The Wages of Recession

Robert Reich, myth buster:

Post-Meltdown Mythologies (I): Americans Have Been Living Beyond Their Means, by Robert Reich: What brought on the economic meltdown of 2008? Besides the bursting of the housing bubble, Wall Street's malfeasance and non-feasance, and Washington's massive failure to oversee Wall Street, fingers are also being pointed at average Americans. Some of them took on mortgages they couldn't afford, of course, but we're also hearing ... something like this: For too long, Americans have been living beyond our means. We went too deeply into debt. And now we're paying the inevitable price.

The "living beyond our means" argument, with its thinly-veiled suggestion of moral terpitude, is technically correct. Over the last fifteen years, average household debt has soared to record levels...

But this story leaves out one very important fact. Since the year 2000, median family income has been dropping, adjusted for inflation. One of the main reasons the typical family has taken on more debt has been to maintain its living standards in the face of these declining real incomes.

It's not as if the typical family suddenly went on a spending binge... No, the typical family just tried to keep going as it had before. But with real incomes dropping, and the costs of necessities like gas, heating oil, food, health insurance, and even college tuitions all soaring, the only way to keep going as before was to borrow more. You might see this as a moral failure, but I think it's more accurate to view it as an ongoing struggle to stay afloat when the boat's sinking. ...

The real answer over the long term is to restore middle-class earnings so families don't have to go deep into debt to maintain what was a middle-class standard of living. ...

The short-term outlook isn't so good:

Next Victim of Turmoil: Your Salary, by David Leonhardt, NY Times: ..What ... will the next stage of the downturn be about? It is likely to revolve around the worst slump in worker pay since — you knew this was coming — the Great Depression. This slump won’t be anywhere near as bad as the one during the Depression, but it also won’t be like anything the country has experienced in a long time. ...

The events of the last several weeks have removed any serious doubt that the economy is in a recession. ... As the chart next to this column makes clear, every recent recession has brought an effective pay cut of somewhere between 3 and 7 percent for the typical family. The drop typically happens over a period of about three years, lasting longer than the recession officially does, as pay fails to keep up with inflation. ...

What will make this recession different, no matter how deep or shallow it is, is that it’s following an expansion in which most families received little or no raise. The median household made $50,200 last year, slightly less than the $50,600 that the equivalent household earned in 2000...

For two decades, consumer spending has been an enormous driver of economic growth, thanks in good measure to a long bull market, a housing bubble and a boom in consumer debt.

The bull market, the housing bubble and the debt boom have all ended — and now paychecks are shrinking, too.

At some point, the next big economic engine will indeed arrive. It always does. This time, however, it’s going to have some stiff head winds to overcome.

Comments

[a]

"One of the main reasons the typical family has taken on more debt has been to maintain its living standards in the face of these declining real incomes."

Um, isn't the rational thing supposed to be, cutting back on living standards when real incomes go down? Or are we going to continue to pretend that we can maintain living standards beyond our means?

says...

Way to completely miss the point about the distribution of income. When income is mal-disributed, forcing those at the bottom to cut back isn't the only solution. But I suppose you raise a family of four on $50,000 and think it's really easy - they're just a bunch of whiners? Right.

[12many]

Agree with a - why are we entitled to the highest standard of living we've attained in the past. Maybe real incomes went down for the wrong reasons, but we don't have a "right" to the earlier level. So where's the myth?

[a]

"forcing those at the bottom to cut back isn't the only solution"

I agree entirely. The government taxes the rich and redistributes, so that the rich have to cut back. But *somebody's* living standard has to go down, rather than pretending everything goes merrily on before.

[Gegner]

Mr. Reich is correct, although the situation wasn't an attempt to 'maintain a lifestyle', it was simply getting pounded by life's little bumps and bruises.

You get a flat and a new tire sets you back a hundred you don't have 'em dollars. Then the check engine light comes on and it's another $300 hit on the head to replace something you never head of, never mind knew your car had one.

You (or one of the kids) gets sick, tapping with another $20 for the co-pay, another $15 for meds and a day's pay because 'sick pay' is a 'luxury' your employer doesn't provide.

Then you go to get a sticker and they reject you because you need ball joints, new tires and one of your brake lights is out...for another $500 (you don't have 'em bucks.) So you put all of these little 'incidental' on your plastic...and the next thing you know, you find out you made a late payment and now all of your credit cards are charging you 30% interest!

Well, this won't do...so you go to the bank and get a 're-fi' to pay down your credit card debt (back when all it took to qualify was a pulse.)

You pay off your credit cards...and then the freaking car dies!

Seems like a few 'minor' things...but the 50% point in our 'income distribution' is just 30K for a man and about half that for a woman.

And if it isn't the car then something major around the house is always giving up the ghost! it never ends.

[Linda]

It appears I'm in good company. As I said here and here, most of us have been squeezed for some time.

As for the idea of cutting back on expenses when money is short----Duh! While there may be some who have continued to spend on things they didn't need, financed by The House/ATM and the plastic, there are far more who have been cutting back all along. As Gegner points out, there are some expenses that one is simply stuck with. At some point, cutting back just doesn't cut it any more.

And then there's the psychology of the thing. To whom are all those ads on tv, in magazines, and affixed to the shopping cart addressed? How much of the "lifestyles of the rich and famous"-type advertising can one abide when one is wondering if there will be money to replace the water heater or fix the furnace before winter? The world would benefit from a lot more consideration of what it would be like to walk in someone else's shoes.

To borrow a phrase that's getting pretty worn out this year, what we need is change - fundamental societal change. Frankly, I don't think either candidate is talking about that, but I do think one of them is more able relate to life south of median income and more able to at least consider that the way we've been doing things hasn't worked out very well for us.

[salao85]

The mystery to me is that this house-as-cash-machine scheme didn't create a political backlash while it was happening.

The problem for me is that if I felt obliged to increase my leverage in order maintain a common, grounded, lifestyle I would protest that I was being forced to increase risk as I age, not decrease it. Why didn't this happen in the form of greater political activism and protest?

I fear the answer lies in what was at least until this electoral year and surrounding global financial crisis, a shameful political vacuum, there was simply no credible opposition to the scheme for people to rally around.

Any politician who wasn't protesting about the equity for wages swap should be ashamed.

Lets hope that the change that now seems inevitable in November also sees a return to some grounded thinking. It's people real incomes that matter.

[ken melvin]

Robt. Reich and Linda - thanks for the refreshing honesty. This is a time of great transition, many have been hurt, everyday many more are hurting; enough of this Reaganesque blaming the victim crap.

[ken melvin]

MEW, and the housing bubble, are much in the measure of how dismal the GWB record. Let's subtract this bailout and the MEW from his numbers. We have lost so much ground.

[save_the_rustbelt]

The little people are supposed to send a trillion dollars to Wall Street and then suffer in silence.

Easy, right?

[Ninja Zombie]

I'm sorry, but at least some of this is silly.

"But with real incomes dropping, and the costs of necessities like gas, heating oil, food, health insurance, and even college tuitions all soaring, the only way to keep going as before was to borrow more."

Gas and college prices certainly went up, and I agree that the cost of college needs to be reigned in.

Food prices, however, are not up relative to 2000. Food prices were 9.9% of disposable income in 2000, and 9.8% in 2007. In 2004, food prices went down to 9.7% of disposable income, and the recent rise is simply a return to previous levels.

http://www.ers.usda.gov/Briefing/CPIFoodAndExpenditures/Data/table7.htm

As for health "insurance", also unfair. Wages have held steady, but *compensation* (wages + benefits) has not. The increase in compensation has consisted mainly of increases in spending on health care.

So what have people been spending money on? Bigger houses.

http://online.wsj.com/article/SB118955679788724507.html?mod=hpp_us_whats_news

[ScentOfViolets]

I agree entirely. The government taxes the rich and redistributes, so that the rich have to cut back. But *somebody's* living standard has to go down, rather than pretending everything goes merrily on before.

