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Income, Education and Inequality in the "Recovery": Prepare to be Surprised
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
Note to the higher education industry: issuing diplomas doesn't magically create new jobs in the real world.
By virtually any standard, wealth inequality has soared to historic levels in the six years of "recovery" since the Great Recession of 2008-09. Economist Emmanuel Saez, who has long collaborated with Thomas Piketty, described the recent extremes of wealth inequality in a recent paper Striking it Richer: The Evolution of Top Incomes in the United States, which provides an in-depth look at the widening gulf between the top 1% and the bottom 90% from 2009 to 2012.
Here is a chart of the top 10% share of income, based on their research (the note in red marking the beginning of financialization in 1982 is my own):
As author David Cay Johnston noted in an insightful review of Piketty's book Capital in the Twenty-First Century, Trickle-Up economics: "The top 1 percent of Americans raked in 95 cents out of every dollar of increased income from 2009, when the Great Recession officially ended, through 2012. Almost a third of the entire national increase went to just 16,000 households, the top 1 percent of the top 1 percent, Piketty and Saez’s analysis of IRS data shows."
We would naturally expect those with the highest incomes to have fared best in the past six years and those at the bottom to have fared the worst financially--but this not entirely true. Most income analyses, it turns out, do not factor in government-funded social welfare transfers, tax credits and entitlements. Once these sources of income are added, the bottom 90% saw no decline in income at all from 2007 to 2011, while the top 1% suffered a 27% decline and the top 5% took a 7% hit.
Inequality Has Actually Not Risen Since the Financial Crisis:
"Pretax income for the middle class and poor dropped substantially from 2007 to 2011 – about 10 percent for most groups. Yet including taxes and transfers, incomes fared better: Average income for the bottom fifth of earners rose 2.6 percent, to $24,100, and the average for the middle fifth fell only 2 percent, to $59,000. Such stagnation is hardly good news, but it’s a lot better than a large decline."
Taxes on higher-income households have risen on several fronts: a new tax on high-earners to fund ObamaCare, for example, and a higher tax bracket for the highest-income households.
Social welfare transfers and tax credits/cuts did what they were supposed to do--cushion the blow of recession for lower-income households and transfer more of the tax burden to higher income households. Yes, there are endless debates around the issues of taxes: for example, if most of the benefits of the Bush-era tax cuts flowed to the top income earners, then recent tax increases for the top income bracket are clawbacks rather than new taxes.
But setting aside the many debates on tax policies and sources of income inequality, another surprising data point has emerged: Even the Most Educated Workers Have Declining Wages (Economic Policy Institute)
The chart accompanying the article clearly shows less educated workers suffered larger wage declines than their more educated peers. The year-over-year data shows something else: "Some commentators are under the false impression that wage inequality is a simple consequence of employers’ demand for increased skills and education—often thought to be driven by advances in technology. But new data from 2014 shows that even college educated workers and workers with advanced degrees are not in demand enough to see their wages rise."
In other words, wages are declining even in fields where advanced degrees are supposed to inoculate the highly educated from declines in earnings. This is not entirely surprising to anyone who has first-hand knowledge of the tremendous glut in workers with advanced degrees, but it does drive a stake in the heart of the argument that the solution to income inequality is more education.
ironically, all that minting another 5 million Masters degrees, MBAs, law degrees and PhDs will do is increase the oversupply of highly educated workers and thereby exacerbate the decline in wages paid to these workers.
As I often note, issuing diplomas doesn't magically create new jobs in the real world.
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"Deflation of that thin porelain veneer of society" - Bernank
this chart shows why it is important to get 2 phd's
or 2 professional degrees
or one of each
And to top off the declining wages we have tax increases!
It's a great time to start a career in farming!
http://naturecoastpermaculture.com/2014/12/unemployed-try-wwoofing-work/
WHAT?!?!?! A B.A. in Womyn's Studies with a Masters in Social Justice is NOT going to be highly rewarded?!?!?!
What is this world coming to?...
A minor in gender studies is needed too....
