Imagine $272,000 the TYPICAL family income of the top quintile -- instead of the AVERAGE!

Denis Drew Says:
October 23, 2008 at 11:02 am

More on the need for great not good moves to save American labor (sorry of I carry on and on so, but I am left for dead American labor):

Imagine if the typical top 20 percentile family earned $272,000/yr –instead of the average income of top 20 percentile families being $272,000/yr.

(The Census says $186,000/yr but its family numbers add up to only 67% growth over 40 years while per capita income grew 100%. If family income grew 90% — the difference hidden by top coding income above one million — that would add an extra $86,000 to the top quintile average.)

Wouldn’t just about everybody but Newt Grinchrich agree that the labor of our imaginary top 20 percentile families was not worth that much more than the labor of bottom 20 percentile families ($16,000/yr, not counting food stamps and other helps). Top 20 percentiler’s are not rocket scientists by and large (even if they were!).

That all the excess income (income shift) has been traced to top 3 percentile pockets, overwhelmingly to the top 1 percentile, most especially to the top .1 percentile does not make the situation any less bizarre. CEOs, news anchors and ball players making 25 times what their predecessors did is possibly more extremely out of line with economic common sense…

…creating the necessity to do what we should have done all along – what we would have to do even if a “fairy godmother” wave a magic wand and reset income distribution between the oceans and below the Canadian border to 1973 specs to prevent the income slippage from happening all over again: set up a system of sector-wide labor agreements and institute the highest practicable minimum wage…

…not the (wont even save super market workers from the race to the bottom induced two-tier contracts) card check left-over and not the slow stepped minimum wage increases that will end up a dollar below 1968 by 2011.

Ike's minimum wage pushed it as hard as LBJ's -- 2/3 of 'real" average wage"

I've been noting that LBJ's 1968 minimum wage ($10/hr in today's money) was really pushing the limits at two-thirds of the "real" average wage ("real" meaning all non-investment personal income divided by 2000 hours X 140 million jobs -- not the gov's number, whatever that's based on, which grew only 20% over the last 40 years while per capita income grew 100%).

I've just realized that Ike's 1956 minimum wage ($8/hr) was pushing it exactly as hard as LBJ's.

Come to think of it, pushing the minimum wage to two-thirds of the "real" average wage in lower productivity times when average income was only 50% or 40% of today's -- if we believe those stink tanks dedicated to protecting the working poor from the highest pay they could command with adequate bargaining power -- would have done the most damage to low wage employment when there was so much less income head room. Obviously they had the opposite effect in much tighter living standard times.

In tribute to LBJ, the $8/hr minimum was not Ike's idea. LBJ as Senate majority leader, looked at the Senate floor one day in 1956, realized there were not enough members of the opposition present and called an instant vote to pass the $8/hr minimum wage. Ike had the decency and political realism in his words to sign it.

LINK: The Greatest Explanation for the Great Depression, dot.com boom & housing bubble?

http://hnn.us/articles/55614.html

Professor James Livingston explains simply that if business squeezes too much money out of labor, then, demand drops and business has no healthy place to invest its excess profits (plant and equipment) and heads out in search speculative paper which the only alternative (dot.com start ups with no realistic business model, risky real estate): leading us from bubble to bubble.

Ditto for Bush's tax breaks for the already too rich being invested in, guess what, real estate paper.

Rational utility v. rational selfishness -- in the free market

Unfettered market enthusiasts perceive a matrix of rational decisions -- only of the innocent, comparative value seeking sort -- leading virtually automatically to prices (including labor prices) that accurately reflect relative utility. Anyone sufficiently familiar with selfish human nature knows that equally (often dominant) rational decisions of market players constitute maneuvering themselves into position to be the indispensable last lot sellers while maneuvering everyone else into being the desperate fire sale sellers -- this being very rational indeed.

Pre-industrialization, the labor market pitted fire sale sellers v. fire sale sellers -- e.g., individual weavers v. individual clothes makers -- result: both made decent livings for their time. Post-industrialization pitted newly minted last lot sellers v. fire sale sellers -- e.g., steam loom factory owners v. (100 X more productive) steam loom operators -- result: owners got to live in the big houses on the hill while operators whole families got to live on oat cakes three times a day because they could no longer afford wheat bread.

Formula for post industrial labor market fairness: last lot seller v. lately minted last lot seller -- e.g., ownership v. (sector-wide) collective bargaining and the highest practicable minimum wage.

