One of the things that you hear a lot is how good the economy is doing.
Another thing I hear a lot is how people are struggling to make ends meet.
These two things seem incompatible unless you consider some facts.
Unemployment is low but the jobs are not as good as they used to be for many as low paying service jobs replaced manufacturing jobs.
Jobs used to offer fairly comprehensive benefits including pension and health and now they have reduced both of those dramatically.
While average wages seem to be going up, the wages at the top are going up much more than wages in the middle and bottom.
Many of our recent and not so recent graduates are saddled with debt payments that they mat never be free of.
Much of the economic boon has been retained by industries or distributed to shareholders who are among those high earners already.
So as we migrate to a nation of haves and have nots, the have nots face increasing struggles to make ends meet.
Yet the statistics look good.
Showing posts with label wages. Show all posts
Showing posts with label wages. Show all posts
Tuesday, August 20, 2019
Saturday, July 20, 2019
Minimum Wage
Last week the House of Representatives passed an increase to the minimum wage. I think the odds of it becoming law are probably slim, although it might create some issues for Republican lawmakers.
I imagine that they will ignore the very argument they used when they passed the tax break for the wealthy, that it will pay for itself in additional revenue.
The workers who would be impacted by this are not investing in the stock market or buying Government bonds. The money would be spent as soon as it was available.
There is a multiplying impact of money flow in the economy. The second person who gets it then spends it on something they need and that person spends it and so on until taxes or other factors dissipate its value.
It would also likely cause additional salaries to increase since people making slightly more than the minimum would want to keep that differential.
Would it lead to fewer jobs? It might, it really depends on how employers react.
These are low paying jobs and replacing them with automation may or may not be affordable. I'm going to assume that the number of workers is roughly equivalent to the lowest number of workers needed for operations. Places that employ minimum wage employees are generally not hiring extra workers.
We will hear all these arguments that are always rolled out but paying our lowest paid workers a living wage is simply fair.
Isn't this economy supposed to be so great?
I imagine that they will ignore the very argument they used when they passed the tax break for the wealthy, that it will pay for itself in additional revenue.
The workers who would be impacted by this are not investing in the stock market or buying Government bonds. The money would be spent as soon as it was available.
There is a multiplying impact of money flow in the economy. The second person who gets it then spends it on something they need and that person spends it and so on until taxes or other factors dissipate its value.
It would also likely cause additional salaries to increase since people making slightly more than the minimum would want to keep that differential.
Would it lead to fewer jobs? It might, it really depends on how employers react.
These are low paying jobs and replacing them with automation may or may not be affordable. I'm going to assume that the number of workers is roughly equivalent to the lowest number of workers needed for operations. Places that employ minimum wage employees are generally not hiring extra workers.
We will hear all these arguments that are always rolled out but paying our lowest paid workers a living wage is simply fair.
Isn't this economy supposed to be so great?
Wednesday, July 17, 2019
Statistics and Reality
People like o look at statistics and believe they reflect what is actually happening and they do in a certain way. However take a simple statistic I saw the other day saying a certain company was having its best year since 1990. Well it was about the stock price and that company's stock had virtually collapsed in the last year. It recovered from the lows and had therefore a big percentage increase. Of course the company was doing much better years ago and the percentage increase did not make up for the fact that the stock was around 20% of its one time high.
The same is true with the statistics about the economy. Unemployment is low, true, but workforce participation is low. Wages are increasing, true, but from lower bases. Wages are for most working people no where near where they once were.
Things not accurately measured in statistics, at least not the economic ones are the other risky changes to most Americans. Pensions have been eliminated at many companies and while they offer self investment plans, many don't participate because it means a lower paycheck. Issues with social security add a degree of uncertainty to many people.
Health insurance is also a high risk for many even if they have coverage now. Its in danger or the contributions required keep increasing. Sure the stock market is up but working class Americans are generally not big shareholders, except maybe in a company 401K if they participate.
Housing is up, but not at the level is once was and many young people have onerous student debt to contend with. The reality is see is that most people struggle to make ends meet and dig themselves deeper into debt to afford some nice things. Some are doing much better than that.
Is the economy as good as the statistics say? Well the statistics are correct, but the reality is just different. An increase of a few percent in average wages is not changing anybody's life. A secure future and secure health care would.
