Thursday, December 14, 2006

The Growing Inequality

Since we are, from time to time, an actual labor blog (not just an art/animation history blog), we want to lay upon you economist Paul Krugman's new Rolling Stone article. Dr. Krugman discusses some of the economic realities of America today, and he puts it in visual terms:

According to the federal Bureau of Labor Statistics, the hourly wage of the average American non-supervisory worker is actually lower, adjusted for inflation, than it was in 1970. Meanwhile, CEO pay has soared -- from less than thirty times the average wage to almost 300 times the typical worker's pay.

The widening gulf between workers and executives is part of a stunning increase in inequality throughout the U.S. economy during the past thirty years. To get a sense of just how dramatic that shift has been, imagine a line of 1,000 people who represent the entire population of America. They are standing in ascending order of income, with the poorest person on the left and the richest person on the right. And their height is proportional to their income -- the richer they are, the taller they are.

Start with 1973. If you assume that a height of six feet represents the average income in that year, the person on the far left side of the line -- representing those Americans living in extreme poverty -- is only sixteen inches tall. By the time you get to the guy at the extreme right, he towers over the line at more than 113 feet.

Now take 2005. The average height has grown from six feet to eight feet, reflecting the modest growth in average incomes over the past generation. And the poorest people on the left side of the line have grown at about the same rate as those near the middle -- the gap between the middle class and the poor, in other words, hasn't changed. But people to the right must have been taking some kind of extreme steroids: The guy at the end of the line is now 560 feet tall, almost five times taller than his 1973 counterpart.

I grew up an Eisenhower Republican. My parents liked Ike, I liked Ike. When I was in high school, I supported Goldwater. And when I was in the U.S. Navy, I voted for Richard Nixon -- just one more military man voting Republican. (How many people will confess to that on a labor blog?)

So here we are in 2006, and I still think of myself as a middle-of-the-roader. Problem is, the road has swerved way east from where it was when I was growing up. Televisions, cars, radios, and most appliances were built here in the U.S. Movies were produced here. America was the largest industrial power, a major creditor nation, the country with the largest military and the biggest, most efficient factories. The nation with the largest, most prosperous middle class. My background artist father made thirty thousand dollars a year and we lived in a custom-built house, had three cars, and Mom stayed home and looked after the kids.

But hey, just look at us now. And for some reason I don't vote Republican anymore.

24 comments:

Anonymous said...

I totally agree that income disparity is obscene. So what's the solution? We hear these types of stories all the time, but I never hear suggestions from people like Dr. Krugman about what to do about it. How do we rein in executive pay when the executives themselves are determining how much to pay each other?

In a related story, HP CEO Mark Hurd is being investigated regarding a stock transaction last year that profited him by nearly $1.4 million. This news comes one day after Hurd announced that there will be additional layoffs at HP beyond the 15,000 job cuts announced last year. Nice.

Anonymous said...

few columnists have as abysmal a record of twisting the statistics and presenting a purely lugubrious outlook as Paul Krugman. i don't think this article was as bad as some of his past ones(like when he defended the anti semetic vitriol of Malaysian Prime Minister Mayathir), but here is an excellent segment where Neil Cavuto holds his feet to the flames about the above article:

http://www.youtube.com/watch?v=XaagpBO_CMY

Steve Hulett said...

Whatever you think of Krugman, government stats are fairly persuasive. Income disaparity is indeed widening, and the poverty rates have risen steadily over the past six years. (There's a surprise.)

Now. You listen to Rush Limbaugh, he'll tell you that the top 1% is paying a huge amount of taxes (true, but there tax burden has fallen as their income and share of wealth has gone up.) And he'll tell you that there is the cash economy that's not counted and the government income transfers (food stamps, Social Security) that aren't counted.

My problem with Rush is, he's as bad if not worse than Krugman in tweeking numbers. He'll scream about the INCOME taxes that the top rates are paying, and bluster on about how the low and low-middle class workers pay NO INCOME taxes, but of course, he always fails to mention how it's payroll (Medicare, Social Security) taxes that chew up those clinging to the bottom economic rungs.

At the end of the day, people know when they're in a bad way with their cash flow. The constant conservative complaint that "it's the damn media that makes everybody believe they're not well off" doesn't really hold much water. It's reality and day-to-day living that convinces people that times are tough.

Just as it's the casualty figures and body counts that make people think that, well, things might not be going swimmingly in Mesopatamia.

