Income inequality: the great divergence

May 4, 2012

Posted by AzBlueMeanie:

The Economic Policy Institute released a new report on income inequlaity last week. Lawrence Mishel writes, Understanding the divergence of pay and productivity:

Income inequality has grown over the last 30 years or more driven by three dynamics: rising inequality of labor income (wages and compensation), rising inequality of capital income, and an increasing share of income going to capital income rather than labor income. As a consequence, examining market-based incomes one finds that “the top 1 percent of households have secured a very large share of all of the gains in income—59.9 percent of the gains from 1979–2007, while the top 0.1 percent seized an even more disproportionate share: 36 percent. In comparison, only 8.6 percent of income gains have gone to the bottom 90 percent” (Mishel and Bivens 2011).

A key to understanding this growth of income inequality—and the disappointing increases in workers’ wages and compensation and middle-class incomes—is understanding the divergence of pay and productivity. Productivity growth has risen substantially over the last few decades but the hourly compensation of the typical worker has seen much more modest growth, especially in the last 10 years or so. The gap between productivity and the compensation growth for the typical worker has been larger in the “lost decade” since the early 2000s than at any point in the post-World War II period. In contrast, productivity and the compensation of the typical worker grew in tandem over the early postwar period until the 1970s.

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[T]he experience of the vast majority of workers in recent decades has been that productivity growth actually provides only the potential for rising living standards: Recent history, especially since 2000, has shown that wages and compensation for the typical worker and income growth for the typical family have lagged tremendously behind the nation’s fast productivity growth.

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The hourly compensation of a typical worker grew in tandem with productivity from 1948–1973. That can be seen in Figure A, which presents both the cumulative growth in productivity per hour worked of the total economy (inclusive of the private sector, government, and nonprofit sector) since 1948 and the cumulative growth in inflation-adjusted hourly compensation for private-sector production/nonsupervisory workers (a group comprising over 80 percent of payroll employment). After 1973, productivity grew strongly, especially after 1995, while the typical worker’s compensation was relatively stagnant. This divergence of pay and productivity has meant that many workers were not benefitting from productivity growth—the economy could afford higher pay but it was not providing it.

Note: Hourly compensation is of production/nonsupervisory workers in the private sector and productivity is for the total economy.

Source: Author's analysis of unpublished total economy data from Bureau of Labor Statistics, Labor Productivity and Costs program and Bureau of Economic Analysis, National Income and Product Accounts public data series

Figure B provides more detail on the productivity-pay disparity from 1973 to 2011 by charting the accumulated growth since 1973 in productivity; real average hourly compensation; and real median hourly compensation of all workers, and of men and of women. As Figure B illustrates, productivity grew 80.4 percent from 1973 to 2011, enough to generate large advances in living standards and wages if productivity gains were broadly shared. But there were three important “wedges” between that growth and the experience of American workers.

April jobs numbers disappoint due to conservative economics ‘austerity’ measures

May 4, 2012

Posted by AzBlueMeanie:

By way of comparison, conservative economics "austerity' measures in Europe have led to a 14 year high in unemployment Euro-Region Unemployment Surges to 14-Year High, Nears Record – Bloomberg, and Europe has slipped into a government policy induced double-dip "austerity recession." Europe's austerity recession – European Financial Crisis – Salon.com. Britain, Spain, Portugal, Italy and Greece are in recession. "[I]t seems highly likely France and Germany are also contracting."

"Blame it on austerity economics – the bizarre view that economic slowdowns are the products of excessive debt, and so government should cut spending in a slowdown."

The European recession is having an adverse impact on the U.S. economy because we are a global economy. This is why I have been posting the series "The Fire Next Time: The Euro Financial Crisis."

The other day Willard "Mittens" Romney said his economic policies would be "to do exactly the opposite of what President Obama has done," meaning that he would follow the conservative economics "austerity" measures being used in Europe and called for by Tea-Publicans in Congress. We have a real-life example of what those policies would mean for the U.S. — massive unemployment and recession.

While the April jobs numbers are disappointing, the U.S. economy is still expanding and is not contracting in a double-dip recession like Europe — a recession caused by misguided conservative economics "austerity" measures.

Steve Benen writes, The Maddow Blog – Job totals disappoint again, but overall rate inches lower:

The U.S. economy added 115,000 jobs in April, which fell short of already-tepid expectations, while the overall unemployment rate dipped slightly to 8.1%. As has been the case, there was a big gap in the public vs. private sectors — American businesses added 130,000 jobs last month, while the government shed 15,000 jobs.

It is the second consecutive month of disappointing totals, but there was a silver lining in today's Bureau of Labor Statistics report — job creation in February and March were both revised up by a combined 53,000 jobs. It offers a reminder that these initial estimates are just that — initial estimates — and that overreacting to new reports generally isn't a good idea.

That doesn't change the fact, however, that 115,000 obviously isn't good enough. It's a figure that barely keeps up with population growth, and is roughly half of what the economy should be producing as part of a larger recovery. Ideally, policymakers would see data like this and take steps to boost job creation, but given the Republican agenda in Congress, that's no longer an option.

