magpie at Pacific Views brings us this from the Economic Policy Institute:
In 48 of the 50 states, jobs in higher-paying industries have given way to jobs in lower-paying industries since the recession ended in November 2001. Nationwide, industries that are gaining jobs relative to industries that are losing jobs pay 21% less annually. For the 30 states that have lost jobs since the recession purportedly ended, this is the other shoe dropping—not only have jobs been lost, but in 29 of them the losses have been concentrated in higher paying sectors. And for 19 of the 20 states that have seen some small gain in jobs since the end of the recession, the jobs gained have been disproportionately in lower-paying sectors.
and says:
Just note there are at least two ways to establish equality: raise everyone to the same level or depress everyone to the same level.
Posted by P6 at January 21, 2004 05:39 AM
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Comments
Lowering income is only meaningful within the context of purchasing power. Over the past decade, there has been a substantial rise in income, while inflation has been kept very low. That inflation of income relative to prices of goods could not be sustained without increasing inflation in the costs of goods, but since there has been very little inflation, income dropped.
During a recession, that is what is supposed to happen. Incomes drop and prices drop. In this case, the net result is small. The result of lowering incomes in the US over the past few years has been that prices have changed little over that same time period.
Posted by Brian at January 21, 2004 11:28 AMIf you're talking about purchasing power parity, you don't have the right grip on the subject. It's a macroeconomic topic, having to do with relative equality of wages as determined by the ability to purchase equivalent goods. The way you're talking sounds more like it's based on the Consumer Price Index.
Beyond that, it's been a long time since wages increased faster than prices. And the "substantial rise in income" is statistical rather than particular…while a number of people had incomes enhanced by various things (internet bubble, stock options, whatever) a greater number became under or unemployed, or accepted give-backs to keep their job. It's more than possible to have the majority of people worse off in the middle of improving statistics—it is the case.
Posted by P6 at January 21, 2004 02:03 PMP6,
While I agree with your basic premise that in the past few years purchasing power for many has decreased, I don't think there are facts to back up your assertion that the prosperity of the 90's was limited only to a few because of the bubble and stock options. An all time period of low unemployment, and high demand for workers really did produce a prolonged period of wealth. I don't think it's conclusive that we've lost all of that. Of course these aggregate numbers mean little in terms of people who are unemployed, or have taken positions paying less than they were making.
Also, as far as your arguments about the CPI raising faster than wages... there are strong arguments that the CPI dramatically overstates inflation by not taking into account increases in good quality. Especially considering major items like TVs, Computers, Electronics that improve so rapidly in quality, I'm not sure that the CPI is necessarily a good way to measure standard of living (though I'd be hard pressed to find something better.)
Posted by Jason Shao at January 21, 2004 09:20 PMthere are strong arguments that the CPI dramatically overstates inflation by not taking into account increases in good quality
The arguments aren't strong--they're really just rhetorical chaff--and "dramatically" means something noticeable over the course of your natural lifetime.
The argument was introduced just as the GOP and the Democrats switched sides on the inflation debate. During the 60's and 70's the Dems argued that inflation was a smaller danger than recession; the GOP argued that even small inflation was dangerous. After 1986, when economic growth faltered, the GOP insisted that inflation was overstated. Reason? So COLA's could be reduced.
The flaw in the argument is that the CPI is based on a weighted average of goods and services consumed by American households. Very subtle methods have been implemented by the BLS since '96 to factor quality improvements, but a small coterie of hardliners is miffed because the new '96 rules calculated that quality improvements--such as increased computing power--only created "illusory inflation" of 0.04% or so. In the mean time, the chain weights give excessive weight to items consumed by wealthier households. For houses in the lower 60% of US households, the major shares of income are tied up by medical expenses or insurance, education, housing, and retail mark-ups. Air travel, telecom/info tech (TCIT), big-ticket durables, financial services, and construction have been larger components of the top 40% of households.
Posted by James R MacLean at January 22, 2004 05:30 AMJason:
My point is there was no great increase in income relative to prices that would "justify" a reduction in salaries as Brian says.
Even if there were, that's not how the overall salary figures reduced. The overall salary figured fell because there was a reduction in the number of high end jobs and an increase in the number of low end jobs. And I know you didn't say anything about that, but it just occurred to me. It was stick it in this comment or write a whole new post.
Posted by P6 at January 22, 2004 04:34 PM