3 ms·

Over the last thirty years, households have gone from predominantly single bread winner, to dual earner. And at the same time, consumer debt has done up while s

Over the last thirty years, households have gone from predominantly single bread winner, to dual earner. And at the same time, consumer debt has done up while savings have gone down. Now, if worker compensation was growing significantly faster than inflation, wouldn't we expect the amount of disposable income to be higher, and hence savings and debt to be lower? Why were Americans forced to tap home equity and credit cards to continue consumption? Either prices went up, or people started consuming a lot more. The article claims disposable income went up, but if that's the case, why the credit binge? Doesn't add up. Moreover, even if you ignore this, the share of national income of the bottom quintiles has been dropping monotonically over the last 30 years, but it was rising with the rest of the quintiles prior to that. That tends to indicate that broad based productivity increases were accruing benefits to workers. Now it tends to indicate that productivity increases accrue solely to capital and not labor. It is not a stable situation. The apologetics seem designed to avoid debate about the problem, just like climate change, because the assumed solutions would conflict with closely held ideological beliefs. That is, ideological belief trumps contradictory data.

twoodfin 14y ago
Now, if worker compensation was growing significantly faster than inflation, wouldn't we expect the amount of disposable income to be higher, and hence savings and debt to be lower? Not necessarily. If college education and its financing became more broadly available and increased expected lifetime earnings by more than the cost of the debt to pay for it (+ opportunity cost), you might expect to see many more households with college debt without your expected lower incomes. We've been living through two decades of historically low rates of interest and inflation. It's possible that had folks in the 1970's seen rates like that, they might have chosen to debt-finance more as well.
- cromwellian 14y ago
  It is true that credit is a lot easier to come by, and given American's trade deficit/capital account surplus, a lot more money across the world is flowing into the US, like crack into a poor neighborhood, obviously increasing borrowing above what it would have been in the 70s. I'm not sure how to square this, it pollutes the data. It does seem to me however, that given the loss of manufacturing jobs, and the increase in low end retail / service jobs, that there has been downward pressure on wages.
chrisfromto 14y ago
"...people started consuming a lot more."

twoodfin 14y ago

Now, if worker compensation was growing significantly faster than inflation, wouldn't we expect the amount of disposable income to be higher, and hence savings and debt to be lower? Not necessarily. If college education and its financing became more broadly available and increased expected lifetime earnings by more than the cost of the debt to pay for it (+ opportunity cost), you might expect to see many more households with college debt without your expected lower incomes. We've been living through two decades of historically low rates of interest and inflation. It's possible that had folks in the 1970's seen rates like that, they might have chosen to debt-finance more as well.

cromwellian 14y ago
It is true that credit is a lot easier to come by, and given American's trade deficit/capital account surplus, a lot more money across the world is flowing into the US, like crack into a poor neighborhood, obviously increasing borrowing above what it would have been in the 70s. I'm not sure how to square this, it pollutes the data. It does seem to me however, that given the loss of manufacturing jobs, and the increase in low end retail / service jobs, that there has been downward pressure on wages.

chrisfromto 14y ago

"...people started consuming a lot more."