact that they are practically indistinguishable below this income threshold. As a rule, modern studies of income inequality find their conclusions here. The curves, apparently, evidence that the portion of population with higher incomes has been growing since 1990 and economic inequality has effectively increased.
This is not the end of the story, however. There is one question left. What is the effect of increasing total personal income on the observed population density distribution? Actually, total personal income grew from $3.41E+12 to $4.70E+12 (1990 dollars) between 1990 and 2004. So, the larger total income is a possible reason for the increased number of people with higher incomes. Then the same level of population density at lower incomes might be an artifact associated with inaccurate measurements at very low incomes. This is always a problem, as the Census Bureau discusses in methodological documents - http://www.census.gov/prod/2002pubs/tp63rv.pdf .
Two curves in Figure 3 represent those in Figure 1, which are additionally normalized to total personal income, i.e. to $4.70E+12 in 2004 and $3.41E+12 in 1990. Income scales are also normalized to these total incomes and represent dimensionless portions of total income. As a result, widths of the income bins also become different since the incomes scale in 2004 and 1990 are compressed by different factors. In turn, the centers of the same original income bins in 1990 and 2004 are shifted against each other. Effectively, the curves in Figure 2 are reduced by different factors and shifted against each other.
The curves now represent the density of population as a function of dimensionless income and coincide at high incomes and diverge at low incomes. Therefore, the density of population at higher incomes, as measured in dimensionless portions of total income, is practically the same in 1990 and 2004. In low-income range, the density of population is relatively higher is 2004. Hence, the (dimensionless) distribution of total personal income at higher incomes is practically constant, considering the effectiveness of the IRS and possible measurement errors.
At low incomes, the distributions are diverging with time. There are several explanations of this observation. First, this is the results of some real (objective) processes in the US economy. Second reason for that is likely not related to increasing income inequality but is defined by a lower (and varying) accuracy of income measurements at smaller incomes (possibly driven by definitions).
In the first case, one can expect some consistency between various measures of income inequality. For example, estimates provided by the US Census Bureau, which include many taxable income sources and some extra sources as well, are expected to confirm the IRS income results. This is not the case, however, as I mentioned before. Figure 4 presents population density distributions obtained according to the above procedure for the same years. There is no significant difference between the distributions in 1990 and 2004. Therefore, the reason for the discrepancy reported by the IRS might be associated with income definitions and reports.
Figures 5 through 7 demonstrate that the IRS income estimates are prone to large volatility and are not reliable.

Conclusion.
The estimates of income inequality based on the data reported by IRS are not reliable. One has to use income data provided by the US Census Bureau. Results of my study of (non-changing) income inequality in the USA are published in

Kitov, I., (2007). Modeling the evolution of Gini coefficient for personal incomes in the USA between 1947 and 2005, Working Papers 67, ECINEQ, Society for the Study of Economic Inequality. www.ecineq.org/milano/WP/ECINEQ2007-67.pdf

Figures in
How to explain of the difference between income inequality estimates using data by the IRS and Census Bureau: Methodological notes
http://inequalityusa.blogspot.com/2007/10/how-to-explain-of-difference-between.html

[robertdfeinman]

Excessive wealth inequality has several bad side effects.

1. It distorts national priorities to benefit the wealthy class. In many cases this is not optimal for the bulk of society. I'm thinking of social welfare programs.

2. It distorts the democratic process since money becomes worth more than votes. This fosters the "anti-government" theme and harms the attempts to use government for legitimate purposes. We are rapidly approaching a point where the only uncontested roles for government are in militarism and policing.

3. It undermines the rule of law which is based upon equality. When a person steals $20 million and gets off with a fine and another smokes dope and goes to prison for a decade the public becomes disenchanted.

4. It lowers real productivity and replaces it with financial manipulation. This has the effect of undermining projects with a long payback period or with no direct profit prospects. This includes things like funding basic research, building public infrastructure and encouraging capital investment by firms in efforts aimed at producing tangible products, not short term bubbles.

5. It makes the society less competitive. Slaves or indentured servants don't make good workers. They have no motivation.

[anne]

Meh, thank you.

I do not know how to address the problem properly, even to the terms for financial management and I understand, as I am corrected, that financial managers range, from attorneys on. I understand well that in 2004, 57.5% of corporate shares were controlled by 1% of households. I understand and have for months explained that the new figures on concentration of wealth and income will show pronounced increases again because I pay attention to fiscal structure and investment markets. But, I am trying to refine how I understand the issue.

Financiers or financial specialists or financial managers or company lead executives? Well, think to Shakespeare a little. Think to "Merchant of Venice," though likely my least favorite of the plays.

[ken melvin]

Beware the ba; Icarus is an attack sheep.

[anne]

Ken Melvin, I understand the worry but I worry about language getting away at least from me.