This is making an unwarranted supposition as to where the cost accounting begins. Yes, median incomes are down - but median productivity is up. So really, what is happening is that several millions of somebodies living standards had to go down so that a few thousand 'elite' could see their living standards go up. Why not start the accounting there, rather than ignore it completely and complain about a 'redistributionist' government later?

[Ninja Zombie]

Scentofviolets: "Yes, median incomes are down - but median productivity is up."

Do you have a source for this? While I'm aware *mean* productivity is up, I wasn't aware there was even a good way to measure *median* productivity.

To the best of my knowledge, the best one can do is measure *mean* productivity on a per-firm basis, and then measure the *median* firm. But that's not even remotely the same thing.

[baileyman]

On Reich - People act to freeride on market information assumed to reflect real prices. When prices deviate such people can be hurt. The operation of the consumer finance market was "more is better". If people shouldn't rely on the information from the market, then that's a regulatory problem, not their own problem.

On Leonhardt - If this is deflation, then fixed comp will do well and variable comp badly.

[Inflation is the Enemy]

"But this story leaves out one very important fact. Since the year 2000, median family income has been dropping, adjusted for inflation."

So get rid of inflation, and the problem is solved. Mild deflation would even result in the same wage buying more over time. Enough with destroying the middle class standard of living for no other reason than so borrowers don't have to pay back all that they borrowed. There are other citizens in the country than just borrowers.

Get rid of inflation, and the middle class standard of living can finally grow along with the economy, instead of steadily eroding. Stop creating extra money and giving it all to just a few borrowers.

[hari]

Look this global recession is going to fix it!

It'll kill the goose that laid the golden egg for NYSE.

Let the damn correction to take place and celan up the accumulated assest of no value.

Me thinks we shall then have abetter idea of what really happend and/or what caused it.

This modern internet age of media has sought to interfere with the correction - it ain't going to happen any time soon.

[Economics Observer]

"Um, isn't the rational thing supposed to be, cutting back on living standards when real incomes go down? Or are we going to continue to pretend that we can maintain living standards beyond our means?"

That depends on whom you ask. One problem I've always had with Milton Freidman's permanent income hypothesis is the problem of figuring what your permanent income is. If you believe that your income level will recover then borrowing to maintain living standards is not irrational. Of course, if you are wrong then you've just dug yourself into a pit.

Inflation is the enemy: If you think inflation is bad try deflation. Or, better yet, read about it, thus sparing people other than yourself the agony.

[Inflation is the Enemy]

"If you think inflation is bad try deflation."

Bring it on. Excessive leverage causes the problems, not deflation. Inflation is just a belated attempt to deal with the effects of excessive bubble leverage. Carried on too long, inflation encourages even more excessive leverage, and greater problems later.

[kharris]

Reich is being a bit disingenuous. There are, as others here have noted, those who are struggling to keep up. However, residential square footage per capital and road-hog square footage per capital have skyrocketed in recent years. Closets are full of stuff. Storage units are full of stuff.

The simple fact is that real spending per capital has risen inexoribly in recent years, and didn't really even pause for the past recession. We haven't maintaining our living standards. We have raised them.

The majority of workers do have reason to complain, but I don't think pointing at their debt ratios gets us anywhere. Most of us could have walked more, driven less, owned less, heated less. We chose to do what we did. Where we are in trouble is that pensions have disappeared and the machinations of financial manipulators have caused bubbles in the assets we own to finnance our retirement and our children's education. We have a health insurance system which makes us doubly vulnerable to unemployment and which is run largely for the benefit of the insurer. We need to stop moping about not being able to have enough toys and make a bigger fuss about security. We need stable retirement prospects and secure health care, not a living standard that goes up regardless of what our incomes are doing.

[anne]

http://www.cbpp.org/8-9-05bud.htm

August 29, 2008

How Robust Was the 2001-2007 Economic Expansion?
By Aviva Aron-Dine, Chad Stone, and Richard Kogan

We examine Commerce Department, Labor Department, and Federal Reserve Board data on seven economic indicators: the gross domestic product, personal consumption expenditures, private domestic fixed non-residential investment, net worth, income from wages and salaries, payroll employment, and corporate profits. For each indicator, we look at average growth both since the economy hit bottom in November 2001 and since the last business-cycle peak in March 2001. We compare average growth over these periods with the average growth that occurred over comparable periods in the other business cycles since the end of World War II. (Growth is measured after adjusting for inflation, except for employment levels, where such an adjustment is inapplicable.)

For six of the seven indicators, the average annual growth rate between 2001 and 2007 was below the average growth rate for the comparable periods of other post-World War II economic expansions. Notably, this expansion was among the weakest since World War II with respect to both overall economic growth and growth in fixed non-residential investment. These two indicators should have captured any positive "growth effects" of the tax cuts.

The labor market also was weaker during the 2001-2007 expansion. Both employment growth and wage and salary growth were weaker during this expansion as a whole than in any prior expansion since the end of World War II.

The 2001-2007 expansion outperformed the average post-World War II expansion in only one area: corporate profits, which grew much more rapidly than average.

These conclusions hold whether one focuses on comparisons that examine the period since the expansion began in the fourth quarter of 2001, or comparisons that examine the period since the last business-cycle peak (i.e., since the 1990s expansion ended in the first quarter of 2001).

Annual Growth Rates Measured from Trough *

GDP
Consumption
Non-Residential Fixed Investment
Net Worth
Wages and Salaries
Employment
Corporate Profits

Current Expansion

2.8%
2.9%
3.9%
3.5%
1.8%
0.9%
10.8%

Post-War Average

4.3%
4.0%
6.0%
4.1%
3.8%
2.5%
7.4%

1990s

3.3%
3.2%
7.6%
4.1%
2.7%
1.9%
8.0%

* Average growth rate in 23 quarters after trough. Current expansion: 2001-IV:2007-III. 1990s: 1991-I:1996-IV. Post-war average includes 1990s and 1949-IV:1955-III, 1954-II:1960-I, 1958-II:1964-I, 1961-I:1966-IV, 1970-IV:1976-III, 1975-I:1980-IV, 1980-III:1986-II, 1982-IV:1988-III.

[Notice consumption....]

[anne]

http://www.cbpp.org/8-9-05bud.htm

August 29, 2008

How Robust Was the 2001-2007 Economic Expansion?
By Aviva Aron-Dine, Chad Stone, and Richard Kogan

Annual Growth Rates Measured from Peak **

GDP
Consumption
Non-Residential Fixed Investment
Net Worth
Wages and Salaries
Employment
Corporate Profits

Current Expansion

2.5%
2.9%
2.0%
3.2%
1.2%
0.6%
9.5%

Post-War Average

3.4%
3.6%
3.7%
3.9%
2.9%
1.7%
3.8%

1990s

2.8%
2.8%
6.4%
4.3%
2.3%
1.5%
8.1%

** Average growth rate in 26 quarters after peak. Current expansion: 2001-I:2007-III. 1990s: 1990-III:1997-I. Post-war average includes 1990s and 1948-IV:1955-II, 1953-II:1959-IV, 1957-III:1964-I, 1960-II:1966-IV, 1969-IV:1976-II, 1973-IV:1980-II, 1980-I:1986-III, 1981-III:1988-I.

[Notice consumption. Get it, I get it....]

[paine]

ninja

u are still living on your personal soft ware tale

it was bogus self serving and ignotrant then
and
it still is

the distribution of value added
and the distribution of compensation
in a co operative process of production
both share dubious asumptions
if the task is to justify the status quo

unless one simplifies
and assumes all value added
is from labor and all markets clear
and are highly price competitive
then we can begin to sort out rates
of
contribution
compensation
and..... exploitation

[donna]

But if we cut the capital gains tax everything will be ok, right?

