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Thread: The American Economy - The Big Picture







Post#1 at 07-10-2013 07:15 PM by JustPassingThrough [at joined Dec 2006 #posts 5,196]
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The American Economy - The Big Picture

I decided to post this here, after not posting here much for a while, because I have no other place to post it. There are occasionally people posting here who have some background in economics, so it may stimulate some discussion. It also requires a historical overview, and may correspond to the S&H cycles.

There are a lot of things being written these days about the economy, and a lot of explanations for why things are the way they are. This is an area where I feel all sides of the ideological spectrum have things wrong. Their determination to shoehorn things into neat boxes blinds them to the big picture. The Democrats love to talk about the stagnation of real wages. They look at the timeline and blame it all on Ronald Reagan and Republican policies. They like to talk about income inequality, but it's always through the lens of the rich stealing from the poor in a zero sum game. As for the Republicans, the fact that there is a clear structural decline happening is all a result of lazy, freeloading moochers seduced into idleness by the safety hammock of government programs. Libertarians just chalk everything up to the free market and leave it at that, good or bad.

I'm going argue to that none of the above are sufficient descriptions of what's happened. I will submit at the start that various factors often mentioned have some validity: globalization of trade, the outsourcing of jobs, the automation of jobs formerly done manually, and the negative incentives of welfare programs. However, having looked at the data, I think those are all marginal issues. The real issue comes down to the most basic economic principle: the law of supply and demand.

So I'm now going to post a series of charts and graphs, starting with the most important one. This is the overall labor force participation rate since the 1950s:
"I see you got your fist out, say your peace and get out. Yeah I get the gist of it, but it's alright." - Jerry Garcia, 1987







Post#2 at 07-10-2013 07:16 PM by JustPassingThrough [at joined Dec 2006 #posts 5,196]
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Sorry for the size of the image, I couldn't find a way to shrink it. The graphs may tell the story on their own, before I even explain it.

Here is the labor force participation rate over the same period of time, divided between men and women:



Real wages, over the same period of time:



U.S. Birth rate:



Foreign-born share of the US population:

Last edited by JustPassingThrough; 07-10-2013 at 07:32 PM.
"I see you got your fist out, say your peace and get out. Yeah I get the gist of it, but it's alright." - Jerry Garcia, 1987







Post#3 at 07-10-2013 07:43 PM by JustPassingThrough [at joined Dec 2006 #posts 5,196]
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Income inequality over time (ignore the polarization number, although it is interesting):
"I see you got your fist out, say your peace and get out. Yeah I get the gist of it, but it's alright." - Jerry Garcia, 1987







Post#4 at 07-10-2013 08:14 PM by JustPassingThrough [at joined Dec 2006 #posts 5,196]
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What you see in every graph is a clear inflection point, right around 1970. Women entered the workforce in massive numbers, raising their participation rate from 34% in 1950 to 60% today. The birth rate cratered and flatlined, and the foreign-born share of the population began to rise, reaching a peak today unseen since the 1920s. Individual earnings flatlined, and income inequality began to rise.

As I said, the Democrats love to blame tax cuts for rising inequality, and greedy businesses for flatlining wages. Republicans and libertarians ignore this data, and/or simply don't care.

In reality, what has happened is that there has been a dramatic increase in the supply of labor. As the law of supply and demand dictates, increasing supply leads to falling prices - in this case, lower wages.

The same effect has happened when it comes to college degrees. Many more people are going to college, and especially many more women than in the past. That has the effect of driving up the cost of tuition, while driving down the value of the resulting degree. The more demand there is for college degrees, the higher the price of tuition rises (government subsidies also play a role). The more college graduates there are, the less valuable the degree becomes when seeking employment.

It is still possible for a two-income household to produce an upwardly mobile lifestyle, but it requires that both spouses work. However, marriage rates have fallen, divorce rates have risen, and single parent households are increasingly the norm. A single individual (or even worse a single parent) is going to have a hard time doing more than maintaining a flat standard of living over the course of their lifetime. When men and women are increasingly living separately, and they're competing against each other for jobs while having to pay the expenses for two separate households, the overall standard of living for most of society is going to remain flat, or decline depending on inflation.

Now going back to the first graph, the most important one. What you see is that the labor force participation rate has dropped by 6 percentage points since 2000, with 5 of those dropped since 2008. What is important is that that rate is still slightly higher than it was during the post WWII boom times.

We may be experiencing a reversion to the historical norm, after an unsustainable bubble in the labor force. The difference is that women have replaced men in the workforce, and immigrants have replaced children in the population.

Simply put, we now have the world the Boomers dreamed of in the 1960s. Except that the economic reality of it is stagnation and decline, and disintegrating societal cohesion.

This will be met with great howls of outrage, but the fact of the matter is, it is hard to come to any other conclusion than that the primary cause of all of these changes is feminism. With women rejecting marriage and motherhood and entering the workforce to compete with men for jobs, everyone's standard of living has declined. That effect has been compounded by the replacement of children with immigrants from third world countries who will work for lower wages, driving down incomes even further. We're told there are "jobs Americans won't do", but in reality there are jobs Americans won't do for the wages being offered, because the market has already adjusted to the presence of low-skilled immigrant labor.

There are many women who have to work, and have no choice in the matter. But they have always existed, and they were already working in the 1950s. What we've seen since the 1960s is a movement of women working because they want to (or because they're told they should want to, and everybody else is doing it), for the sake of "independence", "self-fulfillment" and so forth. Being a stay-at-home mom is a demeaning enslavement, and a waste of a woman's potential. These are all things we've heard a million times in the wake of the Baby Boom generation.

But the economic consequences and resulting realities were never taken into account. The reality for most women now is being a single mother, struggling to get by on her own, or a single non-mother living a dreary lower-middle class existence, working like a slave all day, and finding it harder and harder to find a suitable husband, or any direction in life. The decline in male participation, combined with affirmative action for women in the workplace and in education has made it so that it is more and more common for a woman from a particular background to be better off economically than a comparable male, which exacerbates the problem of single parenthood, and denies them the economic benefits of marriage. Men, meanwhile, are increasingly unwanted, unneeded, and idle. Which often lands them in prison.

It is possible that some of this could be fixed if women become much more willing to support unemployed spouses, as men were always willing to do in the "bad old days" we're so often told about. But that's about as likely as a trout winning the Boston marathon. Barring the emergence of some new social arrangement that can replace the old norms, or a reversion to something more like the old norms, the future seems to be set in stone, and it is what we now see around us every day. Men and women living alone, barely getting by. Children being raised by single mothers, and all of the disadvantage that brings with it. We could, for a short period of time, tax and spend our way through and give people subsidies to soften the malaise. But eventually those paying the taxes will cease to exist, and the conditions will not have changed, only worsened.

I think this is clearly the new reality of American life, and it is a society in decline, economically, culturally, and ultimately as a whole nation. The economic problems are a result of societal changes, and the economic problems cause new societal pathologies in a vicious cycle, a downward spiral.
Last edited by JustPassingThrough; 07-10-2013 at 08:35 PM.
"I see you got your fist out, say your peace and get out. Yeah I get the gist of it, but it's alright." - Jerry Garcia, 1987







Post#5 at 07-10-2013 11:27 PM by playwrite [at NYC joined Jul 2005 #posts 10,443]
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First, welcome back.

Just a day or two ago, I singled you out as perhaps the only person I had a clear hand in driving away from the forum, and that I regretted having played that role. My apologies to you.
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While there is much you have presented that is just facts and you've provide some decent deductions, the main tenet that I would take issue with is your sense that more people in the labor force is the root cause of unemployment. More people can aggravate the true causes of unemployment but more people can also facilitate those factors that grow employment.

While it is true that more people, either by immigration, births or women joining the workforce, add more to the potential labor force, the supply side, it is also true that they add more to the demand side that can take up any slack in the supply side. To think otherwise, one would have to explain why the growth in US population since its establishment doesn't now have the vast majority of people unemployed.

It's referred to as the "virtuous cycle." The key to it was covered by Henry Ford when he often explained his rationale for providing his workers higher pay scales than most other industry being due to his wanting them to be able to afford to buy his cars.

The most critical graph missing in your presentation is this one -



- essentially, the wealth from the nation's economic production is increasing going to corporate profits rather than to wages. If one is not addressing that fact, then one is really not addressing the issue.

Now a couple of things about that. Those corporate profits are not just going to very rich CEOs and the financial system that banks them, most of it actually goes to investors as dividends or re-invested by the corporations on behalf of their investors to further production and capital gains. There's the issue there that is mostly older established folks and their investment institutions (pensions, 401ks, insurance) that are profiting while there is hardly any participation in those gains by younger folks. But maybe there's some solution in there as well of broadening the investment class.

