Real wage growth anaemic

Since the GFC (global financial crisis) real wage growth, i.e., the growth in wages after inflation has been accounted for, has fallen sharply.  The blue bars show real wage growth in Q4 2017, year-on-year, and the purple dots show real wage growth in Q4 2007, just before the GFC hit.   Remember that since the GFC, all these countries have experienced some rise in real GDP, which implies what we know from other evidence that all or most of the growth in GDP has not "trickled down" to the workforce.

Source: OECD

The new American Aristocracy

This is a fascinating and revealing article in The Atlantic.  I can't possibly do justice to it.  I'll include just this section:

None of this matters, you will often hear, because in the United States everyone has an opportunity to make the leap: Mobility justifies inequality. As a matter of principle, this isn’t true. In the United States, it also turns out not to be true as a factual matter. Contrary to popular myth, economic mobility in the land of opportunity is not high, and it’s going down.

Imagine yourself on the socioeconomic ladder with one end of a rubber band around your ankle and the other around your parents’ rung. The strength of the rubber determines how hard it is for you to escape the rung on which you were born. If your parents are high on the ladder, the band will pull you up should you fall; if they are low, it will drag you down when you start to rise. Economists represent this concept with a number they call “intergenerational earnings elasticity,” or IGE, which measures how much of a child’s deviation from average income can be accounted for by the parents’ income. An IGE of zero means that there’s no relationship at all between parents’ income and that of their offspring. An IGE of one says that the destiny of a child is to end up right where she came into the world.

According to Miles Corak, an economics professor at the City University of New York, half a century ago IGE in America was less than 0.3. Today, it is about 0.5. In America, the game is half over once you’ve selected your parents. IGE is now higher here than in almost every other developed economy. On this measure of economic mobility, the United States is more like Chile or Argentina than Japan or Germany.

The story becomes even more disconcerting when you see just where on the ladder the tightest rubber bands are located. Canada, for example, has an IGE of about half that of the U.S. Yet from the middle rungs of the two countries’ income ladders, offspring move up or down through the nearby deciles at the same respectable pace. The difference is in what happens at the extremes. In the United States, it’s the children of the bottom decile and, above all, the top decile—the 9.9 percent—who settle down nearest to their starting point. Here in the land of opportunity, the taller the tree, the closer the apple falls.

All of this analysis of wealth percentiles, to be clear, provides only a rough start in understanding America’s evolving class system. People move in and out of wealth categories all the time without necessarily changing social class, and they may belong to a different class in their own eyes than they do in others’. Yet even if the trends in the monetary statistics are imperfect illustrations of a deeper process, they are nonetheless registering something of the extraordinary transformation that’s taking place in our society.

A few years ago, Alan Krueger, an economist and a former chairman of the Obama administration’s Council of Economic Advisers, was reviewing the international mobility data when he caught a glimpse of the fundamental process underlying our present moment. Rising immobility and rising inequality aren’t like two pieces of driftwood that happen to have shown up on the beach at the same time, he noted. They wash up together on every shore. Across countries, the higher the inequality, the higher the IGE (see Figure 2). It’s as if human societies have a natural tendency to separate, and then, once the classes are far enough apart, to crystallize.

[Read more here]

In this chart, the higher the number on the left hand axis, the lower inter-generational mobility.
The label should read Inter-generational  earnings elasticity (IGE)

I strongly recommend that you read the original article in full.  It's how quality journalism should be.

Also, if you haven't already, you should read F Scott FitzGerald's The Great Gatsby, which is an utterly brilliant masterpiece, and watch the the 1974 film by Jack Clayton.  We are back in the 20s with income distribution, politics, and debt.  Will it all end as badly as the 20s did ten and twenty years later, in war and genocide and millions of dead?

Share of national income going to the 1%

From an interesting article about Joseph Stiglitz in the Guardian by Greg Jericho.

The problems with the Right

Source

Back in the 1950s, a Republican president, Eisenhower, could see how a interstate freeway network would be good for the country, so he started to build one, using borrowed money funded by a petrol (gasoline) tax.  A Republican! In fact, in retrospect the post war decades in the United States were a golden age of high growth and low unemployment, of progress and equality (Eisenhower, again, at Little Rock.)  What's gone wrong since?

The Right believes that poverty is a personality defect.  Billionaires with practically uncountable wealth, who control press and TV stations, are greedy for even more wealth.  And the Right has spent millions funding "think" tanks which spread lies about global warming and its causes.  What's changed from the 1950s?  Well, back then, there was the alternative offered by communism and socialism.  But after the fall of the Soviet Union and China's conversion to state capitalism, the Right stopped worrying.  They have come to believe that their policies can be as far right as they want (witness Donald Trump), because the Left no longer presents a threat.  Indeed, in Anglo countries, the Left has feebly trailed behind the Right to adopt more and more neo-liberal policies.  But neo-liberalism has failed: economic growth no longer delivers greater prosperity for everyone, but only for the top 10% and the top 1%.  The Left is helpless in the face of right-wing triumphs because it has deserted its own base: the poor and the lower-middle class.  It thinks it can win by identity politics, but the Right is far better at that because it is far more unscrupulous and dishonest.  The Right has no problem with dog-whistling and racism, while we on the Left think that sort of  behaviour immoral.  Because we won't stoop to the sort of unprincipled politics of the Right, we will continue to struggle to win unless we start lifting the living standards of the bottom 50%.

In each US economic recovery since WW2, the percentage of the increase in real GDP going towards the top decile of income earners has risen. In the most recent recovery (since the GFC) 110% of the rise in real GDP accrued to the top 10%. The remaining 90% were worse off, even as real GDP rose. In the UK, real incomes have fallen even as real GDP per capita has risen. In Australia, the same pattern is emerging.

The Republicans in the US, the so-called "Liberals" in Australia and the Conservative Party in the UK want to cut taxes (for the rich and companies, naturally), and welfare for the poor (of course). They want to cut the minimum wage, they want to eviscerate public health provision, they want to destroy decent public schooling, they want to offshore production, they want to destroy the whole post-war consensus which helped lift millions out of poverty and deprivation. Just so their mates can buy a bigger yacht or another house or another $2000 suit. Income inequality is now worse than it was in the "gilded" age before WW1.

And to distract ordinary ppl from what is happening, they confect enemies: Mexicans, immigrants, Muslims, the EU, gays, "leftists", environmentalists, you name it, anybody but them and their policies.

I have no compunction about blaming the Right for what they are doing to our society.  But the Left is to blame too: the Right will go on winning elections until we start helping those who have lost out because of neo-liberalism and globalisation.   The Left must ask itself why working class Americans, Brits, or Australians vote for for right-wing parties which will only make them worse off.  And the answer is because once they had an alternative, because the Left represented their interests.  Now it no longer does.

See also:

Neo-Liberalism
The Rich Get Richer
Happy Days are here again
The "S" word
Trickle-down economics is a nightmare
Lessons from history
America is rotting at the core
What would Keynes do?
The failure of American capitalism

The Rich get Richer

Even though the averages for the economy (employment, unemployment rate, industrial production, etc,) have not yet passed the 2007 peaks (or low in the case of the unemployment rate) the rich are fine, thank you.

Second chart comes from The Dish

The cost of the GFC in Spain

A telling chart.  As so often, it is the poor, in fact the poorest of the poor, who suffer: the lowest percentile falling nearly 45% in real terms.  The property speculators and the top bankers have pocketed their profits and bonuses.  Those who in and closest to grinding poverty pay the price.  Shameful.

Click to see original size