Well, at least for John and Cindy!

[anne]

http://www.cbpp.org/8-9-05bud.htm

Annual Growth Rates Measured from Trough *

Consumption
Wages and Salaries
Corporate Profits

Current Expansion

2.9%
1.8%
10.8%

Post-War Average

4.0%
3.8%
7.4%

1990s

3.2%
2.7%
8.0%

* Average growth rate in 23 quarters after trough.

[anne]

http://www.cbpp.org/8-9-05bud.htm

Annual Growth Rates Measured from Peak **

Consumption
Wages and Salaries
Corporate Profits

Current Expansion

2.9%
1.2%
9.5%

Post-War Average

3.6%
2.9%
3.8%

1990s

2.8%
2.3%
8.1%

** Average growth rate in 26 quarters after peak.

[ScentOfViolets]

Do you have a source for this? While I'm aware *mean* productivity is up, I wasn't aware there was even a good way to measure *median* productivity.

To the best of my knowledge, the best one can do is measure *mean* productivity on a per-firm basis, and then measure the *median* firm. But that's not even remotely the same thing.

I've heard both terms used, although it's certainly possible that they were improperly applied. Googling does seem to yield quite a few hits for median productivity; here's one pulled at random:

http://provider.thomsonhealthcare.com/uploadedFiles/docs/0408MTM.pdf

I'm curious, btw, as to what you mean when you say that they are not 'remotely the same thing'. Median is, after all, just a measure of central tendency, as is mode and mean. I suppose you could talk about cases such as bimodal distributions or skewness; in which case measures of central tendency don't agree(which, imho, does not mean that 'they are not remotely the same thing.) But in most of the relevant cases, they agree pretty well; it is the exceptions, like income, that need explaining and close scrutiny, not the other way around. In fact, it is precisely the extreme differences between mean and median income (for example) that has many people thinking that something is not right; bimodal distributions can often be interpreted as the mixing of two distinct populations, within which the distribution is approximately normal, etc.

[anne]

Ordinary Americans have of course been struggling to live within their means as Hillary Clinton understood above all and was frequently mocked for emphasizing. Ordinary Americans struggled to live within their means through the expansion that was the weakest expansion for households and strongest for corporations since 1945. Ordinary Americans failed to benefit in wages relative to productivity gains and corporate revenues through the expansion, but especially in terms of benefits, especially in terms of health care benefits they have been continually, progressively harmed.

[anne]

To claim that Americans have gained in terms of health care benefits since January 2001, is to deceive beyond shame.

[paine]

rusty
nice points

[ScentOfViolets]

Reich is being a bit disingenuous. There are, as others here have noted, those who are struggling to keep up. However, residential square footage per capital and road-hog square footage per capital have skyrocketed in recent years. Closets are full of stuff. Storage units are full of stuff.

The simple fact is that real spending per capital has risen inexoribly in recent years, and didn't really even pause for the past recession. We haven't maintaining our living standards. We have raised them.

But how significant is this to the claim that - morally speaking - the average consumer has been spending on frivolities rather than necessities? Do most people live in new houses, for example? How does the cost of owning a vehicle really compare with one that was purchased fifty years ago? I grew up in a time when an automobile going a hundred thousand miles before replacement was notable. Ditto for trips to the mechanic.

I think a lot of this is designed to fit into a narrative, rather than supports the idea of a petulant consumerism. I _still_ hear from some people that so-and-so has a microwave . . . _and_ a TV! Owning these gee-gaws (especially when they can be purchased on a rent-to-own plan that has rates of $30/month) does not indicate any notable success to me.

No, what seems to have gone up have been the necessities. Health care. Insurance. Education. Housing (and we know why that was now, don't we?) The insatiable urge for consumer electronics has not impoverished the Common Man to any notable degree that I've seen.

[paine]

i suspect to answer this imp
with the assumption
of a shared goal of truth seeking
is a mistake

ninja needs to convince himself
at least on the surface
he's in some important sense
facing .... reality
or at least willing to face the facts of reality
because he's .....superior
and didn't delude himself to feel good

ahh the irony of that !!!

the deeper motives operating
behind the back
of his concious mind
are probably ...

[anne]

What needs to be understood clearly is just how relatively difficult a period we have had economically in the 93 months of the Bush Presidency since January 2001; a period in which a mere 7 million jobs have been created * when during the Clinton Presidency there were 21 million jobs created in such a time leaving a stark, sorry difference of 14 million fewer jobs as a legacy.

Where an average of 80,650 jobs have been created monthly through the Bush years, there was an average of 225,000 during the Clinton years and 150,000 new jobs a month are needed to stay even with population growth.

* As yet a distinct over-estimation.

[paine]

scent

the reich point

if our corporate cluster fucks
paid out
a better piece of value added
in the form of compensation
to mid level and belower jobsters
they wouldn't need to borrow so much
whether they spend it
on sick children or porno films
or house lot speculations

[paine]

"7 million jobs... a distinct over-estimation"

yes sustainable
bush cycle jobs added
---given A HUNGER CHANCELORY type next admin----
may prove to be
closer to zero

[kthomas]

"We need stable retirement prospects and secure health care, not a living standard that goes up regardless of what our incomes are doing."....kharris, I agree.

I think this is the "great societal change" Linda spoke of.

[hari]

Dr Doom says Recession will last 24mths and will be really a serious downturn. This is the only guy who has had the guts to call the financial meltdown - 2006! Now he says it will be global also.

How is it possible - with same stats - he can come down so hard on the Establishment =- compared to his colleagues?

Are we all playing the same ball game? Or are some playing on a different playing field altogether - and don't know it?

Let the recession clean up the mess - let's reckon with it!
Europe will go into recession in Q4. EU SUmmit is preparing for this downturn and recovery today.

[Patricia Shannon]

salao85 says...

The problem for me is that if I felt obliged to increase my leverage in order maintain a common, grounded, lifestyle I would protest that I was being forced to increase risk as I age, not decrease it. Why didn't this happen in the form of greater political activism and protest?

I fear the answer lies in what was at least until this electoral year and surrounding global financial crisis, a shameful political vacuum, there was simply no credible opposition to the scheme for people to rally around.

Any politician who wasn't protesting about the equity for wages swap should be ashamed.

John Edwards was addressing issues like this, and the result is that the plutocracy-owned media froze him out. First the slimy conservatives tried making fun of him, but that didn't work, it just resulted in more contributions for him. So they then started totally ignoring him, even thoughbecause he was still doing well enough to have a decent chance of winning. All other candidates had to have gotten the message.

[ken melvin]

Perforce, the difference between 81k and 150k means that nearly 70k/ month were added to the true unemployment for some 6.5 million over the period of GWB's Admin.

[ken melvin]

Which is nearly 5%.

[anne]

http://www.cbpp.org/8-9-05bud.htm

August 29, 2008

How Robust Was the 2001-2007 Economic Expansion?
By Aviva Aron-Dine, Chad Stone, and Richard Kogan

Annual Growth Rates Measured from Trough *

Employment
Corporate Profits

Current Expansion

0.9%
10.8%

Post-War Average

2.5%
7.4%

1990s

1.9%
8.0%

* Average growth rate in 23 quarters after trough.

[anne]

http://www.cbpp.org/8-9-05bud.htm

Annual Growth Rates Measured from Peak **

Employment
Corporate Profits

Current Expansion

0.6%
9.5%

Post-War Average

1.7%
3.8%

1990s

1.5%
8.1%

** Average growth rate in 26 quarters after peak.

[anne]

Ken Melvin:

"Perforce, the difference between 81k and 150k means that nearly 70k/ month were added to the true unemployment for some 6.5 million over the period of GWB's Admin."

Interestingly developed.