Anonymous said...

thats because its a valid question to ask:

"where was this media frenzy ten years ago when the numbers were EXACTLY the same as they are today."

i guess it all depends on the party in office because these figures certainly aren't new ground. - which was Neil Cavuto's point if you watch the clip(complete with stammering and sidestepping by a flustered Krugman).

s.r. hulett said...

Okay, I finally watched the clip. And sorry, Cavuto didn't "mop the floor" with Krugman. He dished it out pretty good, but I wouldn't call it a floor mopping. (Obviously, you disagree.)

Point One: Democrats took Congress because of three or four things: 1) The Iraq War, on which 400-plus billion has been spent off-budget. 2) Congressional corruption. Mr. Foley, Mr. Abramoff, Mr. Delay didn't help the conservative cause very much. (Hard to hold yourself up as being morally superior when one of your senior members is propositioning teen-age boys. And you're studiously looking the other way.) 3) The economy. Dr. Krugman's point that the vast middle haven't shared in the swell economy has been well-documented. All you have to do is look at the stats. The poverty rate -- as tracked by the Bush Administration -- is up over the past half dozen years. Incomes for 85% of the population are flat. (It's generally acknowleed that much of consumer spending has been fueled by dipping into the rising equity of family homes. Current problem: now that equity is shrinking.

Is Krugman too harsh on President Bush? Maybe he is if you take his criticism as starting with Bush. But Cavuto slamming the doc for failing to wax apoplectic over the NY TIMES chairman grabbing millions doesn't undercut the facts of income stagnation for the middle class, does it?

Anonymous said...

S.R., i never used the term "mopping the floor" it is just the unfortunate title someone posted for the clip. i said he had a point, and other than that i thought Cavuto was very respectful and fair to Mr Krugman - a man that has spent the last four years STATING a huge recession is coming around every corner. if only middle america had a nickel every time Chicken Little Krugman cried about the sky falling.
economc systems are cyclical and eventually there will be a downturn. my bet is that Paul Krugman will be squawking tiwce as loud about how right he is when that occruance comes about.
even a stopped clock is right twice a day.

s.r. hulett said...
This comment has been removed by a blog administrator.
Steve Hulett said...

No question that Krugman has a liberal bias. Also no question that, like most economists, he's not always right about when recessions will happen.

But, ah, since we're on the subject of wrong:

Sometimes it's easy to sit in an anchor chair and talk about a war. It's a lot more difficult being in that war, fighting in that war and for some, dying in that war.

But there are many who protested this war. That was their right then. But I think it's wrong now. Yet it continues. And given the transition difficulties in Iraq, it is even picking up steam now.

I think it borders on insulting now. Not only because the war clearly was a success. But because of the Americans who lost their lives to make it a success.

I want those who still burn flags and hurl insults to change venues. Away from very public places like the White House or New York's Times Square and to the front lawns of the homes of families who've lost loved ones.

If you're so convinced fighting for the freedom of an oppressed people wasn't worth their sons and daughters dying, then tell them directly....

-- Neil Cavuto, April 28, 2003

Anonymous said...

...and i thought we were talking about the economy.

s.r. hulett said...

...And I thought we were talking about what Krugman wrote in the article posted. But since Anonymous cited articles of Krugman's not posted, and dragged "wrong" and Neil Cavuto into it, I thought anything was fair game. My apologies.

And anyway. Anybody here who doesn't think that half a trillion dollars dumped into the Iraqi desert isn't going to impact the economy going forward? (Like it hasn't already?)

And who is it that has termed the war (and by extension the blood and treasure going into it) a "success"? And thinks Krugman is full of it? Why, the man who "mopped the floor" with Dr. Paul!

Anonymous said...

Neil Cavuto is talking to Krugman ABOUT the Rolling Stone article that is posted.

...you can now continue your deranged tirade about the war.

s.r. hulett said...

So let's deconstruct Mr. Cavuto's criticisms on the "mopping up" tape then.

1) He hammers Krugman for his hypocrisy about not citing the chairman of the New York Times as one of the greedy CEOs that Dr. Paul rants about. Nice sylistic point, but it doesn't undercut Krugman's larger point that CEOs make five hundred percent more now than they did thirty, forty years ago. And that the middle class wage earner's salary has remained flat.

2) Cavuto goes after Krugman for criticizing Bush when there were the same kind of numbers under Clinton, and not criticising Clinton. Krugman points out that a) he HAS said that inequality has grown under both Democratic and Republican presidents, and b) there was no "media frenzy" about Clinton's numbers a decade ago because (now read closely), Clinton's stats were different (one specific: the poverty rate then was falling, not rising.)