I don't know the answer, but I do know ignoring this as the most fundamental change in our economy forgoes any serious attempt at understanding the ills of our economy today.

Just one minor point. Rather than using gross labor participation rate, most folks who are seriously study what is going on now use participation by the prime working age of 26-56 (I believe that's the range off the top of my head) that not only normalizes the trend to negate the increasing bulge of baby boomer retirements but also influences on the other end of younger folks going to school. Some actually limit the trend analysis to males in that age group since the female side has actually been more stable for some time now.

Generally, you may be on the right track overall. The key is supply and demand. The question is why the increase in population, by births, immigration, or women in the workforce, has led to the increased supply of labor you've noted but not to a corresponding increase in demand for labor. What has disconnected the virtuous cycle?
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Post#6 at 07-11-2013 01:39 AM by JustPassingThrough [at joined Dec 2006 #posts 5,196]
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Quote Originally Posted by playwrite View Post

While there is much you have presented that is just facts and you've provide some decent deductions, the main tenet that I would take issue with is your sense that more people in the labor force is the root cause of unemployment. More people can aggravate the true causes of unemployment but more people can also facilitate those factors that grow employment.
My point was not about unemployment, it was about stagnant wages. The unemployment rate can be measured in a variety of ways. When it comes to unemployment, I pointed out that the participation rate at the bottom of this recession is the same as what it was during the 50s and 60s, when most people consider the economy to have been doing well. Perhaps the participation rate of the last few decades was unsustainable. There is also undoubtedly a point at which wages fall to a point where people start to drop out of the labor market.

While it is true that more people, either by immigration, births or women joining the workforce, add more to the potential labor force, the supply side, it is also true that they add more to the demand side that can take up any slack in the supply side. To think otherwise, one would have to explain why the growth in US population since its establishment doesn't now have the vast majority of people unemployed.
Whether or not people participate in the work force, they still contribute to demand. They still need food, clothing, and so forth. It's another reason why growing the population through childbirth is better than importing adult immigrants. If you contract the labor participation rate without contracting the population, wages should rise. If you expand the population while expanding the labor force at an equal rate, wages should remain steady. If you expand the labor force without correspondingly expanding the population, wages should fall. Which is what has happened.

The traditional family unit, with one male breadwinner, is a very efficient way to divide labor and pool resources, while keeping wages high. With population held constant, a bunch of single adults with fewer children living separately is far less efficient. It floods the labor market with too many job seekers, driving down wages, and increases the relative cost of living for each individual.

The most critical graph missing in your presentation is this one -



- essentially, the wealth from the nation's economic production is increasing going to corporate profits rather than to wages. If one is not addressing that fact, then one is really not addressing the issue.
Wages are not necessarily related to corporate profits. The labor market dictates wages, and the labor market has been oversupplied. If there are 100 customers for every plumber, plumbers will make a good living. If there are 100 plumbers for every customer, 99 of those plumbers are going to be in bad shape. It doesn't matter how much money the customer has, they still only need one plumber. That said, there is another factor, which is immigration from third world countries, bringing in people willing to work for lower wages. Businesses have consistently lobbied for essentially open borders, and they've gotten their way. They have an incentive to drive down wages, and they've pursued it. If the labor market was tighter, they would have no choice but to pay people more.

Also, you can see that the chart you supplied points directly to 1970, just like every chart I supplied. 10 years before "Reaganomics". Reagan's policies may have ameliorated the effects of these trends, but they did not cause them, and they did not change the trajectory.


Just one minor point. Rather than using gross labor participation rate, most folks who are seriously study what is going on now use participation by the prime working age of 26-56 (I believe that's the range off the top of my head) that not only normalizes the trend to negate the increasing bulge of baby boomer retirements but also influences on the other end of younger folks going to school. Some actually limit the trend analysis to males in that age group since the female side has actually been more stable for some time now.

Generally, you may be on the right track overall. The key is supply and demand. The question is why the increase in population, by births, immigration, or women in the workforce, has led to the increased supply of labor you've noted but not to a corresponding increase in demand for labor. What has disconnected the virtuous cycle?
The whole point is that the supply of labor has risen at a higher rate than the population. That's what the increase in the participation rate illustrates. It's the percentage of the population that is participating in the labor market.
Last edited by JustPassingThrough; 07-11-2013 at 02:14 AM.
"I see you got your fist out, say your peace and get out. Yeah I get the gist of it, but it's alright." - Jerry Garcia, 1987







Post#7 at 07-11-2013 02:36 AM by Eric the Green [at San Jose CA joined Jul 2001 #posts 22,504]
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Quote Originally Posted by JustPassingThrough View Post
What you see in every graph is a clear inflection point, right around 1970. Women entered the workforce in massive numbers, raising their participation rate from 34% in 1950 to 60% today. The birth rate cratered and flatlined, and the foreign-born share of the population began to rise, reaching a peak today unseen since the 1920s. Individual earnings flatlined, and income inequality began to rise.
But some of the graphs did not show 1970 as the turning point.
As I said, the Democrats love to blame tax cuts for rising inequality, and greedy businesses for flatlining wages. Republicans and libertarians ignore this data, and/or simply don't care.
At least an attempt for some neutrality; commendable.
In reality, what has happened is that there has been a dramatic increase in the supply of labor. As the law of supply and demand dictates, increasing supply leads to falling prices - in this case, lower wages.
You and Kepi make this point. I have disagreed with him on this as well. Playwrite makes the correct reply.
The same effect has happened when it comes to college degrees. Many more people are going to college, and especially many more women than in the past. That has the effect of driving up the cost of tuition, while driving down the value of the resulting degree. The more demand there is for college degrees, the higher the price of tuition rises (government subsidies also play a role). The more college graduates there are, the less valuable the degree becomes when seeking employment.
It makes some sense, although a well-educated populace has its benefits, and they may tend to create more businesses and be more qualified for more challenging jobs. It still seems there is a shortage in tech fields and people must be imported. The gap there is the allure of financial careers in the age of greed.
It is still possible for a two-income household to produce an upwardly mobile lifestyle, but it requires that both spouses work. However, marriage rates have fallen, divorce rates have risen, and single parent households are increasingly the norm. A single individual (or even worse a single parent) is going to have a hard time doing more than maintaining a flat standard of living over the course of their lifetime. When men and women are increasingly living separately, and they're competing against each other for jobs while having to pay the expenses for two separate households, the overall standard of living for most of society is going to remain flat, or decline depending on inflation.
Assuming that a couple saves money by sharing their living arrangement.
Now going back to the first graph, the most important one. What you see is that the labor force participation rate has dropped by 6 percentage points since 2000, with 5 of those dropped since 2008. What is important is that that rate is still slightly higher than it was during the post WWII boom times.

We may be experiencing a reversion to the historical norm, after an unsustainable bubble in the labor force. The difference is that women have replaced men in the workforce, and immigrants have replaced children in the population.

Simply put, we now have the world the Boomers dreamed of in the 1960s. Except that the economic reality of it is stagnation and decline, and disintegrating societal cohesion.
It seems like your better world didn't exist very long. Truly we had a very unequal society before the 1930s in which most people were poor and a few were rich. We have returned to that today, almost. Only in the 1950s and 60s was society the way you prefer, and even in the 60s it was under assault. The real boomer "dream" was more communes and extended families, as well as more freedom for women and ethnic groups.
This will be met with great howls of outrage, but the fact of the matter is, it is hard to come to any other conclusion than that the primary cause of all of these changes is feminism. With women rejecting marriage and motherhood and entering the workforce to compete with men for jobs, everyone's standard of living has declined. That effect has been compounded by the replacement of children with immigrants from third world countries who will work for lower wages, driving down incomes even further. We're told there are "jobs Americans won't do", but in reality there are jobs Americans won't do for the wages being offered, because the market has already adjusted to the presence of low-skilled immigrant labor.
Immigrants aren't doing these jobs, because these jobs had already disappeared. The major factor is free trade and cheap foreign labor. Factories have moved to China and Bangladesh, and that is what drove down wages. In addition, productivity and automation has made many jobs unnecessary. Any objective account has to put these two factors as centrally important. Plus, most of the wealth gained through productivity in the last 30 years has gone to the bosses and owners, so that wages have flatlined while prices have risen. Immigrants have been shown to contribute as much to the economy as they cost it.
There are many women who have to work, and have no choice in the matter. But they have always existed, and they were already working in the 1950s. What we've seen since the 1960s is a movement of women working because they want to (or because they're told they should want to, and everybody else is doing it), for the sake of "independence", "self-fulfillment" and so forth. Being a stay-at-home mom is a demeaning enslavement, and a waste of a woman's potential. These are all things we've heard a million times in the wake of the Baby Boom generation.
Although it was Silents like Betty Friedan and Gloria Steinem who called for these changes as well as young Boomers.