[Patricia Shannon]

Anne, thank you for using the inclusive term "ordinary" Americans, rather than "middle-class", which ignores the people worse off. Almost none of the employees at Waffle House below the manager level have cars, because they can't afford them. And A wants them to cut back.

[robertdfeinman]

Harvard's Elizabeth Warren has done some original research on this and has found that the cost of "necessities" has outpaced the inflation rate for over a decade.

So the idea that people are spending on plasma TV's and the like is mostly a fiction. The real cost increases have been in the cost of health care (now not provided by employers as before), college tuition, transportation and housing.

Manufactured goods have gone down in price and this is the area the the conservatives like to point to when promoting the benefits of "free trade". But, the proportion of budgets devoted to these items has also decreased.

If you've got an hour to spend you can watch her talk on YouTube:

http://www.youtube.com/watch?v=akVL7QY0S8A

Even Reich tends to buy into the profligate consumer story, but she shows that it is mostly not true.

[anne]

http://krugman.blogs.nytimes.com/2008/10/15/train-headed-downhill/

October 15, 2008

Train Headed Downhill
By Paul Krugman

It’s the real thing [Chart]

This chart comes from Calculated Risk, * still my favorite housing-and-credit-bust site. It shows nominal and real retail sales, and shows that consumer spending is now plunging at serious-recession rates.

This reinforces a point I’ve been trying to make: even if the rescue now in train succeeds in unfreezing credit markets, the real economy has immense downward momentum. In addition to financial rescues, we need major stimulus programs.

* http://calculatedrisk.blogspot.com/2008/10/retail-sales-decline-sharply-in.html

[save_the_rustbelt]

Paine - thank you

I still do enough tax returns to keep a level of competence, and in September we sit down and look at the witholding and estimate payments to see if everyone is on target.

From a very small sample of the small business, professional and retiree community - we will not need to worry about capital gains this year.

Having said that, in one of McCain's multitudinous economic plans, it seems he wanted to cut cap gains taxes for shares purchased after a certain date, I suppose in order to give the market a boost - not totally dumb, because in that case there might actually be some gains (not an endorsement though, we have bigger walleye to fry here).

Like a bad case of stomache crud, we may to an extent have to let this sickness run its course, which will be as ugly as sleeping on the bathroom floor for, you know.

[Ninja Zombie]

ScentofViolets: "I've heard both terms used, although it's certainly possible that they were improperly applied. Googling does seem to yield quite a few hits for median productivity; here's one pulled at random:"

It's true that for some *specific jobs*, one can measure median productivity.

But on the scale of the whole economy, it's virtually impossible, particularly at the higher end. For instance, how do you measure the productivity of House M.D. (sorry, just watched it last night) or of some member of his team?

I'm not aware of any measurement of individual worker productivity across the whole economy, though I'm happy to be corrected on this.

SoV: "I'm curious, btw, as to what you mean when you say that they are not 'remotely the same thing'. Median is, after all, just a measure of central tendency, as is mode and mean."

For a normal distribution, this is true. But there is no reason to believe productivity is normally distributed. In the few cases where I've measured it, it's exponentially distributed for low skill jobs (e.g., boring clerical stuff).

Across the economy, however, I strongly suspect that productivity is actually distributed more like a power law (just as income is distributed). Some people are vastly more productive than others. A manager who streamlines a business process by 5% has done the work of 0.05 x (# of people involved).

Additionally, many measures of *median productivity* will count that as a 5% increase in productivity of the workforce, rather than a 0.05 x (#) increase in the productivity of the individual manager.

This is why I'm very skeptical that figures for median productivity exist.

However, it's almost certain that productivity is not normally distributed, and that it has a heavy tail. And heavy tails are what break the "mean == median" approximation.

[anne]

http://www.nytimes.com/2008/10/16/business/economy/16econ.html?hp&pagewanted=print

October 16, 2008

Retail Sales Slump by 1.2% as Economy Downshifts
By MICHAEL M. GRYNBAUM

As governments began rolling out their financial bailouts, a sharp decline in September retail sales provided another sign of a darker economic climate.

[The worry for Paul Krugman through the deflation in Japan was whether we would use similar stimulus-spending programs to sustain employment in a similar circumstance. The question is whether we are philosophically ready.]

[paine]

"health care ... college tuition,
transportation and housing."

transportation or just fuel costs ???
if fuel costs the direction is back down

housing or just buying a house lot plus ...fuel costs ???
rent baby rent
return to pure ralph cramden jobholder status

fuel costs (see above )
college tuition..... boo hoo

skill aquisition ???
why bother
let the imports do the skill jobs
they'll do em better and for less pay
lowering your cost of L
INSTEAD
learn to be a nativist bully
both on and off the job

as to the elite friends of the ordinary people
and their silver moon fantasy
of a college liberal arts
"experience for all "
i put that
with plastic surgery and jogging
needless self feathering

health care ...now that could use
uncle's knife
it's
single payer or bust
mein volk

[paine]

"But there is no reason to believe productivity is normally distributed. In the few cases where I've measured it, it's exponentially distributed for low skill jobs (e.g., boring clerical stuff)."

jack ass hooves thunder thru the comment cages

you measured value added ????

how my friend ???

[paine]

the only discovery ninja boy
makes is about distribution of compensation
which indeed is non normal

but then
he discovers
productivity distribution
is similarly "shaped "

what's your value added data son ???

do you understand
how one might apply
the concept of economic rent here ???
or market structures ???

in the long run compensation
might
in ozville
follow some law of
its own cost of production
plus natural scarcity
but here
in ox ville
it don't
in fact
it don't
even come close

example near home

a soft ware writer

does he pay licensing fees
for the real use value
of the universal labor
contained in his schooled brain????

or just what it cost
to transfer ???

confusions of use value and price
are as old as economics
and
as to the age of
stubborn self serving
stupidity itself .....

[robertdfeinman]

Paine:
If you want to comment on Elizabeth Warren's findings it would better if you watched the video first. She, unlike those with a right wing political agenda, actually did some rather subtle analysis.

So, the cost of buying a car has gone down, while the cost of driving a car has gone up. You may not consider the cost of a college education a "necessity", but if its not then why do all the candidates promote people getting more education and then do nothing about making it affordable?

[paine]

the scam here
is to accept the verdict of the job market
ie
an ever more skewed compensation distribution
is simply if grimly value added justice served
not surplus grab
opportunity snatched

a jb clark
eulerian paradise
where discount rates are exactly zero
and
marginal revenue product
equals wage rates
and
total economy wide wages
equals total net revenue product
with no residues

[Lafayette]

Moral twerpitude

Reich: The "living beyond our means" argument, with its thinly-veiled suggestion of moral terpitude, is technically correct.

Turpitude, Robert, means depravity or wickedness. So, in as much this is an interesting suggestion on your part, it somehow disconnects from the facts.

On the other hand (love that phrase!), perhaps you meant "moral twerpitude"?

Now a twerp is a silly or annoying person. That, indeed, coupled with moral seems closer to the mark. Yes, America has been morally silly in the rapacious greed that brought about this mess.

[hari]

We need to send paine to Mao's re-education school. He's too valuable to be fixed in his current knowledge - like we normally criticize *shul medicine*.

[paine]

rf

why do the dembo pols push this

itsersatz land of opportunity stuff

utterly useless for 7 out of 10 partakers
universal college ed
funded by gub usury
is none the less
a honey pot for the human cap builders

higher ed success
is the wellspring of plenty
for amerika' s
meritorious professional class

a hyper extended gauntlet
that for a while
looked like
it justified the extra special high comp
these merit bespangled stiffs copt
from the common wage fund
a comp really protected by various merit professional cartels
vide dean the dream baker

btw
i'm not in favor
of ugly agit prop on this

but rather
i suggest we need
an all earned income class front
an alliance
predicated on the fact trend
we're all job class geefs now
including
these best and brightest

i'll not mention their
restricted market "gifts"
so long as they stop yapping about
their soulful
support for the oppressed under class
and the need
for first aide and lift up
in particular
more job loss welfare
and more higher ed

[Ninja Zombie]

Paine: "jack ass hooves thunder thru the comment cages

you measured value added ????

how my friend ???"

