Hey, Art Laffer...how do you explain this?
Wasn't supply side economics supposed to incentivize everyone to work harder because they'd get to keep more of their hard-earned money? Well, work harder they did, but they earned far less. Average hourly earnings collapsed under Reagan. Art Laffer how do you explain this? Laffer's the greatest con man of the last 30 years!
Average hourly earnings y-o-y % change
20 comments:
Could someone explain why earnings have collapsed?
But prices "collapsed", too.
What does the graph look like if you plot inflation-adjusted hourly earnings?
Is this adjusted for inflation? You have to remember that inflation and unemployment went down under Reagan. Maybe that is why hourly wages did not grow as fast?
Speculation - Coincides with the decline of unions?
Volker would claim this as his crowning achievement. A superb job managing to keep incomes suppressed for decades. If only they were more effective at containing the price of food, energy and housing at these low levels while raising incomes.
Odd that countries from Chile to China are trying to grow incomes faster than inflation with great success while the US tries to grow incomes less than inflation to manage inflation.
Hey Mike - I think you need to change your twitter password. It has been posting spam.
Real hourly wages flat lined while the real per capita GDP continued climbing, though at a slower rate. Thus people working for a living saw real wages stagnate. All increases in per capita real GDP went to the financial industry.
Armo,
Thanks. I'll get it fixed.
Flat-line, in real terms, sounds a little closer to what I remember.
We must be careful not to mix micro- language with macro- concepts. My personal experience was that my income stagnated during the 70's (in the Navy) and soared in the 80's (working for IBM). Like many other boomers, the 80's were my years of rapid ascent on the learning/earning curve.
My Texan friend likes to tell of the Texan who moved to Oklahoma, thus raising the average IQ in both states. With the rapidly expanding workforce, and rapid creation of entry-level jobs, one would expect the average wage to go down, even as individual workers experienced big raises.
I guess Reagan should have adopted economic policies that would have created one C-level job instead of 8 million entry-level jobs, then average hourly earnings would have gone up instead of flat-lining.
Hourly earnings went down during the Reagan period. Not as precipitously as we see in the chart (which is not adjusted for inflation), but the point is, earnings went down, not up. Union busting.
http://www.youtube.com/watch?v=TWpk9bVd1T8
nothing that a strong dose of austerity won't solve :)
we need to cut all public and social spending, all government departments, all worker salaries and after median worker pay goes to US$0.1 per hour, you will see us rise from the ashes and record an incremental increase in worker pay.
US$0.5 per hour will be a 500% increase!
No doubt the decline of industrial unions had an effect. Also the application of automation technology to previously labor-intensive processes that employed high-wage blue-collar union workers. Ironically, the technology was made affordable only by the high price of the labor it replaced.
The chart is hard to read, but I think it shows wages rising, in nominal terms. Not as fast as before, when inflation was much higher, but rising, not falling.
http://www.youtube.com/watch?v=ABkKI6vodBE&feature=channel_video_title
Also the rise of the external sector's USD asset hoarding started in earnest at that time, first with Japan and now with China.
This unfettered neo-Mercantilism leads to a race to the bottom for those working in the deficit nation.
Here again is the record of that irrationality:
http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt
$5T total over about 100M US households comes to about $50,000 per household.
Resp,
The last 35 years. The biggest con man of the 25 years before that was Milton Friedman!
It's been going full speed for 30 years with all Presidents taking part in deficit spending that far exceeded GDP. Now you are surprised?
http://market-ticker.org/cgi-ticker/akcs-www?get_gallerynr=2772
Notice the slope and time in the chart I posted? Each period the slope more than doubles while the time is more than cut in half. Now you see why people call it hitting the wall. What's left is a 90 degree moon shot which will last less than 2 years.
Matt, I told you that $1.2 TRILLION wouldn't last till the election. Feel free to eat your words anytime you like after TOTUS released his orgy of spending called a budget.
http://market-ticker.org/cgi-ticker/akcs-www?get_gallerynr=2772
A.K.A., it's because unlike the banks, who have first use of money, most businesses are suffering from margin compression, but don't tell the FED, as they are now using the PCE to hide their debacle and want no part in the truth of the matter.
“Have the workers received a fair share of the enormous increase in wealth which has taken place in this country…?” the report demanded. “The answer is emphatically—No!”
http://www.slate.com/articles/news_and_politics/history/2012/02/income_inequality_the_government_had_better_ideas_for_fixing_it_100_years_ago.html
If you want to see how earnings data can be manipulated to make any point, see this graph:
http://research.stlouisfed.org/fredgraph.png?g=54d
Average weekly earnings and average hourly earnings follow completely different paths.
Rodger Malcolm Mitchell
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