It is a cart and horse question. Which drove us to where we are? Do more women want to work, giving us two worker households and a labor surplus and resulting lower wages? Or are both men and women working because they have to, because wages have fallen and prices have risen? Being more pro-feminist than you, I say it's more the latter.
But the economic consequences and resulting realities were never taken into account. The reality for most women now is being a single mother, struggling to get by on her own, or a single non-mother living a dreary lower-middle class existence, working like a slave all day, and finding it harder and harder to find a suitable husband, or any direction in life. The decline in male participation, combined with affirmative action for women in the workplace and in education has made it so that it is more and more common for a woman from a particular background to be better off economically than a comparable male, which exacerbates the problem of single parenthood, and denies them the economic benefits of marriage. Men, meanwhile, are increasingly unwanted, unneeded, and idle. Which often lands them in prison.

It is possible that some of this could be fixed if women become much more willing to support unemployed spouses, as men were always willing to do in the "bad old days" we're so often told about. But that's about as likely as a trout winning the Boston marathon.
Actually it's getting more common.
Barring the emergence of some new social arrangement that can replace the old norms, or a reversion to something more like the old norms, the future seems to be set in stone, and it is what we now see around us every day. Men and women living alone, barely getting by. Children being raised by single mothers, and all of the disadvantage that brings with it. We could, for a short period of time, tax and spend our way through and give people subsidies to soften the malaise. But eventually those paying the taxes will cease to exist, and the conditions will not have changed, only worsened.

I think this is clearly the new reality of American life, and it is a society in decline, economically, culturally, and ultimately as a whole nation. The economic problems are a result of societal changes, and the economic problems cause new societal pathologies in a vicious cycle, a downward spiral.
Family decline is a factor in national decline. Being a liberal, I do not put it as the main cause, as you a conservative do. Liberals would point to economic factors as the cause of single parenthood, although there is clearly a cultural factor too. But whatever the explanation, all things considered, single parenthood is not the best lifestyle, and is not the best way to raise children. The nuclear family was no picnic either, being very alienating; and again, it existed only for a couple of decades. Before that, families were much more extended, and less mobile. That is what I would like to see again.

I don't expect much shifting of opinion from you or me. But I truly don't mind a few conservatives here to represent their side's opinion and develop a dialogue and a test of ideas.
Last edited by Eric the Green; 07-11-2013 at 02:55 AM.
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Post#8 at 07-11-2013 11:21 AM by Marx & Lennon [at '47 cohort still lost in Falwelland joined Sep 2001 #posts 16,709]
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Most of the meat in this has been well addressed already by others, so I'll try to add a different spin and address a few misses.

Quote Originally Posted by JustPassingThrough View Post
What you see in every graph is a clear inflection point, right around 1970. Women entered the workforce in massive numbers, raising their participation rate from 34% in 1950 to 60% today. The birth rate cratered and flatlined and the foreign-born share of the population began to rise, reaching a peak today unseen since the 1920s. Individual earnings flatlined and income inequality began to rise.

As I said, the Democrats love to blame tax cuts for rising inequality, and greedy businesses for flatlining wages. Republicans and libertarians ignore this data, and/or simply don't care.

In reality, what has happened is that there has been a dramatic increase in the supply of labor. As the law of supply and demand dictates, increasing supply leads to falling prices - in this case, lower wages.

The same effect has happened when it comes to college degrees. Many more people are going to college, and especially many more women than in the past. That has the effect of driving up the cost of tuition, while driving down the value of the resulting degree. The more demand there is for college degrees, the higher the price of tuition rises (government subsidies also play a role). The more college graduates there are, the less valuable the degree becomes when seeking employment.

It is still possible for a two-income household to produce an upwardly mobile lifestyle, but it requires that both spouses work. However, marriage rates have fallen, divorce rates have risen, and single parent households are increasingly the norm. A single individual (or even worse a single parent) is going to have a hard time doing more than maintaining a flat standard of living over the course of their lifetime. When men and women are increasingly living separately, and they're competing against each other for jobs while having to pay the expenses for two separate households, the overall standard of living for most of society is going to remain flat, or decline depending on inflation.

Now going back to the first graph, the most important one. What you see is that the labor force participation rate has dropped by 6 percentage points since 2000, with 5 of those dropped since 2008. What is important is that that rate is still slightly higher than it was during the post WWII boom times.

We may be experiencing a reversion to the historical norm, after an unsustainable bubble in the labor force. The difference is that women have replaced men in the workforce, and immigrants have replaced children in the population.

Simply put, we now have the world the Boomers dreamed of in the 1960s. Except that the economic reality of it is stagnation and decline, and disintegrating societal cohesion.
I actually agree with a lot of this, but there are a few assumptions (especially one) that I simply can't accept. You built your argument on a premise you disparaged in an earlier post: the zero sum game (ZSG). Adding to the employment pool certainly drives down wages and salaries, at least a first, but it can easily be absorbed in a growing economy. That's not a ZSG - far from it. Think of it as adding fuel to a fire. If the fire is already hot, it merely grows larger. If it's waning, the new fuel has no additive benefit, and may actually stifle the fire. While the second case resembles a ZSG, it's actually situational, and one not likely to be repeated any time soon.

We had a huge influx of workers in the 70s and 80s, but much of that was driven by necessity, not by opportunity. The OPEC Oil Embargo triggered a jump in prices which evolved into an inflation spiral. With prices rising and interest rates very high, two-earner families became a necessity. Of course, the economic fire was bit weak at the time, so this had the effect you describe.

Quote Originally Posted by JPT ...
This will be met with great howls of outrage, but the fact of the matter is, it is hard to come to any other conclusion than that the primary cause of all of these changes is feminism. With women rejecting marriage and motherhood and entering the workforce to compete with men for jobs, everyone's standard of living has declined. That effect has been compounded by the replacement of children with immigrants from third world countries who will work for lower wages, driving down incomes even further. We're told there are "jobs Americans won't do", but in reality there are jobs Americans won't do for the wages being offered, because the market has already adjusted to the presence of low-skilled immigrant labor.

There are many women who have to work, and have no choice in the matter. But they have always existed, and they were already working in the 1950s. What we've seen since the 1960s is a movement of women working because they want to (or because they're told they should want to, and everybody else is doing it), for the sake of "independence", "self-fulfillment" and so forth. Being a stay-at-home mom is a demeaning enslavement, and a waste of a woman's potential. These are all things we've heard a million times in the wake of the Baby Boom generation.
As much as I disagree, I'll ignore your implication that women belong at home, since this is a point we'll never settle. That you see the actual impacts in the way you do is the result of a faulty premise, added to a series of business and labor decisions that made the results a virtual fait accompli. The list of bad decision covers everything from favoring business over labor to deregulation to so-called free trade. I'll let the real pros put that together into a model with a narrative.

Quote Originally Posted by JPT ...
But the economic consequences and resulting realities were never taken into account. The reality for most women now is being a single mother, struggling to get by on her own, or a single non-mother living a dreary lower-middle class existence, working like a slave all day, and finding it harder and harder to find a suitable husband, or any direction in life. The decline in male participation, combined with affirmative action for women in the workplace and in education has made it so that it is more and more common for a woman from a particular background to be better off economically than a comparable male, which exacerbates the problem of single parenthood, and denies them the economic benefits of marriage. Men, meanwhile, are increasingly unwanted, unneeded, and idle. Which often lands them in prison.
It's a known fact that the parts of the country most favorable to the feminist message are also the ones with the lowest abortion rates, highest rates of marriage and most stable families. They are also the ones with the most generous safety nets. You would have a point if the opposite was the case, but it isn't. Based on that, you have to argue cause and effect - in other words, are the bad social habits a cause of the economic problems we're having or the effect of them. The data seem to support the second case better than the first.

You need to sharpen your model.

Quote Originally Posted by JPT ...
It is possible that some of this could be fixed if women become much more willing to support unemployed spouses, as men were always willing to do in the "bad old days" we're so often told about. But that's about as likely as a trout winning the Boston marathon. Barring the emergence of some new social arrangement that can replace the old norms, or a reversion to something more like the old norms, the future seems to be set in stone, and it is what we now see around us every day. Men and women living alone, barely getting by. Children being raised by single mothers, and all of the disadvantage that brings with it. We could, for a short period of time, tax and spend our way through and give people subsidies to soften the malaise. But eventually those paying the taxes will cease to exist, and the conditions will not have changed, only worsened.