I did not attempt to measure value added. I measured productivity in material terms. For instance, when I measured productivity of install techs (guys who deliver and install the machine) for a machine distributor, I measured machines delivered and installed weighted for the complexity of the job.

In this case, I can conclusively measure my productivity *relative to an install tech* in terms of *weighted setups*. My software and optimizations of their business process allowed them to increase capacity without hiring new people. In terms of setups, I was about 15-17x as productive as one install tech.

As I said, I don't know how to measure individual productivity across jobs, except when one job substitutes for another (e.g., an engineer building a machine to replace humans). I don't know if anyone does. That's my point: I don't believe there is any good information on median productivity. I was disputing ScentOfViolets when (s)he claimed median productivity went up, since I don't believe it is possible to know that.

My guess is that productivity is probably distributed according to a power law. But as I said, that's just a guess. I have no good information.

By the way, Paine, you might want to work on your formatting. Your posts are nearly unreadable, Pops.

[paine]

hari
i love you

"fixed"
as in
like a cat gets fixed ???

tru enough

my brain wash circa 74
done some fixin indeed
but there is no unfixin
a least not at this point

just playing out the hand

hammers and sickles are wild
btw

[Lafayette]

Reich: At some point, the next big economic engine will indeed arrive. It always does. This time, however, it’s going to have some stiff head winds to overcome.

Yes, good point.

It means, one must assume, that the engine will need enormous torque to just stay in place without being sunk. Such torque can only come from a conventional Keynesian economic expansion. Sounds good, huh? We could call it New Deal II, in reverence to a previous Dem PotUS in similar dire straights just before WWII.

But, where does the financial torque come from? The banks are bust, the national debt is above 350% of GDP, the economy in a recession so tax revenues are declining. International Markets? Oh?

Why should they buy T-notes when they have more than enough already?

Because, they will want an America that participates in the Global Economy? Wow, that's a bit pretentious, isn't it? It sounds like the sort of argument that would make a Wall Street Investment Banker roll their eyes.

Because America has considerable good will and its time to cash in on it? Had a lot of good will, rather. Lead-head spent most of it in his sandbox war.

Because it is in their vested interests? That sounds better. A humbled and weak Uncle Sam means less international presence in terms of trade and, most importantly, throw-weight. With a weaker military presence globally, the bad guys would come out of the wood-work.

Things could get VERY ugly.

[dude]

I am skeptical of the government's ability to redistribute any meaningful amount of money from the top to the bottom. It is clear that a lack of willpower allowed amassment at the top at a rate not seen in several generations, and this has been going on for a generation so far. If the median household income is $50K, a "meaningful" redistribution would already have to be ~$5K/yr to make a dent in the gilded age of today. That check isn't going to be coming. How did the country right the wrongs of the previous gilded age? Not by going about things the way we're going about things now, I would say. Leonhardt is correct that there are going to be "stiff headwinds." But what's not being said is that like in the 1930s, an entire generation of earners will be screwed over with little chance at a meaningful recovery within their lifetimes.

[hari]

Chinese Central Committe has decided during next decade to double farm incomes - priority UNO!

Contradictions rural/urban divide is central to developments on mainland, as more than 200 million have risen out of dirt poverty into the mainstream.

So the wages of global recession, in China, is decided in favour of the farming population.

[paine]

ninj
this is a thrice told tale here

u and the labor time reduction
thru automation
your writing skills produced

as i recall
some of us
tried to make clear
the vacuity of
your cavalier and self a-grandizing methods
oand that wasn't until
the second time u told
this heroic moment's tale

seems you understand more or less
without market valuation
u can't compare and you can't measure
across tasks
good

compare diffrent activites for
relative value added
and
the price system with its obvious circularity
produces your data right ????

so indeed you can only measure
gain
in a common material unit
like hours before and after
a technical change
and that only for a given
homogenious task

but then to show your productivity
you measure it in task hours saved

but
how can u value the two hour types
if the comp per hour is not added in

their's and yours ???
imagine if your cost exceeded
the present value of
the savings ????

enter gary becker

but
hu cap economics is riddled with
slap dash assumptions
mostly or decisively at least
based on class politics

in other words
t'is surely
not well described
as
dollar de-nominated
civil engineering

and of course
on another dimension
you fail to pay tribute
to the history of prior labors
embedded in technology
labors
which after licenses run out
--like nature's bounty ---
only get paid an extraction fee

you are worth what ninj
vs the unskilled ????

how do u measure ???

i suggest
if you aren't trying to justify a relative pay raise
u stop asking that question
it has only a contextual score
and the context's game
is played
using
class loaded dice

ps
i hardly do justice here
to a very intricate topic
consider
my nasty posts
as a particularly rude
warning to re examine your methods

[paine]

laff

the fed will buy the treasury notes
and since there's plenty
of slack in the production system world wide
inflationless results mre or less

as the slack easily absords
the artifially manufactured
added effective demand

the fear is too small here

the sad realiy of the pre 40 measures

too little too long

there's nothing magic about building a war products machine
we can build a peace products machine
just as easily

[don]

As usual, Reich is spouting nonsense. The increase in asset values caused people to increase consumption - a reasonable thing to do if you believe the market has accurately priced your assets. Why save from a $50,000 income if your wealth (house and stocks) have increased in value by $100,000 in the same year? This is the phenomenon that spurred consumption and reduced saving, not some attempt to maintain spending while real income fell. The wealth effect explains reduced saving for those whose real income grew as well as those whose real income fell. Reich offers no evidence that the latter group was primarily responsible for the drop in overall saving.
The fact that Bill appointed Reich to an important post has given the latter's silly utterances much too much exposure. (See Reich's equally silly notion that a change in income distribution would provide a "long run" solution to the aggregate demand deficit, because it would spur consumption -this at a time when aggregate private saving was already negative at unsustainable rates).
This is not just my opinion. See PK's assessment of Bill's economics appointments, in which he names Reich. "Second rate economist" is a nice understatement - "third rate" or maybe "fifth rate" would have been more accurate.

[ken melvin]

Thanks paine! Sometimes I get Peonage and economic cannon fodder mixed up.

[paine]

"Chinese Central Committe has decided during next decade to double farm incomes "

what part will be by
simply cutting farmers and farm hours by 50 % ????

thats 7 % per year
say they now got .... 500 million farmers

35 milion new non farm jobs next year ????
above "natural increase "

off point
but

problem if china tries to internally grow
now the world market is in crisis
how do they regear
a high flying output system
now geared to affluent foreign markets

given the absolute limits to modern sector affluent demand domestically
what macro /micro policy
will keep up the hell bent rates
of output and jobs expansion
while all of a sudden
having to rely less and less on export growth
and more and more
on poor peasant inner china domestic markets ???

[kthomas]

paine, sometimes I think you are a descendent of both Keynes and Shakespeare.

If you were a pro boxer, I'd call you "Pretty Boy" paine for the grace and beauty of the blows you deliver. Remind me never to piss you off.

[Ninja Zombie]

Paine, try to pay attention. You seem to be arguing against points I'm not making.

So let me clarify my claims.

Point 1: measuring the productivity of individuals is extremely difficult. We have no information on median productivity across the economy, as we do have on median wages. Thus, I don't believe ScentOfViolet's claim that *median productivity* is up.

It's quite possible that both wages and productivity increased only for people at the top.

Point 2: In terms of *material productivity* (units of $(object) produced/hour), quite a few workers are vastly more productive than the masses. This strongly suggests that a normal or exponential model is wrong.

