Sometimes one chart really does tell you what you need to know.
The Economic Policy Institute prepared an updated chart yesterday based on newly-released Census data. It confirms what most people know: the last generation has seen no improvement in the economic standing of ordinary workers. Indeed, this “median real income” picture masks elements of underlying deterioration, including: increased working hours (understated due to the fact that overtime by salaried workers isn’t captured in official statistics); a rise in “on demand” schedules in retail; shortened job tenures, which increases stress; and a reduction in health care benefits (by restricting coverage and/or increasing employee charges).
Key points from the EPI report (emphasis theirs):
The Census data show that from 2013–2014, median household income for non-elderly households (those with a head of household younger than 65 years old) decreased 1.3 percent from $61,252 to $60,462. This decrease unfortunately exacerbates the trend of losses incurred during the Great Recession and the losses that prevailed in the prior business cycle from 2000–2007. Median household income for non-elderly households in 2014 ($60,462) was 9.2 percent, or $6,113, below its level in 2007. The disappointing trends of the Great Recession and its aftermath come on the heels of the weak labor market from 2000–2007, during which the median income of non-elderly households fell significantly from $68,941 to $66,575, the first time in the post-war period that incomes failed to grow over a business cycle. Altogether, from 2000–2014, the median income for non-elderly households fell from $68,941 to $60,462, a decline of $8,479, or 12.3 percent…
Since 1973, the median man working full-time, full-year has seen no sustained growth, dropping from $53,291 in 1973 to $51,902 in 2002 and falling further over the 2002-07 recovery and the recession to $50,383 in 2014..
A second chart shows that even when you parse out the apparently most successful cohort, those that have full-time employment, still show stagnant real incomes for the past decade plus:
If anyone wants to know why Bernie Sanders is doing so well despite his outsider status, they need only to look at this data. Wage earners outside the top 10% (which one can reconceptualize as the top 1%, plus the various service professionals that support them, like lawyers, consultants, and high end personal service businesses, along with wannabes) know they’v been left in the ditch, and they are hungry to see candidates that want to change that.
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It’s pretty clear this drop has been happening.
But maybe the discrepancy of household income between the developed and emerging markets got too large. Maybe our hh income has to drop and theirs has to increase as to redistribute the consumption of resources and energy more fairly across the planet.
And if it’s not our household income then it`s our purchasing power… and that`s when deflation and inflation get mixed up. Both inflation and deflation can cut one’s purchasing power.
“Maybe our hh income has to drop and theirs has to increase as to redistribute the consumption of resources and energy more fairly across the planet”
Good point.
There is also relativity at play here. First-world consumers buying cheaper and cheaper consumer goods knowing full well that they were trading desire for cheap price for self-sufficient productivity of such goods by domestic labor, which has been going on for decades since Reagan-Bush-Clinton latter especially.
So although wages were stagnant, decreasing costs of consumer electronics etc gave the illusion of increased standard of living and wages via increased purchasing power, by willful ignorance of gutting domestic economic well-being fundamentals.
The greedy desire for the cheapest item at Best Buy and by Jamie Dimons of the world is the same greedy desire. They are co-dependents and feed off of eachother. True, the more powerful party has more privilege and more ethical responsibility not to abuse the lesser party in the arrangement, but the public has willy nilly gone along with the masta’s grand plan even though it meant suicide in terms of labor wage increase and personal standard of living over the long term.
Heroin addicts, alcoholics, chronic gamblers, all risk long term well being for immediate gratification. American public short sightedness and greed for cheapest is no different than greed of GS, BoA, JPMC, etc. That is why the former keep coddling the latter sugar daddies!
The problem is though that the top 1% hasn’t seen an income drop. So they aren’t sharing with the rest of the world, they just take more from everyone else.
Solving world poverty, $1/hr at a time, was just too great a temptation.
Also rents haven’t dropped, quite literal housing rents are one example. So yea blah blah blah blah we’re supposed to take a cut in income for the rest of the world, while healthcare and housing costs soar to the stratosphere. I agree a better global distribution of income is warranted, but I suggest the guillotine for any capitalists (including rentiers) that suggest it. On the other hand if true (naturally anti-capitalist of course) humanitarians suggest it, it might be worth listening to.