I think this is clearly the new reality of American life, and it is a society in decline, economically, culturally, and ultimately as a whole nation. The economic problems are a result of societal changes, and the economic problems cause new societal pathologies in a vicious cycle, a downward spiral.
These are unjustified conclusions based on faulty premises. There are issues that need to be addressed, but the fixes you list aren't among them. I covered most of this already, so I won’t repeat myself, although the issue of spousal support does need a major overhaul. FWIW, there are cases where the former husband is, in fact, the one who receives support. I know this for a fact, since it has happened in my own family. The real issue is more subtle. What support is reasonable, under what circumstances and for how long? That needs a thread of its own.
Last edited by Marx & Lennon; 07-11-2013 at 12:12 PM.
Marx: Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies.
Lennon: You either get tired fighting for peace, or you die.







Post#9 at 07-11-2013 11:51 AM by pbrower2a [at "Michigrim" joined May 2005 #posts 15,014]
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Quote Originally Posted by JustPassingThrough View Post
I decided to post this here, after not posting here much for a while, because I have no other place to post it. There are occasionally people posting here who have some background in economics, so it may stimulate some discussion. It also requires a historical overview, and may correspond to the S&H cycles.

There are a lot of things being written these days about the economy, and a lot of explanations for why things are the way they are. This is an area where I feel all sides of the ideological spectrum have things wrong. Their determination to shoehorn things into neat boxes blinds them to the big picture. The Democrats love to talk about the stagnation of real wages. They look at the timeline and blame it all on Ronald Reagan and Republican policies. They like to talk about income inequality, but it's always through the lens of the rich stealing from the poor in a zero sum game. As for the Republicans, the fact that there is a clear structural decline happening is all a result of lazy, freeloading moochers seduced into idleness by the safety hammock of government programs. Libertarians just chalk everything up to the free market and leave it at that, good or bad.
You now make some sense.

I'm going argue to that none of the above are sufficient descriptions of what's happened. I will submit at the start that various factors often mentioned have some validity: globalization of trade, the outsourcing of jobs, the automation of jobs formerly done manually, and the negative incentives of welfare programs. However, having looked at the data, I think those are all marginal issues. The real issue comes down to the most basic economic principle: the law of supply and demand.
The law of supply and demand explains much, but not everything.

So I'm now going to post a series of charts and graphs, starting with the most important one. This is the overall labor force participation rate since the 1950s:
overall labor force participation rate

So why does the overall labor force participation rate rise and fall? That reflects the pattern of boom and bust. The most volatile segment of the labor force are low-skilled workers -- the "last-hired and first-fired". In a boom time, raw labor gets attracted into low-skilled labor. These are the unskilled laborers of construction sites, assembly-line workers, the file clerks and data-entry operators, the domestic servants, the checker-cashiers at box stores, the cleaners, the messengers, the sales clerks at department stores... people who as a rule can be put on the job quickly for low pay. Others are those who might hold onto a job by getting away with extending a career with obsolescent skills. As the boom comes to an end, those marginal workers lose their jobs. Add to that people who work in highly-cyclical activities (such as tool-and-die makers).

Obsolescent skills? Maybe those with some flexibility can make changes. Perhaps a 50-year-old engineer who recognizes that he can't keep up with the hot-shots fresh from college as he was 25 years earlier learns how to drive a truck or a bus. A chemist becomes a lab technician. That is at a lower level of skill, of course, but it is still work-force participation. But the unskilled rarely have the flexibility to make such a change.

Note well that the 2007-2009 recession is by far the severest of the lot with nothing comparable since at the least the post-war conversion from a war economy to a peace economy (soldiers taking industrial jobs from "Rosie the Riveter" who often became "Helen Housewife"). Workforce participation which had peaked around 64.5% in 2000 has dipped dramatically from slightly over 63% in 2007 to just above 58%... the latter close to peaks known between 1950 and 1975.

Barring a war-fueled economy in which anyone who can imaginably work in a defense plant gets a job if not drafted for military service, the overall labor force participation rate may be stuck in the 58-60% range for a while. Youth may become less likely to drop out of school to take low-paying jobs when those do not exist. People may not stay in the workforce as long. Maybe people will decide that family life is richer than the consumer economy. Marriage rates may rise. A 4T can force people to rediscover the old virtues of family and community -- and force people to make the best of a grim, dreary, joyless world that they thought that they could escape by going from Appalachia to Denver. Maybe their world is grim, dreary, and joyless because they have put too little into it and too much effort into occasional escape.

The high overall labor force participation rates of the 1980s through the Double-Zero decade may reflect a 3T pattern that people would reject in a 1T or a 2T. Maybe we are going to see things done far differently. Getting out of the home and its dreary tasks is liberation for a woman who can get a high-paying or at least esteemed job in industry or a government bureaucracy. Trying to make ends meet by abandoning the children to daycare while one works in a fast-food place is not the sort of women's liberation that Betty Friedan or Gloria Steinem envisioned. Perhaps the crackdowns on domestic violence can make domestic life comparatively attractive as unskilled or slightly-skilled work becomes less so.

What remains of the workforce is likely (by default) to become more skilled and competent.
The greatest evil is not now done in those sordid "dens of crime" (or) even in concentration camps and labour camps. In those we see its final result. But it is conceived and ordered... in clean, carpeted, warmed and well-lighted offices, by (those) who do not need to raise their voices. Hence, naturally enough, my symbol for Hell is something like the bureaucracy of a police state or the office of a thoroughly nasty business concern."


― C.S. Lewis, The Screwtape Letters







Post#10 at 07-11-2013 12:46 PM by pbrower2a [at "Michigrim" joined May 2005 #posts 15,014]
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Quote Originally Posted by JustPassingThrough View Post
Sorry for the size of the image, I couldn't find a way to shrink it. The graphs may tell the story on their own, before I even explain it.

Here is the labor force participation rate over the same period of time, divided between men and women:

Female participation of course steadily rose until the 2007-2009 "Little Depression" while male participation has fallen. I suspect that the rate ofmale participation has shrunk as

(1) more men are incarcerated for criminal offenses such as drug dealing

(note well that the assembly line used to absorb huge numbers of marginally-educated male workers)

(2) competent women have been swept into the workplace, but that has likely met its end

(3) marginal participants -- typically very-young (teenagers and the elderly) get shut out or removed from the workforce, which especially applies to men.

Real wages, over the same period of time:

Poor link or poorly inserted.

U.S. Birth rate:

Ski trip to Vail or baby.
Home entertainment center or baby.
Jaunt to Vegas or baby.
Once-in-a-lifetime trip to London or baby.
College education or baby.
Lots of passionate sex or baby.
Golden retriever or baby.
Job at the box store or baby.
New car or baby.

People more often make reproductive choices with a rational calculus of opportunity costs and the juxtaposition of pleasure and pain instead of "doin' what comes natchur'ly" which may offend the refined sensibilities of the educated bourgeoisie and its pretenders-- but it fits tradition well. A pattern that once was the norm of a Catholic families in which the great achievement was to have several children -- one of whom continues the trade or keeps a hold on the family farm, one of whom becomes a Catholic priest, one or two of whom become nuns -- is no more.


Foreign-born share of the US population:

Compensation for low birth rates.
The greatest evil is not now done in those sordid "dens of crime" (or) even in concentration camps and labour camps. In those we see its final result. But it is conceived and ordered... in clean, carpeted, warmed and well-lighted offices, by (those) who do not need to raise their voices. Hence, naturally enough, my symbol for Hell is something like the bureaucracy of a police state or the office of a thoroughly nasty business concern."


― C.S. Lewis, The Screwtape Letters







Post#11 at 07-11-2013 01:19 PM by pbrower2a [at "Michigrim" joined May 2005 #posts 15,014]
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Quote Originally Posted by playwrite View Post
First, welcome back.

Just a day or two ago, I singled you out as perhaps the only person I had a clear hand in driving away from the forum, and that I regretted having played that role. My apologies to you.
__________________________________________________ __________________


(It is a faulty contention) that more people in the labor force is the root cause of unemployment. More people can aggravate the true causes of unemployment but more people can also facilitate those factors that grow employment.

While it is true that more people, either by immigration, births or women joining the workforce, add more to the potential labor force, the supply side, it is also true that they add more to the demand side that can take up any slack in the supply side. To think otherwise, one would have to explain why the growth in US population since its establishment doesn't now have the vast majority of people unemployed.

It's referred to as the "virtuous cycle." The key to it was covered by Henry Ford when he often explained his rationale for providing his workers higher pay scales than most other industry being due to his wanting them to be able to afford to buy his cars.

The most critical graph missing ... is this one -



- essentially, the wealth from the nation's economic production is increasing going to corporate profits rather than to wages. If one is not addressing that fact, then one is really not addressing the issue.