3) Pointing out that Krugman is wrong about predicting future economic recessions doesn't make his Rolling Stones article balderdash. And Cavutor doesn't demonstrate that it is. All he demonstrates is that Krugman spends more energy criticising Bush than he does Clinton...or Kennedy...or Nixon...or Eisenhower.

But back to the main point: Cavuto's premise that Clinton had the same economic numbers as Bush" is wrong. And if they're wrong, why would the media have been in a "frenzy" about them? The numbers, contrary to Cavuto's assertion, started in a different place and ended in a different place.

Outside of that, Neil C. is right about everything (as shown above with his pithy Iraq quote, which was my principal point in posting it -- Cavuto ain't a particularly astute observer about what's actually going on.)

Finally as to my tirade about the war, I'm delighted you're content with a half trillion dollars (and rising) more national debt poured into the sands of Iraq. I guess I'm just more fiscally conservative than you are.

Anonymous said...

Cavuto states that the numbers today are for all intensive purposes, the same as those under Clinton - and Krugman does not refute this fact.
you do, but you haven't published an article with numbers to back up your assertion.
so excuse me if i don't take your bald faced statements gospel.
the media's reporting on most matters now as compared to under Clinton is like the differece between shooting a bullet and throwing it.

the fact of the matter is that the economy was STRONGER before the november elections than it is now - but i defy you to find ONE article published by the media that stated that.

Anonymous said...

...the fact of the matter is that the economy was STRONGER before the elections than it is now - but I defy you to find one article published by the media that stated that.

Maybe because the figures don't quite back you up. Statistics can be such tricky things. Of course, it's all how you read the data...

U.S. unemployment rate rises to 4.5%

Job market strong despite auto woes

December 9, 2006

BY JEANNINE AVERSA

ASSOCIATED PRESS

WASHINGTON -- Gearing up for the holidays, employers boosted hiring in November, and hundreds of thousands of job seekers streamed into the market, nudging the unemployment rate up to 4.5%.

The Labor Department's mostly positive report, released Friday, showed a national job climate that remains quite sturdy despite the troubled housing and automotive industries.

That cheered Wall Street, easing investors' fears that the economy was in danger of losing too much momentum. The Dow Jones Industrial Average gained 29.08 points to close at 12,307.49.

Employers added 132,000 jobs to their payrolls, an improvement from the 79,000 generated in October.

Sharing in the gains were retailers, bars and restaurants, hotels and motels, health-care providers, financial firms, computer-design outfits and architectural and engineering companies. Their increases eclipsed job losses, mostly in construction and manufacturing.

"The job market is not booming, but it is holding up relatively well despite strains from the housing and auto sectors," said Lynn Reaser, chief economist at Bank of America's Investment Strategies Group.

The unemployment rate crept up to 4.5%, which is still relatively low by historical standards.

Feeling better about job prospects, people poured into the labor market looking for work last month, a factor that played a key role in pushing up the rate.

"The unemployment rate is low enough that it is enticing workers who had stepped out of the market to step back in," said Mark Zandi, chief economist at Moody's Economy.com.

The rate had declined to 4.4% in October, the best showing in five years.

* * * *

So hey ho. There's an AP article, right above, stating that the unemployment rate was 4.4% in October,the best showing in five years, and 4.5% in November.

So there you go. An actual news item that says unemployment (a piece of the economy) was better in October, before the election. Happy now?

(Oh wait. There's another stat that kind of undercuts the unemployment rate thingie. Job creation was better in November than in October. Can't have everything. Like I say, stats can be tricky things.)

s.r. hulett said...

And now a few stats for you re the economic apples and oranges that Cavuto refuses to acknowledge between Bush and Clinton, claiming there "the same":

Unemployment

Clinton's first month in office: 7.5%
Clinton's last month in office: 4.0%

Bush's first month in office: 4.0%
Bush November 2006: 4.5%

(There have been points when the unemployment rates for the two president's have been similar. For example, November '96 unemployment was 4.4%; November 2006 it was 4.5%)

Jo Creation

Clinton monthly job creation: 260,000
Bush monthly job creation (to date): 130,000.

But let's go micro and deconstruct manufacturing jobs, since manufacturing wages have been high-paying -- and important economically -- over time:

Total employment in this area increased from 16,790,000 in January 1993 to 17,181,000 or an overall increase of 391,000. Not particularly great, but under Bush, the manufacturing sector has -- to date -- lost 2.8 million jobs.

