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Where Did The GDP "Growth" Go? Not Into Wages
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
How can the economy grow by roughly one-third in real dollars while real median household income drops like a rock?
Based on gross domestic product (GDP), the U.S. economy has grown smartly since 2000: GDP rose from 10,031 in 2000 to 17,840 in mid-2015. That's an increase of 77.8%.

If we adjust GDP for inflation, we get what's known as real GDP, which increased 31.6%: from 12,360 in 2000 to 16,270 in mid-2015. This works out to a real annual increase of about 1.9% annually.

It would be natural to expect full-time employees' wages and salaries to rise at about this same rate as the economy expanded. But real median weekly earnings (wages and salaries) increased a grand total of $7 in the past 15 years: from $334 per week to $341 per week.

If wages and salaries had risen at the same 1.9% annual rate of real GDP growth, median weekly earnings would be $443, not $341. That's $102 more per week. But weekly median earnings for full-time workers rose only $7 per week, not $102 per week.
In other words, the growth in real GDP hasn't trickled down to wages and salaries.
Real household income--which includes both earned income and unearned income such as dividends and interest--has plummeted 8.5% since 2000. This is a striking contrast with real GDP growth of 31.6%: the economy has expanded 31.6% after adjusting for inflation, while real median household income has declined 8.5%.
If real median household income had grown at the same 1.9% annual rate of GDP, it would now be $75,000 a year, rather than $52,000.

So where did all this growth of the economy end up? How can the economy grow by roughly one-third in real dollars while real median household income drops like a rock and real wages/salaries are essentially unchanged for 15 years?
You can check these projections based on 1.9% annual growth for yourself with a simple Excel spreadsheet.
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So where did all this growth of the economy end up?
Lloyd Blankfein Is Now a BillionaireSilver For The People
the rich are richer and the poor are no longer counted...so what's the problem??
It works just like advanced socialism, where those unable to produce are quietly eliminated or sterilized. No sustainable system can carry but a certain amount of dead weight before it fails, especially when the dead weight is being incentivized and becomes a flesh eating virus. We never know for sure where that tipping point lies because it is dependent upon the culture but also because these governments are so protective of their real data, we would likely never know for sure what the true statistic is.
Everybody knows that the dice are loaded
Everybody rolls with their fingers crossed
Everybody knows the war is over
Everybody knows the good guys lost
Everybody knows the fight was fixed
The poor stay poor and the rich get rich
Thats how it goes, everybody knows
Everybody knows that the boat is leaking
Everybody knows the captain lied
Everybody got this broken feeling
That their father or their dog just died
Everybody talkin to their pockets
Everybody wants a box of chocolates
And a long stem rose and everybody knows
Everybody knows, everybody knows
Thats how it goes, everybody knows
Everybody knows that you love me, baby
Everybody knows that you really do
Everybody knows that you've been faithful
Give or take a night or two
Everybody knows that you've been discreet
There were so many people you just had to meet
Without your clothes and everybody knows
Everybody knows that its now or never
Everybody knows that its me or you
Everybody knows that you live forever
When you've done a line or two
Everybody knows that the deal is rotten
Old Black Joes still pickin cotton
For your ribbons and bows, everybody knows
Everybody knows, everybody knows
Thats how it goes, everybody knows
Everybody knows, yeah, everybody knows
Thats how it goes and everybody knows
Everybody knows that the plague is comin
Everybody knows its movin fast
Everybody knows that the naked man and woman
Are just a shining artifact of the past
And everybody knows that the scene is dead
But theres gonna be a meter on your bed
That will disclose what everybody knows
Everybody knows that you're in trouble
Everybody knows what you've been through
From the bloody cross on top of Calvary
To the beach at Malibu
And everybody knows its comin' apart
Take one last look at this sacred heart
Before it blows and everybody knows
Everybody knows, everybody knows
Thats how it goes, everybody knows
Everybody knows, everybody knows
Thats how it goes and everybody knows
Everybody knows, everybody knows
Thats how it goes, everybody knows
Everybody knows, everybody knows
Thats how it goes, everybody knows
Don Henley (his version of a Leonard Cohen song)
What a f*cking awesome piece of writing/music/commentary. And aptly placed.
