One of the top economic writers of the New York Times and his editors have published an article entitled “The Great Wage Slowdown of the 21st Century”. There is no mention of the fact that there is a global market for labor. Here’s a comment that I posted in response:
Why the narrow focus on the U.S.? “The Great Wage Slowdown of the 21st Century” is certainly not a headline that would make sense to someone in China or Botswana. The pool of money for wages worldwide has grown dramatically in the 21st Century and people all over the world are enjoying dramatically better lives as a consequence. If I am not getting the share of this pool to which I feel entitled, perhaps my resentment just proves the adage “When the market gives you an answer you don’t like, declare market failure.”
Could it actually be that one reason we don’t get our former share of global wages is that we are unable to think globally?
[And, as a minor point, if employers provide health insurance to employees and the cost of that insurance has gone way up, isn’t that itself a substantial increase in compensation? Perhaps there has been wage growth in the U.S. but it isn’t noticeable unless we have to go to the hospital.]
Increased healthcare spending isn’t a minor point; it accounts for roughly 25%-50% of the growth in GDP since wages stagnated. I guess the rest went to the top of the 1%.
The common argument of “The typical American family makes less than X years ago” is also misleading since the typical American family size keeps decreasing.
This is not about wage slowdown or healthcare spending cost, it is about life style changes.
Families grew up happy having food and a place to call home. Going to the movies or your local baseball game, visiting friends and relatives, being able to swim and fish at your local pond, getting a job at a local factory was all that mattered. Those days, if you do not have a smart phone, a cable box, an xBox, the latest designer clothing, the current year car, etc., you are nobody. All of those extras, that don’t really add much to life quality is the issue. Wages is not slowing down, we are spending out of our means.
Regarding @Mark’s comment: in addition to family size keeps getting smaller, the typical American family use to lived on 1 wage owner, those days it is 2. Furthermore, families were not in debt as we are today (I’m not talking about mortgage debt here).
George: I don’t see how it is possible that “in addition to family size keeps getting smaller, the typical American family use to lived on 1 wage owner, those days it is 2.” If there are fewer adults in a household how can there be more wage earners?
The definition of “family” now may also be broader. In the old days it would be two adults and their children. Today it could be one adult collecting child support and/or alimony and a part-time child. Even if the child support exceeds a typical worker’s after-tax salary it isn’t counted as “income”. Child support has become vastly more lucrative since the 1980s and, as you’d expect if people follow economic incentives, single parent households are a lot more common as well. So if you include those into the statistics you’ll get a lower “median family income” number. Also I think the cash value of welfare benefits, including housing, food, and health care, are not included. So again, you have zero-income families included in statistics. (Here in Cambridge a zero-income family could be occupying a $4500/month apartment in a new luxury building. It doesn’t make sense to say that they aren’t living as well as a zero-income family from 15 years ago when their luxury apartment building hadn’t been built.)
The pool of money for wages worldwide has grown dramatically in the 21st Century
Do you actually know this for a fact? If corporations are moving jobs from first world countries to places like China, the purpose is to significantly reduce the amount that they pay in wages.
If you think about it globally, it’s even worse for Americans. The average Chinese family makes vastly more than it did 15 years ago while the average American family has gone backward. I don’t think the article was speaking of American wages as a share of global wages but comparing the America of 15 years ago to that of today (for workers below the 90th percentile). It’s the old politician’s question, ” are you better off than you were X years ago?”
Likewise, our elected officials are sworn to pursue the happiness of their fellow Americans, not the overall wealth of the globe. It’s great for Bangalore that Facebook can outsource and can also get H1B programmers to come over here, but what has that done for American programmers? Do our Senators represent the 90% of people who are now worse off or do they represent the 10% who are donating to their campaign?
Globalization overall is supposed to be good, but I get the feeling that America gets rolled – we freely take imports from abroad but when it’s time for them to take our exports there are all sorts of requirements for local joint ventures (who steal American technology and then go off on their own), etc. Try selling American rice in Japan or Korea and see what happens.
Not getting the answer we want from a market is kind of the definition of market failure. If the market’s answer is that the air must be filthy (e.g. Los Angeles in the 1960’s) why is society obligated to accept that?
Love your points Philip. We need more of your reasoning out there!
Also, if I interpret your comments, my compensation has drastically decreased with the changes at my lovely, formerly gold-plate employer-provided health care plan that is no more 🙁
Like Jeff, I agree with your observations about the overall global economy for labor improving, but for us “high skilled” Americans (I am a chemist) it seems to have only been a downer the entire time I have been trying to establish a career.
The Asian imports I compete with seem pretty happy with taking far less in wages and lifestyle. However, I am looked down upon by my fellow Americans due to my inability to find steady employment, get indebted to a mortgage and start a family on top of it all.
But maybe it is a small loss to the world that some Americans, such as I, endure these declines, since the benefits seem greater in comparison. I have also learned to just accept the Asian culture by dating their women. They seem pretty tolerant of the long hours and lower pay in comparison to the natives.
Having thought about this a bit it remains unclear to me what the fact that the US share of a growing global GDP fell has to do with the fact that the 99%’s share of a growing US GDP also fell.