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September 04, 2006

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nice post

Something I've been wondering about for a while now:

In the face of alll this accumulated crud, what exactly do labels like "recession" and "recovery" mean?

Median income has risen in all three of the states colored blue, which had, as of 2005, a total population of 2,081,641, or .069% of the US total. The remaining 99.3% of us live in states whose median income has fallen.

Minor nitpick: Median income has risen in four states (you missed Rhode Island), and the District of Columbia. For some reason the tiny east coast states aren't coloured properly in the map; you have to look at the data on the right-hand side. This also affects your population numbers.

"In the face of alll this accumulated crud, what exactly do labels like 'recession' and 'recovery' mean?"

If it's good news: stuff that happens to people making over $200,000/year.

Rough, cynical, approximation.

Peter: Yikes, you're right. I fixed it. Thanks.

And then you read someone like Paul Craig Roberts, out of Counterpunch, and find that decent white collar jobs have fallen off the graph in The States, as well. Any employment increase seems to be happening in only casual, hospitality style jobs. Hmmm Housing Bubble, anyone?

"Hmmm Housing Bubble, anyone?"

No, thanks; I'm trying to give them up.

Would that you were Alan Greenspan, Gary.

Then I'd have to be an Objectivist, and married to Andrea Mitchell. No, thanks, again.

Besides, how much use is it to be a retired guy? (More people might pay attention to my blogging, though.)

But you would be able to play sax!

So normally profits grow twice as fast as wages and salaries; in this recession, however, they are growing over seven times as fast.

So we should pass a law limiting corporate profits, requiring that the income be used to pay employees more instead? That is, if you see this as a problem, what should be done about it?

I do get your point. I make in about 10 years what my parents made in their lifetime. If I had children, they would be out of college and starting careers about now. They would be hard pressed to do better than I have. But that is less due to the current economic situation (and corporate profits) than to the fact that my generation just happened to come of age during a time of unprecedented opportunity – the beginning of the technology revolution (for lack of a better term). The number of white collar jobs seemingly increased exponentially every year shortly after I completed my education. We had to import technology workers from overseas because the demand simply could not be met domestically. Has that changed today? Yes – but I don’t see a clear reversal. I see more of a leveling off.

I submit that you would find a similar pattern at the beginning of the industrial revolution. The first factory workers made a lot more money in their lifetime than their parents did – but their children, also factory workers, would not likely improve their lot in life much beyond what their parents accomplished.

What about non-monetary factors? Does each generation still have an overall easier life than the last? I think it does. Even if my children could not outdo my lifetime earnings, they would certainly have an easier life when everything is considered. Do those living officially in poverty today have a better lot than those living in poverty a couple of generations ago? Of course they do.

And guess what… The next ‘revolution’ is not that far off. A couple of generations from now, most people will make more and work less.

So cheer up. Even if I hate unions, I enjoyed the day off. I hope you all did as well.

OCSteve: I'm not interested in passing laws restricting profits, of course. I do think there are other things the government can do that have an impact, one way or another, on the way these things shake out. (Raising the minimum wage would be one thing; not having the changes made to the tax code vastly favor income from corporate profits (dividend and capital gains income) and do very little for middle-income people is another.)

The thing is, while some people are, like you, making in ten years what their parents made in their lifetimes, a lot of people aren't. According to Elizabeth Warren , "Today, a fully-employed, median-earning male makes about $800 less than his counterpart made back in 1972." That means that the real wages of working men have tended to go down, not up, in the last 34 years, even though the real wages of people at the top (and here I mean not the top 1%, but the college-educated lawyers and programmers and the rest of us who have done well) have risen. We are leaving a lot of people behind (which is what focussing on median incomes tells us.)

We do in some ways have it much easier than previous generations. Some diseases that were fatal are now treatable. I don't have to physically go to the library in order to read professional journals. Etc. But for all that, people are declaring bankruptcy over medical bills, taking out second and third mortgages on their homes, and not saving at all.