See also:

http://ontodayspage.blogspot.com/2008/10/to-under-price-higher-skilled-labor-or.html

Addictive habits of violent street gangs and "Karl Markets" Repbulicans

Street gangs (we'll get to Republicans in a moment) substitute their love and money for the love a kid does not get at home and the money the member cannot earn in the straight economy. The gangs (we are almost to Republicans) also substitute the feeling of the (negative) accomplishment of gratuitous violence for the feeling of the real accomplishment of tasks on a straight job: making the violence addictive. The latter connection goes mostly unnoticed because the connection is so weak (a substitute).

"Karl Markets" Republicans substitute their free market ideology for the good feeling of (hard work acquired) understanding of a complex economy: why they, too, find their substitute so addictive; it, too, being all they've got in the world.

Chinese snake dance theory -- v. -- reptilian (economic) geek responses

If we could put everyone in the labor market to sleep and change their pay around without them remembering what they used to earn when the woke up (I saw a movie like this once) -- if we shaved what we thought was the excessive wages of the top 3 percentile in today's American labor market and spread it over the pay of the bottom 90 percentile so that the overall result resembled 1973 wage distribution -- and then woke everybody up: the top 3 percentile would still compete with each other with the same skill sets, they just would be competing in a (now) poorer country; the bottom 90 would do the same in a (now) richer country.

Otherwise all should go on as before. Well, not completely as before: more goods would be produced for lower wage workers (more cars, fewer boats) which -- since lower wage workers tend to some extent to work in businesses serving lower wage consumers -- might result in more demand for lower wage workers. Corresponding lower demand for to top 3 percentile earners could just mean they had to lower their labor prices a bit -- but we are being overly theoretical.

That is my (cab driver) "Chinese snake dance" theory of wage and employment. :-).

Is such adjustment dangerous to the economy if too far out of proportion? Too far out of proportion is top earners making 5-25X what similar employees made 25-35 years ago for doing the same thing -- while the minimum wage drops almost in half as average income doubles. The latter is something to worry about!
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Boys who are on the hunt for new ideas cannot come up with new ideas because they are on the hunt -- for a kill today -- not the time to introduce new thoughts, no, no; time to cooperate using what we all know already.

Unfortunately, this modus operandi -- this rigid hunter/not-gather instinct -- follows geek (economic) boys into the library when they are all alone at 1 AM. Just as surely as a cat's eyes will follow a moving object back and forth, back and forth, geek boys will internally coordinate all (not some or only most) of their thinking with what every other geek boy is thinking all over the country when they are involved in a national conversation. CANNOT COME HOME EMPTY HANDED TODAY -- EMBARRASSING. :-)

Could this be why the abstract answer to the race to the bottom -- which is lying around waiting to be picked up all over the world from Indonesia to Canada: sector-wide labor agreements NEVER (!!!) makes it to the national conversation table while some last sliver of brain dead 1940s labor law, the card-check, spotted by some smart labor lawyer, is pressed into service as the salvation of labor organizing.

What if he had not come across it? Can we not think for ourselves? Are we to have fourth-world labor law behind Indonesia, Argentina and modern OECD economies?

[Addendum: Maybe if I could talk some Republicans into pushing sector-wide collective bargaining -- as a means of one-upping Democrats with the blue collar who Republicans are about to lose (David Frum a good prospect?) -- maybe then progressives would scramble to get out front on sector-wide even if they did not fully understand what they were pushing. He, He. Maybe if I could just scare progressives into thinking I was getting Republicans to go alone when I wasn't really getting anywhere with them -- maybe that would be enough to panic Democrats and progressives into pushing sector-wide. He, he, he.]

To over-price lower skilled labor or to under-price higher skilled labor -- is this the quesiton?

Santa Fe’s minimum wage raise to $8.50/hr (now $9.50/hr, soon indexed) lost lower skilled workers a significant number of jobs (8.3%, adjusted for something – nominal employment rose) many to higher skilled replacements, according to a think tank committed to protecting the working poor from higher wages.

Could such pay/employment trade-offs lie in the future as America catches up wages with productivity growth?

Simple (ask any minimum wage earner) job/wage resolution:
1) If lower skilled workers lose a percentage of jobs to a higher minimum wage (or any broadband wage increase), they should earn more over a lifetime because they will earn more when they are working ($3.35/hr more in 2005 Santa Fe!) – which should be most of the time.
2) Higher skilled workers would be earning enough extra to pay a bit more in taxes to fund some cover for the lower skilled if needed.
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Quick lopsided income tutorial:
At $186,000/yr, the average family income reported by the Census for top 20 percentile families may sound out of proportion – your typical primary care provider earning well below that these days – but is actually a little less than we might expect if family income growth matched per capita income growth reported by the same Census: doubled since 1968, when $102,000/yr was the top 20 average.