The overall economy has now added over 2 million jobs over the last year, and nearly 3.5 million jobs over the last three years. For America's private sector, it's 2.3 million over the last year, and 4 million over the last three years.

Incidentally, the 8.1% unemployment rate is the lowest since before President Obama took office, but as we've talked about before, that's not necessarily the best metric for looking at the overall jobs landscape, and in April, it was largely the result of people dropping out of the workforce.

Here's another chart, this one showing monthly job losses/gains in just the private sector since the start of the Great Recession.

Pathetic Russell Pearce plays the victim in wake of killing spree

May 4, 2012

Posted by AzBlueMeanie:

The Arizona Republic published a statement from disgraced former Sen. Russell Pearce on Thursday in response to the killing spree by his friend and fanboy J.T. Ready. Gilbert mass shooting: Former Arizona Sen. Russell Pearce's statement.

This WATB used this tragedy to play the victim of "editors and producers all over town making a concerted effort to make the story about a politician whose conservative politics they disagree with."

The real reason is Russell Pearce's long and close personal relationship with J.T. Ready that has been well documented by the Phoenix New Times over the years, and is well summarized in this report from the Rachel Maddow Show (video below the fold).

Maddow's guest is Arizona Republic columnist E.J. Montini, who wrote this post yesterday. EJMontini – Pearce's lame J.T. Ready lament:

Former Senate President and de facto governor Russell Pearce, dethroned in a recall, is angry with the news media for contacting him in the aftermath of the murder/suicide carried out by neo-Nazi Pearce supporter J.T. Ready.

In a statement released by Pearce, he says, “In the past several years the local media has worked hard to try to tie me to the JT Ready that preached hate, and that is nothing more than a lie.”

Is it?

Mark Potok, a senior fellow at the Southern Poverty Law Center, editor of its Intelligence Report and Hatewatch blog calls Pearce's claim an “utter crock.”

That’s putting it nicely.

If you want an understanding of just how whining and self-centered Pearce can be, even in the face of such a horrific tragedy, read his full, lame lament here.

Then read a blog about Pearce by Potok here.

Or you can watch this video featuring Pearce and Ready.

Pearce, well, he’s pathetic.

The plight of the curious voter: False equivalence, Part 4

May 3, 2012

by David Safier I was talking about the Barber-Kelly race with a friend this morning. She's reasonably progressive and reasonably well informed politically, though not an active Democrat or a political junkie like me. She asked me about the attack ad on Barber saying he wants to cut $500 billion from Medicare. Is that true? … Read more

Jan Brewer, the Scott Walker of the West, ends the civil service merit selection system

May 3, 2012

Posted by AzBlueMeanie:

I have posted that Jan Brewer wants to be the Scott Walker of the West several times in discussing the plot by Jan Brewer Boss Tweed to do away with the civil service merit selection system and return to the halcyon days of the spoils system and political patronage. (Thomas Nast print, right).

The House is probably voting on HB 2571 as a write. On Wednesnesday, the Senate passed this regressive bill to hand Boss Tweed her number one legislative priority this session. The Arizona Capitol Times (subscription required) reports Senate OKs overhaul of state personnel system | Arizona Capitol Times:

The GOP-controlled Senate today approved Gov. Jan Brewer’s proposal to overhaul the rules that govern state workers.

The measure seeks to remove workers from the state’s merit system, giving supervisors more flexibility in firing them.

The measure split the Senate along party lines. The final tally was 21-9.

The measure now goes to the House for a final vote.

Brewer is expected to sign the measure once it reaches her desk.

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Under the legislation, the conversion to an “at-will” status will apply to new hires, supervisors, attorneys and IT workers, those who are above a certain pay grade and any employee who voluntarily accepts a new assignment or chooses to be “uncovered.”

Other workers may choose to remain covered.

Under the latest plan, the conversion to an “at-will” status won’t extend to peace officers, lower-level correctional officers, and civilian employees at the Department of Public Safety.

The job of administering state workers would fall to a consolidated State Personnel System. The measure, HB 2571, seeks to consolidate eight systems that currently govern state workers.

Almost every agency head will also serve at the governor’s pleasure, eliminating their terms of office.

The director of the Department of Public Safety, however, will serve concurrently with the governor and may only be dismissed “with cause.”

READ FINAL PERSONNEL DOCUMENT(.pdf).

UPDATE: Boss Tweed got her way on ending the civil service merit selection system. But my labor sources tell me that the four anti-union bills sponsored by th Goldwater Institute/ALEC failed to pass in the final hours before sine die.

Democrats vigorously opposed the proposal, arguing it gives the governor “tremendous power” and it will breed political cronyism in state government.

Press release from the Senate Democratic Caucus:

The video: Kelly says Social Security and Medicare are Ponzi schemes, need to be privatized and phased out

May 3, 2012

by David Safier On July 30, 2010, during a KUAT debate, Kelly declared his views on Medicare and Social Security in no uncertain terms. He can say he's changed his views, but he can't say he never wanted to privatize and phase out Social Security and Medicare. Here's the minute-long clip of Kelly in all … Read more