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Except this wasn't the federal bailouts. Those are an entirely different beast. It's talking strictly about income stagnation. The study shows that if wages ke

Except this wasn't the federal bailouts. Those are an entirely different beast. It's talking strictly about income stagnation. The study shows that if wages kept up with productivity (as was the case in the immediate post-WW2 era) the bottom 90% would earn $2.5 trillion per year more. > We document the cumulative effect of four decades of income growth below the growth of per capita gross national income and estimate that aggregate income for the population below the 90th percentile over this time period would have been $2.5 trillion (67 percent) higher in 2018 had income growth since 1975 remained as equitable as it was in the first two post-War decades. From 1975 to 2018, the difference between the aggregate taxable income for those below the 90th percentile and the equitable growth counterfactual totals $47 trillion. https://www.rand.org/pubs/working_papers/WRA516-1.html https://www.rand.org/pubs/working_papers/WRA516-1.html

treis 6y ago
>Except this wasn't the federal bailouts. Those are an entirely different beast. It's talking strictly about income stagnation. Which rests on the fundamentally incorrect assumption that a dollar a rich person gets means that a poor person is a dollar poorer.
- fuzzfactor 6y ago
  did not downvote, but More accurate to calculate how it still regularly costs a million poor people a dollar each to make one person a new millionaire. But we all know a $Million doesn't buy what it was supposed to any more, so all million-and-one of them are screwed anyway. And poor people actually used to be able to afford this kind of spending.
Seanambers 6y ago
Some nice graphs to go along; https://wtfhappenedin1971.com/ https://wtfhappenedin1971.com/
- tylerhou 6y ago
  A bunch of these graphs are misleading, especially the ones from the EPI. /r/badecon can explain better than I can: https://www.reddit.com/r/badeconomics/comments/6rtoh4/productivity_pay_gap_in_epi_we_trust/ https://www.reddit.com/r/badeconomics/comments/6rtoh4/produc... TL;DR: 1. The pay line is for the bottom ~80% of workers, while the productivity line is for all workers. If you graph all workers wages vs all workers productivity, then the gap shrinks quite a bit. (Of course, maybe we should redistribute wealth from top workers to all workers, but that's another discussion.) 2. Average hourly wages doesn't take into account workers' increase in benefits. 3. The lines aren't adjusted for inflation in the same way, which makes the gap look worse.
  - josho 6y ago
    > Average hourly wages doesn't take into account workers' increase in benefits. I can't help but feel /r/badecon's rebuttal is dishonest. For many people benefits haven't increased, so the fact that it is excluded is a non-issue. E.g. The growing number of workers who are kept below full time hours to avoid being given fulltime benefits as one of many examples I could list. Regardless, if it is accurate I'm very curious what the growing employer benefits has been.
    - tylerhou 6y ago
      Badecon addresses this — in fact, it’s the top comment.
  - webmaven 6y ago
    > Average hourly wages doesn't take into account workers' increase in benefits. There is a pretty good reason for that. Most of the increase in benefits has been in the form of increased healthcare costs, which only somewhat reflect increased value, as much of that value is unrealized due to high deductibles incentivizing people to not use medical services if they can avoid doing so (which preserves an odd form of household rainy day fund dedicated to medical catastrophes). Meanwhile, the segment of workers that are (precariously, so with litle to no leverage even in aggregate) holding one or more part-time jobs instead of a full time job with benefits has grown as well.
mindslight 6y ago
Even with income remaining stagnant, the prices for goods and services should have been continually going down due to technology and outsourcing. Price optimization is the fundamental mechanic of any market! For example, when most manufacturing was moving to China the promise was that it would benefit consumers via lower prices. However the Fed's overt policy is to erase these gains by printing money via low interest rates, and injecting it into the nonproductive financial sector. This made sure that the cost of living continued to march upwards, while all those manufacturing jobs still went away.
- danans 6y ago
  > Even with income remaining stagnant, the prices for goods and services should have been continually going down due to technology and outsourcing. The price for goods did go down. Everything from food to toys to tools got much cheaper than it was before. However, the price for cornerstone needs that govern access to opportunity - i.e. healthcare, housing, education, physical security - and the percentage of income and average net worth that these consume went up dramatically. Furthermore, these things became ever more correlated with each other, meaning that if you have bad access to one, you are likely to have bad access to the others, and if you have great access to one, you likely have great access to the others. But sure, it's never been cheaper to buy random widget X at a big box store.
