The Wage-Productivity Gap

[FallenFairy]

Originally Posted by Undertoad

Not me dude. (Am I everyone you argue with now?)

[unlawflcombatnt]

Originally Posted by Undertoad

Why use wages and not personal income for the comparison? Almost everyone in the country, from rich to poor, receives non-wage income.

Though that may be qualitatively true, non-wage income is minuscule to most Americans. Most Americans derive nearly all their income from wages. It's only those at the top who receive enough rent and dividend income to make a significant difference. As a result, the use of average income overstates what the average American actually receives.

Most working Americans with IRAs or 401Ks receive 0 income annually from them. And that's where most of middle America's so-called stock market investment is. Outside of that, the majority of Americans have little in the way of investment income. Interest on bank or savings deposits contributes only a trickle to most people's income.

Thus the bulk of most Americans spendable income comes from wages. It is these wages (supplemented by borrowing) that finance the necessary consumer spending to keep our economy alive. If wages continue to stagnate, and borrowing declines, that necessary consumer spending will also decline. Purchase of America's production will decline as a result. This will reduce the demand for production and the demand for labor to provide that production. If demand for labor declines, so will employment and wages. As a result, aggregate worker/consumer income will decline even further. There will be progressively less spendable consumer wealth, resulting in less spending & demand for goods, and still less demand for the labor to produce goods.

[Undertoad]

Well there's non-wage income, and then there's income that is not wages. Things like medical benefits, pensions, waitstaff tips, medicaid/medicare checks, social security checks, veterans benefits checks, other entitlement checks, inheritances and eBay sales also figure into people's standard of living.

As a sole proprietor I can take income from my dying company which is not wages (which is still reported on a different IRS schedule). And I am just next to poor at this point, so I "count".

[unlawflcombatnt]

Originally Posted by Undertoad

As a sole proprietor I can take income from my dying company which is not wages (which is still reported on a different IRS schedule). And I am just next to poor at this point, so I "count".

How do you report your income to the IRS?

[Undertoad]

Schedule C.

[xoxoxoBruce]

But you are not mainstream, or typical.......... or normal.

[Clodfobble]

I file with Schedule C as well. Along with at least 30 or so other people at my company. But as a rule they hire a lot of contract labor, I couldn't tell you how many people in the general population have work situations like I do.

[tw]

Originally Posted by Undertoad

Not me dude. (Am I everyone you argue with now?)

I don't have any problem with the facts provided by that economist. I have a problem with what he suggests as solutions; that changing monetary policy can fix these problems.

Meanwhile, whether wages are most of or just one source of America's income, the fact remains that American wages and other income sources have remained flat while corporate productivity and profits have climbed immensely. I don't believe anyone here disputes that - at least from the perspective as I read them.

Facts from that economist were also stated in a cited article from The Economist. I am not entirely sure, but I believe Greenspan also said that. However if one listens to Greenspan, one cannot always be sure what he said.

I believe the consensus here is that common man American income has not increased in this short century.

[slang]

Originally Posted by unlawflcombatnt

..... and borrowing declines.....

Seriously here.

Is borrowing still increasing even now? I'll be God damned if I borrow for most anything nowdays. The contracts are here one day and gone the next.

The trend with the people that I know is to pay off debt with an urgency I've personally never seen before.

Borrowing SHOULD be on the decline.

Oh, and yes of course....this is vewy vewy bad ....and Bush's fault. That's obvious

[slang]

Just call me.....Mr. Thread killer slang

[Torrere]

Ooh! That graph of productivity resembles a purty exponential function!

[unlawflcombatnt]

Originally Posted by xoxoxoBruce

I'm not convinced it will help us by increase US wages to stimulate Chinese production. That's the fly in the ointment.

Of course somes wages are increasing.

Excellent points. Wages are increasing for the top income earners, and have been for the last 20 years. Increases in the wages of high income earners does much less to increase consumer spending than wage increases of lower income earners. As people earn more, they spend a smaller fraction of their income on consumer goods. They do, however, have more money to invest. But as consumer income stagnates, there are fewer investment opportunities created, because consumer spending creates those investment opportunities. The result is that this extra "capital" goes into non-capital investment areas, such as stocks and bonds, or toward overvaluation of the housing market. Much capital is now going into foreign production facilities, as you alluded to. That creates NO jobs in this country. In effect, the money American workers pay for goods is slowly leaking out of the economy into non capital goods endeavors and foreign capital goods purchases, creating jobs overseas and further reducing labor demand (and jobs) in the U.S.

The economy needs balance between the "means of production" & "means of consumption."