There are policies that would make this happen less, witness the fact that this recovery is such an anomaly. (I mean: compared to the recovery that happened under Reagan -- not exactly a fan of command-and-control economics, this recovery is a lot more skewed towards the wealthy.) It's not as though there's anything inevitable at all about the fact that four years into a recovery, the poverty rate is climbing.

OCSteve:

"Do those living officially in poverty today have a better lot than those living in poverty a couple of generations ago? Of course they do."

That might be because a couple of generations ago one was permitted to live in poverty unofficially. Then we made it official and things got better.

I didn’t realize children in coal mines had it so good.

I wish those spoiled industrial workers would have been more grateful, during the 1920’s, the depression would not have hurt so much.

But what to do? As best as I can tell your Detroit Free Press map just shows that the U. S. has continued to lose manufacturing jobs and that, in states with small populations, federal spending can help a lot. I'm not sure there's a lot to be learned from that.

We have a pretty good idea of how to lower the incomes of those in the highest quintile. Is that enough? That doesn't automatically translate into gains by the lowest quintile. It'll raise median income though.

There are other obvious ways to raise the median income. For example, if we limit the number of unskilled immigrant workers, that alone will raise the median income.

Are those the right policies?

My take is that over the last, say, 40 years a combination of events and policies have resulted in owning things being significantly more important in producing income than working. That, and that those in the higher income brackets have been able to seek rents more effectively than those in the lower brackets (some of those in the highest quintile are there mostly due to rent-seeking). How we correct that course isn't obvious to me.

As I was driving out to the coast last week I tried to imagine how rural Washington state would look to a vistor from Ireland or Sweden.

Impoverished. Unpainted houses, old cars, untended yards, sheets hanging in the windows for curtains.

This isn't unusual. Drive around almost any rural area , outside a resort or retirement community zone, and that's what you'll see. Big sections of the towns and cities are getting like that, too.

My generation is the last one that will be able to retire. No one else will ever earn enough money to be able to save for anything. Except for the veneer of rich people at the top, this country is on the verge of being a nation of the working poor. And all that work won't even get them health insurance. Maybe the poor are better off now than the poor of one hundred years ago, but as a rationalization for supporting conservative policies which have encouraged the economic changes of the last thirty years, that's pretty weak.

Right now those areas of white rural poverty are also wingnut areas where Republicans get elected by appealing to jingoism, mean-spirited religion and the myth of the liberal elite. Bread and circuses. I'm not sure how much longer those appeals will work, however, since the biggest circus of all, the war in Iraq, has gone so badly wrong and the liberal elites have no politcal power. After six years of Republican rule it is hard even to fool the ignorant about the nature of Republican policies.
I don't think a democractic government can continue to screw its own citizens indefinately.,. After awhile something has to give. Either the government has to go the way the Bush administration wishes, ie become not really a democracy, or there will be a rebellion at the voting booth.

OCSteve: I make in about 10 years what my parents made in their lifetime.

I can see that for a person of the generation prior to mine; certainly my dad made orders of magnitude more money than his parents, but that's in large part a question of the life they chose to lead. [Missionaries and other lives in Christ.] For someone of my generation, though, that's damn near impossible -- or at least, damn near impossible to be true across the board.

In fact I think that's particularly revealing, and goes to the point about the decline in median wages. If you can make it into the upper stratosphere in terms of pay then yes, you'll make more now than in any time in recent history... but the vast majority of people won't, the opportunities for transitioning from one income bracket to the next are rapidly diminishing, and those lower brackets are hurting. Frankly, not being of the right temperament to enter those upper echelons, I fully expect to never make as much as my father did. Whether that's a sign of a "natural market correction" or of the utter failure of the Republican economic ideology I leave as an exercise to the reader (:

I'm normally non-awful in interpreting graphs, but I'm really confused about the interaction between the state map chart and the average income graph. I know that median and average are different, but I can't for the life of me picture a situation where the high, middle and low are all positive but the median is negative unless the omitted fifths are radically different from the high, middle and low.