Bravo! (It was also Leonard Cohen's version...)
Where did the missing GDP go, smoke and mirrors A. It was never there. B. The banksters ate it. C. Hyperinflation is just around.. the..
Great song but no way should Henley's name be in bold at the bottom. He sang it. I sang it once in the shower. Cohen WROTE the damn thing. It matters.
That is what I meant.
Something trickled down but it wasn't wealth
There's a high denmand for moar liquidity.
So where did all this growth of the economy end up?
There was no real growth. Inflation was adjusted lower to create a fake growth
Let's not forget that the Chapwood Index for 2014 was 9.7% and official CPI in the land of the free was only 0.8%. So the Nominal GDP of 5.6% for 2014 becomes real GDP of -4.1%.
The revised real GDP for years 2011 to 2013 worked out to -6.2%, -6.5%, -6.5% respectively.
What is the Chapwood Index?
"The Chapwood Index reflects the true cost-of-living increase in America. Updated and released twice a year, it reports the unadjusted actual cost and price fluctuation of the top 500 items on which Americans spend their after-tax dollars in the 50 largest cities in the nation."
http://www.zerohedge.com/news/2015-05-29/inaccurate-statistics-and-threa...
heresy...Chapwood is a witch...burn 'er!!!
....unless she floats...
"Build a bridge out of 'er!"
Actually, the old test was to throw her into a lake or river. If she drowned, she was innocent and deserving of decent burial. If she failed to drown THEN she must be a witch, and needed to burned at the stake. (you had it backword, you were going to burn her unless she floated, the test worked the other way around...).
Some times I don't actually miss the old Days...
This is the reality of Orwellian Newspeak. Negative is Positive, down is up, and bad is good. This is repeated so often that even people who are trying to be critical of the government and its policies end up spouting the government's propaganda (either intentionally as a limited hangout, or unintentionally through confusion).
these goons undoubtedly counted unemployment benefits as part of GDP
and hookers and blow
GDP isn't anything near a representation of our true economy, and the more they 'adjust' it, the worse it gets. The one thing we need is a solid, verifiable number, which is the last thing we're likely to get.....
He fouled this one up.
He's not taking into account population growth .. the weekly earnings is assuming same number of people worked.
Population was 280 million in 2000 and is now 321 million ..
so like 1% of that 1.9% growth is in population growth alone!
This is an important miss. But the bigger miss is the reporting of inflation and the lack of calculation on what that inflation is doing to our "growth" (negative or otherwise) in GDP and wages. Notice that wages are "inflation adjusted" to the government data also.
True...but then, workforce participation has dropped ay back to late-1970s levels too...
What's the impact on GDP from a strong dollar sally-dogging exports? I'm assuming it's a pretty big dent.
Exports haven't been much of the GDP ever since Reagan opened up the country to subsidized imports. The profits were used to buy American productivity. That makes it in-company transfers, so it doesn't show up on the balance.
Subtract out government from GDP. Government produces nothing.
Then what do you have?
A dying economy.
Why? Government is a net drag on the economy.
There must be a sponge in the works soaking up all the trickle....ya think??...
Isn't that why they call us little people *peons*?
It went to the Hamptons and Curpertino, to San Francisco and Washington D.C., it went to boob jobs and Ferrari's and BMW's for little Josephine and Joel on their 16th birthday, to hookers and blow, to McMansions with granite counter-tops and vacation homes, to G6's and illegal help to clean the toilets, cook the food, and pick up the leaves.
It certainly didn't go to the tax donkeys going to work every day doing something useful and trying to be frugal.
1) Wage growth went into bubbles, 2/3rds left out
2) As the general bubble burst (driven by R.E.) some jobs salaries
were also inflated and revised lower.
3) Global wage arbitrage
4) When 2008 crash happened, unemployment was high. Surplus labor (ties into #3) meant that corporations took advantage. Many people were willing to take any job at the time for lower rates of pay and no benefits.
If you were an executive, especially in newer/renewed bubbles in debt financing, healthcare, education or I.T. you made out like a bandit. The Fed's reflation really helped existing wealth asset owners in reflation. Such described are a small portion of the economy that can't carry the rest in consumption/taxation.