Now a couple of things about that. Those corporate profits are not just going to very rich CEOs and the financial system that banks them, most of it actually goes to investors as dividends or re-invested by the corporations on behalf of their investors to further production and capital gains. There's the issue there that is mostly older established folks and their investment institutions (pensions, 401ks, insurance) that are profiting while there is hardly any participation in those gains by younger folks. But maybe there's some solution in there as well of broadening the investment class.

I don't know the answer, but I do know ignoring this as the most fundamental change in our economy forgoes any serious attempt at understanding the ills of our economy today.

Just one minor point. Rather than using gross labor participation rate, most folks who are seriously study what is going on now use participation by the prime working age of 26-56 (I believe that's the range off the top of my head) that not only normalizes the trend to negate the increasing bulge of baby boomer retirements but also influences on the other end of younger folks going to school. Some actually limit the trend analysis to males in that age group since the female side has actually been more stable for some time now.

What has disconnected the virtuous cycle?
Probably the belief that we are all in it together and that people other than elites must have a stake in the system if the system is to work well and not result in the breaking of people into sullen serfs or an eruption of class warfare. Extreme inequality does not so much create or reflect growth as it creates misery. Extreme inequality is a symptom of pathologies within the economic order -- traditional serfdom (tsarist Russia), systemic racism (South Africa under Apartheid), regional differences within a country (Brazil), complete suppression of workers' rights (Nazi Germany, Chile under Pinochet), and unequal opportunity (China). I was shocked to find that India has lower Gini coefficients for wealth and income than the US.

The share of income going to capital in America is high -- but capital itself is extremely concentrated in America. The decline of small business plays its role, but even more significantly the tax policies since 1980 have intensified inequality in America and rewarded people for getting well paid for treating others badly. (Executive compensation has also skyrocketed with no evidence that such has made things better for any but elites).

For most Americans of comparable age and job description, things in 2013 are probably no better than they were in 1980 except for technological progress which would have happened without special tax breaks for traditional elites. If most of us knew what America would be like in 2013, maybe we would have had two terms of Jimmy Carter.
The greatest evil is not now done in those sordid "dens of crime" (or) even in concentration camps and labour camps. In those we see its final result. But it is conceived and ordered... in clean, carpeted, warmed and well-lighted offices, by (those) who do not need to raise their voices. Hence, naturally enough, my symbol for Hell is something like the bureaucracy of a police state or the office of a thoroughly nasty business concern."


― C.S. Lewis, The Screwtape Letters







Post#12 at 07-11-2013 01:31 PM by Mikebert [at Kalamazoo MI joined Jul 2001 #posts 4,501]
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Quote Originally Posted by JustPassingThrough View Post
What you see in every graph is a clear inflection point, right around 1970.
Huh. It's in one graph, the percent foreign born bottomed around 1970. The %employed was range bound over 1947-77 and broke out of that range after 1977. LFPR for men shows a secular trend over the entire period--no inflection points. That for women shows a trend to ca 1993 and has been trendless less. Crude birth rate peaked in 1957 and bottomed in 1975. Gini corriffient abd house polarization were both range bound until ca 1983 and then started to rise. So we have the following "inflection points": 1970, 1977, 1993, 1957/75, 1983, 1983. These average 1977 with standard error of the mean of 4 years, which hardly supports your assertion of 1970 being special.







Post#13 at 07-11-2013 01:45 PM by JordanGoodspeed [at joined Mar 2013 #posts 3,587]
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It's also worth pointing out that the countries with the lowest fertility rates are developed ones with quite rigid gender roles, particularly where parenting is concerned (Japan, South Korea, Italy, Poland, etc).


Iran has had a pro-natalist policy since the Islamic Revolution, and yet its fertility rate is below replacement today (1.64). Fastest drop for any nation in history. How feminist do you think those mullahs are? I think you might want to look for a different explanation.


I think that looking at the labor market in only the US is a little misleading, given the extent to which services and goods in particular are made overseas. We've benefited (and suffered) from a situation where more goods and services were available for consumption than we could produce on our own, while the people who were providing them weren't competing with us as consumers until relatively recently. The growth of credit and overall financialization of the economy made up the difference between our consumption and our production.


It might be helpful to think of the '50s and '60s as being an unusually prosperous period, and our trajectory since then as a reversion towards the global mean, which has been rising to match. It's the market at work.

You could look at late 19th/early 20th century Britain and late 17th/early 18th Holland and see very similar parallels in terms of financialization, declining competiveness, and imperial overstretch. Barring an amazing new energy resource, declining EROEI will likely make our future trajectory more like that of the 18th century Dutch than the 20th century British.







Post#14 at 07-11-2013 02:16 PM by pbrower2a [at "Michigrim" joined May 2005 #posts 15,014]
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Quote Originally Posted by JustPassingThrough View Post
Income inequality over time (ignore the polarization number, although it is interesting):
I'm not going to ignore political polarization. As economic inequality in America intensities associated with racist, fascist, and plantation economies one finds that the economic elites endorse economic policies that would intensify economic inequality. Those elites begin to believe that any good that anyone gets is the result of their specific permission or beneficence.

What I say of economic elites that seek to exploit and degrade working people for their own selfish indulgence that results from extreme inequality is parallel to the pitch of a child molester. A child molester never tells a child that he will give the child pain and shame that a child can never imagine before experiencing it first-hand -- pain and shame that no child should rightly experience. The abuser offers candy, a trip to the amusement park, attention that his parents either do not or cannot offer, and rare and special experiences. Then the abuser exposes the child to pornography or 'sex games' -- and eventually... I need go no further. Our elites offer 'prosperity' -- if only for themselves. They offer 'traditional values' -- the sorts that extreme poverty and ignorance necessitate.

What passes as the American Left (Democrats) today in electoral politics was middle-of-the-road from about 1950 to about 1985. Basically Barack Obama is little different from an "Eisenhower" or "Rockefeller" Republican. But the Right has gone from slightly-Right to nearly-fascist -- serving people who believe that no human suffering is excessive if it turns a profit or allows elite indulgence on the cheap. The Hard Right (Republicans) has an economic agenda of people working longer and harder under harsher discipline with more fear for much less. They believe in weak formal government directed by lobbyists responsible only to the lobbyists' paymasters (as a rule, the super-rich and their corporations).

What most scares me is that the Republican Party increasingly takes on the characteristics of a Communist Party in its command-and-control structure. Front groups and "democratic centralism" should remind us of what J. Edgar Hoover warned about in Masters of Deceit. Conservatives would surely find such appalling -- but the GOP is no longer a conservative party except as a euphemism.
The greatest evil is not now done in those sordid "dens of crime" (or) even in concentration camps and labour camps. In those we see its final result. But it is conceived and ordered... in clean, carpeted, warmed and well-lighted offices, by (those) who do not need to raise their voices. Hence, naturally enough, my symbol for Hell is something like the bureaucracy of a police state or the office of a thoroughly nasty business concern."


― C.S. Lewis, The Screwtape Letters







Post#15 at 07-11-2013 02:27 PM by Mikebert [at Kalamazoo MI joined Jul 2001 #posts 4,501]
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When I started at the Upjohn company 25 years ago, when you looked at an organizational chart, it was easy to determine for what each of the CEO's direct reports were responsible based on their job titles. If you look at the Pfizer organizational chart today, this is no longer possible. At one time I could start at the CEO and drill down through the chart to eventually get to me. I tried to do that the other day and I got hopelessly lost, even though I knew which one of the many "finance" veeps is the start of the chain that leads to me. I figured I would find the "manufacturing guy" and go from there. I know my chain five levels up, but I couldn't find the top guy I know--even though he is in charge of tens of thousands of employees. Sure seems to be a lot of highly-paid people in charge of things that have no recognizable link to any business function relevant to the customer.

Then there is my sister who hates her job (she works at a dense contractor) ever since they were sold to an investment firm. Al the employees are now called "associates" like Walmart employees. What is the function of an associate?

I focus on langauge because language is indicative of culture, and I strongly suspect that changes in business culture are partly responsible for the economic malaise we have experienced since 2000. Another factor is maladaptive market signs caused by government economic policy changes made since 1980. A third factor was the peak of the particularly robust "mass market economy" in 1973 and it replacement by an "information economy" that is smaller in terms of the number of people employed in its leading sectors as compared to the previous one.

And yes, expansion of the workforce is part of the story for wage stagnation, but it is hardly central, if it were the huge drop in LFPR from 2000 to today should have been accompanied by a 10% increase in real wages from their 2000 levels. Didn't happen.







Post#16 at 07-11-2013 02:40 PM by playwrite [at NYC joined Jul 2005 #posts 10,443]
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Quote Originally Posted by JustPassingThrough View Post
My point was not about unemployment, it was about stagnant wages.
Actually, it holds for wages as well. In fact, one can look at unemployment as just a category of the wage distribution curve - the slice of people with zero wages.