What is out of proportion is the Census reporting 100% per capita income growth along with 67% (overall) family income growth since 1968 – a 33% family shortfall? The presumed missing 33% -- presumably hidden by the Census practice of “top coding” income over $1 million per family out of its survey -- would add $112,000 to the top quintile average – presuming family income grew exactly the same pace as per capita income since 1968.

Family income may have grown closer to 90% over those years: still leaving $86,000 hidden by the top code (not $111,000): still making for 185% top quintile growth (not 212%), still comparing lopsidedly to the 12%, 22%, 37% and 53% eked out by lower quintiles (much due to more members working more hours). If we add enough dollars to all five quintile 2007 incomes (top quintile growth was reported at only 82%) to bring them into line with 90% growth: the additions total up to the unreported dollop of top income, dollar for dollar (by mathematical definition).

If we could somehow throw a reset switch to share around 2007’s doubled personal income according to 1973's distribution, lower four quintile wage earners would remain in the same relative (skill/pay) bargaining positions vis-à-vis each other in the job market – making for little expectation of more unemployment -- ditto for shaved-income top earners: my “Chinese snake dance” theory of labor price and employment. :-)
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It is not under-priced labor -- in the sense of people here and overseas willing to work for less -- that is dragging down American wages and causing whole-segment unemployment (see very many American born cab drivers or fast food workers lately?). It is the under-pricing of labor that is causing America's Great Wage Depression (my term covering both lost pay and lost jobs).

If Australia had a 1000 mile land border with China – open, Mexican-American style – Australian labor would need powerful wage support legislation to maintain its native pay and employment at maximum levels: a solid minimum wage (1/2 the “real” average wage -- USA "real" meaning $25/hr; reported AWI up only 20% since 1968) plus the most up to date collective bargaining structure known as sector-wide labor agreements (not the card check attempt to wring one more drop of life out of all but dead labor law -- Australian could actually consider sector wide now that its once effective if eccentric wage support structure has badly eroded).

America's is the only modern OECD labor market facing the double whammy of globalization and yearly immigrating millions; and yet remains the only modern OECD market seriously devoid of legislative defenses against either outside low wage expectations or against the home grown race to the bottom (recently introducing whole-segment unemployment to middle class, would-have-been supermarket employees).

Book Review: Ghost Train – Paul Theroux

More of an open letter to Theroux (but “Book Review” gets more hits):

You found Japan inundated by comics but short on books. A likely result of having to use a unique character for every word – instead of an alphabet.

John W. Campbell, editor of Astounding, once told Isaac Asimov that they both probably knew 300,000 words. Can anyone know 300,000 characters? Would you want to write books in characters? How many would want to read them if you did?

If Japan (or any nation that uses individual character writing) doesn’t want to fall short of world education standards they may ultimately need to shift to using an alphabet.

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Vietnamese persistence won the Vietnam war. Which Vietnamese won what? (I only recently read in "The Two Vietnams" by Bernard B. Fall that Vietnam was essentially freed from French colonization in 1949 -- the French Army stayed behind to help fight off Ho's insurgency -- for the information of my fellow misinformed.)

3 million Vietnamese died which probably means 12 million more permanently maimed or wounded by normal distribution of casualties -- out of a population of 35 million -- to inflict a crackpot police state than can get half the population shot at the whim of one madman and a permanently impoverishing economic madness called communism.

Prosperous Vietnam (I virtually never support sanctions)? Prosperous like South Korea? Or at least like Thailand or Singapore?

Korea involved the same civilian and soldier casualty rates as Vietnam. 7 million tons of bombs in 7 years? Maybe if we made it 10 million in 10 years South Vietnam would be free – and truly prosperous – today.

The book, Decent Interval, by former CIA employee Frank Snepp actually claims that we had somebody on Ho’s politibureau and that the bureau had voted to give up on the war after Nixon’s last Hanoi bombing (portrayed by the administration as only targeting industry). In any case, after losing 60,000 American lives over there, when we finally got the South Vietnamese to do all the bloody ground fighting – imagine if we had had that opportunity in Korea (but of course the Koreans could not fight the Chinese single handed. At which point we singed a “peace treaty” and then we pulled out most of the financial and all of the air support -- after which the South still held out three more years.

The worst you or anyone can say about our involvement in the war is that it would not have been worth it to us – and/or it would not have been worth it to the South Vietnamese – even if we did win – that the game wasn’t worth the candle to either.

You come on like we were the root cause of the whole horror because we didn’t drop out and let the South lose. Those 19 year old Hanoi kids volunteering for the army were volunteering to invade another country in order to impose a heavy fascist/stupid economic state the other country did not want (or they could have voted for it right after Ho took the North).