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The Erosion Of The U.S. Economy In Two Words: Jobs And Wages
Submitted by Charles Hugh Smith from Of Two Minds
The Erosion Of The U.S. Economy In Two Words: Jobs And Wages
The current de facto policy of inflating asset bubbles to spark a "wealth effect" is no substitute for policies that make it less burdensome to start new enterprises and hire employees.
The Status Quo is shameless when it comes to hyping the recovery by whatever metric is most positive. Recently, that has been the stock market, but if GDP rises significantly (and recall GDP increases if the government borrows and blows money), then that number is duly trotted out by politicos and Mainstream Media toadies.
If we scrape away this ceaseless perception management, we find that legitimate broadbased prosperity is always based on rising employment and increased purchasing power of wages. The phantom wealth that is conjured by asset bubbles vanishes when the bubbles inevitably pop, leaving all those who borrowed against their ephemeral bubble wealth hapless debt-serfs.
Since very few households own enough productive assets (i.e. financial assets above and beyond the family home equity) to replace earned income (i.e. a job) with unearned income, rising asset yields and prices do little to improve household wealth or income.
Those with investable assets of more than $1 million are labeled "high-net-worth individuals" or HNWIs. There are about 3 million Americans who qualify as HNWIs; roughly 1.8 million Americans own $2 million or more in investable assets. Number of Rich Americans Fell in 2011.
For context, the U.S. has about 307 million residents and about 110 million households. Roughly 112 million people have full-time jobs and about 38 million are self-employed or have part-time jobs.
Recall that thanks to the Federal Reserve's zero-interest rate policy (ZIRP), $1 million invested in short-term Treasury bonds earns around $10,000 a year in interest--less than a job paying minimum wage. Owning $1 million in stocks that pay a 2.5% dividend yields $25,000 a year in income, considerably less than the median wage of around $35,000. So even $1 million isn't necessarily generating enough income to replace earned income (wages).
If prosperity ultimately depends on employment and earned income (wages), how are we doing as a nation? Unfortunately, the answer is "terrible." As a percentage of the population, full-time employment is down. Only 36% of the population has a full-time job.(Charts 1 & 3 were reprinted by permission from mdbriefing.com; charts 2,4 & 5 are courtesy of frequent contributor B.C.):

It is also down on a per capita (per person) basis:

Meanwhile, an increasing percentage of jobs are part-time. When the media reports that the number of those employed has gone up, note they never break down how many of those new jobs were full-time and part-time.
Total civilian employment is also down:

If we adjust GDP for the growth of M2 money supply and population, we find the broadest measure of the U.S. economy is tanking.

As for wages, I have often reprinted this chart by Doug Short: adjusted for official inflation, real wages are down by 7% - 8%.

(Doug recently reported on net worth, which has nominally matched previous levels but adjusted for official inflation is down 12% from its peak: Household Net Worth: The "Real" Story.)
Adjusted for inflation, the median income for the lower 90% of wage earners (138 million people) has been flat since 1970--forty years. Only the top 10% (14 million people) actually gained income, and only the top 5% gained significantly (+90%).

Clearly, current policies are not very employment-positive. We could start by noting that the only way 90% of the populace can buy more goods and services is if the cost of living declines, i.e. deflation.
We might also concede that saddling employers with skyrocketing healthcare costs is a tremendous drag on hiring. There is nothing sacrosanct about employer-paid health coverage; it was more an historical accident than a well-planned policy. It may be time to scrap employer-paid healthcare and set up a prevention-only national system and open the healthcare field to true competition. A Sustainable National Healthcare System: Prevention Only (August 20, 2012).
Perhaps corporate taxes could be radically lowered for companies that invest in domestic human capital. Were the nominal corporate tax rate 0% for companies that produce goods and services in the U.S. with U.S. workers, we might find such incentives yield significant employment dividends even as corporate tax revenues decline. (If more enterprises are launched and more people are employed, taxes will rise without needing to boost tax rates.)
The current de facto policy of inflating asset bubbles to spark a "wealth effect" is no substitute for policies that make it less burdensome to start new enterprises and hire employees.
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Amen.
But let's add interest income. Fuck you very much, Ben.
Obamanomics!
Other countries get it...
Punishment of twelve banks for collusion on loan rates ‘fair’: Economy Minister
http://www.hurriyetdailynews.com/punishment-of-twelve-banks-for-collusio...
...the countries that dont, are getting IT, and thats phucked..
No worries. We can replace those with moar Programs and Benefits.
What type of benefits are you looking for?
http://www.benefits.gov/
I didn't qualify for anything. Bummer. There was a question in the survey asking if I worked to make American Indian arts and crafts so I'm guessing there is a grant program for that. Thank goodnes.