Structural underemployment and stagnating wages are here to stay for some years to come. Corporations begin raising wages when paying the lowest wage begins costing customers, revenue, decreased productivity in other words. I see a recognition of this now by companies but not the incentives (yet) for employees. Government subsidies to corporations also delayed this basic cycle.
Among the largest Government subsidies to corporations are those that never touch the corporation's books at all, but allow corporations to hold wages low without the consequences that typically come from underpaying workers. Low-paid workers get tax breaks and subsidies for daycare, the refundable Earned Income Tax Credit, and those who qualify get housing assistance, food stamps, medical coverage (or subsidies taking the form of premium reduction via ObamaCare), etc. All of these are added together to create the fictitious meme that being on Government Assistance is such a great deal compared to earning a living. However, the fact is that these are indirect subsidies to low-paying corporations. Without those subsidies, employers would have to dramatically increase wages to attract any employees at all, much less retaining good ones. And eventually, if corporations were to try to hold the line on low wages, civil unrest would ensue.
All the propaganda to the contrary, a lot of Americans are earning barely above minimum wage. $341/week divided by 40 hrs. per week = $8.53/hr. Subtract out payroll tax, and take-home, before any other taxes or deductions, is about $7.85. Sure, lots of people earning that are kids. But my kid just got a dishwashing job, starting pay $10/hr., because they couldn't get anybody for less. My son can afford to work for that because I pay all his bills. No adult can afford to work for that. Hence the need for dramatic increases in welfare. Eliminate welfare payments and indeed, all hell breaks loose. Low-wage employers either have to double what they're paying, or trouble ensues promptly.
Yes, I understand that most of these jobs are not providing 40 hours per week of work. Most are in the 20s now. So perhaps the nominal hourly wage is $17.06. If the weekly check is still only $341/wk (before, once again, any withholding), then an adult needs two such jobs, to bring in the princely sum of $34,100 (again, before any withholding). That person is working 40 hours per week, 50 weeks per year, at two jobs; so perhaps 8 hours a day on the clock plus several hours per day in transit. It's still wage-slavery, and no way to raise a family or gain any financial security. But those are the jobs available, and the wages that go with them. The rest is being skimmed off the top.
"Where Did The GDP "Growth" Go? Not Into Wages"
Zion's pockets.
Liberty is a demand. Tyranny is submission..
Short version: The money was burned up by the friction caused by financialization of everything. Everything now carries fee up on fee, which isn't counted as an actual price increase, but which makes everythiing cost more. Taxes are indeed part of this, but the carrying costs of enormous piles of debt are added into the cost of everything.
You create 3 part time jobs for every full time job and it lowers the median income. It would also lower the average income.
You need to add in benefits - health insurance is the BIG one and look at total compensation.
The median job back in 2000 may have paid $334 in wages and had benefits of an additional $50 - total $384
Now you have $341 in wages and $102 in benefits - total $443
Health insurance alone has more than doubled.
It end up always where it has been for centuries: Into the coffers of the Rothschilds.
does household income include federal welfare payments?
Government shouldn't be your biggest customer.
That's Fascism.
Simple explanation, GDP is utterly meaningless and does not in any form whatsoever reflect economic growth. When somebody talks about GDP, they are telling you they do not understand economics.
Inventories for a future that will never come.
It's pretty basic, but never part of a discussion because people are stuck in a paradigm. The credit world paradigm we are in is faulty to its core, and has to be replaced.
Having most of the economy of the world run by cycling money that disappears, makes people run on a treadmill. That disappearing money also vectors improperly causing dislocations. This type of money also comes into being improperly against assets that are marked to markets, and markets are not good predictors of price (they are rigged and interact with the very money that is created as credit).
Monetary policy should be floating money that has no accounting periodicity. This lets it become savings, and lets it be stored to then be loaned out as intermediated money. In other words, banks should not be making credit, but instead loaning out people's savings.