[ken melvin]

Do ewe know? If a sheep should go fishing on a summer's day, does it become a fisherman? Do all sheep become fisherman if one goes fishing once?

[Icarus]

Melvin...

I assume childish attacks are your current strategy? Nice...

Sounds like you have lost the capacity to mount something slightly argumentative.

Moo buddy, moo...graze away on your redistributive dreams.

[anne]

"I'm not sure where our leftist bloggers want to take us? Protectionism to save the proverbial 'rustbelt'? Abolish private property and redistribute it evenly? Perhaps a guaranteed minimum wage to all, without work requirements. I think they even want every child in America to be guaranteed everything they need from the govt (school, healthcare, food, soccer camp, a sticker collection, etc)."

Simply notice the craziness and struggle to restrain a burgeoning meanness.

[DRR]

I think Juandos is crude and obviously wrong, but boy is it a nice change of pace from the regular vitriol soaked bitter dudes and dudettes consantly comparing themselves to 12th century serfs.

[Icarus]

Anne, I think you mistake the word 'meanness' for accountability and responsibility. I wish some of your wrath actually pointed itself at the behavior which causes the continuation of poverty, and not blame those who avoid it through better decisions.

[bullbust]

Isn't there supposed to be a glut of "liquidity" because of things like Chinese savers. Shouldn't a glut of liquidity depress returns on invested capital. Why isn't this happening?

There is an abundance of credit, which ended up in bad loans. All that is being held, through a game of smoke and mirrors, in off-balance sheet SIVs by big banks and wall street IBs.

Now the music has stopped, and these people who "earn"(swindle) their money, (who scream about redistribution and taxes) are facing big losses.

Don't worry. Our Treasury secretary, the Fed, and all economists, and of course the Rethugs (who scream about socialists and liberals) are all in aid of bailing these super-rich folk out. The toxic crap they hold is ultimately being sanitized at public cost.

Read all about it here.

http://online.wsj.com/article/SB119221840415557568.html

http://www.bloomberg.com/apps/news?pid=20601087&sid=aVuIHO4.0sPU

For honest comments, go here
http://calculatedrisk.blogspot.com/2007/10/wsj-banks-discuss-siv-liquidity-problem.html

It's all done in super-secret talks, so that the charade of rich "earning" their money can be continued, and the economists who aided the Fed bubble blowing, can still pretend that it was all for the greater good.

[anne]

There is reason for, need for accountability, but in terms of inequality I do not have in mind the poorest or poorer, but the middle class, the accountable middle class who are being harmed by the startling growth in inequality. Much of the last year, I suggested that from an investor's perspective the inequality data to come would be worse, and worse and strikingly so. We have a serious problem, and I do not like this data though I knew it was coming.

[anne]

Already, I can tell again from an investor's perspective that the coming year will show worse data. We are going through what may be the finest time of international wealth building since the 1940s, and the building has been astonishingly concentrated here and will be recorded more so.

[paine]

these share numbers move like box turtles
why flash up the obvious unless the tend reverses

as it almost "seem to "
for a couple three years there
at the butt end of the clintonian miracle

nice to factor out cap gains

that's a timing biz
the delta on wealth is the real deal

only an estimate
of top one and top .1 net worth share change
has real brass balls

[paine]

prize cream pie in own face line :

"barrage of vitriol agains
corporations,
capital,
and all else technologically modern"

icky baby soar soar soar

[Gil]

Of course, from a free-market perspective, those making more and more money are working smart whereas those who are losing financially are working dumber. I am a believer that in a free market there'd be little to no middle-class. Either you're a price maker or a price taker. Take actors, a handful are price makers, they get millions to act in one movie. On the other hand, most actors are price takers, they act in bit parts and get whatever the basic rate is, if they don't like it then another actor will take his/her place. Likewise, if this were a truly global free market then the West would soon look like any developing nation as corporations would say something to the tune of 'if you don't work for a third of your previous pay, I'll take my business to India'. Perhaps the 'increasing inequality of the West' is simply the free market reasserting itself after the demise of the Socialist 20th century.

[german_reader]

There seems to be an interesting parallel between the total debt level ( private + public ) of the US economy and the rise and fall of inequality. The same policy that leads to an increase in inequality seems to cause a steep rise in national debt. If you look at the following two graphs from Paul Krugman's Blog at the New York Times about the historic trend in inequality in the US and from the Gabelli Mathers Fund ( private investment fund ) on the national debt level, you will find that they show amazing similarities.

inequality:

http://krugman.blogs.nytimes.com/2007/09/18/introducing-this-blog/

debt:

http://www.kwaves.com/debt.htm ( it's in the middle of the page )

or a more actual version ( it's on page 3 )

http//www.gabelli.com/Gab_pdf/annual/1726.pdf

You can calculate the historic debt levels of the US back to 1973 yourself if you compare the total reported credit market from the US Flow of Funds Accounts ( table D3 ):

http://www.federalreserve.gov/releases/z1/current/z1.pdf

( the federal reserve website provides more tables for historic data )

to the historic GDP data from the Bureau of Economic analysis:

http://www.bea.gov/national/xls/gdplev.xls

National debt grew rapidly during the twenties of the last century, peaked at 265% of GDP in the early thirties and fell steeply in the second half of the thirties. From 1940-80 national debt remained moderate at around 150% of GDP and began to rise again afterwards. It currently stands at around 325% of GDP ( including intragovernmental debt 350% ). Inequality followed the same trend: High during the twenties and early thirties, dramatically falling at the end of the thirties, low during the fourties, fifties, sixties, seventies and early eighties and steeply increasing since the mid eighties.