Those are my only claims. I'm not saying I deserve more money, or repeating a "heroic" tale (in fact, what I'm describing is quite common). Just pointing out a flaw in ScentOfViolets post.

And dude, work on the punctuation and formatting.

[hari]

Paine - point well taken on decision by CC on rural farms income.

It seems they've guaged the currency politics of US/EU with Chinese characteristics (my interpretation) and decided to focus on domestic development and social stability.

Indian/PM is also focusing on rural education and health care and welfare. Indian rural population is in excess of 500M or more (I don't know the exact figs not that I don't trust their stats at this stage).

BTW VicePremier of China and Commerce visited India with a big business delegation (few days ago) to find economic symmetries between the two Asian giants - going forward. There is a lot going on right now - and they're keeping their eyes on the international financial markets also.
Neither emerging markets are constraint by export trade contracting at this stage of development, since FDI is pouring into Indian manufacturing/service sectors.

[hari]

Add: Next five years China/India targetting $100 Billion in bilateral trade.

[robertdfeinman]

Off Topic - The value of education.

Paine thinks the ed business is a scam since it doesn't lead to higher wages. Taken to the logical extreme this is, of course, true. During the depression Macy's was hiring college girls to work as clerks. They didn't need their extra education, but with a labor glut they could afford to set up arbitrary criteria.

To get to the real value of education one needs to go back to John Dewey. To him the real value of education was to teach critical thinking and to teach enough about the real world so that people couldn't be easily taken in by false claims. The objective was to make well-educated citizens needed to perform their role properly in a democracy.

We can see the reverse phenomenon right now where much of the right wing consists of under educated people who are easily misled by propagandists such as Fox News. Studies have shown that the more people believe Fox the less they know about the real world.

There is another reason for better education - there is the satisfaction in learning as a human experience. Just like people get pleasure out of listening to a piece of music or reading a good book, learning something new also provides a benefit. With the proper learning tools instilled in people they can repeat this on their own for the rest of their lives.

As the world changes more and more quickly the skill of learning by oneself becomes even more valuable.

Continual learning is the type of public good that I keep suggesting could replace material consumerism in a revamped society. There is hardly any limit to how much learning can be absorbed, and it can provide economic activity without consuming vast amount of "stuff".

So, let's have more education, not less. Just don't try to sell it solely as a good career move.

[anne]

"We can see the reverse phenomenon right now where much of the right wing consists of under educated people who are easily misled by propagandists such as Fox News."

Please reference this if possible.

[paine]

"It's quite possible that "

really "quite possible "???

what deity revealed that" quite" to u ???

as opposed to a simple

"well mack
its not impossible .."

yes its not impossible

after one trend for 30 years
post wwII
ie earned income compression
ie
mean to median compensation gap closing
with
the mean compensation moving up in tandem
with mean value added
suddenly
corporate amerika
experienced a reverse trend
for the 30 years since

and
not because of market forces primarily
but because disribution
of physical er hour productivity trends shifted
to a new profile of rates
that skewed toward top earners productivity
where before it was skewed toward
middle and even lower earners

simply assume
compensation trends
track value added trends
and value added tracks "physical" productivity trends
and all you need to explain is
how this sudden dramatic physical productivity trend occured eh ????

simple

efforts to explain this empirical distribution shift
are every where
and often circular and self vindicating
now to your factoid :

"quite a few workers are vastly more productive
than the masses."

again you violate the unit law here

i agree if you had a jury of diggers
dig for 8 hours with identical shovels
in identical soil
results would vary
piles of dirt might vary by a factor of five .. who knows
and that vaiation might persist
even if they each got paid in gold dust
pound for pound
per pound of dirt dug "

but say
measuring surgeons against butchers
let alone
progammers against telephone operators ....

counting and measuring market value added
sector by sector
without market prices

opporunity to change tasks
learn new skills etc etc
that is the equalizer
of all but natural differences

what remains impossible
is your steadfast conviction
that
".. both wages and productivity increased
only for people at the top"
which
rests on nothing more then
empty formal possiblity
wishful spite
and/or a need for
hierarchic apologetics
or
moe likely
a moral simpleton's
misanthropic
glee
in the notion of
relentlessly sharpening
social pyramids

not even partial analysis
or illogic
can rescue u now ninj

you are
nakedly an elitest flack

and to think
you ain't part
of the corporate elite
or
well compensated

by the corporate elite

how foolish

[robertdfeinman]

Here you are Anne:
http://people-press.org/report/319/public-knowledge-of-current-affairs-little-changed-by-news-and-information-revolutions

Some would say watching Fox (or listening to Rush, et al) makes one stupider, but I think what is being demonstrated is that the outlets with a simple, right wing story tend to attract those with less education.

There have also been studies which show a correlation between right wing ideology and low educational level. The most hands-on I know of is the work of psychologist Robert Altemeyer which he has conducted for 40+ years.

You can read his results in his free, online book at TheAuthoritarians.com

[paine]

rf

"To get to the real value of education one needs to go back to John Dewey. To him the real value of education was to teach critical thinking and to teach enough about the real world so that people couldn't be easily taken in by false claims. The objective was to make well-educated citizens needed to perform their role properly in a democracy"

so u wants higher ed
to produce better citizens ????

fair enough

but i suspect we could do that
in 10 6-15 free school grades
plus free 0-5 pre school

turn 15 and u oughta be able
to turn yourself loose

enough dewey is enough

as to education as a consumption "good"

i guess i missed that class

[paine]

hari
for now i see india and china as primarily
trade rivals on the world market
emerged and emerging alike
even if political commonality
logically goes hand in hand with trade rivalry
the zero sum trade game tends to force
out the benign politics

[anne]

http://people-press.org/report/319/public-knowledge-of-current-affairs-little-changed-by-news-and-information-revolutions

April 15, 2007

Public Knowledge of Current Affairs Little Changed by News and Information Revolutions: What Americans Know: 1989-2007

Republicans and Democrats are equally likely to be represented in the high-knowledge group. But significantly fewer Republicans (26%) than Democrats (31%) fall into the third of the public that knows the least....

[robertdfeinman]

Anne:
Here's more on the topic:
http://www.wilsoncenter.org/index.cfm?fuseaction=wq.essay&essay_id=478918

I don't know the political leaning of the author or what particular ax he has to grind.

Splitting the electorate into Democrat or Republican is a poor indicator. For one thing party affiliation changes over time, while people's basic world views don't. In addition there are many who have no party affiliation and forcing them into one of the two boxes makes for poor discrimination.

Altemeyer's classifications along an authoritarian, hierarchical view vs individualism and a more questioning attitude seem to work better.

[Icarus]

The elephant in the room, which Reich was trying to discuss, is whether "ordinary Americans" spend too much, and have to reset expectations and behavior.

And, the evidence seems clear. SUVs all over the place, obesity at ridiculous levels (1/3 or higher), credit card debt, uneccesary consumption at the walmarts. All of this has lead to a profligate lifestyle for the masses.

The battle isn't between ordinary americans and the american elite class. That vertical battle is a remnant of our past.

The new battle is horizontal; between the "ordinary american" and the "ordinary non-american". The later has made her entrance on the global labour market in a qualitatively new way.

That high school drop out, or even college grad isn't worth as much, as there are so many new entrants, willing to offer a higher skill set, at any price point (most price points).

Also...having a Family is not a 'Right', and it is an individuals responsibility to manage that Cost. If the cost of having a family has increased, that means less people should have them.

[ScentOfViolets]

Sigh. Why did I suspect it was going to end this way? Oh well, no one can say I jumped the gun with an inopportune accusation:

Ninja Zombie says...

ScentofViolets: "I've heard both terms used, although it's certainly possible that they were improperly applied. Googling does seem to yield quite a few hits for median productivity; here's one pulled at random:"

It's true that for some *specific jobs*, one can measure median productivity.