Individuals can then determine the payback rate. Creditors can cut their debtors some slack in extenuating cricumstances. The debt instruments are held by individuals, not banks. The money becomes wealth based and is held in accounts at banks as if it is valuable. The bank is paid to store savers wealth money, and the bank earns fees to match up new debtors with new creditors. Banks are to be forbidden from making credit. This action removes the banker as a particpant trying to get rich on his own by manipulation, and instead converts him to being a fee based advisor and agent for his customers/ people.
Fiscal policy is to tax away rents and hence return what the commons created back to the commons. For example, a single individual who owns the airwaves e.g. Carlos Slim, would be taxed and his gains returned to the public. Or if a rentier trys to own or monopolize the earths gifts for his own gains, then he is taxed. Land site value should be taxed. Labor and the ability to create should be untaxed. Unearned income should be taxed, as it is theft.
This then allows an economy to be modeled as a pump, where floating money is taxed and then spent at the base of the population. The base can then consume, and it becomes TRICKLE UP. The pumping action creates demand and simultaneously redistributes back to the source those rents that were stolen.
This is the only sytem that will work when automation fully takes over. Financial Capitalism is at its end stages: Put a fork in it, it is done - only many have not realized it yet. Financial Capital can only distribute wages as prices, and wages will never increase especially as capital looks to find lower and lower wages overseas, or it looks to automate and displace. Capital then buys up the earth and monopolizes what was once free. Greece is a perfect example of the action, and growing Oligarchy is a symptom of the disease.
It is a simple matter to convert the world's credit system to wealth based sovereign money. It can be done overnight.
But, instead - we'll probably destroy ourselves in war rather than let go of the fraudulent money system.
We are willfully stupid; in fact we are not even trying alternate money systems and observing their functions.
The plain fact of the matter is that sovereign money systems have already been run in the past, and they worked well. Again, it is willful ignorance, or perhaps is it malicious - to ignore these facts, and not have them as part of the debate.
3000 years of coin history also cannot be ignored; yet it barely gets mention in economic textbooks.
But we need MOAR CREDIT!!!
Thanks.
Would you be able to comment on the COMER case before the Canadian courts?
The COMER case is important. From 38 to 74, BOC was a crown bank, where its stock was held by MOF.
Canda was a mixed system, where most of the money supply was debt fee issued by BOC. Trusts loaned out intermediated money at 1 to 2 percent for those who wanted to buy a home, therefore the interest money cycled back to savers rather than vectoring to bankers.
Canada was a sovereign system from 38 to 74, or rather sovereign like, and the historical data is impressive. Economic surplus that was created funded education, including college, and also medical. Yet there was little to no price inflation, little to no private debts, efficient industry. The economy had a large component of gifting as well, as it wasn't fully monetized.
In the U.S. during the Greenback era, upwards of 40% of the money supply was greenbacks, so that is another reasonably recent period in history. Greenbacks were so popular there was a greenbacker political movement to keep them; but of course, private credit issuing bankers ended up winning.
To American's: Greenback laws are still on the books. Treasury CAN spend greenbacks again if they chose too. That it doesn't happen shows how far gone the country is.
BOC Crown bank being usurped by BIS rules in 74 was a crime, and it should be overturned. Canadians should be advised to put layers of law, or consitutional law around BOC if it is released, that way it cannot be usurped again in future.
Very grateful for your thoughts.
It's called non-wage compensation, i.e. benefits--healthcare benefits/spending. Duh.
I once told my "receptionist" about spread sheets and she spred it on the sheet!?
Not sure where it went... but we sure borrowed alot of money to make up for less wages
Growth? You're kidding, right? Take a look at the debt to gdp ratio post 2000.
http://www.macrotrends.net/1381/debt-to-gdp-ratio-historical-chart
Buy a peanut for $1 or $10?
$9 growth on the higher value but you are not consuming more and you are saving less. Economy moves to needs like food and housing and all the non-essentials start falling in value just to shift it.
Bought a quadcopter, awesome $1 but it cost $6 to ship ... way to go.
Two words missing from the analysis: per capita
Population has grown almost 15% since 2000, so real GDP per capita has only grown about 15%, which is easily within the grasp of the 1% skimming off the top, plus the errors and distortions of the published inflation rate.