That's "transgender studies", you gotta keep up with latest cool thing.....
That, and several other forms of deviant sexuality can be addressed with mandatory CEUs (sustaining business model you see)
I recommend a degree in underwater gender reassignment surgery. You'll move right to the front of the line when applying for the Starbucks managers job.
Don't pick on the FWOTUS. It's had a tough week...almost ripping the arms of his Imperial-ness, while stomping on Tokyo.
Education is a soluton in a labor market where high skills are needed and sought after. The laws of economics say that on a certain number of people can benefit from such a condition. Once a glut develops, the wage scale goes down. A glut of anything drives it's value down.
If we trained every welfare mother to be a doctor, would that solve anything?
You missed the part about fire being hot, water being wet, and ice being cold.
That depends on the substance and where you are on its phase diagram.
Education is a soluton in a labor market where high skills are needed and sought after.....
The problem is 'degree' has replaced 'education'. The old fashioned liberal education where you acquired knowlege across a wide area no longer exists. Instead we have indoctrination and feel good classes and it's still taking students 6+ years to get a 4 year degree.
The best solution was what Jefferson and his buddies initially set up, namely honest money, no substantial gov. intervention, and let the cards fall where they may ... equilibrium will be established and natural systems continually correcting to maintain balance. Now we have a buttload of unsustainable, distorted, theft based programs - with the .01% thieving like nobody's business.
Soltn: re-embrace the limited republic, restore moral monetary practices, phase out the welfare state and acronym soup, let the cards fall where they may
Good point, Jack.
In the past two months I have gotten resumes from 2 recent chemical engineering grads who simply cannot find work. Technically skilled from very good schools and they are looking for anything to generate income. I also have a resume from a biochemistry PhD who cannot find a job where he wants to. This is another symptom of the times - a belief that we can work where we want. I was always told I had to go to where the jobs were.
In any case, jobs are just hard to find for Cultural anthropology majors. It's hitting everywhere.
A good friend of mine decided to go back to college at age 38. He was going for a degree in nutrition... which I thought was a good fit for him and his lifestyle. I told him to work and only take classes when he can afford them. Well, he instead got loaded up on student loans and hit the books.
A few months later, we were talking and he was complaining about his organic chemistry class. I thought, "wow, this nutrition program is hard core." Well he then told me that he switched his major to chemical engineering. I was stunned. I asked why and he said that he talked to someone and that person told him that chemical engineers were getting hired out of college at $90+k/year. He decided to chase the money.
Since then, it's been a disaster. Low grades, difficult classes, academic probation. He got a gut check when the student loans were cut off due to his academic probation and he was going to have to start making payments!! Over $25k in loans accrued in a short period of time.
He petitioned the school and got reinstated. He doubled down on his goal and is planning to take classes during the summer because, "every year he's in school, he's missing out on making $90k." I'm afraid for the day when he graduates. A 40-something year old guy with a degree that he barely got, saddled with debt only to end up working the same job he was working before starting college to pay it off.
Two biochem grads I know, late-20's age wise:
She is $130,000 in student loan debt, alone.
He is $70,000 in student loan debt.
Both hold B. od Sci. degrees.
They could get married this year, but no local bank would give them a loan for a house, especially these days when they want 20%-30% down.
spending money you don't have to buy something you don't need is patriotic
Current education is bollocks. In the old days people learnt the job by doing it from the bottom up. Now you get a degree and get hired to do a job you've only learnt the theory of.
It breeds a sense of entitledment that harms your work ethic. Rather than working hard to get where you want to be you think it should be handed to you on a plate because you've spent $20,000+ on a piece of paper.
Obviously this doesn't apply to some people who have the right work ethic and go to college to become a doctor or other job that requires a high level of skill and knowledge.
It applies more to the fucking business related degree wankers.
Most advance degrees find work in the gov., not private sector. It's another form of welfare, mostly for democratic demo's. If gov. ain't hiring, they'll have a helluva time paying back those loans.