Whoops, I see it now. The problem is the years are different. My bad.

Seb: yes -- last year seems to have been the first in which real median income actually rose, though only slightly.

I should note that the charts I offer are constrained by what I can find online, since I tried and failed to make other ones in Excel, which I have never been able to master. (Sitting down with the manual might help, if I had a manual...)

If you have any questions about Excel, feel free to email me. I'm fairly good with it, even though like all Microsoft products it tries and fails to read your mind at annoying moments.

"But you would be able to play sax!"

I'd rather just have sax.

"That is, if you see this as a problem, what should be done about it?"

One of my answers: strengthen unions, and eliminate some of the Republican-passed laws of recent decades that weakened them.

I'm sure there are other useful suggestions without, well, let me point out, with all due respect (and I do respect you, OCSteve!) that this sentence doesn't even quite make sense: "So we should pass a law limiting corporate profits, requiring that the income be used to pay employees more instead?"

That wouldn't be limiting corporate profits, which is why I say the sentence doesn't quite make sense. It would directing the profits (whether away from executives or stockholders, or whathaveyou, you didn't say), not limiting them.

I do think it would be only just for workers to get a fairer share of profits, and for the share of executives to quit growing to such insane proportions, but since I'm not an economist, I'm not at all sure what would be the least harmful, for the company and economy, and best way to accomplish that goal.

How all these rich liberal elites conned Republicans into filling their bank accounts is beyond me.

Great post.

Really wish I could see the numbers on earnings elasticity (strange use of "elasticity", no?) broken down by ethnicity in the US.

So how do we solve the problem? Tax redistribution remedies it, but that doesn't change the before tax numbers. What steps could be taken that wouldn't harm economic competitiveness?

Ara: there are some class mobility figures broken down by race here. E.g.:

"African American children who are born in the bottom quartile are nearly twice as likely to remain there as adults than are white children whose parents had identical incomes, and are four times less likely to attain the top quartile.

The difference in mobility for blacks and whites persists even after controlling for a host of parental background factors, children’s education and health, as well as whether the household was female-headed or receiving public assistance."

Do those living officially in poverty today have a better lot than those living in poverty a couple of generations ago? Of course they do.

Roy Edroso has had some interesting things to say about this topic recently.

Even more added graphs, this time going back to the dark ages (shudder) before the dotcom bubble.

Income inequality matters. What we see now even here in egalitarian Norway is that once wealthy people start using their wealth to compete for limited supply commodities like fuel and electricity (as in the present energy situation), it's much more unpleasant for the rest of us than when they're only investing or bidding for the occasional luxury goods.

What I'm trying to get through is that we don't see what it actually means that Bill Gates has so much more money than us. We don't see the extreme power of the rich, how immensely much resources and skills they can commandeer, because for the most part they invest it rather than spending it on consumption.

The mansions, the cruise ships, the private jets, they're just the top of the iceberg. I hope there never comes a crisis that shows the size of the part that is now below water.

Slarti: fwiw, Roy Edroso (in the second of the two links Phil put above) addresses at least some of Back Talk's arguments.

Making verbal arguments in some bizarre English dialect is a counter to data? Ok, then.

I dunno. Maybe if he'd just gone ahead and rebutted, without all the extra stuff, I'd have a bit more patience. And of course it's possible that I'm reading all that he writes through the filter of his former association with the rocket scientists at Warbloggerwatch, of which group he was inarguably the smartest. Anyway, if anyone would care to translate his response in #2 link to English, I'd be much appreciative, because I can't for the life of me understand his point.

Making verbal arguments in some bizarre English dialect is a counter to data? Ok, then.

I have absolutely no idea what you're talking about here, Slarti. I never said that Roy Edroso "countered" Back Talk's arguments, just that he addressed them, and he's writing in straight-up SAE so far as I can see; you sure you clicked on the right link?

