Sunday, June 17, 2018

Absent economic progressivism, workers' wages slip while the rich get richer

The United States is the most economically unequal of industrialized countries. It’s not getting any better. American workers are losing ground even though the economy is roaring. So where does the wealth go? To the already wealthy reports the Washington Post, For the biggest group of American workers, wages aren’t just flat. They’re falling.

The average hourly wage paid to a key group of American workers has fallen from last year when accounting for inflation, as an economy that appears strong by several measures continues to fail to create bigger paychecks, the federal government said Tuesday.

For workers in “production and nonsupervisory” positions, the value of the average paycheck has declined in the past year. For those workers, average “real wages” — a measure of pay that takes inflation into account — fell from $22.62 in May 2017 to $22.59 in May 2018, the Bureau of Labor Statistics said.

This pool of workers includes those in manufacturing and construction jobs, as well as all “nonsupervisory” workers in service industries such health care or fast food. The group accounts for about four-fifths of the privately employed workers in America, according to BLS.

The fall in those wages has alarmed some economists, who say paychecks should be getting fatter at a time when unemployment is low and businesses are hiring.

“This is odd and remarkable,” said Steven Kyle, an economist at Cornell University. “You would not normally see this kind of thing unless there were some kind of external shock, like a bad hurricane season, but we haven’t had that.”

Falling wages
Declining worker share of corporate income

The falling wages promise to exacerbate historic levels of U.S. inequality. Within the labor force, it means workers who were already making less are falling further behind. And if private laborers as a whole are seeing their earnings flatten while the economy as a whole grows at an annual rate of more than 2 percent, that means the gains are going almost exclusively to people already at the top of the economic ladder, economists say.

"The extra growth we are seeing in the economy is going somewhere: to capital owners and people at the top of the income distribution,” said Heidi Shierholz, director of policy at the Economic Policy Institute and a former chief economist at the Labor Department, noting workers’ share of corporate income remained relatively low as of January. “And what we’ve seen is in recent period a much higher share of total income earned going to owners of capital.”

Economics of Progressivism

At its general membership meeting this last Friday (June 15th), alliance4action hosted Alison Jones whose research talk was titled “The Economics of Progressivism.” The video is on YouTube. Progressive policies, she argued, are good for the economy because they encourage recirculation of money especially by those who buy things. Trickle-up (my word, not hers) economics does the opposite, effectively sequestering money among the rich.

The gangbuster video of Jones’ talk is about 30 minutes. Replete with shocking data made simple by cool explanatory graphics, it’s a good investment of your time.

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