But on the scale of the whole economy, it's virtually impossible, particularly at the higher end. For instance, how do you measure the productivity of House M.D. (sorry, just watched it last night) or of some member of his team?

I'm not aware of any measurement of individual worker productivity across the whole economy, though I'm happy to be corrected on this.

And since it's already confirmed below, I'll go ahead and say that most people saw this one coming a mile off: a defense that those at the top earned their money because they were being more productive, the rest of us schlubs, not so much. But notice a)the goalposts change from measuring median productivity is impossible to 'impossible for some jobs' and b)the proposition, assumed for the purposes of argument is that it is impossible to measure median productivity. More on this later.

SoV: "I'm curious, btw, as to what you mean when you say that they are not 'remotely the same thing'. Median is, after all, just a measure of central tendency, as is mode and mean."

For a normal distribution, this is true. But there is no reason to believe productivity is normally distributed. In the few cases where I've measured it, it's exponentially distributed for low skill jobs (e.g., boring clerical stuff).

Note again that the goalposts have been changed: for mean median 'they're not remotely the same thing' has morphed into they won't be the same on populations with different distributions. Well, duh. Of course not. But that does not mean that they are not remotely the same thing. On to the next bit:

Across the economy, however, I strongly suspect that productivity is actually distributed more like a power law (just as income is distributed). Some people are vastly more productive than others. A manager who streamlines a business process by 5% has done the work of 0.05 x (# of people involved).

Note here, how we've gone from 'median income is impossible to assess' to 'it follows a power or exponential law'. Which directly contradicts the initial claim, but oh well. I'm not expecting consistency from this one at all. And, there's still more confusion on the way:

Additionally, many measures of *median productivity* will count that as a 5% increase in productivity of the workforce, rather than a 0.05 x (#) increase in the productivity of the individual manager.

Um, no. The manager's job is to figure out how to make the people under him more productive (among other things.) For a manager to become 'more productive' they would have to either have to figure out more ways for their people to be more productive as time passes, or the amount of productivity gains from each change would have to increase from year to year (or some combination.) If employees are producing five percent more widgets from one year to the next, they are indeed five percent more productive.

This is why I'm very skeptical that figures for median productivity exist.

However, it's almost certain that productivity is not normally distributed, and that it has a heavy tail. And heavy tails are what break the "mean == median" approximation.

No, you're bound and determined to figure out a way to show that inequality increased because productivity gains were almost all realized at the top. As I said, I had this suspicion right from the get-go, but I thought I would let you go ahead and confirm this.

Now, which assumption do you want to go with? median productivity gains are impossible to measure? Or 'productivity gains are concentrated near the top'? Considering that a 28-year-old slacker living in his parents basement working the fry baskets at Burger King was more productive than Angelo Mozillo, I really don't think you want to go with the latter.

[ScentOfViolets]

And to continue:

So let me clarify my claims.

Point 1: measuring the productivity of individuals is extremely difficult. We have no information on median productivity across the economy, as we do have on median wages. Thus, I don't believe ScentOfViolet's claim that *median productivity* is up.

It's quite possible that both wages and productivity increased only for people at the top.

But in fact, this is not a lack of belief, but a disbelief. Not the same thing at all. And as for the 'quite possible' - if you can't measure in the one instance, then you have no business making some sort of speculation that directly contradicts that assumption. And given that there are multiple sources out there that show median income has increased for at least some professions, and given that it is now a dead certainty that many of those at the top were not disproportionately more productive, but were in fact disproportionately more unproductive, your 'quite possibles' are not only inconsistent, but they are taking a rather severe beating.

Point 2: In terms of *material productivity* (units of $(object) produced/hour), quite a few workers are vastly more productive than the masses. This strongly suggests that a normal or exponential model is wrong.

Those are my only claims. I'm not saying I deserve more money, or repeating a "heroic" tale (in fact, what I'm describing is quite common). Just pointing out a flaw in ScentOfViolets post.

Sigh. We're not talking about productivity per se, but about productivity increases. You're arguing that not only are there people that are many times more productive than their peers in a comparable setting, but that they were the _only_ ones to become more productive over the last several years.

This is sheer wingnuttery. Please. Think about what you want to post rather than automatically popping off next time.

[Ninja Zombie]

Paine: "how this sudden dramatic physical productivity trend occured eh ????"

Technology. New technology amplifies the productivity of the high skilled, while replacing the low skilled. This is particularly true of modern computers.

As I pointed out before, flipping burgers today == flipping burgers 50 years ago. Management, programming and finance today are very different.

Paine: "what remains impossible
is your steadfast conviction
that
"..[It's quite possible that] both wages and productivity increased
only for people at the top""

That's hardly my "conviction". You deliberately my words with '..' to make it look like I said something I didn't.

I think it's likely, based solely on my own experience. I also think it's difficult to gather data one way or the other. Or, as I said earlier:

"Do you have a source for this [the claim that median productivity is up, unlike median wages]? While I'm aware *mean* productivity is up, I wasn't aware there was even a good way to measure *median* productivity."

Try arguing against the point I'm making rather than some straw man you wish I was making. I'm done with your posts now, feel free to have the last word.

[ken melvin]

Reich knows Heidegger.

[paine]

ninj

"New technology amplifies the productivity of the high skilled, while replacing the low skilled"
nonsense
an automated assembly line
increases
those remaining low skilled workers productivity

[paine]

ps
we are not communicating ninj
i suspect you need to think this thru

i won't try to get you to learn something about these matters

[Ninja Zombie]

ScentOfViolets: "Note again that the goalposts have been changed: for mean median 'they're not remotely the same thing' has morphed into they won't be the same on populations with different distributions."

By "not remotely the same thing" I meant as a *statistical quantity*. The numerical values may (in some instances) be the same (as for a normal distribution). But comparing a median to a mean is a fallacy unless you also provide evidence showing they should coincide.

"Note here, how we've gone from 'median income is impossible to assess' to 'it follows a power or exponential law'. Which directly contradicts the initial claim, but oh well."

Nope. I said that *on the few occasions I've measured it* and within certain *specific low skill jobs*, it was exponentially distributed. I then speculated that it's a power law across all jobs, without claiming to be able to prove it. That's my intuition based on scale free networks.

"No, you're bound and determined to figure out a way to show that inequality increased because productivity gains were almost all realized at the top."

That is my *guess*. I have no way to properly measure this except for specific jobs (e.g., ditch digging) and jobs which are substitutes (e.g., build ding a machine to dig ditches). And as far as I know, no one can properly measure this.

"given that it is now a dead certainty that many of those at the top were not disproportionately more productive,"

Dead certainty? Please provide the numbers. I'm really curious how you are even measuring productivity, let alone productivity for those at the top. Let me guess, your "dead certainty" actually only means "the CEO of Bear Sterns sucked"?

Note that there are actually more than 20 CEO's in the top 50% minus one (the relevant quantity, since we are discussing the equivalence of median and mean). There are actually 3 million people in the top 1%. You'll actually need to do a little more work than "Franklyn Raines is unproductive".

[ScentOfViolets]

Chuckle. You're 'just speculating', but you're 'pretty sure' you're right. I, otoh, have to produce links, cites, graphs, etc. Otherwise, you'll just not fail to be convinced, but will actively disbelieve me.

I think we're done here. This sort of dishonesty is something I'm just not going to tolerate. I've noticed that you've induced this sentiment in other people as well, which should tell you something about this type of facile positioning. To erase any doubts you may have about the efficacy of your technique, you _don't_ come across as 'skeptical, but willing to be convinced'. You come across the same way other people do who affect that pose with, say, AGW.

[BJ Feng]

RobertFeinman, your excuses don't make sense. Democrats are Democrats, there's no way to recategorize them as anything else, especially since they can just identify themselves as Independent if they wish. Your premise that Republicans are stupid and ignorant is wrong. Your belief that more Americans would be Democrats if they weren't so ignored is in error. The study clearly shows Democrats are much more ignorant than Republicans, there is simply no way to get around this if you believe the study is not flawed. If anything, the study is biased towards giving Democrats a higher score.

