7 ms·

>"The shift to lower wage jobs for entire groups of workers is similarly problematic. Working full time while earning much less than in the past has profound ra

>"The shift to lower wage jobs for entire groups of workers is similarly problematic. Working full time while earning much less than in the past has profound ramifications. Entire industries have been disrupted, and often employees find taking a new job in a different sectors leads to near-entry-level pay -- equivalent to a 30, 40, even 50% salary cut. These folks may be working full time but they clearly are underemployed relative to their experience, skills and past work. This is not captured in economic data." The US is uniquely unable to cope with this outcome. Health Insurance is tied to employment. Education is costly. Our new mythology of Bootstraps instead of Social Guarantees. I don't see a new robust and dynamic economy coming to the rescue. For those of us currently doing well, this ought to be worrying.

draw_down 7y ago
I suppose, but perhaps more worrying to those of us not currently doing well.
zaroth 7y ago
If a significant number of people were working now at 30-40-50% reduced wages, then wouldn’t that show up as a decrease in median household income? Real median household income is at an all time high, up 13% from 2012-2017.
- ssivark 7y ago
  Isn't this the quantity that has barely risen since 1970 or so (till ~2012), while productivity has multiplied manifold? https://en.m.wikipedia.org/wiki/Middle-class_squeeze#/media/File%3AProductivity_and_Real_Median_Family_Income_Growth_1947-2009.png https://en.m.wikipedia.org/wiki/Middle-class_squeeze#/media/... Further, the median can easily mask such changes as underemployment if it happens in much less than 50% of households, if the "middle class" previously had a broad base. Basically, the middle of the histogram would continue to look pretty flat (same median income for the "middle class") while the width of the flat region would shrink (shrinking middle class).
  - zaroth 7y ago
    No, I’m not sure you can reduce wages 30-40-50% for many workers without moving the median down, unless a similar number of workers on the lower side had their wages increased 42-66-100% (that would effectively mean two workers swapping places, which would keep the median the same). Worth mentioning that the 4th and 5th Quintiles have either not grown at all (in real terms) or even slightly fallen. Of course compared the the 1st quintile and Top 5% everyone else has been totally screwed. I think the narrowing of the middle class has more to do with the dramatic rise in housing, education, and health care costs than it does with wages. https://www.advisorperspectives.com/dshort/updates/2018/10/16/u-s-household-incomes-a-51-year-perspective https://www.advisorperspectives.com/dshort/updates/2018/10/1...
    - nopzor 7y ago
      are you normalizing for how many fte are in the average household? i'm guessing there are a lot of 2-working-parent households now than there were in 1970. and possibly more working kids still living with their parents too. when you consider this shift, it might allow for a reduction in wages. just speculation. i haven't looked at the data.
    - echaozh 7y ago
      Median is not mean. If everyone under the median suddenly gets no pay at all, or anything under, the median doesn't change.
      - sytelus 7y ago
        Median guarantees that at least half of the population has income increased. Mean is unreliable to make any such guarantees. Bill Gates walks in to bar and everyone is millionaire on average.
  - malandrew 7y ago
    The middle class is shrinking, but not because they are getting poorer, but because more are becoming upper middle class: https://marginalrevolution.com/marginalrevolution/2016/06/the-middle-class-is-shrinking-because-many-people-are-getting-richer.html https://marginalrevolution.com/marginalrevolution/2016/06/th... http://www.aei.org/publication/yes-the-us-middle-class-is-shrinking-but-its-because-americans-are-moving-up-and-no-americans-are-not-struggling-to-afford-a-home/ http://www.aei.org/publication/yes-the-us-middle-class-is-sh... This piece from the Minneapolis Fed is also worth reading: https://www.minneapolisfed.org/publications/the-region/where-has-all-the-income-gone https://www.minneapolisfed.org/publications/the-region/where...
- defterGoose 7y ago
  A. The time period you mention is post 2008 recession; you would expect the number to go up after such a catastrophic event. B. Median simply means the middle of the frequency distribution, so you could have a glut of people earning significantly lower than the median, while the upper tail is more or less smooth out to the top end. C. It's not as easy to find data going back to mid-century, but the trend since the eighties has been largely upward in real terms. Again though, we know that the top 1% has had outsize gains, and it's reasonable to assume that the distribution was more Gaussian in the preceding years.
  - zaroth 7y ago
    Yes, absolutely. But in terms of a labor market being “healthy” or not, what are the labor market conditions today if not healthy? Decades of policy created the environment we are in now, where the bottom 3 quintiles lost out entirely on any gains to globalization. Now, perhaps more than any time in the last 50 years, we have conditions which could lead to gains for those lower quintiles. I don’t expect to see decades of losses reversed overnight, but for the last 10 years things have gotten better not worse, which is something new. Hopefully we are at a point which will start seeing accelerating gains accumulating toward the lower quintiles. IMO, for that to happen, we need to reduce the supply of unskilled labor to drive increased wages at that point on the curve.