Now, are all these lesser Bush stats Bush's fault? Not necessarily, but it gives the lie to Cavuto's point when critiquing Krugman that Clinton and Bush's numbers were "the same" and that poor Dubya got no credit for them while Clinton got plenty.

And whether Krugman refuted Cavuto's claim that Bush/Clinton's economic records were similar in a five-minute tv interview is irrelevant. As shown above, the Bush/Clinton economic records ain't the same.

Which might explain why the mean old liberal press treated the two President's ahm, differently.

Anonymous said...

oh my god!

you found that the unemployment rate was .1% better in October than November! my shame is overwhelming - did i say shame? because i mean my astonishment at your idiocy. you present a NEGLIGABLE split between two months and come in here waving it around like a bitter screaming weenie partisan scmuck.
and why wouldn't you behave that way?

the other stats you presented are awfully colse to each other - which is pleasantly surprising since the previous president reaped the economic rewards of an antire new economy blooning up from the technological advances of the world wide web and the current president endured the worst attack on American soil in the history of our nation. with numbers that close, the current president's economic scorecard looks astoundingly strong

...but color me surprised that you use the often frowned upon tactic of "cherry picking" certain stats while ingoring the larger ones (like gross domestic product and average household net worth).

i was simply pointing out that Krugman should be taken with a grain of salt and in HIS OWN WORDS STATED:
"compare me with anyone else, and I think my forecasting record is not great. "
(you can google that)
i pointed out that Krugman should not be taken at face value when you post an article by him and ask the blog readers to do just that. my suggestion to question Krugman is attacked by you rather than considered. my posting of a relevant interview of Krugman and his article is roundly dismissed by you.

you aren't a middle of the road guy. that admission only tips the world off to your delusion. you are a partisan democrat and you dismiss any point of view that isn't towing that line. the best thing to come of this discussion is that you have revealed yourself as such to all of the union members. your gross sense of entitlement has been dually noted. i don't think most union members want an agenda to be put in front of their well being.

lets see if we can't do something about the status of your "leadership" in the future.
good day.

Anonymous said...

Ever wonder what the minority that still support W sound like? ;)

Anonymous said...

Ever wonder what the minority that still support W sound like? ;)

Anonymous said...

Hmmm, I've known Hulett for lots of years, and in all that time I've never seen him put his own personal feelings ahead of the good of the union. Maybe to the long winded guy above it's more important that our union leaders pass some political litmus test, but for me, I'll judge people by what the actually do in my life.

Thanks Steve for representing us so well for so long.

s.r. hulett said...

I'm done, I give up.

I was requested to find one article that stated "the economy was better before the election."

I found one article. I posted it. I was told it wasn't enough.

I was told to find stats to back up my arguments, so stats I found and posted. And I got slammed for "cherry picking." I could post more, but why bother? I'll be accused of cherry picking again.

So let me state that George Bush is a marvelous President doing marvelous things. A year, ten years, thirty years from now, we will all look back at his time in office and ooh and aah at the wonderfulness of it all.

Say good night, Gracie.

Anonymous said...

my first post stated that Krugman's article wasn't as bad as most - and your reply immediately brings up Rush Limbaugh.
talk about a knee jerk reaction.

i state that Cavuto fairly critiques the article - and you start going on about the war.

i try to bring the conversation back to the article - and you claim the interview with Krugman isn't relevant - when indeed it IS relevant and about said article.

you ingore the facts that
-real wages have risen
-retail profits are up from increased spending
-after tax income has risen per person
-consumer prices have fallen
-a huge 3% growth of economy over the last 4 quarters

I'm saying Krugman could very well be wrong - and the record shows that he has been many times before. those are the facts that keep getting in the way of your little Rolling Stone article and how lovingly you adhere to it.

is the economy without concerns? no.
is President Bush doing a stellar job? no.
is the war in Iraq a rousing success? no.

but the last thing i want to read on the union blog is indicators of the economy that are overly dismal, defeatist, and delusional. you should try and be fair about the issues instead of preaching how you vote for one party over the other.
it leaves a bad taste in a lot of people's mouths who vote based on issues and not such transparent binary partisan decision.

Anonymous said...

Talk about transparent partisanship . . .

Paul said...

"you are a partisan democrat and you dismiss any point of view that isn't towing that line."

Pot, meet kettle...

Anonymous said...

Median wealth has declined across every industry in this country, just because the average income levels did does not mean it anything to the average Joe.

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