John Roberts is considered a conservative to Democrats, he is considered a moderate to Republicans. This is a matter of opinion and the fact that the authors made "conservative" the correct answer gives Democrats an advantage as they are more likely to agree with that answer. That is why matters of opinion usually are not included in tests of knowledge. To state that John Roberts is generally regarded as conservative brings into question other factors such as generally regarded by whom? Is the question, the main stream media is generally considered A) Liberal (right answer) B) Neutral C) Conservative a fair question? I don't think that question can be used to test knowledge.

So even after giving Democrats a bonus, the results still confirm that they are much more ignorant. Imagine what the results would have been if they had not been given that advantage. We all know that allowing someone to self-identify is much better than labeling someone. That's why the census collects race data based on self-identity. I suggest you re-examine your false assumptions.

[paine]

the cork screw brief of lord fengula
not withstanding

i ask u rf
what has the dembotry done for the
bulk of the gainfully employed
ie jobholding
pri sec american wage smurfs
at least
since the great society days ???

on payroll taxes on trade on health insurance

nada baby nada

so voting dembot hasn't done much for em bread wise
and the repugs sure have seemed to come across
for em ... circus wise eh???

[paine]

but all is about to change ...one hopes

[dude]

Wages aren't the only thing about the stagnate... the states are too. States will have very little room to make up revenues the next few years. And any infrastructure not covered by the feds is going to suffer for even longer. I don't think people completely comprehend, yet, just how much has been squandered the last several years while our country has been tilting at windmills in the middle east and giving all of its gdp growth to the top 1%. While that's not irreversable, it's well nigh impossible that any sense of balance will be restored for a decade or two. If we're lucky. In the meantime, you can bet that Russia will continue to flex its muscles like king kong.

[Lafayette]

Dude: I am skeptical of the government's ability to redistribute any meaningful amount of money from the top to the bottom.

Why? Just change marginal taxation rates.

What's your problem with that?

[Lafayette]

Good kharma, bad kharma

anne: What needs to be understood clearly is just how relatively difficult a period we have had economically in the 93 months of the Bush Presidency since January 2001; a period in which a mere 7 million jobs have been created * when during the Clinton Presidency there were 21 million jobs created in such a time leaving a stark, sorry difference of 14 million fewer jobs as a legacy.

This makes of the presidency some sort of magician. Exchange presidents for the period in question, and today we'd be castigating the Dems.

There is NO inherent political will (read policy decision making) on the part of Bill Clinton that can claim parentage of the mentioned job creation during his presidency. Bill's a lucky guy, just like Jimmy Carter (every bit as intelligent as Bill) was an unlucky PotUS.

Rather, consider the fact that, at his Secretary of Treasury prompting, he repealed the Glass-Steagal act to please Wall Street interests. The Golden Boys were eager to apply their financial engineering ... to ruining the economy.

I suggest he did it for purely political purposes, to make amends to his wife and prepare her for her own run at the presidency. Their move to New York was also beautifully executed to help develop funds for her candidacy.

Such is politics in America where only the well-heeled get a chance at the gold ring. Half a billion dollars to elect a PotUS. Only in America ...

Lord knows what will happen to Billary when they can no longer command the spotlight. Mind you, I maintain to this day that Hillary was the better prepared candidate for the job.

So be it. On with Obama and his tough challenge ahead. Let's hope he pulls Congress along with him. He'll need it.

[Ninja Zombie]

ScentOfViolets: "Chuckle. You're 'just speculating', but you're 'pretty sure' you're right. I, otoh, have to produce links, cites, graphs, etc. Otherwise, you'll just not fail to be convinced, but will actively disbelieve me."

I'm making a guess, based on my own experience and knowledge of the modern economy. I think it's a good guess, and I have been careful to qualify it as just that. I was also careful to stipulate that no good data is available.

Me: "But on the scale of the whole economy, it's virtually impossible, [to measure individual productivity]...In the few cases where I've measured it...My guess is that productivity is probably distributed according to a power law. But as I said, that's just a guess. I have no good information."

What is your objection, that I made a guess which doesn't fit your ideology?

You, on the other hand, are making claims for which there is no evidence: "Yes, median incomes are down - but median productivity is up."

This isn't qualified as a guess. It's just a statement about an unmeasurable quantity.

If true, it would prove some injustice if you hold the belief that wages should track productivity. It would prove that at least one person in the bottom 50% is getting stiffed (or more, depending on the numbers).

However, median income failing to track mean productivity proves absolutely nothing of the sort. A change in distributions with productivity gains concentrated at the top provides a counterexample to such a claim.

[Lafayette]

Productivity ain’t what it used to be

NZ: "Yes, median incomes are down - but median productivity is up."... If true, it would prove some injustice if you hold the belief that wages should track productivity.

Yes, that relationship can be seen … often if all other variable are held fixed. Problem is, one can’t hold other variables fixed just to coincide with assumptions.

If foreign dirt-cheap labor is producing equivalent products and delivering them to local customers at a third to a half of a company’s total cost, productivity cannot save that company.

If the product/service is displaced in the marketplace by technological evolution, nothing will help it to survive.

If the company is run into the ground by stupid management (oh yes! that happens), productivity will get them nowhere.

If a product/service design or engineering is wrong, productivity can't come to the rescue.

I could go on, but I think the point is made.

Now for an example: Americans like big cars. Once upon a time, just after WW2 in the 1950s, they built small cars and exported them to a European market that was craving them. Then, to follow national trends, Detroit decided to go for the higher margins of larger cars. American car exports dwindled. Detroit today is hanging on by the tenterhooks, whilst BMW and Volkswagen export around the world.

[Real Person from the Real World]

Late to the party here, for despite the crisis, I am swamped at work. My boss cannot find anyone as cheap as me to manipulate and do all the donkey work for the wal-mart wages he pays while he is building his biz ("skin in the game" he calls it).

Hallelujah! Finally, at last! Reich among others, champions the US middle class not as luxury spendthrift wastrels, but rather consumers squeezed into going into debt to keep afloat. I am tired about hearing bout the consumer "binging" like we were all buying diamond rings. The only funkiness I see is marketing hype crap.... for example, the word "organic" stamped on everything in order to fetch a premium price, or higher price small "convenience" packages vs, oversized amounts that take even a family a long time to go thru. No, there is little binging among most of us....

I live without a lot of necessities, because I tried to live within my means. Others, will use credit/leverage to keep their lifestyles. The real truth about the spent out credit situation is not about diamond rings, but about roofs, tires, washing machine, kids and school expenses, et al, and banking companies, credit card companies, and over compensated executives who have squeezed the max out of consumers and the middle class, and when wages stagnated, just moved on to monetize homes to get their profits.

[Lafayette]

RP: I am tired about hearing bout the consumer "binging" like we were all buying diamond rings.

Sorry but I do not share your benighted view of Joe & Jane America going into debt to make ends meet. They did it willingly buying a lot of stupid things.

Especially the MacMansions that everybody "just had to have" despite the fact that they could not afford one. The economist Veblen got it right a hundred years ago ... never underestimate the power of conspicuous consumption, meaning "keeping up the Joneses".

All they had to do is "Say No." But, they didn't ...

Some people never learn, others must learn the hard way. Such is life.

[Callahan]

We should not be girly men about this, if they say we are binging, then I guess by damn we are. So in that vein, I'll forgo the berries portion of my diet of roots and berries.
No berry binging for me, no-sir-eee. Ya betcha.

Maybe wally street has been on a bing too, along with unca sam under w, along with big oil, along with pharmasooooticals, along with other big bizniss, get it? I got that right didn't I?