TRB FEBRUARY 28, 2013
-
Read Later
READ LATERAvailable only to subscribers. SUBSCRIBE TODAY
-
Listen
ARTICLE AUDIO
- Font Size
On the eve of the sequester, there's more bad news about the economy. Just last month, Berkeley economist Emmanuel Saez reported that during the first two years of the recovery (2009-2011) average market income for the top one percent in the income distribution grew by 11.2 percent while it shrank by 0.4 percent for everyone else. Saez didn't yet have distribution data for 2012 (and likely won't for many months). But he predicted that surging stock prices and re-timing of income to avoid the 2013 tax increases probably meant we'd likely see much bigger gains for the one percent in 2012, while the bottom 99 percent would likely have experienced some gains, too—albeit much more modest ones.
That may still prove true. But new data from two former Census officials at Sentier Research, a private firm, indicates that median income, which had finally started sustaining consistent increases in early 2012 after dropping through the first two years of the recovery, halted its upward climb in May. (It is now $51,584.) Since May, there’s been no statistically significant increase in median income. For the typical American worker, then, recovery from the 2007-2009 recession began in the fall of 2011 and was over that following spring. Hope you liked it!
This is market data, and doesn't include government redistribution through taxes and benefits. When those are factored in, we may have seen a modest increase in median income after May 2012. That is reason to be thankful for such policies as the earned income tax credit, the payroll-tax cut (now expired), the extension of unemployment benefits, etc. But when most people think of "the economy" they aren't thinking about the government's social safety net; they're thinking about wages. And Sentier's data suggests that the economy gave the typical worker only six months of post-recession stimulus before throwing in the towel. More authoritative data from the Census bureau will eventually follow, but will likely show the same pattern.
Median income in January 2013 is 1.7 percent higher than it was in January 2012, thanks to the increases in the first four months of 2012. That is a modest increase. But it's still 4.5 percent lower than it was in June 2009, the start of the "recovery," and 6.2 percent lower than it was in December 2007, when the recession began. And if the pattern since May 2012 continues into 2013, we won't see any improvement soon. Look, I know the struggles of ordinary workers to pay their bills pale in comparison to the (entirely hypothetical) threat that the budget deficit poses to the U.S. bond market. But would it be too much to ask Congress to pass—or even sweeten—the president's proposal to increase the minimum wage?
8 comments
But would it be too much to ask Congress to pass—or even sweeten—the president's proposal to increase the minimum wage? You mean the Republican-controlled House of Representatives, don't you? But, surely, you are not assuming that the Republicans actually want the economy or the plight of working families to improve. Despite their recent electoral losses, they are still very much committed to trying to prevent recovery and aggravate unemployment. They are most of all loath to prevent anything positive from happening on a Democratic watch, lest that cement their status as the minority party for a generation. And they continue to hope that if things go badly the country will be ready for regime change sooner rather than later. Traitors all.
- roidubouloi
February 28, 2013 at 2:58pm
Raising the minimum wage simply raises prices. There's no such thing as a free lunch. Explain to the class what would happen if we doubled everyone's wage. Does the guy working a crap job suddenly have more buying power? No he does not. He has exactly the same buying power. Yes, his wage goes up, but his buying power goes down because the price of everything would double along with it.
- seattleeng
February 28, 2013 at 3:58pm
sure seattle because we all know there is nothing that can be called a productivity gain (wherein goods are produced cheaper than before). We all know it should be an ironclad law of nature that all productivity gains by employees should go in the form of profits to the owners of the businesses because Jeebus said so.