Inequality and high debt levels seem to be in some way interrelated. I think it's not exaggerated to assert that the same policies which lead to an increase in inequality lead to a rise in financial debt. Tax cuts for top earners and other significant capital holders combined with low interest rates and the deregulation of the financial sector aggravate not only inequality, they also encourage aggressive profit maximizing strategies based on high levels of debt ( for example leveraged buy outs ). And they seduce the lower ranks of the society to replace their stagnant or falling income by higher levels of debt to maintain their standard of living.

High debt levels have caused major economic crisises in the past. We all know what happened at the end of the twenties. The current debt level of the US is much higher than it was during the 1920/30s. And it has been rising rapidly in the last years. It's certainly not unrealistic to expect a huge economic crash at the end of this debt rally. And it's high time for the US politics to address this problem.

If my assumption is true that extreme debt levels are the result of capital concentration in the hand of a few and the deregulation of the "financial industries" this would mean higher taxes for large capital owners/earners and the partial re-regulation of the financial sector. That could not only help to reduce inequality. It would support the return to a more sustainable path for the US economy.

[cm]

Meh: There are all kinds of management and administrative layers everywhere who are perhaps not making out like bandits, but who are in large part effectively feeding off others' productivity (while not too rarely actually impeding the latter).

[Peter Schaeffer]

german_reader,

Facts, figures, statistics, government data sources, URLs, analysis...

Kudos.

I agree with your observations (the linkage between debt and inequality). However, I am not sure what the mechnaisms are.

[Blissex]

«It's not the "management class" or even the "investor class" who are making out like bandits, it's three groups:
1) The "financial management class"»

That mostly in the past 10 years of highly subsidized money supply. Low interest rate are a wonderful tonic. But the rise and rise in the rewards for the management classes has begun in the early 80s...

«2) The "high net worth investor class" who by virtue of having very large amounts of capital [ ... ]»

Well, large amounts of capital do confer pricing power, especially thanks to K-street, but it is also simply that the doubling of the global workforce has not been accompanied by a doubling of global capital, as labour-rich but capital-poor countries have joined the global economy.

«3) The "CEO class" a group of managers who have entered collusion with the "financial management class" to enrich themselves and the other classes.»

That's just the age old story of the sharecropper -- they always take over from the absentee landlords.

Anyhow the categories you describe above are essentially rentiers, which derive their fortunes from control of value-chain chokepoints rather than ownership.

When unions were powerful, they also shared in the rents, to the point that UAW workers on old contracts still cost $100/h; the major difference is that now management share the rents with financiers instead of unions, as laws that have made hostile takeovers easier and unionization more difficult have shifted the balance of power.

[anne]

"When unions were powerful, they also shared in the rents, to the point that UAW workers on old contracts still cost $100/h...."

Though the comment is important, the point is entirely fictional. Auto companies priced labor not according to wages and benefits but according to wages and benefits and capital stock which is why contracts were portrayed as more valuable than they ever were.

[cm]

Blissex: Removing those value-chain chokepoints was in my opinion a major and greatly hyped promise of "Internet based" B2B and B2C paradigms. Has it come to fruition?

I don't know if business and other social interaction can be effectively and efficiently conducted in an any-to-any, all-equals "anthill" paradigm. Otherwise you will have chokepoints and middlemen of some sort.

What is needed is essentially uncorruptible checks and balances to limit abuse of chokepoints. I don't have the recipe. What do you think?

[real person from the real world]

"...the authors write, though they note that well over half of the top earners come from somewhere else. "

WHAT EXACTLY ARE THEY SAYING HERE?
--------------------------------
Peter Shaefer says:
However, there must be more to the story. My guess is that labor arbitrage is a critical factor. At some point, the gains from replacing American employees with Chinese workers should be competed away. However, in the transition period transition (10 – 20 years) it is presumably very highly profitable.

I AGREE .....

Peter continues:
Take a look how fiercely outsourcing, the RMB peg, and the astounding US / China trade deficit are defended tooth and nail by the WSJ (and others). Is altruism at work here or economic interest?

Of course, domestic labor arbitrage should not be overlooked. Replacing Americans with illegals is clearly a profitable, and once again, fiercely defended business.