The cause of what really Eroded Jobs and wages and The U.S. Economy can also be mentioned in two Words:
Criminal Politicians.
This article condensed into three words:
Competitive Interest Rates..............
They claim to know it, but obviously haven't learned it, and sure as hell don't live it.
ZIRP 4 EVA = jobless until the end of time....................
Excellent work FED.
2 words- Globalization and Plutocracy
5 Words.
Global Criminal Cabal Crime Syndicate.
The Great Unwind has only just begun.
<Stay tuned for Chapters Two, Three, Four.....>
Jobs:
http://globaleconomicanalysis.blogspot.com/2013/03/recession-through-recovery-employment.html
Sequestration Prediction:
http://confoundedinterest.wordpress.com/2013/03/10/economic-mirages-house-prices-unemployment-stimulus-spending-and-sequesteria/
Jobs and wages are just suffering a little "deflation".
All is good, no?
20% of the population has 80% of all the wealth. They don't give a fuck about the other 80% of the population, just keep the 20% going and tax them to redistribute
Why does the 20% have 80% of the wealth? BECAUSE THEY WORKED HARD!
How do you know they worked hard? BECAUSE THEY HAVE 80% OF THE WEALTH!
Rent seeking is not "work" in the traditional sense...
You might be able to say that in some utopian world where only those who work smart, hard, and honest rise to the top... unfortunately, much of the wealth as we know it has questionable origins at best. What mechanism is there to divest one of wealth? Competition? The market? Surely ye jest...
The reality is that many professionals don't work any harder than their secretaries... the issue is much, much more complicated.
And a lot of the plutocrats increase profits at the expense of the working class. Average CEO made 40 times average worker in 1980, now it's nearly 400 times. A lot of people work hard.
Wage arbitrage happens at all levels of wealth... it's a natural derivative of self interest. In and of itself, I'm not sure it's any sort of issue.
Was my reasoning a tad circular?
edit: I'm concerned that If I don't support the top 20% (or 10%, or 1%), I'll never get to be one of them.
edit edit: And MachoMan, are you talking about "work" in the classical mecanical definition sense? If so, a great number of people in the top 20% not invovled in rent seeking still do no work whatsoever.
Work involves intellectual pursuits too... I think you're confusing production with work... production really is more of a mechanical process. (fixing each others' windows isn't production). Work is much broader and includes, among other things, a relation to providing a benefit or worth... we could even go further and discuss worth to society in general (which may be improved through helping individuals)... and I think you could make a pretty good argument that an incredible amount of work pursuits don't benefit individuals, let alone society as a whole... but actually drafting something that properly incentivizes people is a completely different ball of wax (less is virtually always more).
Why not just define "work" as something somebody will pay for? If so,
rent seeking = work
Actually the idea that rent seeking=work is the problem. People work hard all the time for little or no compensation - think some of the more worthwhile charitable activites. Just b/c someone wants to pay you for it doesn't make something work - the compensation is often based more on winning a bet. Winning a gamble is not work.
We have to incentivize the gamble, else it will not happen... The issue is that most of the "gambling" going on really isn't a gamble in the strictest sense... given it doesn't come from real capital, among other things (e.g. government monopolies, socialized losses, and what not).
Agreed.
Um...I don't think so. Yes there are people who got where they are from hard work and producing things of value, but more often the people at the top (especially top 1-5%) accumulated their wealth through extractive rather than productive means. Also, one is most likely to become rich from being born rich. And while you may believe that parents should have the right to leave all of their wealth to their children unencumbered by any little unpleasantries such as taxes, being a one of the lucky sperm club is not exactly hard work...or is Paris Hilton someone you look up to?
Unfortunately a larger percentage of wealth is acheived in this country (and many others) by gaming the system and not by engaging in anything actually productive. Can you say a hedge fund manager works hard than a coal miner? I think not.
Actually, it's very much possible for a hedge fund manager to work harder than a coal miner... now, many of them get their heads handed to them on a platter if they fall out of grace with the money masters... or refuse to learn new tricks... but make no mistake about it, keeping up with the industry can be incredibly hard work. You telling me when you listen to kyle bass that he personally hasn't spent thousands and thousands of hours researching things? Hugh Hendry gets more work done drinking a pint than a legion of walmart workers in a day... it just depends on the person and situation, all things considered.