Almost everything, except wages (which have either stagnated or fallen), has gone up. Well I live in CA, so that’s probably true of the coasts. Unsure about the middle of the country. Rents are up, groceries are shockingly high (it’s what eats up a lot of my income & I’m single), in CA the utilities are threatening to raise rates, only gas has gone down recently but for how long? Let’s not ignore tertiary tuition, amongst other issues.
I am a singleton making what looks like a great salary with decent (for these days) benefits. I tend to live frugally, but it seems like my expenses (I don’t own a tv and don’t subscribe to cable or the internet at home & deliberately keep my phone rate low) just keep going up. I am lucky enough to get an annual COLA and am grateful but can state that said COLA in no way keeps up with the REAL cost of living increases… not even close.
I simply don’t know how families do it.
I”m not sure what you mean by “Maybe our household income has to drop.” If we are looking for a “world equilibrium” wage, US wages still have a lot further to fall. I remember the CEO of Caterpillar during the long strike in the 1990s saying US manufacturing wages needed to fall to Chinese levels before the US would be competitive again. That viewpoint, despite German mfg success with much higher wages, still seems to prevail, at least as far as wages for working people goes.
But I don’t see why hh incomes “need” to converge. Before we even get to the 1 percent, doctors, lawyers, college professors, etc., here make tons more than they do in most of the rest of the world, and certainly continue to consume much more than their counterparts elsewhere. But there doesn’t seem to be either economic or political pressure to bring their incomes into line with their counterparts elsewhere.
With 7 billion people on this planet going to 9 billion, and refugees pushing their way through, I have a hard time believing we can keep on exploiting the developing world, sending them images of how we live and expect to maintain our stupendous energy and resource consumption.
Just like people spread out in an elevator and share the air and space, the same thing is happening on the planet. Of course there is always someone who does not get the cue and will face the wrong way or not move when someone enters or exits… so the redistribution will not be smooth.
It does not need to perfectly converge but I would say the elastic got stretched a little too much…
However, Americans, and the rest of the Western world to a lesser extent, seem to think they live on an island. That if their leaders make the right choices, they can get back to where they left off. I doubt it. I think we will be forced to shrink our energetic lifestyles but we will fight it until reality hits us in the face. That will probably take a good decade. And this denial will generate many more losers.
Ok. Canada can ship their/our tar sands to India, and India should be all fixed up then.
Done deal. On to the next subject.
Americans could maintain supreme standard of living throughout the entire population if they just abandoned the military spending and engagement.
They would then lose the reserve currency status and the value of the dollar would plummet.
The military is probably one of the biggest reasons why the US gets to consume the outsized share of the world’s resources.
If the US shrank its military, the global allegiances would quickly shift to create a new patchwork we can’t even begin to imagine.
That’s not to say that the military is not a disgusting waste of resources…. but humanity has gone down a rabbit hole from which it will have a lot of trouble reemerging.
The catch-up and convergence idea has a grain of truth, but reality is much more complicated than that.
Most relevant is that besides a few countries like China, and a few smaller ones in S. America, most countries in the WORLD are seeing stagnant-to-falling wages. The US is quite successfully exporting it’s bubble-causing, highly stratified, low investment, low wage driven political economy around the world. That means the rest of the world ends up with those and ONLY those characteristics, not a convergence to US income levels.
In any case, US living standards are overstated (vis-a-vis the rich world) because of health care costs, higher energy usage (winter is harsh here compared to Europe), and corresponding transport costs due to more cars, less public transit, and longer working hours. All those things boost GDP, but not really living standards.
Additionally, the poverty rate, after rising the first year or two of the Obama presidency, has held firm (at ~15%) since then. For people in poverty before the Great Recession and for those who entered into poverty as a result of it, there has been no recovery at all.
See Bill Mitchell, Only the top-end-of-town in the US have seen real income gains since 1999 (9/17/2015)
Even the top 10%, ex the top 0.5%, are just treading water. See this earlier study from EPI:
The Increasingly Unequal States of America: Income Inequality by State, 1917 to 2012
This is awesome. Just curious if Bernie asked EPI to do it, or if they did it on their own.
This is a long-standing focus for EPI.