  - mindslight 6y ago
    > The price for some cornerstone needs that govern access to opportunity - i.e. healthcare, housing, education First, I wholeheartedly agree that this is the major stakes. I mentioned consumer goods prices because they're immediately tangible. The differences in the others are all too easy to handwave away as improvements. > Everything from food to toys to tools got much cheaper than it was before I don't know about toys, and they seem hard to compare. Food has gone up over the past few decades (groceries that used to cost $2 now cost $3, $3->$4, etc). From one of the first hits for historical milk price (https://www.in2013dollars.com/Milk/price-inflation https://www.in2013dollars.com/Milk/price-inflation): "Between 1997 and 2020: Milk experienced an average inflation rate of 1.73% per year". Note that I'm talking about sticker prices here, not any "but they actually went down with inflation", as the original argument was referencing stationary wages. Tools are being made much more flimsy and disposable - eg real high speed steel has been replaced by inferior foreign steel with gimmicky coatings to "prolong" its poor wear characteristics. If you look at good quality tool brands today, the prices are higher than what tools cost several decades ago. This goes for appliances as well - take a look at "commercial" offerings that are built to be maintained.
credit_guy 6y ago
> The study shows that if wages kept up with productivity (as was the case in the immediate post-WW2 era) the bottom 90% would earn $2.5 trillion per year more. The productivity growth is not a constant number. The productivity of a Machine Learning engineer has increased much more than the productivity of a gas station attendant.
nostrademons 6y ago
Why do you think wages haven't kept up with productivity? The decoupling of wages from productivity started around 1971-1973, which is suspiciously close to the Nixon Shock and beginning of the 1970s inflation. In periods of inflation, firms with high bargaining power (notably monopolistic corporations, corporate executives, and right now, software engineers & quants) can extract the excess money floating around. Firms in highly competitive industries (notably restaurants, family farms, and ordinary workers) get undercut every time they try to raise prices. Therefore all the gains go to the rich.
- sjy 6y ago
  I’d say it probably has something to do with the collapse in union membership, deregulation and growth of the finance sector, and capture of the political system by those who can afford billions of dollars worth of advertising, but it’s a complicated story. Are you suggesting that wages haven’t kept up with productivity because inflation has been consistently high since the US abolished the gold standard?
  - kazen44 6y ago
    Also, the massive rise in economic power of the rest of (western) world around that time. the US was the only major world power left standing after world war 2 without colossal damage, and rebuilding (western) europe took the better part of 25 years to fully complete.
  - nostrademons 6y ago
    Yes, mostly. I'd say that high inflation, declining union membership, and growth of the financial system are all consequences of the U.S. dollar's status as a fiat reserve currency. The causality for the decline in union membership runs [collapse of Bretton Woods system] -> [U.S. dollar becomes global reserve currency] -> [U.S. manufacturing becomes uncompetitive abroad] -> [American manufacturing firms go bankrupt, allowing them to renegotiate or renege on union contracts] -> [decline in union membership]. Step 3 had a lot of help, between poor corporate governance and quality control at American corporations, the rest of the world rebuilding from the ashes of WW2, the collapse of communist systems in China and the eastern bloc, and globalist policies from Washington. But probably the most significant factor is that the dollar is overvalued, which makes American exports overpriced, which makes all but our highest-productivity industries uncompetitive. The causality for inflation-lowered wages is [U.S. dollar is global reserve currency] -> [U.S. must "print" an excess amount of dollars to satisfy foreign demand - here really referring to interest rates, since physical currency is a minority of foreign trade] -> [excess dollars flood financial markets, causing asset inflation] -> [ordinary workers lack the bargaining power to divert some of these excess dollars to themselves, falling behind in purchasing power]. Note that when ordinary workers do have this bargaining power - like when they work for Goldman Sachs, or when they're paid in Google/Apple/Facebook stock - they actually have shared in this inflated prosperity. The causality for growth of the financial industry is [U.S. dollar is global reserve currency] -> [a significant number of foreign transactions require trade in dollar-denominated assets] -> [more jobs are needed to manage these money flows] + [manufacturing careers in the U.S. suck, per second paragraph] -> [smart, ambitious people go into finance because it's where the money is, literally].