The virtuous cycle would have the downward pressure on wages from more wage earners being offset by the upward pressure on wages from the need to meet the demand of all new wage earners.

Quote Originally Posted by JustPassingThrough View Post
Whether or not people participate in the work force, they still contribute to demand.
... but only if they have dollars to do so provided by a wage earner, govt or charity. Their adding demand without a corresponding upward pressure on wages to meet that increased demand is actually part of the puzzle of the disappearance of the virtuous circle.

Quote Originally Posted by JustPassingThrough View Post
The traditional family unit, with one male breadwinner, is a very efficient way to divide labor and pool resources, while keeping wages high. With population held constant, a bunch of single adults with fewer children living separately is far less efficient. It floods the labor market with too many job seekers, driving down wages, and increases the relative cost of living for each individual.
The virtuous cycle would normally make the adjustment. The family with two incomes will now take the kids to Disney World for a full week rather than just 3 days - that puts upward pressure on Disney wages to attract sufficient Goofy imitators to cover 7 rather than just 3 days. [Did anyone else note that a regular day ticket to the Magic Kingdom is now $100?! I'm glad my kids have grown out of it. However, I wouldn't mind gong back to give the Harry Potter ride another spin at Universal!]

Quote Originally Posted by JustPassingThrough View Post
Wages are not necessarily related to corporate profits. The labor market dictates wages, ...
The relation of macro economic interest is made in terms of where income goes from national production, i.e., how the pie is split up. Labor's slice has been on a downward slope while the owner/investor slice has been doing the opposite. Don't get me wrong, we need the corporate profits, if turned into investment in production, to grow the economy - to make the overall pie bigger. However, the virtuous circle apparently needs to have some of that profit instead going to wages in order to also grow demand. The lack of the latter gets aggravated by increases in the labor force but it still the lack of sufficient wages that is the more organic aspect of the problem.

What to do? I have no idea.
"The Devil enters the prompter's box and the play is ready to start" - R. Service

“It’s not tax money. The banks have accounts with the Fed … so, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed. It’s much more akin to printing money.” - B.Bernanke


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Post#17 at 07-11-2013 02:50 PM by playwrite [at NYC joined Jul 2005 #posts 10,443]
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Quote Originally Posted by Marx & Lennon View Post
...Adding to the employment pool certainly drives down wages and salaries, at least a first, but it can easily be absorbed in a growing economy. That's not a ZSG - far from it. Think of it as adding fuel to a fire. If the fire is already hot, it merely grows larger. If it's waning, the new fuel has no additive benefit, and may actually stifle the fire. While the second case resembles a ZSG, it's actually situational, and one not likely to be repeated any time soon.
That is one of the best analogies of the concept I've seen. Three-pointer! How do you do a "thumbs-up" icon?

Quote Originally Posted by Marx & Lennon View Post
I'll ignore your implication that women belong at home, since this is a point we'll never settle.
I think most see that is the real agenda being presented. At best, one might be able to argue, using some select statistics, that children out of 2-income families can have some problems, but that might just be offset alone by family financial ability to afford secondary education. But again, I don't think any minds are going to change on the underlying agenda. I'm on my tippy toes. It's the new me.
"The Devil enters the prompter's box and the play is ready to start" - R. Service

“It’s not tax money. The banks have accounts with the Fed … so, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed. It’s much more akin to printing money.” - B.Bernanke


"Keep your filthy hands off my guns while I decide what you can & can't do with your uterus" - Sarah Silverman

If you meet a magic pony on the road, kill it. - Playwrite







Post#18 at 07-11-2013 02:59 PM by playwrite [at NYC joined Jul 2005 #posts 10,443]
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Quote Originally Posted by Mikebert View Post
When I started at the Upjohn company 25 years ago, when you looked at an organizational chart, it was easy to determine for what each of the CEO's direct reports were responsible based on their job titles. If you look at the Pfizer organizational chart today, this is no longer possible. At one time I could start at the CEO and drill down through the chart to eventually get to me. I tried to do that the other day and I got hopelessly lost, even though I knew which one of the many "finance" veeps is the start of the chain that leads to me. I figured I would find the "manufacturing guy" and go from there. I know my chain five levels up, but I couldn't find the top guy I know--even though he is in charge of tens of thousands of employees. Sure seems to be a lot of highly-paid people in charge of things that have no recognizable link to any business function relevant to the customer.

Then there is my sister who hates her job (she works at a dense contractor) ever since they were sold to an investment firm. Al the employees are now called "associates" like Walmart employees. What is the function of an associate?

I focus on langauge because language is indicative of culture, and I strongly suspect that changes in business culture are partly responsible for the economic malaise we have experienced since 2000. Another factor is maladaptive market signs caused by government economic policy changes made since 1980. A third factor was the peak of the particularly robust "mass market economy" in 1973 and it replacement by an "information economy" that is smaller in terms of the number of people employed in its leading sectors as compared to the previous one.

And yes, expansion of the workforce is part of the story for wage stagnation, but it is hardly central, if it were the huge drop in LFPR from 2000 to today should have been accompanied by a 10% increase in real wages from their 2000 levels. Didn't happen.
You noted our moving to the "information economy." One aspect of that: over the years/decades, have you notice a trend in the number of secretaries in your organization?

Maybe they all fled to those jobs that now defy characterization?
"The Devil enters the prompter's box and the play is ready to start" - R. Service

“It’s not tax money. The banks have accounts with the Fed … so, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed. It’s much more akin to printing money.” - B.Bernanke


"Keep your filthy hands off my guns while I decide what you can & can't do with your uterus" - Sarah Silverman

If you meet a magic pony on the road, kill it. - Playwrite







Post#19 at 07-11-2013 07:41 PM by JustPassingThrough [at joined Dec 2006 #posts 5,196]
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Quote Originally Posted by Mikebert View Post
Huh. It's in one graph, the percent foreign born bottomed around 1970. The %employed was range bound over 1947-77 and broke out of that range after 1977. LFPR for men shows a secular trend over the entire period--no inflection points. That for women shows a trend to ca 1993 and has been trendless less. Crude birth rate peaked in 1957 and bottomed in 1975. Gini corriffient abd house polarization were both range bound until ca 1983 and then started to rise. So we have the following "inflection points": 1970, 1977, 1993, 1957/75, 1983, 1983. These average 1977 with standard error of the mean of 4 years, which hardly supports your assertion of 1970 being special.
The term I used was "inflection point". Trends may only be noticed once they break past historical norms, but they start before they reach that point. The peak, bottom, or point of flattening in each of those charts is somewhere around 1970. That's where we all know a massive societal shift happened on many fronts. The birth rate is one that's slightly earlier - the Baby Boom ended before 1970 - but the point at which the current trend of low birth rates set in was around 1970, where they bottomed out and have barely increased since.
"I see you got your fist out, say your peace and get out. Yeah I get the gist of it, but it's alright." - Jerry Garcia, 1987







Post#20 at 07-11-2013 07:55 PM by JustPassingThrough [at joined Dec 2006 #posts 5,196]
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Quote Originally Posted by Mikebert View Post
When I started at the Upjohn company 25 years ago, when you looked at an organizational chart, it was easy to determine for what each of the CEO's direct reports were responsible based on their job titles. If you look at the Pfizer organizational chart today, this is no longer possible. At one time I could start at the CEO and drill down through the chart to eventually get to me. I tried to do that the other day and I got hopelessly lost, even though I knew which one of the many "finance" veeps is the start of the chain that leads to me. I figured I would find the "manufacturing guy" and go from there. I know my chain five levels up, but I couldn't find the top guy I know--even though he is in charge of tens of thousands of employees. Sure seems to be a lot of highly-paid people in charge of things that have no recognizable link to any business function relevant to the customer.

Then there is my sister who hates her job (she works at a dense contractor) ever since they were sold to an investment firm. Al the employees are now called "associates" like Walmart employees. What is the function of an associate?

I focus on langauge because language is indicative of culture, and I strongly suspect that changes in business culture are partly responsible for the economic malaise we have experienced since 2000. Another factor is maladaptive market signs caused by government economic policy changes made since 1980. A third factor was the peak of the particularly robust "mass market economy" in 1973 and it replacement by an "information economy" that is smaller in terms of the number of people employed in its leading sectors as compared to the previous one.

And yes, expansion of the workforce is part of the story for wage stagnation, but it is hardly central, if it were the huge drop in LFPR from 2000 to today should have been accompanied by a 10% increase in real wages from their 2000 levels. Didn't happen.