The same is true with the statistics about the economy. Unemployment is low, true, but workforce participation is low. Wages are increasing, true, but from lower bases. Wages are for most working people no where near where they once were.
Things not accurately measured in statistics, at least not the economic ones are the other risky changes to most Americans. Pensions have been eliminated at many companies and while they offer self investment plans, many don't participate because it means a lower paycheck. Issues with social security add a degree of uncertainty to many people.
Health insurance is also a high risk for many even if they have coverage now. Its in danger or the contributions required keep increasing. Sure the stock market is up but working class Americans are generally not big shareholders, except maybe in a company 401K if they participate.
Housing is up, but not at the level is once was and many young people have onerous student debt to contend with. The reality is see is that most people struggle to make ends meet and dig themselves deeper into debt to afford some nice things. Some are doing much better than that.
Is the economy as good as the statistics say? Well the statistics are correct, but the reality is just different. An increase of a few percent in average wages is not changing anybody's life. A secure future and secure health care would.
Tuesday, June 4, 2019
Economic Thoughts.
The economy is a very complex system but often a single factor can impact it significantly.
Some of that is simply mathematical but some of it is also based on psychological factors.
Everyone is always trying to predict how something impacts the overall economy, because the most successful strategy is to be ahead of the crowd, but not so far ahead as to go broke waiting for them to catch up to where you are.
So what about this economy?
In many ways it is considered robust, but is it?
Three areas that are still weak are manufacturing, mining and farming.
In 2004 there were over 13 million workers in manufacturing. This dropped to less than 11 million during the financial crisis and has been slowly improving since. However, the latest numbers show us still down over a million workers. Considering population growth there are less manufacturing jobs available. Still we have grown from the lowest point and we see that data claimed as a measure of an improved economy.
The big increase in employment has been in service jobs and generally they don't pay as well as manufacturing.
So the average American is having more trouble paying bills and saving for the future, even if fully employed.
This is one of the reason that we see so much income and wealth inequality, since the workers continue to get a smaller share of the pie as they are forced into lower paying jobs.
It wouldn't take much, maybe some increased cost because of tariffs to make the whole thing tumble.
Time will tell.
Some of that is simply mathematical but some of it is also based on psychological factors.
Everyone is always trying to predict how something impacts the overall economy, because the most successful strategy is to be ahead of the crowd, but not so far ahead as to go broke waiting for them to catch up to where you are.
So what about this economy?
In many ways it is considered robust, but is it?
Three areas that are still weak are manufacturing, mining and farming.
In 2004 there were over 13 million workers in manufacturing. This dropped to less than 11 million during the financial crisis and has been slowly improving since. However, the latest numbers show us still down over a million workers. Considering population growth there are less manufacturing jobs available. Still we have grown from the lowest point and we see that data claimed as a measure of an improved economy.
The big increase in employment has been in service jobs and generally they don't pay as well as manufacturing.
So the average American is having more trouble paying bills and saving for the future, even if fully employed.
This is one of the reason that we see so much income and wealth inequality, since the workers continue to get a smaller share of the pie as they are forced into lower paying jobs.
It wouldn't take much, maybe some increased cost because of tariffs to make the whole thing tumble.
Time will tell.
Sunday, February 3, 2019
Robin Hood Democrats?
Most of us are aware of the story of Robin Hood, a person who robbed from the rich to give to the poor.
While most likely fictional, it has resonated over the years as a popular story and has inspired a number of books and movies.
This popular legend resonates because it was pretty clear that the rich of that time exploited the labor of the serfs who worked their lands.
The rich exploiting the poor is something that has happened almost everywhere almost always.
It has led to significant disruptions, think the French Revolution or the Russian Revolution to name two.
However the system has always ultimately reverted back to this model, as some of us manage to excel and surpass the rest of us in acquiring wealth.
I don't think too many of us object to the people who do this, like Bill Gates, or Warren Buffet. They managed to create their own money and they certainly have the right to enjoy it.
What strikes many as unfair is how profits are distributed among those who generate them. If you look at the statistics you see a number of trends which basically tell you the rich get richer and the poor are standing still at best.