treis 6y ago

>Except this wasn't the federal bailouts. Those are an entirely different beast. It's talking strictly about income stagnation. Which rests on the fundamentally incorrect assumption that a dollar a rich person gets means that a poor person is a dollar poorer.

fuzzfactor 6y ago
did not downvote, but More accurate to calculate how it still regularly costs a million poor people a dollar each to make one person a new millionaire. But we all know a $Million doesn't buy what it was supposed to any more, so all million-and-one of them are screwed anyway. And poor people actually used to be able to afford this kind of spending.

Seanambers 6y ago

Some nice graphs to go along; https://wtfhappenedin1971.com/ https://wtfhappenedin1971.com/

tylerhou 6y ago
A bunch of these graphs are misleading, especially the ones from the EPI. /r/badecon can explain better than I can: https://www.reddit.com/r/badeconomics/comments/6rtoh4/productivity_pay_gap_in_epi_we_trust/ https://www.reddit.com/r/badeconomics/comments/6rtoh4/produc... TL;DR: 1. The pay line is for the bottom ~80% of workers, while the productivity line is for all workers. If you graph all workers wages vs all workers productivity, then the gap shrinks quite a bit. (Of course, maybe we should redistribute wealth from top workers to all workers, but that's another discussion.) 2. Average hourly wages doesn't take into account workers' increase in benefits. 3. The lines aren't adjusted for inflation in the same way, which makes the gap look worse.
- josho 6y ago
  > Average hourly wages doesn't take into account workers' increase in benefits. I can't help but feel /r/badecon's rebuttal is dishonest. For many people benefits haven't increased, so the fact that it is excluded is a non-issue. E.g. The growing number of workers who are kept below full time hours to avoid being given fulltime benefits as one of many examples I could list. Regardless, if it is accurate I'm very curious what the growing employer benefits has been.
  - tylerhou 6y ago
    Badecon addresses this — in fact, it’s the top comment.
- webmaven 6y ago
  > Average hourly wages doesn't take into account workers' increase in benefits. There is a pretty good reason for that. Most of the increase in benefits has been in the form of increased healthcare costs, which only somewhat reflect increased value, as much of that value is unrealized due to high deductibles incentivizing people to not use medical services if they can avoid doing so (which preserves an odd form of household rainy day fund dedicated to medical catastrophes). Meanwhile, the segment of workers that are (precariously, so with litle to no leverage even in aggregate) holding one or more part-time jobs instead of a full time job with benefits has grown as well.

mindslight 6y ago

Even with income remaining stagnant, the prices for goods and services should have been continually going down due to technology and outsourcing. Price optimization is the fundamental mechanic of any market! For example, when most manufacturing was moving to China the promise was that it would benefit consumers via lower prices. However the Fed's overt policy is to erase these gains by printing money via low interest rates, and injecting it into the nonproductive financial sector. This made sure that the cost of living continued to march upwards, while all those manufacturing jobs still went away.