The issue of inherited wealth is also not, in and of itself, an issue... we are, after all, given our genetics, which make up a much larger percentage of our "outcome" in life than most care to admit. The big issue with inherited wealth is that the loopholes are such that wealth can be sequestered from tard ass descendants. That said, it's still really easy for timmy trust fund to snort and otherwise fuck off enough wealth to feed an entire state for a few years... but it could be easier. Essentially, wealth gets tied up into spendthrift vehicles that feed out enough money for timmy to live the life he wants, but not jeopardize the principal.
And don't call taxes an "unpleasantry"... they're slavery and you know it.... as the present system currently operates.
Stealing is hard work.
Make it less burdensome to create new business and hire people? HAHAHAHAHAHAhaha... that's crazy talk! You're crazy! Business is the bad guys who's out to screw all the good guys who want jobs! Besides, THEY DIDN'T BUILD THAT!!! Pfffttt... make it less burdensome for business....
Feeling lonely and thinking that maybe you've been looking at too many of these charts wrong way around?
Well turn that frown upside down! ‘Cassandra Does Tokyo’ - who appears to be a fundamentalist member of The Church of What’s Workin’ Now and who generally subscribes to the view that nominal strength today leads to real strength tomorrow - attempts to mock Zero Hedge and it's readers via a women’s magazine type quiz.
Clearly she isn’t too familiar with ZH content or she wouldn’t have succumbed to a fit of knee-slapping hilarity in the comments section after a reader introduced her to the term “fucktard”.
Salt to taste of course but who thinks Tyler and crew can cover the rest of their overhead for 2013 by talking Marla into a live, pay-per-view cage match?
I could have gone all day without reading Cassandra's Fucktard Blog.
She's just a peon who drank the koolade.
Is that MDB's girlfriend?
y. robotrader
I notice Trav and Robot both come and go and the same times.
Sock Puppets?
Cassandra:
"But all this would be moot if ZH "came clean" and admitted it is squarely "entertainment", most of which is self-serving survivalist QVC and financial infomercials lacking integrity and neither serious nor objective financial analysis. "
Krugman would be happy to read that blog.
I had no idea who Cassandra was until 10 minutes ago. She kept repeating the same joke over and over again "people who read ZH and comment on ZH are batshit crazy gold loving doomers who follow the elders of the protocol of zion." It wasn't funny or witty and it doesn't stimulate my senses or mind so I suppose I won't be going back there ever again. Oh well.
I love the bit about having to admit you have a problem while completely and totally denying the obvious problem of too much debt. Denial is an ugly thing.
The problem is not too much debt, it's too much theft and a failure to prosecute white collar theft. Debt can be paid back if there isn't theft because the assets aren't overvalued by the debt process. The last few "business cycles" have had an unprecedented amount of theft which has lead to this unsolvable crisis. That's why all the wealth is concentrated with the 1%. It's undeniable unless you believe the 1% create 99% of everything produced.
you mean GM's CEO doesn't buy 200 cars each year?
No, but he does channel-stuff them. Everybody has to do their part.
Not when that one Full time job pays $8/hr.
112 million fultimejobs and 110 million households.
one fultimejob per household. is that so bad?
If you consider that a good portion are low wage jobs and not nearly enough to fund the unpaid liabilities of over 112 trillion dollars, But lets not pay attention to specifics it only confuses people. Don't worry everything will be just fine
good point. same here. one job isn't enough to live.
As of 2006 there were 33 million dual income households: http://www.dol.gov/wb/factsheets/Qf-ESWM07.htm
I'm sure it's higher now.
Ample supply of cheaper labor is good for corporations. The cheaper the more profitable and the higher the stock price goes.
I here more and more late 20, early 30 somethings talking about debt problems.
Guess central banks are running out of suckers.
it's a lot better than greece, where there are 3 jobs for about 10 million people.
Humans are surprisingly resilient. You'd be surprised at how survival instincts kick in when times are difficult... People aren't leaving the work force as much as just not finding work. Business activity is extremely weak - ask anyone. The busy people are in service sectors (i.e. make work). In fairness, the curve is inching up, but from 1980s levels, and might just as likely turn around again. For all the money they print, it isn't making it into the pockets of the people.
I agree, most people will adapt and learn new skills and some will suck on the government teat and waste away. The storm is still coming, corrections on all levels. It's not going to be pretty but it needs to happen. I think this is better for people in the long run because it pushes people to become more independent of the system.
I also remember reading an article about how a lot of small innovative new company's pop up in times like these, time will tell.
While I agree that it will be good to push people away from the system, this "correction" will be far from healthy. As stated in this article the top 5 % have been able to reap nearly all of the rewards from our debt fueled growth cycle. They continue to use their monetary influence to adjust their system to allow for as much control over the populus as possible. In the event of a large market "correction" or as some might call it, a large scale resource sale, those with the influence to maintain their wealth will undoubtlety make a killing. For the 95% who are not in this club, this means further impoverishment. If you would like a taste of what these kinds of people are capable of, look to China. Their fully manage economy allows good citizens housing right outside the factories, as well as completely unregulated working/environmental conditions. You are correct though, there are very few living off the government teet. But that group feeds themselves...