I ALMOST AGREE.... I AM IN IT, AND IT IS NOT THE ILLEGALS BUT THE LEGAL IMPORTED LABOR THAT CAUSES THE ARBITRAGE ON THE BEST JOBS, AND GETS THE EXPERIENCE OUR OWN GRADS OUGHT TO GET..... READ THE WIKIPEDIA ARTICLE ON H1 VISAS.... THEY ARE MAINLY GOING TO SMALL OFFSHOOT INDIVIDUALS SELLING PEOPLE FOR MARK UP.

[Icarus]

"real person"

Stop hating H1's...they're not the problem. Our corporations need them to do skilled labour. The people you should direct your vitriol to is the insufficiently educated domestic student class. How is it that India or China or wherever can produce students in IT, Math, Engineering, and we can't? They study, we don't. That's the brutal difference. Those topics are relatively culture neutral, and, simply require discipline and effort.

[cm]

Icarus: That is BS. You are confusing bringing in (at least nominally) experienced foreign H1's with hiring college grads in offshore locations.

The problem at least in the domestic tech industry is that much domestic entry-level hiring has been replaced by hiring entry-levels offshore, or hiring from a (yet) sufficiently large pool of domestic or imported experienced workers. There is a lot of hidden underemployment with workers that have "surplus" experience stuck in dumbed down workflows or doing relatively menial work. Whether that's intentional to keep the replaceable or that's merely a welcome side effect is not clear.

As a consequence a good part of "higher level" and "ground breaking" work isn't done, and employers/business groups are too busy "investing" in free training offshore plus absorbing domestic re-work charges on the results of "cost effective" offshore work to "waste" time on growing domestic talent from entry-levels who cannot get a job in their field.

I see this firsthand in "mature" business -- domestic graduates without industrial experience except PhDs in specific narrow research fields are not even considered. We are still living off of those who got their chance at getting said experience prior/during dotcom when the business was growing. And of course H1's and ex H1's.

[Icarus]

Cm...

Ultimately, offshore resources can provide the same quality and quantity of labour, at lower wage levels. Shouldn't we applaud that?

Doesn't that take our product cost, and lower it, making it affordable for a greater percentage of the populous? Isn't the benefit of trade?

Sure, those working in those industries/positions within the host nation will suffer, and will have to adapt. But, this is a good thing. We, the consumer, now have the ability to get goods and services which used to be more expensive, for a lower cost.

I'm not following what upsets you in this trade off?

[real person from the real world]

CM - all I can say is AMEN to what you say. It is "SPOT ON." I studied programming, and the education of some of these foreing guys is spotty. Once in a class were we were working on creating a statistical program, a foreign guy who actually had his eye on the little foreign gal I was working with in a team, told me (I have a masters, where I took statistics) that a bell curve is sliced like a layer cake horizontally! He did not want some stupid American telling him, who was already employed as a programmer somewhere, anything. In some classes, unless they were the lead in the group, they did not always participate well, but as a team, you had to make do, and not complain. This is not to say some are not well educated, but in many cases, the education is ROTE. While we decry rote learning here in the west, that is what underlies a lot of the education overseas. That is also why US Higher education is still highly regarded. AND, the colleges have made a fortune, catering to the foreign elites who come here, and get educational help our own citizens are denied.

[real person from the real world]

BTW icarus, I do not "hate" visa people. I actually am friendly, with quite a few. I do HATE ignoramuses like you, who think cut throat competition is the only good way to live.

[Gil]

Or alternatively Icarus if Indians are willing to do the same work for, say, 30% at the going rate of an American, could we then presume that the Indian has the 'natural' rate for that job and Americans have an unfair 70% mark-up? On the other hand, who's the 'we' who benefit from lower prices, if Americans have to drop their wages to 50% of what it was before because any more will justify the companies wanting to offshore their business to India and this in turn causes the manufactured goods to drop to 50% at the stores, wouldn't this mean manufacturing workers have gained nothing? Or worse, if the other retail prices don't go down similarly, such as food prices, electricity, etc., then workers are worse off. Presumably it the well-off employees and business owners whose jobs are rather unique enough that they can't be easily outsourced (at least for the time being >:D) who would benefit from the price drops? Or likewise do employees have to be reminded that they have to compete for jobs the same way businesses have to compete for customers? In a free-market economy, a business delivers a good for a lower price and the other businesses have drop their prices or fade off, so to do workers who are competing for jobs have make themselves more desirable by accepting lower wages, no?

[cm]

Icarus: What many are not getting, and admittedly it's difficult to see, is that most of the value add in "skill based" industries like tech is a "network effect", that mostly requires geographical concentration. A lot of information flow (and maybe it's really that - information intensity not just fancy skill) happens informally. Not just coworkers talking to each other, but also forging of business deals, people hashing out ideas over lunch/beer, "cross pollination", etc. A lot of "small scale" communication will only happen face to face, and is often incidental if not accidental.