If not countered, what? Agreed? Disagreed, but offered nothing supportive? I'm really at a loss to see what Edroso added to the discussion, here. Other than scoffing.

So first of all, you're referring to two separate "he"s in your response, right? The first sentence "he" is Edroso, the second sentence "he" is the guy who writes Back Talk, the third sentence is Edroso again? And the remarks about Edroso's "bizarre English dialect" are entirely substance-free, correct? [I mean, you're not actually accusing Edroso of illiteracy, right?] I'm still trying to figure out what you meant there.

As to the other question, I think Edroso has a legitimate point in these two paragraphs:

All the beautiful junk of empire is yours, little man! Just don't fuck up and become a loser. Keep your skills sharp and relevant -- and don't make the mistake of following a career that will become obsolete. Technology's ever changing, so you'll have to stay very nimble. Re-train yourself constantly. That'll take a heap of money, of course -- maybe you can get the tuition on eBay!

And if, by some ordinary misfortune -- a disease, a failed marriage, an extra child, or a shift in market forces that you just weren't sophisticated enough to anticipate -- you find yourself underqualified, living in a double-wide, working an extra job just to make ends meet with no time or opportunity for advancement, well, shows to go ya: some cats is meant to enjoy indescribably superior coffee, and some cats ain't.

I'm not saying it's the Ultimate Takedown -- there's a reason I prefaced my earlier remark with "FWIW" -- just that I think it captures a certain truth that isn't well-measured by the statistics Mr Back Talk used, and one which is worth thinking about.

In this response I should have said.

So first of all, you're referring to two separate "he"s in your response, right?

No. I have no idea why you might think this.

I mean, you're not actually accusing Edroso of illiteracy, right?

No. Since I actually didn't, and all.

just that I think it captures a certain truth that isn't well-measured by the statistics Mr Back Talk used, and one which is worth thinking about

Ah, that's the part that seemed to be written in some other dialect, because it didn't appear to be in response to any particular point advanced by the Back Talk fellow. Nor did it seem to follow that advances in real wages might tend to insure one against those very twists and turns in life that he mentions.

I found Edroso's post fairly close to content-free, so I wasn't sure what Phil found interesting.

The part that Anarch quotes is interesting to me especially in the idea that this somehow represents a nasty change brought about by Republicans. A nasty disease, a failed marriage, an extra child, shifts in market forces, these things have always been problems for almost everyone. My grandfather's middle-class divorce made things almost impossible for my grandmother. Having twins instead of just a third child was very difficult for my parents. Disease has been causing huge problems forever--even for the very rich and even for Europeans! Technological change has been putting people out of work since before the Luddites (1811). These are not part of some evil Republican plot. These are parts of real life. Yes there is are all sorts of balancing problems in mitigating these harms. But even with problems, this is not the 1800s or 1930s or 1950s or 1960s or 1970s. Would you rather have cancer and be poor now, or have cancer and be rich in 1950? There has been significant material progress--even just in the last 5 and 10 and 15 years and even among people in the bottom fifth.

In related news, it appears that the Detroit Free Press isn't using the standard numbers in its analysis. See here and if you dismiss JaneGalt because you don't 'trust' her without engaging the points she makes I will glare. :)

Main point:

A little back story: I didn't see anything particularly surprising or horrifying about the lefty bloggers harping on this. Median household income has fallen slightly under Bush, and though I plan to explore why this isn't quite as dire as it seems, and also not really related to who the president is, over the next few days, it's perfectly honorable for them to make hay out of it.