danans 6y ago
> Even with income remaining stagnant, the prices for goods and services should have been continually going down due to technology and outsourcing. The price for goods did go down. Everything from food to toys to tools got much cheaper than it was before. However, the price for cornerstone needs that govern access to opportunity - i.e. healthcare, housing, education, physical security - and the percentage of income and average net worth that these consume went up dramatically. Furthermore, these things became ever more correlated with each other, meaning that if you have bad access to one, you are likely to have bad access to the others, and if you have great access to one, you likely have great access to the others. But sure, it's never been cheaper to buy random widget X at a big box store.
- mindslight 6y ago
  > The price for some cornerstone needs that govern access to opportunity - i.e. healthcare, housing, education First, I wholeheartedly agree that this is the major stakes. I mentioned consumer goods prices because they're immediately tangible. The differences in the others are all too easy to handwave away as improvements. > Everything from food to toys to tools got much cheaper than it was before I don't know about toys, and they seem hard to compare. Food has gone up over the past few decades (groceries that used to cost $2 now cost $3, $3->$4, etc). From one of the first hits for historical milk price (https://www.in2013dollars.com/Milk/price-inflation https://www.in2013dollars.com/Milk/price-inflation): "Between 1997 and 2020: Milk experienced an average inflation rate of 1.73% per year". Note that I'm talking about sticker prices here, not any "but they actually went down with inflation", as the original argument was referencing stationary wages. Tools are being made much more flimsy and disposable - eg real high speed steel has been replaced by inferior foreign steel with gimmicky coatings to "prolong" its poor wear characteristics. If you look at good quality tool brands today, the prices are higher than what tools cost several decades ago. This goes for appliances as well - take a look at "commercial" offerings that are built to be maintained.

credit_guy 6y ago

> The study shows that if wages kept up with productivity (as was the case in the immediate post-WW2 era) the bottom 90% would earn $2.5 trillion per year more. The productivity growth is not a constant number. The productivity of a Machine Learning engineer has increased much more than the productivity of a gas station attendant.

nostrademons 6y ago

Why do you think wages haven't kept up with productivity? The decoupling of wages from productivity started around 1971-1973, which is suspiciously close to the Nixon Shock and beginning of the 1970s inflation. In periods of inflation, firms with high bargaining power (notably monopolistic corporations, corporate executives, and right now, software engineers & quants) can extract the excess money floating around. Firms in highly competitive industries (notably restaurants, family farms, and ordinary workers) get undercut every time they try to raise prices. Therefore all the gains go to the rich.

sjy 6y ago
I’d say it probably has something to do with the collapse in union membership, deregulation and growth of the finance sector, and capture of the political system by those who can afford billions of dollars worth of advertising, but it’s a complicated story. Are you suggesting that wages haven’t kept up with productivity because inflation has been consistently high since the US abolished the gold standard?
- kazen44 6y ago
  Also, the massive rise in economic power of the rest of (western) world around that time. the US was the only major world power left standing after world war 2 without colossal damage, and rebuilding (western) europe took the better part of 25 years to fully complete.
- nostrademons 6y ago
  Yes, mostly. I'd say that high inflation, declining union membership, and growth of the financial system are all consequences of the U.S. dollar's status as a fiat reserve currency. The causality for the decline in union membership runs [collapse of Bretton Woods system] -> [U.S. dollar becomes global reserve currency] -> [U.S. manufacturing becomes uncompetitive abroad] -> [American manufacturing firms go bankrupt, allowing them to renegotiate or renege on union contracts] -> [decline in union membership]. Step 3 had a lot of help, between poor corporate governance and quality control at American corporations, the rest of the world rebuilding from the ashes of WW2, the collapse of communist systems in China and the eastern bloc, and globalist policies from Washington. But probably the most significant factor is that the dollar is overvalued, which makes American exports overpriced, which makes all but our highest-productivity industries uncompetitive. The causality for inflation-lowered wages is [U.S. dollar is global reserve currency] -> [U.S. must "print" an excess amount of dollars to satisfy foreign demand - here really referring to interest rates, since physical currency is a minority of foreign trade] -> [excess dollars flood financial markets, causing asset inflation] -> [ordinary workers lack the bargaining power to divert some of these excess dollars to themselves, falling behind in purchasing power]. Note that when ordinary workers do have this bargaining power - like when they work for Goldman Sachs, or when they're paid in Google/Apple/Facebook stock - they actually have shared in this inflated prosperity. The causality for growth of the financial industry is [U.S. dollar is global reserve currency] -> [a significant number of foreign transactions require trade in dollar-denominated assets] -> [more jobs are needed to manage these money flows] + [manufacturing careers in the U.S. suck, per second paragraph] -> [smart, ambitious people go into finance because it's where the money is, literally].