Another related dimension of this can be summarized by Newtons "standing on the shoulders of giants" remark. You can only try to do new things when you have some competent guys who can work on the details, and/or you can work with (not outsource to!) relatively-local vendors producing equipment customized to your needs.

When you are gutting your industrial base, you are losing this network effect. Do you think some new brand of tech industry, and work force, can spring out of nothing? Every new industry develops in the context of existing industries, and continues to use their services for a while or forever. There is also liquidity in the labor/business service market as people can easily switch to the company across the street or next town.

Where do you think the first founders of "Silicon Valley" learnt their bearings?

I'm constantly hearing "it is so difficult to find qualified people". What this often means in practice is, I want to hire some guy with let's say 5 years experience in and credentials from our industry sector who supposedly can do "advanced stuff" without detailed supervision.

But, when our industry has been aggressively offshoring for 5+ years, where is that guy gonna come from?

The "advanced stuff" they don't want to quite offshore/outsource (yet?). Somewhere in their gut they probably feel that retaining only the management overhead here is not going to do it.

On the individual "bright side" for us the greying workforce, if they don't grow "new talent", as long as there is a need for this industry and local workers (the big caveat) they cannot simply fire us even when we get 50+.

[Icarus]

Real Person...

I do think competition is the right way to live, don't you? I'd rather have the A student get into the top schools, and filter out the C students. I'd rather have a company who can deliver me a product/service at a lower price (all other things equal), and weed out the companies which can't.

I find it interesting when a high tech worker complains about the market. We are still in a market where there is demand, with little supply. Companies want to hire, and can't find qualified people. I see it all over. Instead of complaining, adapt to the market. Learn a new skill (a new programming language, for example), and be adaptable. Why is that so hard?

It's funny...I hear so many immigrants in high tech wonder out loud why Americans aren't satisfied with the job market here. Entry level wages in high tech are 50K+ (my company pays 60k to college graduates), jobs exist...growth is abundant. And, after a few years of skill acquisition, you'll be close to six figures.

Instead, the laid off programmers complain. They have all sorts of excuses, but, as they sit and complain, others will step in, and take those jobs.

Competition implies winners and losers...just don't be the C student. And, if you are, don't blame anyone else.

[Icarus]

Gil.

Your economic math is off. A 50% wage reduction doesn't decrease the cost of goods and services (especially in the grocery store) 50%. Wages are a fraction of total product cost (sometimes a large fraction).

If another nation can do the same service for 30% of our cost, and we embrace trade, prices will come down, as we've seen. Indian consulting companies, for example, have reduced the cost of software implementations significantly, so, companies can now spend more on software than before.

The people who suffer, can't really compete on price (wage levels are too high in the US to do that). They have to change careers. Move to Nashville, Phoenix, etc. There are cities with growth. Get out of Detroit, Cleveland, etc.
It's that ability to adapt and be mobile we have to infuse into the populace. People think the have a 'right' to a job, a lifestyle, a home, a family.
You don't.
No one does.
If you want those things, you have to manage the risk of those costs. You have to save before spending, and have enough saved to manage a potential move. Don't trust the company you work for, don't trust any of the management hype.

[real person from the real world]

Icarus, I was an "A" student, and I have a grad degree to boot. Competition is one thing, cut throat competition is another. Cut throat competition brings on lying, falsified credentials, those certification tests that only mean that someone memorized enough stuff, to pass the test, with little real insight into the technology. I have had employers look at a excellent resume, only to complain later that the guy, usually a visa guy, seemed to be answering questions to an on phone screening with delays suggesting he was looking up the answers, and the company that wanted an Infrastructure manager, and mowed thru 40 well qualified guys in as many days, only to hire a hands-on geek, because that is what the CIO was. I have seen HR gate keepers who reject a visa guy as a "job hopper." What was the poor guy supposed to do, when the guy who owns his visa says "jump." There are hotlists and reqlists flying over cyberspace, from thousands of foreign companies with names like American Tech whatever, that are actually 1 or 2 foreign guys with a bunch of scared serfs on bench, or who may not even have any visa guys, but work to become "preferred vendors" and then end up trading with the other vendors who do have serfs. The non-sense that goes on, is only apparent to those who deal with it. You are apparently one of the blessed few, with a commodity job, and doing OK.... for now. Some day, you may find the gypsy life NOT to your liking, or want to settle down to raise a family, only to find it tough to get a permanent gig.

[Peter Schaeffer]

real person from the real world,

At the relatively high end of the labor market H1Bs are germane. However, at the middle and low end, unskilled immigration (legal and illegal) is far more relevant. We have 12 million illegal aliens in this country. Compare that to the number of H1B visas.

Icarus,

Studies have shown the H1Bs aren’t used because domestic labor doesn’t exist. It does. It just costs more. Supply and demand. Basic Econ 101 principles.