How is sucking on the government teat less adaptive than being an underpaid worker? Adaptivity doesn't care about your preferences. If it works, it's adaptive. Gaming the system works.
+5
The saddest thing is that the best & the brightest are the ones who now tend to be unemployed, under employed, or unable to retire. These are the people who believed they could succeed in private sector jobs and fund their own retirement. The folks in the middle of the bell curve got jobs as teachers, fireman, policemen, etc. and are the ones who are living it up.
Exactly. In my callow youth, government drones were laughed.
The biggest mistake some of us made was to try to do something, instead of nothing.
+1000- should've been a teacher
"...should've been a teacher...."
I know, huh? But what's the value of that suck-my-dick defiance that comes -- damn the torpedoes -- with being able to say "I did it my way"?
Priceless.
I wouldn't trade it, or sell it, for anything.
.
kaiserhoff:
" Exactly. In my callow youth, government drones were laughed. [at] ..."
But ... but .. who are we going to pay to keep the 'animals' in check? Not me ...I've long favored a bounty system.
Das hundin used to be a better editor. She gets lazy und oldt, like Papa;)
"The saddest thing is that the best & the brightest are the ones who now tend to be unemployed, under employed, or unable to retire. These are the people who believed they could succeed in private sector jobs and fund their own retirement."
best comment of the day. this aspect was not mentioned in zerohedge before.
A bone to pick: Broadbased prosperity is not BASED on rising wages and increased purchasing power. If that was the case, giving everyone money would be the answer. Instead, a prospering (READ GROWING) economy leads to rising wages and a strengthening dollar leads to purchasing power. And, we grow by taking other people's money, not printing our own.
If you want the country to prosper then get rid of 90% of the beaurocracy and taxes, and encourage companies to hire at home.
For Christ's sake!!! Before commenting please spend longer than two seconds and digest the author's thesis. Seriously, your last paragraph is exhibit 1 why were are doomed.
For Christ's sake!!!! read the 2nd frigging bold sentence. Seriously, your response is exhibit 1 as to why we're doomed. Clearly, our public school systems are failing to teach our populace to read. If you are representative of the public at large, and I belive you are, then we're already toast.
"Jobs and wages are just suffering a little "deflation"."
Yet i am told the deflationists are wrong.
Bank Leumi suspected of tax fraud via Swiss banks
A Swiss newspaper reported that US authorities are expected to investigate a suspicion that Bank Leumi assisted clients in tax evasion via Swiss bank accounts.
The US authorities are conducting an investigation against 10 Swiss banks suspected of assisting American clients in evading taxes and according to the report, Bank Leumi holds subsidiaries in that country and is involved in fraud. (AFP)
http://www.ynetnews.com/articles/0,7340,L-4354649,00.html
Deflation has been going on for a long time in REAL terms, i.e.' priced in gold. The whole iinflation-deflation argument is confused by the fiat illusion.
I think the wealthy always resented the middle class in this country. A little extra money=freedom. The plutocrats don't like freedom for others, they like endentured servants
The wealthy don't like it when the outrageous demonstrations of wealth that their money can buy are not really envied by the majority of the middle class. Up until the last decade the middle class about "had it all" so there was little to distinguish the wealthy from the "proles".
To "lord it over someone" is something many of the wealthy really aspire to. The political/bureaucratic class in the Beltway also seek to do the same.
The elites really want to reinstitute the old feudal arrangement in all respects. And they have made a very good start at getting it done.
The 48 million on food stamps should be included somewhere, no?
They are included under "crop supports."
I love how that line follows the last chart. The amusing thing is that the last chart shows the time period that was supposedly "very employment-positive" and doesn't include the current administrations time. So in reality the fundamental problem is greed and nothing to do with the current administration's policies in that 90% of the population has lost out while the top has been hoarding what they can, even in times when these top people were "creating jobs". Attaching that last chart to politics is down right idiotic and shows the lack of any unbiased analysis by the author. The issue isn't politics as much as it is greed.
The issue is, is anyone going to do anything about it? Each new lying sack of scum that is elected to fix it only makes it worse. ANd it is worse, if you haven't been out in a while. You may think author is biased, but obviously so are you as you seem to want to be an oppologist for the current liar and thief.
article connects some of the data dots but the questions still remains when does the twig get snapped off the tree and some asses get whipped for bad behaviour, tired of reading the endless hit parade of this is why you, me, us are getting bent over and ever so slowly ass raped by the unseen hand.