- blackton
March 1, 2013 at 1:27pm
SHOW ALL 2 RESPONSES
As I've said all along: Punish the 1% at your own risk. It never sucks to be in the 1%. Good economy, bad economy, they do OK. And once you realize that, then you can get back to the business of getting people working. Instead, this administration has done nothing but focus their energy on trying to hammer down a few, instead of bring up up everyone. And this president will leave office in 3 years having delivered the most crushing blow the middle class has felt since...well, since our last anti-1% ran roughshod over the economy in the name of social justice: FDR.///Stop trying to punish everyone, and just let people create. The more they create, the more will need to be employed. And as the unemployment rate falls, the wages will climb. /// Ironic, in a way, that the middle class had so much more under Bush than Obama. But not a surprise. /// What is a surprise is the knots folks will tie themselves into trying to explain why being miserable together is better than posting healthy gains under Bush (and Clinton). Noah especially. ///PS. Noah, instead of looking at wages, why not look at employment? That is why the Sentier graph overlays employment data. High unemployment results in depressed wages due to excess supply. But of course, it's easier to sell the read-meat narrative "Middle class wages have been stolen by the 1%" rather than the actual narrative: "The president has reduced incentive to work across the board, and thereby unemployment rises and wages suffer". Got it.
- seattleeng
February 28, 2013 at 3:53pm
Complete horse manure, seattle, as usual. The way to get people back to work is for the government to increase its spending. There is no other policy tool available with interest rates already on the floor and the economy essentially unresponsive to monetary policy. Obama has had all he can do just to resist Republican and wacko libertarian fruitcake right-wingnut pressure for austerity -- which is working so well in Europe. Read Krugman, His presentation is very elementary, geared for an audience that knows absolutely nothing about economics. I think you can get it. Earlier, I misspoke. I should have said that the Republicans are loath to allow anything that would stimulate the economy and are doing their best to crash it.
- roidubouloi
February 28, 2013 at 8:25pm
Employment responds to demand, seattle, and to nothing else, not to low tax rates, not to investment incentives, not to the preening and stupidity of the rich. To only one single thing -- demand. Any policy that increases demand, increases employment. Any policy that diminishes demand, decreases employment. The notion that job creation is the result of creators creating is the sick, Randian fantasy -- quite as nuts as Marxism -- with which the right wing, especially the libertarian right, attempt to justify its predation on the rest of society. FDR set us on a path of 40 years of unparalleled economic growth. Wacko Reaganomics, otherwise know as supply-side or libertarian economics, took us off that path and we have been paying for it for 30 years. Making the rich richer does nothing to increase employment or the wealth of society. The rich cannot now spend what they earn which is sapping demand. The best possible thing we could do for the economy would be to tax them heavily and spend their money. If that is punishing them, so what? As you say, they will always be fine.
- roidubouloi
February 28, 2013 at 8:31pm
Missed your comment about the consequences of raising the minimum wage, seattle. You have missed the boat again because you really don't understand anything at all about economics, you just repeat the foolishness you read in libertarian rants. Even assuming that doubling everyone's wages would not redistribute income shares because prices would also double (not necessarily), raising the minimum wage does double everyone's wage. It only affects the people at the very bottom. Their income share rises. The income share of everyone else falls. You can explain that to the class. If the entire wage level rose, then the only other element of national income, the share going to capital, would fall. Under present circumstances, that would increase demand and output, but there is no way to achieve a general wage increase other than to increase the demand for labor We can, however, increase demand either with more government spending or by making the tax system more progressive so that those at the top, who cannot spend their income, have less and those at the bottom who must spend their income have more. A minimum wage increase a modest step in the right macroeconomic direction and also improves the circumstances of millions of people in minimum wage jobs. You can be sure it has not upward effect on the income share of the top 1%, or 10%, or 50%. You cannot just make up whatever fairy tale you want, seattle. There is an economic reality, there is economic history, and there are economic data. Libertarian economics ignores all of them in favor of what amount to economic Bible stories, little fables designed to convey the lessons of Randian morality. That has as much to do with economics as does the Bible.
- roidubouloi
February 28, 2013 at 9:35pm
"raising the minimum wage does NOT double everyone's wage"
- roidubouloi
February 28, 2013 at 9:36pm