[Icarus]

Real Person...

Every industry has its problems, IT is no different. But, despite all that, the industry provides high wages, and great employement.

If you were an A student, with a masters degree (I assume from good universities...devry doesn't count)...you will get great employment if you're mobile (both physically, and skills wise).

And yes, of course one day I'll want to 'settle down', limit my gypsy lifestyle, and raise a family.
That's why I'm saving now...

[Icarus]

Peter Shaeffer...

No, not really. Try finding qualified SAP/Oracle people...they don't exist here in great numbers. Other nations (india) crank them out at much greater rates. Our schools are just learning to teach such skills now...they're 5-10 years late.

[Peter Schaeffer]

Icarus,

How much are you willing to pay? In the free market prices matter.

For a very tiny fraction of what hedge fund managers make, vast numbers of people will be glad to study SAP/Oracle.

Try offering $50K hiring bonuses. See how many people show up.

[Icarus]

Peter...

I'd pay nothing. Those hedge fund managers earned THEIR money.
And, if you want a job in SAP/Oracle...go study yourself.

It's not anyone else's obligation to finance your skill set.

That's my 'free market' reponse.

[cm]

Icarus: "Learn a new skill (a new programming language, for example), and be adaptable. Why is that so hard?"

I can learn any language XYZ on the evenings/weekends I should use to regain some shape. I cannot learn "2 years recent work at company ABC using XYZ". The latter is what will (maybe) get me to the interview. The former is not.

Sometimes (though not often) it is even as explicit as "we want you to do the same thing here as you did in ABC". (Not from personal experience but heard from others I trust.)

And BTW, I'm a gainfully exmployed ex-H1B greencard holder, not an "American" laid off programmer.

[Peter Schaeffer]

Icarus,

I don't need an SAP/Oracle job. I am gainfully employed.

Your position is that rather than pay the free market wage in the US, you want to import someone for less.

So free markets are "good" when they raise profits, but "bad" when they raise wages.

Capitalism for me, but not for thee. A familiar ideology. Prefix capitalism with “crony” and your worldview becomes commonplace.

[Icarus]

No Peter, that's not my position.

I like free market wages, and strategic immigration. It's good for the overall economy to have the labout we need available. In 1965 congress passed an act to encourage more high tech skills into the US, and we've gained tremendously from it.

We could have opted to close borders, and force companies to retrain, or wait for the labour class to re-skill...but that takes too long. And, it decreases our competitive edge. The best solution is to encourage the immigration of skilled workers. We need more doctors to bring down the costs of medical treatment...are you agains that?

And CM

No, you don't need to know what company ABC has done over the past few years. Usually, company ABC will only expect you arrive with the proper skill set.
So, it is more important that you can program in language XYZ, and understand the toolset behind it.

[cm]

"Try finding qualified SAP/Oracle people...they don't exist here in great numbers. Other nations (india) crank them out at much greater rates."

Give me a break, that's just boilerplate BS, the same as "Americans don't study".

Companies look for "demonstrated experience" (verifiable statements on your resume) domestically, entry levels are hired offshore our outsourced there.

While I'm not in that field, I know some people who are. There was a project where an outsourcer was bidding 20% of the "in house cost" (by whichever calculation). The project manager's comment, "I know that's too good to be true, but if they screw up we have 5 tries". The local developers, who would otherwise have done the implementation, were then expected to "manage" the implementation and teach ("work with") the foreign "experts" anything they didn't know beyond the basics. (How that was consistent with the "lower cost" I will not even ask.) After the inevitable had happened, the local developers had to salvage it. Result huge cost and schedule overrun, and substantial reduction in system functionality (everything had been "implemented", but much was beyond salvage within the allotted rework time).

One of the SAP developers is still there -- for lack of better, as opposed to worse, alternatives.

[cm]

And BTW, SAP and Oracle are different skill sets. When you have SAP, that will not get you anywhere with an Oracle shop.

[ken melvin]

Icarus, obviously you have no intention of ever working for a living.

[cm]

Icarus: You misread what I said. I mean company DEF wants your ABC experience in addition to your XYZ skills.

A large part of the value (and a large part of the pay premium) of an experienced SAP/R3/ABAP programmer to stick with your example is not (just) knowing how to generally program in that tool, it is how to solve particular industry-specific problems and how not, and in such way that it works with other systems you have to interface with.

You can replace any of Java, C++, Perl, Python, etc. for SAP. Nobody is looking for raw language skills, but application specific expertise that you can largely only attain working in that application field in relevant context (i.e. for most purposes in industry).

Practical software development is not very much rooted in science, more so in engineering, but in substantial part it is a craft.

In times of growth, and/or where an industry is starting out, employers are generally willing to hire "raw skill" and build up expertise. Much less so these days.

I think what I'm seeing is in good part employers who want to hire domestically, but not the people that they can readily hire, and then claim they are not there.