Economies and societies are not computers or machines. They're organic. Trends take time to develop, and the economic fallout of those trends can be delayed. The proper way of looking at things is in terms of "bubbles", "corrections" and so forth. I'm suggesting there has been a labor bubble. The bubble has burst. Prices remain extremely low. The same thing that happened in the housing market. As I also pointed out, the bottom of the current labor participation rate is the same as the peak during the 50s and 60s, when the economy was reportedly strong.
"I see you got your fist out, say your peace and get out. Yeah I get the gist of it, but it's alright." - Jerry Garcia, 1987







Post#21 at 07-11-2013 11:27 PM by XYMOX_4AD_84 [at joined Nov 2012 #posts 3,073]
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Increasingly the peak in the labor force is a past event. The native born are below replacement and immigration is slowing dramatically as source countries lose their own fecundity. So we are going from an environment of labor arbitrage to one of decline in demand. And to boot, in addition to decline in demand, real disposable income is undermined ongoing by dilution of the fiat currency. The damping factors are so intense that the economy as we know it may actually die. Ironically, a big war may be the only thing preventing complete economic death. To fund our upcoming Great Patriotic War (it will rival if not surpass what the USSR faced last century) we cannot rely on the normal Fed style of funding. Ultimately, the measures needed to fund it may have the unintended effect of completely overturning and cultivating this current chronically ill economic system.
Last edited by XYMOX_4AD_84; 07-11-2013 at 11:31 PM.







Post#22 at 07-12-2013 12:36 AM by Brian Rush [at California joined Jul 2001 #posts 12,392]
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The only thing I have to add that doesn't seem to have been stated already is that in addition to increased labor supply, there has also been reduced demand for labor. Partly this has come about through advanced technology, particularly computers. Partly it's through outsourcing. Had this not taken place, the increased supply caused by women entering the workforce would, through increased household income, have sparked increased employment (to some extent it did anyway).

I could also point to the loss of union power as a factor. This has happened through the loss of unionized manufacturing jobs coupled with a more hostile government attitude towards organized labor that has retarded organization of the new service jobs that replaced the manufacturing jobs. The problem would have been less, I believe, without that change in government policy.

In the end, though, as we move deeper into a world in which machines do more and more of the work of producing wealth, there will be no conventional solutions to the problem. Ultimately we are going to have to divorce human labor from income in our thinking, just as it is being divorced from wealth production. That's a far more radical change than opening workplace doors to women.
"And what rough beast, its hour come round at last, slouches toward Bethlehem to be born?"

My blog: https://brianrushwriter.wordpress.com/

The Order Master (volume one of Refuge), a science fantasy. Amazon link: http://www.amazon.com/dp/B00GZZWEAS
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Post#23 at 07-12-2013 01:41 AM by Eric the Green [at San Jose CA joined Jul 2001 #posts 22,504]
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Quote Originally Posted by XYMOX_4AD_84 View Post
Increasingly the peak in the labor force is a past event. The native born are below replacement and immigration is slowing dramatically as source countries lose their own fecundity. So we are going from an environment of labor arbitrage to one of decline in demand. And to boot, in addition to decline in demand, real disposable income is undermined ongoing by dilution of the fiat currency. The damping factors are so intense that the economy as we know it may actually die. Ironically, a big war may be the only thing preventing complete economic death. To fund our upcoming Great Patriotic War (it will rival if not surpass what the USSR faced last century) we cannot rely on the normal Fed style of funding. Ultimately, the measures needed to fund it may have the unintended effect of completely overturning and cultivating this current chronically ill economic system.
It would likely not work, although I can see your point. But the Great Patriotic War cemented the command economy of the USSR, which then stagnated and crumbled over time. Such a war would be too destructive to fuel a new New Deal here, since in the USA we had the luxury of not being invaded except for a territory out in the Pacific Ocean.

Brian Rush's comments are well taken. Decline in demand may happen, since the age of economic growth may be over. On the other hand, this demand decline is due in large part to the economic policies of Republicans and New Democrats over 32 years. If different policies had been, or were in place, that would have a major impact. Social taxing and spending increases demand. Also, though population growth may level off, we still have a good century or two of more development and advancing incomes abroad in the 3rd world. That means export income will flow to those countries who can tap into the increasing demand there. I don't think currency dilution is a big factor; if inflation starts again, money supply will tighten again. Right now easy money is necessary, and it's the only government action allowed to counter the recession and unemployment under the current Republican rule (reimposed on Nov.2, 2010 by we the people).

What Americans need to do is get over their obsession with the idea that using the government is not a good solution to our problems. Even so, especially at the local level, regulations could be streamlined to speed up infrastructure projects. Ironically, it is always the Democrats, not the tough-talking Repubs, who actually do this.

If things like education and infrastructure were improved in this country, demand would improve too. We haven't done much of anything about those deficiencies. Unless we do, we can't be sure to blame it all on a labor surplus.

The biggest threat to our future is climate change, which will be even harder to stop if the pundits' enthusiasm for an "oil and gas boom" in the USA is allowed to prevail. We need to switch OFF of those fuels NOW.
"I close my eyes, and I can see a better day" -- Justin Bieber

Keep the spirit alive,

Eric A. Meece







Post#24 at 07-12-2013 02:27 AM by pbrower2a [at "Michigrim" joined May 2005 #posts 15,014]
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Quote Originally Posted by JustPassingThrough View Post
What you see in every graph is a clear inflection point, right around 1970. Women entered the workforce in massive numbers, raising their participation rate from 34% in 1950 to 60% today. The birth rate cratered and flatlined, and the foreign-born share of the population began to rise, reaching a peak today unseen since the 1920s. Individual earnings flatlined, and income inequality began to rise.
Related:

1. to the rapid increase in energy costs that caused costs of heating fuels and electricity to rise as well as the more visible motor fuels. Such pushed more people into the workforce as a rapid increase in living costs. In fact, anything that used energy or petroleum from local government (from heating public schools to running police cars to food (mechanized farming and food processing).

That's cost-push inflation and Americans were not going to deflate the economy to get fixed (nominal) fuel prices. Nobody wanted a reprise of the 1929 stock-market crash. America adjusted, and people who got jobs spent money. To be sure, most of the job creation was in low-wage, dead-end jobs as in fast food (understandable because someone who has worked an eight-hour job will be tempted to take out food on the way home and of course buy lunch on the job).

2. It may be callous to put it this way -- but I have: an infant is an economic choice, especially in a time of birth control.

As I said, the Democrats love to blame tax cuts for rising inequality, and greedy businesses for flatlining wages. Republicans and libertarians ignore this data, and/or simply don't care.
But while federal income taxes have been cut for high-end incomes, FICA and Social Security taxes have risen. One does not pay these taxes on investment income, capital gains, or very high incomes. Such shifts taxes from the rich to the non-rich. Also, state income taxes have risen almost everywhere. State sales taxes are regressive -- especially if the taxes fall on food.

In reality, what has happened is that there has been a dramatic increase in the supply of labor. As the law of supply and demand dictates, increasing supply leads to falling prices - in this case, lower wages.
The labor force participation rate may have started to act differently now. A rate of 58% was typically a peak in a boom -- at least before the mid-1970s. Beginning in the mid-1970s the labor force participation rate reached 60% in the stagflation era of 1980 before a steep downturn and then rose to as high as 64.5% during the tech boom that ended about as Dubya took office (mere coincidence there, in case you wish to see me blaming Dubya for that). It since slid to about 62% before the real-estate crash of 2007. After the worst economic meltdown in 80 years the labor force participation rate seems to have stagnated around 58%.

The new normal may be that fewer people do paid work. Figure that many marginal workers (typically teenagers, unskilled workers, and elderly workers) have either failed to enter the workforces (teenagers may have been told to put emphasis on studies instead of upon getting money for cars, trips, and clothes as they once did; people may be pushed into retirement earlier).

The same effect has happened when it comes to college degrees. Many more people are going to college, and especially many more women than in the past. That has the effect of driving up the cost of tuition, while driving down the value of the resulting degree. The more demand there is for college degrees, the higher the price of tuition rises (government subsidies also play a role). The more college graduates there are, the less valuable the degree becomes when seeking employment.
But not having a degree now sets not so much a glass ceiling to advancement but a very low, more rigid ceiling (call it iron or concrete if you wish). Jobs that used to not require a college degree (like police and fire-fighting) now require one. Due to the complexity of vehicles one can no longer get a job as a vehicle mechanic (unless one simply does such unskilled activities as oil changes or fixing flats) as one once did; one now needs some specialized training. Even if the job description does not so state, chit-chat with customers may be a part of the job -- let us say for a bartender.