Suggestion: Tell your friends, your spouse, and even your grandmother
to help train the algos. When you want market news, use the search
term: RIGGED MARKETS.
Suggestion: Tell your friends, your spouse, and even your grandmother
to help train the algos. When you want market news, use the search
term: RIGGED MARKETS.
Here are my two words: "no" and "shit"
They killed the Golden Goose to get all the eggs at once....now they're trying to whip and beat the Golden Gooses corpse into producing moar.
Never gonna work, idiots.
There are still plenty of eggs, wool, and the like to be had you wait and see...
Works until it doesn't Dog. That dead duck is now a new distressed asset class and it definitely needs a bail-out. The Bankers will get moar from Bernasty; $5B/day is not enuf !
Funny no one talks about this on CNBC.
The President mentioned it; but raising minimum wage to $9 is just throwing more crumbs to the stupid proles.
We have an income crisis. The Fed and the banking system is drowning out the rest of the country. I fear we won't find out or starting caring UNTIL our fiscal lungs are filled with waters full of debt.
Gets me wound-up (easily done) when only the Wages or GDP are presented; naked and with-out the caveat of usefulness. Whether making buggy whips, or writing Apps, your position is subject to the desire of others. Some jobs are proven to be less useful and the wages fall or the position is eliminated. Even expensive capital goods are a bargain if they can improve efficiency.
Why do we always protect the paradigm of rising wages as an universally good thing ?
And continuously rising GDP?...OH PUHLEEZ !
And why is increased productivity always sold as some miracle of modern American workers when it is almost always due to technology that some business purchased and paid to train their employees to impliment? Wouldn't is be grand if people actually went out and got their own training and bought their own technology so they would end up as trained monkeys working at the zoo.
I think it's the paradigm of rising wages for jobs that are in demand, not rising wages for every job including obsolete ones.
There are tons of jobs out there that are obviously in demand (burger flipper, janitor, secretary, teacher, etc), but have not seen any form of wage increase for 40 years.
Prices don't just rise to meet the newest levels of inflationary cost of inputs, they also rise to create more profits. Where do these new levels of profits get funneled? It seems into the pockets of those who's earnings have increased by >300%. Certainly not into the pockets of those who've taken a negative % hit to earnings.
These lower echelons of earners are probably more crucial to the economy on the whole than those socking away 300% more into financial institutions and a few luxury purchases.
I agree with you on the problem of continuously rising GDP, it is nonsensical. But, that is where the idea of universal rising wages is born from. If the economic status was more stable, there would probably be a different school of though on wages.
Please pass the horsemeat.
I hear SNAP is offering a discounbt on HM!
Tons of corporate cash sitting offshore,if the feds want to change the tax laws in a beneficial way to encourage that money to flow back in tax free,you could see some big spending.IMO,it's more than that,there's a bigger structural issues in the economy.I'm seeing a lack of trust not only between investors and the government but also corporations hating them too.Everyone knows that government is the enemy.
Your tax incentives for corporations that employ US workers sounds like a good idea. We also must figure out how to make small businesses more competitive, whether through tax code or regulation.
Regarding health care, I prefer the VA model for universal health care, as you supported here:
http://www.oftwominds.com/blogjan11/healthcare-solution01-11.html
this just in:
SPRINGFIELD - Illinois broke federal securities laws in misstating the true health of the state's depleted pension funds when going out onto the bond market between 2005 and early 2009, the Securities and Exchange Commission announced Monday.
The fraud doesn't subject the state to any fines or penalties but amounts to a warning to potential investors about the state's past financial misdeeds.
The action focuses mostly on misstatements made during impeached ex-Gov. Rod Blagojevich's administration, though Gov. Pat Quinn's administration wasn't spared entirely in the federal order.
"Municipal investors are no less entitled to truthful risk disclosures than other investors," said George S. Canellos, Acting Director of the SEC's Division of Enforcement in a prepared statement.
"Time after time, Illinois failed to inform its bond investors about the risk to its financial condition posed by the structural underfunding of its pension system," Canellos said.
A spokesman for Quinn's budget office said Illinois has "cooperated fully" with the SEC during its inquiry.
"The state neither admits nor denies the findings in the order, which carries no fines or penalties," said Abdon Pallasch, assistant budget director.
OK, so what about the U.S., too? When it goes bust, what, a warning?
Don't confuse hard work and capitalism with Corporatism.
Anger against corporations or 'the rich' sounds too much like bureaucratic anger against those who work hard.
Would that hard work include funding Super PACs?