California Expert Software
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California Expert Software
Truth is Everything |
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The New York Times has, at last, is reporting on what is happening to ordinary workers.
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Hourly Pay in U.S. Not Keeping Pace With Price Rises
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On Friday, the Bureau of Labor Statistics reported that hourly earnings of production workers - nonmanagement workers ranging from nurses and teachers to hamburger flippers and assembly-line workers - fell 1.1 percent in June, after accounting for inflation. The June drop, the steepest decline since the depths of recession in mid-1991, came after a 0.8 percent fall in real hourly earnings in May.
Coming on top of a 12-minute drop in the average workweek, the decline in the hourly rate last month cut deeply into workers' pay. In June, production workers took home $525.84 a week, on average. After accounting for inflation, this is about $8 less than they were pocketing last January, and is the lowest level of weekly pay since October 2001.
On its own, the decline in workers' wages is unlikely to derail the recovery. Though they account for some 80 percent of the work force, they contribute much less to spending. Mark M. Zandi, chief economist at Economy.com, a research firm, noted that households in the bottom half of income distribution account for only one-third of consumer spending. [emphasis mine]
Nonetheless, coming after the bonanza of the second half of the 1990's, the first period of sustained real wage growth since the 1970's, the current slide in earnings is a big blow for the lower middle class. Moreover, the absence of lower income households could also weigh on overall economic growth - putting a lid on the mass market and skewing consumption toward high-end products.
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I repeat the words I emphasized: the bottom half does only 1/3 of consumer spending. What that admits is the gross inability of the working classes and the poor to afford anything. It is a lot worse than the 1/3 to 1/2 comparison suggests. It means just what is suggested: "putting a lid on the mass market." If most of the spending by the upper half on expensive products, there aren't many products being sold.
Example: One HUMMER is worth five KIAs in money, so the 1/3 - 2/3 money ratios suggest one HUMMER (2/3 of the pool @ $55,000) leaves about 2.5 KIAs (1/3 of the pool @ $11,000) to the lower class. If the money were split evenly ($55,000 each), the lower class would buy 5 KIAs. So, in the Dooh Nibor economy, 50% of KIA sales are lost to HUMMERs. This is a drastic redistribution of demand, hence use of production.
This also feeds the import-outsourcing cycle. Working people cannot afford expensive products, so they buy whatever is cheapest. The cheapest stuff is imported from wherever, which shifts jobs to wherever. That puts downward pressure on American jobs and wages, so working people are forced to buy even cheaper and less of it. As Vonnegut said, "So it goes ..."
Meanwhile, the upper classes are laughing all the way to the bank, because they are making money on the outsourcing, the reduction of American wages, and the imports. So, all of it amounts to a gigantic transfer of wealth and income from the lower classes to the upper. That's what Dooh Nibor (per NYT's Prof Paul Krugman) is all about.
Watching the original Robin Hood - the one I remember from my childhood - on the TCM channel is a lot more fun. Those were the days of the New Deal.
July 18, 2004
Last update: 11/13/2007
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amount of money workers receive in their paychecks is failing to keep up
with inflation. Though wages should recover if businesses continue to
hire, three years of job losses have left a large worker surplus.