It is still possible for a two-income household to produce an upwardly mobile lifestyle, but it requires that both spouses work. However, marriage rates have fallen, divorce rates have risen, and single parent households are increasingly the norm. A single individual (or even worse a single parent) is going to have a hard time doing more than maintaining a flat standard of living over the course of their lifetime. When men and women are increasingly living separately, and they're competing against each other for jobs while having to pay the expenses for two separate households, the overall standard of living for most of society is going to remain flat, or decline depending on inflation.
Economic inequality has been intensifying through the 3T because of the choices of our self-serving economic elites. We have always had our tycoons and big landowners faring far better than most of us -- but the economic elites of America now include business executives paid not so much to administer fairly but instead to treat workers badly and squeeze out competition. That those elites generally support the most reactionary politicians around creates a positive feedback for their incomes and low tax rates... while driving real wages down and shifting taxes to the non-rich.

During the 3T Boomers have been supplanting first GI (I remember when GI executives typically made about ten times as much as a factory worker in the 1970s) and Silent executives. The GI executive had loyalties both ways; after all, he (and in those days it was almost always a male) had worked on the shop floor or in the warehouse before getting a sales route typically in some awful part of the country and could relate to people who did clerical or manual work. Today the MBA program perfectly suits the narcissist who kisses up and kicks down -- and that is where Boomer executives come from.

Narcissists may not be as destructive as outright sociopaths, but they can certainly make life miserable for subordinates.

Now going back to the first graph, the most important one. What you see is that the labor force participation rate has dropped by 6 percentage points since 2000, with 5 of those dropped since 2008. What is important is that that rate is still slightly higher than it was during the post WWII boom times.
We have a 'recovery' that isn't creating jobs. It does well at creating elite incomes, but horribly at sharing income. We have an unsustainable trend -- one that the 4T will likely correct even if current elites oppose the correction.

We may be experiencing a reversion to the historical norm, after an unsustainable bubble in the labor force. The difference is that women have replaced men in the workforce, and immigrants have replaced children in the population.
The energy crunch signaled the beginning of the end of the Boom Awakening. People found that they could no longer get away with 'counterculture' styles, behavior, or tastes, at least on the job. By 1980 new young workers saw their work as the way to get nice clothes and a car -- and maybe rent an efficiency apartment.

Now the rewards for work no longer match what they once were. The only improvements in life since the 1980s have been technological -- and cheap electronics don't compensate for miserable lives. (Of course technological improvements are largely the result of innovative engineering that had no connection to the "managerial cult".

Simply put, we now have the world the Boomers dreamed of in the 1960s. Except that the economic reality of it is stagnation and decline, and disintegrating societal cohesion.
The right-wing Boomers, of course -- the corporatists and the religious fundamentalists. But this is no paradise of "peace, love, and dope". The narcissistic Boomers who form the executive elite and serve as their political enforcers look like GIs but act more like Shylock, Scrooge, and Simon Legree.

Maybe it is a good thing that we never achieved a world like Woodstock. But it is not better.

This will be met with great howls of outrage, but the fact of the matter is, it is hard to come to any other conclusion than that the primary cause of all of these changes is feminism. With women rejecting marriage and motherhood and entering the workforce to compete with men for jobs, everyone's standard of living has declined. That effect has been compounded by the replacement of children with immigrants from third world countries who will work for lower wages, driving down incomes even further. We're told there are "jobs Americans won't do", but in reality there are jobs Americans won't do for the wages being offered, because the market has already adjusted to the presence of low-skilled immigrant labor.
The feminists generally were well-educated women with well-paying jobs. They were degreed professionals and not assembly-line workers whose manual dexterity mattered more than their ability to do abstract thought, domestic servants paid badly and treated worse, or waiters and checkers. They were the loan officers and not the tellers. Feminism was an elite phenomenon in its inception because it required some intellectual sophistication. It still does.

Reality of a 4T will probably push more people out of the paid workforce. As in the 1930s women may be pushed out of the workplace so that men can get jobs -- because unemployed men are more dangerous to political stability than are women consigned to the household. Unemployed men become members of gangs like the Bloods, Crips, and ... the Fascii di Combattimento, Sturmabteilungen, Iron Guard, and Arrow Cross.

There are many women who have to work, and have no choice in the matter. But they have always existed, and they were already working in the 1950s. What we've seen since the 1960s is a movement of women working because they want to (or because they're told they should want to, and everybody else is doing it), for the sake of "independence", "self-fulfillment" and so forth. Being a stay-at-home mom is a demeaning enslavement, and a waste of a woman's potential. These are all things we've heard a million times in the wake of the Baby Boom generation.
Professional, managerial, and entrepreneurial activities empower. Factory work, clerical work, retail sales, and food-service work do not empower women any more than such work empowers men.

But the economic consequences and resulting realities were never taken into account. The reality for most women now is being a single mother, struggling to get by on her own, or a single non-mother living a dreary lower-middle class existence, working like a slave all day, and finding it harder and harder to find a suitable husband, or any direction in life. The decline in male participation, combined with affirmative action for women in the workplace and in education has made it so that it is more and more common for a woman from a particular background to be better off economically than a comparable male, which exacerbates the problem of single parenthood, and denies them the economic benefits of marriage. Men, meanwhile, are increasingly unwanted, unneeded, and idle. Which often lands them in prison.
You are discussing working poverty, the ever-increasing norm in American life for non-elites since about 1980, more than you are discussing feminism. There is no true lower-middle-class in America anymore; the clerical jobs that used to pay more than physical labor because clerical jobs require a 'solid high-school education' now pay abysmally. Poverty makes nobody attractive.

It is possible that some of this could be fixed if women become much more willing to support unemployed spouses, as men were always willing to do in the "bad old days" we're so often told about. But that's about as likely as a trout winning the Boston marathon. Barring the emergence of some new social arrangement that can replace the old norms, or a reversion to something more like the old norms, the future seems to be set in stone, and it is what we now see around us every day. Men and women living alone, barely getting by. Children being raised by single mothers, and all of the disadvantage that brings with it. We could, for a short period of time, tax and spend our way through and give people subsidies to soften the malaise. But eventually those paying the taxes will cease to exist, and the conditions will not have changed, only worsened.
America will either need living wages or it will need to tax the Hell out of elite incomes to support a welfare state. Our elites may dream of German productivity on Bangladeshi wages manifesting itself with exploitation as severe as on a plantation in the ante-bellum South. More likely productivity collapses. Hungry people do not work well, and they are prone to either rebel, flee, or to serve as a fifth column for any invader. Just think of all the slaves who fled the plantations as the Union Army approached.

I think this is clearly the new reality of American life, and it is a society in decline, economically, culturally, and ultimately as a whole nation. The economic problems are a result of societal changes, and the economic problems cause new societal pathologies in a vicious cycle, a downward spiral.
The current trend is a disaster. It can be reversed, and a wholesome 4T can do the trick. Maybe it is the current Republican party that must implode -- perhaps as poor Southern whites realize that they have been given the shaft and go populist. To be sure our economic elites are no better than those who funded Hitler, Mussolini, and Tojo -- but those are not the sum of America.

Solutions are nearly self-evident:

1. Cutting back on the military-industrial complex
2. Strong, militant unions
3. Return to the liberal arts as the norm in undergraduate education
4. Progressive taxation
Last edited by pbrower2a; 07-12-2013 at 04:37 AM.
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― C.S. Lewis, The Screwtape Letters







Post#25 at 07-12-2013 04:55 AM by Kepi [at Northern, VA joined Nov 2012 #posts 3,664]
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Just wanted to point out that labor is not the total cause, but it's a major componant. Money supply is another prime problem. We've exponentially increased money supply, and because in a advanced capitalist society money trends upwards, it means we've been increasing the amount of money in the economy which always finds it's way upward ata much faster rate than downward.

Now, many folks blame the lowering of tax rates as being the primary cause of inequality, but a high tax rate doesn't return money into the hands of the people, it usually just reuses money to provide certain services, so increased inequality is guaranteed unless you use taxation to take money owned beyond a certain amount (as opposed to rate) out of circulation. So, say, if you started taxing monthly instead of annually and you taxed folks that were holding more than $1,000,000 in cash of 100% of all money above $1,000,000 and took that money completely out of circulation (or just deleted it as often these days it's not backed by any physical cash money), you'd pull incomes closer together.

So taxation can be part of the solution, just not as it stands today. Why? Because most tax money doesn't go to labor, it goes to contractors, and the money that goes to the laborers prodominantly goes to goods and services just like everyone else who doesn't have massive stockpiles of cash flowing into their accounts merely by virtue of ownership. So taxation doesn't really give the average person more money, it just gives the more services while we inflate cash right out of their pockets by printing money all the time.

However, you need both situations resolved, you need the money supply tightened and you need labor participation rates to match labor demand (and therefore the social structure or government service needs to step in and be able to provide for all those people who will never be employed).
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