But then Stuart Buck emailed me for a quick spot check:

Is the analysis accurate? I don't think so. I'm not sure, because I can't tell what figures they were looking at, but the official figures that I have found seem to be quite different. Here is the Census Bureau's webpage listing median household income by state, from 1984 to 2005 -- the very thing that the Detroit Free Press was supposedly measuring. What's more, if you scroll halfway down the page, there is a separate set of tables that gives state-by-state figures all in 2005 dollars. Let's take my home state of Arkansas. According to the Census Bureau's page, Arkansas' 1999 median household income -- in 2005 dollars -- was $34,770. Then in 2005, the median household income was $36,658. That's an increase of 5.4%, as opposed to the 7.2% decrease that the Detroit Free Press claims to have found. How about another state: Utah. In 1999 (again, in 2005 dollars): $53,943. In 2005: $54,813. That's a rise of 1.6%, not a decline of 10.5% as the Free Press claims. The nationwide median -- In 1999: $47,671. In 2005: $46,326. Adjusting for inflation, that is a 2.9% decrease, not the 6% decrease found by the Free Press. These figures are not necessarily comforting; a nationwide drop of 2.9% is nothing to sneeze at (although you'd have to know if the composition of households changed between 1999 and 2005). In any event, I'm not sure what the Detroit Free Press was looking at, or how they adjusted for inflation, but their graphic seems to overstate any drop in median household income.
I'm on holiday, and immersed in a somewhat idiosyncratic creative project, but I ran over to the Census Bureau for a quick look at the Current Population Survey, which is the standard tool I use for these sorts of analyses. Indeed, as Stuart found, the numbers don't match, and a closer look at the map made no sense: the drops were too big. American median income has dropped a little over the last six years, thanks to the popping of the technology bubble and a surge in non-wage compensation costs (read health care). But the gargantuan drops in almost every state were surely not being counterbalanced by tiny increases in Rhode Island, Montana, and DC.

...

Except it doesn't explain it, because the map clearly states that it is comparing state employment figures from 1999 to 2005, and as far as I know, the American Community Survey, otherwise known as the ACS, only started publishing non-experimental data in 2000. What’s more, at least as I understand it, until 2003 all its data was based on 31 test sites, which wouldn’t allow you to generate state-level comparisons, as obviously this is less than one per state. In fact, it didn’t even include Michigan. The ACS is a tool that will be good for longitudinal comparisons sometime around 2010.

No. I have no idea why you might think this.

The "rocket scientists" threw me; I thought you were referring to actual rocket scientists there, not employing a sarcastic throwaway. Seeing as how you are an actual real-life rocket scientist and all.

No. Since I actually didn't, and all.

See, if you write a post in a cryptic and, let's face it, snide style, you're going to be misinterpreted. Wouldn't it just be easier to say "I disagree" (or "I think his response is content-free" if you feel like being even more forthcoming) or something similar like that? It'd make life easier all around; you wouldn't have to explain yourself to morons and I wouldn't have to waste half an hour trying to parse what should have been an extremely simple point to make.

Wouldn't it just be easier to say "I disagree" (or "I think his response is content-free" if you feel like being even more forthcoming) or something similar like that? It'd make life easier all around; you wouldn't have to explain yourself to morons and I wouldn't have to waste half an hour trying to parse what should have been an extremely simple point to make.

Fair point, as always. I guess I have sufficient regard for your opinion that I thought to myself something like this: if Edroso is making any sort of relevant argument, here, it's not put forth in a way that I can understand. I hadn't really considered pointless.

hilzoy, Megan McArdle has pointed out some flaws in how the numbers behind the map were arrived at; apparently Kevin Drum concurs.

Fair enough, Slarti. And I apologize if I was unnecessarily tetchy above; it's been a rough week and I suspect my brain, let alone my comity, ain't firing as it oughtta.

Also, seconded about the correction of the numbers. I'm somewhat appalled to see that the big loser now is Wisconsin -- appalled, but not especially surprised. And it's only going to get worse.

i dont like child labor at all. whats the point of it.. =( just think of how you work now but probally harder. and your like 4 to 16!!!!!! jeese.. makes you wanna give blood or something right?

thanks for listening

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