Apparently there is enough expertise for the work than really needs to be done. When companies with excellent cashflow and impressive executive compensation keep lowballing and rejecting suitable candidates, even after successfully interviewing, the situation cannot be desperate.

That's all fine, but then don't complain the domestic talent is not there.

[Icarus]

CM...

You're totally off, and have made an irrelevent analogy with your little out-sourcing/off-shoring nightmare story.
There are countless stories of local (US) systems implementers, who screwed up, wasted money, and overbilled. In fact, part of the push to off-shore was to hedge the risk of trusting the same 5-6 SI's.

In any implementation, what can be off-shored is a strategic decision, and, anyone who wants to work in this field in the US, must understand that, and develop a skill set accordingly. Yes, some development will always be offshored, but, much of strategic IT cannot.

So, that ABAP programmer here has to (should) either develop project management skills (or, be a team lead), or focus on an area of development which is harder to offshore.

As for the issue of getting a job, with a skill set change, it will be difficult, but, it can be engineered.
Take a JD Edwards or Baan developer from years ago. Their ERP system dissapeared from the market, and hence, they had to adjust (most did).
So, perhaps they had to get certified in an analagous toolset from SAP or Peoplesoft. And after, they'd have to look for a position at a lower level, for a bit less money. And, they have to be willing to relocate.
If they do that, with some persistance, they will find other offers.

[Peter Schaeffer]

Icarus,

I don't know what 1965 law you are referring to… However, if you meant immigration law changes, you need to check the facts. As a consequence of immigration, the future US labor force will be less skilled that it is today. Take a look at Coming US challenge: a less literate workforce A larger share of workers will have minimal reading skills in 2030 than today, according to a report released Monday. For a shock, check out the chart in the article.

The 1965 immigration law changes promoted chain migration from countries that typically provide less skilled immigrants (compared to the prior law). The consequences for our labor force were not positive. Note that historically, immigrants coming to the US were more educated than the average American. After 1965, they were less educated and the trend has been strongly down.

Importing cheap technical labor into the US doesn’t “improve our competitive edge”. It transfers income to employers and immigrants. That’s not a plus for the American people.

For the record, I favor allowing truly excellent talents to immigrate to the US. However, it should by via green cards, not the indentured servitude of the H1B system. Actually, I even favor H1B visas to a limited extent. However, one again only extraordinary talent should be allowed and no company should be allowed to run a body shop.

“We need more doctors to bring down the costs of medical treatment...are you agains that?”

Yes, I am. Adding additional doctors is likely to make medicine more expensive, not less. Doctors strongly influence both the supply of medicine and demand for it. If the medical system has excess capacity, it is very likely to generate additional demand to the detriment of all of us.

[Icarus]

And CM...

Trust me...people hiring SAP/Peoplesoft/Oracle would ideally like the candidate you're speaking of (ie, with the exact industry background you'd want, with the exact toolset, etc, etc)...but, it doesn't happen like that.

I get the sense you don't really understand this market, and are making generalities based on some very spotty high level fear-mongering stories.

I constantly hire these roles, and have worked both in industry, and for consulting companies. You look for an ideal fit, but, accept the closest they can get (in their budget).

I work for a consulting company which actually hires kids out of college, and trains them. We pay them 60k or so to start, and spend a lot of effort to build their skills. We use H1b hires at slightly higher levels, when we need a specific skill set.
This model is a bit different than other consulting companies, and that's the benefit of having a competitive market.
Companies will try off-shoring, each devise strategies, and some will work better than others. Offshoring isn't as easy as some think, and involves great risk. But, at the end, the end product becomes better, and the horror stories subside.

In technology, the only rule is that one's current landscape or environment will definitely change. Today's SAP solution will become something else in a few years. It's about constant retraining. You may get lucky, and develop an expertise in something incredibly valuble for a few years (SAP consultants in the mid 90s were known to make $500/hour at times). But, that ride can end quickly. You have to position yourself accordingly...ie, be ready to re-train.

This sense of reading the market, understanding one's skills, and being able/ready to re-train is exactly what others have to absorb and mimic. The auto worker in detroit should understand the likely dissapearance of his job/plant. Instead of whining and acting like his family or city is owed a job and a livelihood (aka michael moore), he/she should assume the temporality of that wage/labour relationship, and strategize accordingly. Save enough money to have a retraining budget, keep up with business news, understand which industries booms are in, and plan ahead so any disturbance is better handled.

Inequality can only be addressed by better strategy...that's my point. Strategy at the individual level. What reproduces inequality is the cycle of poor decisions, which lead to poverty.

[Icarus]

Peter...

Take a look at the Hart-Cellar act in 1965, which basically ended years of racist quotas based on countries of origin (with a preference of nordic nations), and opened up the field.