We all just need to become public servants. With tenure. And pensions. It's for the children.
i never understood the whole, "we dont have enough folks with advanced degrees" thing. is it really the case? they really have to hire all of these peeps with visas?
... because what they really mean is "we dont have enough folks with advanced degrees willing to work for low wages"
LOL, if you have "some college" you are worst off. Interesting.
Community college for everyone. 'Cause that will fix it.
How many of the alleged "American" poor are the TENS OF MILLIONS imported poverty of latin shitholes ?????
Issuing electronic credits (money) doesn't create ANYTHING in the real world.
Charles missing one little point
the rich are experts at tax avoidance .... which means deferring income when possible
the huge fly in the ointment is WEALTH gains by the rich ... not income
assets (RE/stocks/fixed income) held mostly by the wealthy have seen huge gains ... with much of gain captured in capital gain ... not realized till sold
Umm WTF?
https://www.tradingview.com/x/fQDfPAkW/
a few years ago i read where warren buffet only had $25 million in taxable income one year
of course, no mention of the $billions in capital gain on assets held for that year
Most degrees or advanced degrees take you into employment, where you are just another minion to be exploited.
Only when you decide your own remuneration package do you get well paid.
Well, it ain't just oil that deflates
when the US$ goes hyperbolic.
Why 'r 'u surprised???
The system has shifted from strongly rewarding education to strongly penalizing anyone who works -- and they expect you to pay for the priveledge of working now, too.
Is it any wonder the FSA keeps growing?
I don't imagine being in the FSA is all daisies and sunshine, but, yes, plenty of disincentives...
FICA
Federal Income Tax
State Income Tax
Health Insurance Premium
Unreimbursed employment expenses (wardrobe, commuting, childcare)
Why I became a stay home mom. Worked 20 years prior to that including a year or so after my daughter was born. After the taxes and expenses my take home was negilible.
"bootstraps"
The President of a county pretty much tells you about its citizenry.
You said I was going to be surprised.
It's job skill. Job training is not education. The word education comes from Latin educare that means receiving training in social codes and manners.
"EduCare"
Sounds like a great new government program!
"As I often note, issuing diplomas doesn't magically create new jobs in the real world."
It's pearls like this that prove what a deep thinker Chuck really is....
Today's education is nothing but conduit toward sanctioned authority for damn political hacks and money stealing ponzi scheme for rest of us. The true goal of so-called education in US and elsewhere is not to teach something society or economy would need since there is no plan other than slavery and submission for 90% of people but instead to destroy rational thinking, common sense and common interest in young people and to proliferate fairy tales about grandiose achievements of ruling elites.
Interesting take on what education system is truly about I found at:
https://contrarianopinion.wordpress.com/2015/03/19/education-blessings-o...
Guy lost me when he quoted David Cay Johnston.
Johnston is a lefty academic who believes every fiscal problem the U.S. faces can be sloved through its income tax code (the following is just one example of his nonsense):
Johnston loves big, paternalistic government, and spending more on it is peachy keen, in his warped mind.
Guy's an ass clown. and is married to the head of the local umbrella charity here in town, basically the Grand Cyclops of all of the shake-down artists in town.
Johnston 'teaches' journalism (cough, cough) at Syracuse.
In the tech industry, those with B.S. and M.S. degrees, the wage issue is more the contract houses sucking as much as 50% from a wage.
While providing no value added, just attaching themselves like a leach and sucking the life blood.
Much like Washington........
Many salespeople are dumber than doornails.
How many Big Pharma sales reps were former receptionists?
I'm not surprised by this.
Sales doesn't require brains.
Tits and ass helps.
Just look at the ads on this page.
LOLOL...
Recently attended the final home game for some college volleyball seniors, with the awards ceremony afterwards. These are mostly tall, athletic and very beautiful young ladies however their top three majors are marketing, communications and HR. Looks like the next generation of salespeople is set...
Finding wealth inequality without measuring taxation and redistribution is bs. Also income does not equal wealth.
What could possibly justify excluding transfer payments and other value to individuals from government from income for a comparison of people such as this?