draw_down 7y ago

I suppose, but perhaps more worrying to those of us not currently doing well.

zaroth 7y ago

If a significant number of people were working now at 30-40-50% reduced wages, then wouldn’t that show up as a decrease in median household income? Real median household income is at an all time high, up 13% from 2012-2017.

ssivark 7y ago
Isn't this the quantity that has barely risen since 1970 or so (till ~2012), while productivity has multiplied manifold? https://en.m.wikipedia.org/wiki/Middle-class_squeeze#/media/File%3AProductivity_and_Real_Median_Family_Income_Growth_1947-2009.png https://en.m.wikipedia.org/wiki/Middle-class_squeeze#/media/... Further, the median can easily mask such changes as underemployment if it happens in much less than 50% of households, if the "middle class" previously had a broad base. Basically, the middle of the histogram would continue to look pretty flat (same median income for the "middle class") while the width of the flat region would shrink (shrinking middle class).
- zaroth 7y ago
  No, I’m not sure you can reduce wages 30-40-50% for many workers without moving the median down, unless a similar number of workers on the lower side had their wages increased 42-66-100% (that would effectively mean two workers swapping places, which would keep the median the same). Worth mentioning that the 4th and 5th Quintiles have either not grown at all (in real terms) or even slightly fallen. Of course compared the the 1st quintile and Top 5% everyone else has been totally screwed. I think the narrowing of the middle class has more to do with the dramatic rise in housing, education, and health care costs than it does with wages. https://www.advisorperspectives.com/dshort/updates/2018/10/16/u-s-household-incomes-a-51-year-perspective https://www.advisorperspectives.com/dshort/updates/2018/10/1...
  - nopzor 7y ago
    are you normalizing for how many fte are in the average household? i'm guessing there are a lot of 2-working-parent households now than there were in 1970. and possibly more working kids still living with their parents too. when you consider this shift, it might allow for a reduction in wages. just speculation. i haven't looked at the data.
  - echaozh 7y ago
    Median is not mean. If everyone under the median suddenly gets no pay at all, or anything under, the median doesn't change.
    - sytelus 7y ago
      Median guarantees that at least half of the population has income increased. Mean is unreliable to make any such guarantees. Bill Gates walks in to bar and everyone is millionaire on average.
- malandrew 7y ago
  The middle class is shrinking, but not because they are getting poorer, but because more are becoming upper middle class: https://marginalrevolution.com/marginalrevolution/2016/06/the-middle-class-is-shrinking-because-many-people-are-getting-richer.html https://marginalrevolution.com/marginalrevolution/2016/06/th... http://www.aei.org/publication/yes-the-us-middle-class-is-shrinking-but-its-because-americans-are-moving-up-and-no-americans-are-not-struggling-to-afford-a-home/ http://www.aei.org/publication/yes-the-us-middle-class-is-sh... This piece from the Minneapolis Fed is also worth reading: https://www.minneapolisfed.org/publications/the-region/where-has-all-the-income-gone https://www.minneapolisfed.org/publications/the-region/where...
defterGoose 7y ago
A. The time period you mention is post 2008 recession; you would expect the number to go up after such a catastrophic event. B. Median simply means the middle of the frequency distribution, so you could have a glut of people earning significantly lower than the median, while the upper tail is more or less smooth out to the top end. C. It's not as easy to find data going back to mid-century, but the trend since the eighties has been largely upward in real terms. Again though, we know that the top 1% has had outsize gains, and it's reasonable to assume that the distribution was more Gaussian in the preceding years.
- zaroth 7y ago
  Yes, absolutely. But in terms of a labor market being “healthy” or not, what are the labor market conditions today if not healthy? Decades of policy created the environment we are in now, where the bottom 3 quintiles lost out entirely on any gains to globalization. Now, perhaps more than any time in the last 50 years, we have conditions which could lead to gains for those lower quintiles. I don’t expect to see decades of losses reversed overnight, but for the last 10 years things have gotten better not worse, which is something new. Hopefully we are at a point which will start seeing accelerating gains accumulating toward the lower quintiles. IMO, for that to happen, we need to reduce the supply of unskilled labor to drive increased wages at that point on the curve.