Here’s another: comparison to productivity. I think this chart is a lot clearer and more significant (and there is only one of it), even if the data only goes to 2013:
Productivity vs. Compensation
From Why the Gap Between Worker Pay and Productivity Is So Problematic, Atlantic, 2/25/2015:
http://www.theatlantic.com/business/archive/2015/02/why-the-gap-between-worker-pay-and-productivity-is-so-problematic/385931/
The article isn’t as forceful as the chart itself.
I would argue that this also explains Trump’s success. In many respects he is tapping into the same concerns as Sanders and is making promises to address them. Sanders is more likely to actually do something about it of course.
It would be nice to think so, but who really knows? I’m all in for Sanders but it’s hard to imagine that he will be dealing with a Congress much more receptive than the current one. Best case scenario would seem to be a Sanders win in 2016, two years of intense ideological battle (including within DP) without much real progress, and then hopefully election of a much more radical Congress in 2018. And more so again in 2020.
But would Sanders really reject the WTO? Impose a 35% tariff on imports? I think Trump is mostly speaking out of his ass, so I don’t have any confidence in what he says. But, unlike all the other R candidates, he seems to get the distinction between productive and non-productive capitalism, and he seems much more likely to be able to steam roll this Congress than Sanders could.
Trump would need a major war to rally the Republicans in Congress and intimidate foreigners unwilling or unable to let him “win” every diplomatic and economic transaction they have with the USA (and that’s what he’s promising and, I fear, truly believes he can deliver). I’m not talking about picking a fight with some isolated loser regime that can’t fight back. I’m talking Iran or North Korea at the minimum. To dislocate and cow internal opposition he will have to exploit the “us versus them” exogenous impulse of his potential voters. It’s called social imperialism, and it led directly in Austria, Russia, and Germany to WWI. That is, in my opinion, why almost any candidate is superior to Trump.
IF Sanders actually became the candidate, I will vote for him, but color me extremely skeptical. That said, I’m not starry-eyed about Sanders. I follow politics closely, and Sanders is not all that and a bag of chips. There’s plenty that I disagree with him, plus what has he really DONE so far as a Senator? Think long and hard about that bc the simple answer is: not much.
That said, he’s clearly the pick of the litter at this point. Given the nonsensical GOP doof-heads, that’s not saying much. I’m no fan of Clinton but will say no more on that topic.
Trump, from the little I know, is just an out of control egomaniac (to put it kindly), whom the “media” (1%) have seen fit to, apparently, pay intense attention to, thus granting this buffoon a patina of what passes for “credibility” in this nation. Oi vey. I have heard citizens championing this putz and saying the usual brain-dead moronic nonsense about how Trump’s not a politician (who sez? but I get I their meaning), so he’s “just what we NEED right now.”
And so on. Trump, for all the hoo-hah right now, is just as unlikely to get his “way” with Congress, IF congress doesn’t agree with him. Having him as the Pres – even given that the Pres really isn’t in charge – would be a disaster. I shudder but live in the tiny hope that our corporate Overlords will not permit that to happen. They could control Sanders better and more easily, imo.
Just my 2 cents worth.
The charts in the main post also show that the accepted economists’ definition of a recession (based on consecutive quarters of falling GDP) does not mesh with the reality of peoples’ lived experience.
What apparent “growth” there is from 1995 onward looks like dust-clouds kicked up by speculative bubbles of one kind or another–but nothing substantial within it.
Once more we see that GDP is almost useless (or worse than useless) as it is currently defined.
If inflation means wages going up (wage inflation), and we exclude food and energy, and spread education and healthcare among others, and if the goal is to contain that wage inflation, at the first sign, well, in some places, one can hear “Mission Accomplished.”
IIRC, Bernie has said that he can’t do it alone, that he will need a wide base of active support. (Which may or may not involve electing like-minded candidates to Congress — if there are any such animals.) However, I wouldn’t put it past Bernie, if elected, to do the exact opposite of what Obama did; namely, mobilize his supporters to overwhelm recalcitrant and obstructionist Congresscritters with calls, letters, visits, and demonstrations in support of specific legislation to fulfill Bernie’s campaign promises. Elected officials are notorious for ignoring voters/constituents once an election is over, but it would be nice to see them trapped between the rock of big-money contributors and the hard place of massive voter demonstrations. (At a minimum it’s a great idea to fantasize about.)
A fact well known to all working people in this country, below the 0.1%.