One example would be CEO pay vs average worker pay. In 1965 CEO's made about 25 times what the average worker made. On average they now make closer to 200 times as much. Have CEO's become that much better?
The problem of wage inequality is further compounded by the wealth inequality. The average American has seen his wealth increase except of course the average hides a disturbing fact. All that increase went to those in the upper percentiles while those in the bottom saw wealth stay the same or even decrease.
In the last election we saw the current President tap into the discontent this has sown by promising to reverse that trend, however he has passed a tax bill that increases is.
The next election may see a whole different populist approach to fixing the problem, call it the Robin Hood one, or if you oppose it you might call it a socialist approach.
We'll see.
While most likely fictional, it has resonated over the years as a popular story and has inspired a number of books and movies.
This popular legend resonates because it was pretty clear that the rich of that time exploited the labor of the serfs who worked their lands.
The rich exploiting the poor is something that has happened almost everywhere almost always.
It has led to significant disruptions, think the French Revolution or the Russian Revolution to name two.
However the system has always ultimately reverted back to this model, as some of us manage to excel and surpass the rest of us in acquiring wealth.
I don't think too many of us object to the people who do this, like Bill Gates, or Warren Buffet. They managed to create their own money and they certainly have the right to enjoy it.
What strikes many as unfair is how profits are distributed among those who generate them. If you look at the statistics you see a number of trends which basically tell you the rich get richer and the poor are standing still at best.
One example would be CEO pay vs average worker pay. In 1965 CEO's made about 25 times what the average worker made. On average they now make closer to 200 times as much. Have CEO's become that much better?
The problem of wage inequality is further compounded by the wealth inequality. The average American has seen his wealth increase except of course the average hides a disturbing fact. All that increase went to those in the upper percentiles while those in the bottom saw wealth stay the same or even decrease.
In the last election we saw the current President tap into the discontent this has sown by promising to reverse that trend, however he has passed a tax bill that increases is.
The next election may see a whole different populist approach to fixing the problem, call it the Robin Hood one, or if you oppose it you might call it a socialist approach.
We'll see.
Friday, November 2, 2018
Wages
The economy continues to transition but we have not seen any fundamental changes in the last few years.
The need for skilled workers at high wages continue while the need for unskilled labor is pretty much stagnant.
This has led to the lack of wage growth we have seen over the last decade or longer as the jobs available actually pay less than the jobs lost.
We are however going to reach a tipping point where everyone is transitioned and wage growth is measured on an apples to apple basis, meaning you had a low paying job last year and you still do.
The impact of that is that any raise you get actually increases average wages and you also will see some natural progression as workers seek promotions or higher paying jobs.
Wage growth is approaching 3% year over year and may exceed it this report, but while 3% is clearly better than 0% its being added in many cases to a suppressed wage rate.
Suppressed from the heavy manufacturing years for the ex factory workers an others impacted by the push to automation.
The economy is growing but the rewards are still top heavy and yes there is some pressure in some cities to increase wage or automation (note ordering kiosks in fast food restaurants) it isn't a return to the 1950s where high paying factory jobs with strong unions and good benefits were plentiful.
Low paying, no unions, no benefits is more the norm for non-skilled workers.
Its not changing anytime soon.
The need for skilled workers at high wages continue while the need for unskilled labor is pretty much stagnant.
This has led to the lack of wage growth we have seen over the last decade or longer as the jobs available actually pay less than the jobs lost.
We are however going to reach a tipping point where everyone is transitioned and wage growth is measured on an apples to apple basis, meaning you had a low paying job last year and you still do.
The impact of that is that any raise you get actually increases average wages and you also will see some natural progression as workers seek promotions or higher paying jobs.
Wage growth is approaching 3% year over year and may exceed it this report, but while 3% is clearly better than 0% its being added in many cases to a suppressed wage rate.
Suppressed from the heavy manufacturing years for the ex factory workers an others impacted by the push to automation.
The economy is growing but the rewards are still top heavy and yes there is some pressure in some cities to increase wage or automation (note ordering kiosks in fast food restaurants) it isn't a return to the 1950s where high paying factory jobs with strong unions and good benefits were plentiful.
Low paying, no unions, no benefits is more the norm for non-skilled workers.
Its not changing anytime soon.
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