And, I quite disagree with you...this act was not only beneficial for america, it was a godsend.
Now, if we look at our best universities, you'll see a disproportionate number of Asians. Why? These are the children of immigrants, many based on this act.

Finally, we now have a nation where getting good food, hearing different languages, and having smart, discplined students is common (or, becoming more common). I'd love to see even more.

[cm]

Icarus: I'm not talking about entitlement to a fixed lifetime job. What I'm talking about is hypocrisy, i.e. pretending that the "talent" is not here when it's about the cost of the talent, or the unwillingness to extend the very training and skill building opportunities that are accorded to cheap offshore labor at substantial cost.

Nobody has a right to a particular job of their choosing, but so don't employers have the right to shirk aggregate skill maintenance investment in the respective industry and expect workers with specific experience, not general principles that are teachable, to come from "somewhere".

But we may be living in different worlds as in yours it's all different than in mine. I can only relate what I see and what I hear from people close to me, perhaps they are all scaremongers or liars, or my circle of associates is truly unrepresentative and we all don't see the greatest story never told.

On a perhaps not unrelated note, you sound like you have more of a management role. How often have you taken the medicine you prescribe for others, i.e. retraining and starting at the entry level every few years?

[Icarus]

CM...

I did it to start my career...my graduate degree was in history, and, I decided I wanted to change paths, and start in technology. See, it's not so hard. I don't have a mba or a degree in technology, and still have managed fine.

And, I think we disagree on this...
See, workers in India don't show up with experience, quite often. There's not much of a 'business culture' in India, as half that economy is still 'black'. The knowledge they show up with is quite textbook, no doubt. But, they show up.

And, as for getting 'cheaper'labour from overseas...this isn't all that applicable in tech. Wages in the H1b program have to resemble the market wage. Sure, they can offer the low end, but, so what. The 'low end' still gets them a starting wage of around 60k, which is great. Over time, they make more.
Are you suggesting such wage rates are 'beneath' the US workforce, and hence, employers are exploiting someone? (who's being exploited at such great wages?).

If we really do have a technical workforce who wants jobs, and can't get them because corporations prefer less expensive H1b's, exactly what wage are they insulted at? Technical workers make a lot of money, so, I'm a bit confused on who you think is getting undercut unfairly.

[cm]

Icarus: Read what I write and don't put words in my mouth.

I didn't say H1's are cheaper. What H1's have "going for them" is the semi-indentured status. While they have to be offered "prevailing wage", there is some leeway in what precisely that is, and the semi-indentured status certainly puts a damper on the worker's propensity to leave, esp. once the GC process is started, leading to a probably hard to quantify damper on raises, which feeds back into prevailing wage.

As for "showing up" on the part of Indian graduates, I don't know what you are trying to say.

[cm]

Icarus: In the part of the world that I see, many jobs (not just IT) are not actually advertised, but reqs are created "when the right candidate comes along" (i.e. is referred).

That pretty much means those employers, or the hiring managers or depts. don't want to bother to deal with applicants and rely on their employees' "networks" to get pre-filtered leads. It certainly doesn't indicate a great urgency in hiring, other than the rhetoric that goes with it.

[Callahan]

A "Middle Class Squeeze" story on MSNBC today has pundits such as Arthur B. Laffer, 'Father of supply-side economics’ making comments suggesting there is no squeeze such as "I can’t hazard a guess as to why there is such a malaise in this country about current living conditions as we have never had it better."

Contrary to that remark I find that being among the UNPOOR or the saggiest part of the sagging middle class does not afford me such a "never had it better" attitude. This Laffer guy and many more like him do not have a freaking clue.

[Patricia Shannon]

http://www.msnbc.msn.com/id/21272238/

Who or what is the middle class?
Economic data can't fully explain why so many feel financially squeezed

Despite income of $100,000, ‘We are squeezed tight’
But many Americans who consider themselves middle class told msnbc.com they do feel financially squeezed. One of them is Kathy McClain, a wife and mother of three teenagers in Westbrook, Maine.

McClain and her husband have a combined income of $100,000 a year, which leaves about $80,000 after paying income and property taxes. They have no credit card debt, don’t take expensive vacations, and she drives a 9-year-old car. Tuition for their oldest child, now at the state university, costs another $16,000. The family makes too much for her to qualify for work-study.

“I can tell you quite honestly that we are squeezed tight,” she said in a recent e-mail. “We live paycheck to paycheck. Yet, by all standards, we are doing well.”

When I was reading this, I was shouting in my mind, "How much do they have to pay for housing?". They finally address this on the next page. They also pointed out that good schools depend on property taxes, which depend on house values. And they pointed out that medical costs can desvastate a family financially.

What they didn't mention is the effects of temporary work on income. With much work being temporary contracts, with periods of unemployment and low-paying jobs in between, a person's average income may be much less than their hourly pay. Eg., my average salary for the last three years is less than half of my current salary. The tax system used to allow income averaging, but Reagan did away with that.