Real earnings, real anger

March 9th, 2016 at 2:17 pm

Over at WaPo, but I realized this AM that it would be interesting to look at the trend in real manufacturing wages for blue collar workers in Michigan. While the national real wage has been flat, that of MI has fallen steeply. Nothing you wouldn’t know if you follow this sort of thing, but if you’re trying to figure out why a bunch of voters are pissed off right now, here’s a picture. Among the many questions we ask, this one ain’t exactly a head-scratcher.

Source: BLS, CPI-RS deflator

Source: BLS, CPI-RS deflator

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9 comments in reply to "Real earnings, real anger"

  1. Roger Chittum says:

    Also, Michigan’s work force and population are down by ~10%. http://michiganeconomy.chicagofedblogs.org/?p=377


  2. Amateur says:

    It is a shame that this problem only gets attention in states like Michigan. The problem exists in all states to some degree. If a person looks at this politically, it looks like only one or perhaps a few states are effected. In reality, the entire nation is effected significantly.

    Does the campaign manager for one of the candidates really need to create a foundation to understand the problem here? There’s no mystery here.


  3. Smith says:

    – Ok, everyone ignores the increase in women in the workforce getting paid less, which affects all men’s wages. No one notices the effect on men due to the gap. All they can see are women earning 80% to 90% of what men earn (even after adjusting for years of experience, and type of job). The effect is masked by downward nominal wage rigidity (DNWR). Even though it’s a basic part of Keynesian economics, it’s ignored by everyone.
    – The same effect is at work when exploited immigrant labor (due to employer sponsorship requirement) are paid less, and makes a mockery of David Card’s analysis (he interprets wage differentials as skill differentials, totally ignoring DNWR).
    – Obama, Clinton, and the Republicans would all reward corporate America for shipping jobs overseas by granting them a tax holiday to repatriate profits, and then tax them at a lower rate to give them further encouragement. The opposite should happen. No tax break, and start taxing their foreign operations whether or not profits are returned to the US.
    – Germany has laws and corporate governance which imposes obstacles to shipping jobs overseas. We could move in that direction.
    – The higher minimum will nudge everyone in a ripple effect, and also level a little more some low wage states.
    – National rules on paid vacation, sick leave, and holidays, and universal health coverage, would supplant long lost labor power without impinging fabled labor flexibility, to hire and fire at will.
    – Ending blanket exempt status for office workers would update Fair Labor Standards Act to 20th Century (yes and we’re already in the 21st) Please also remove special Clinton era tech worker qualified exemption.
    – Universal quality free childcare is a necessary component of a better society with more choice and less poverty.
    – No to TPP obviously (Clinton pushed by Sanders to reject)


  4. Kevin Rica says:

    The difference between less-affluent whites and blacks is that whites are angry at both parties and blacks still haven’t rebelled against the Dems. Dems are probably going to survive Trump asking why there are no jobs for kids in the inner cities, but there are jobs for anyone evading the Border Patrol, but if a Democrat gets elected, he/she will have to actually address the problem with something more than a $15 million, three-year HUD grant. In fact, he/she will actually have to produce results rather than plans and a photo of him/her breaking ground on the new housing project.

    The WaPo piece had a really great graph on real annual earnings of white men 1989-2014 and a spot-on analysis: “For both low- and middle-earning white guys, there’s a small bump up in the full-employment 1990s, though no great shakes.” I would like to see how the same graph would look for black men on the bottom half of the pay scale. I’d guess it’s worse. You can’t blame W for all these problems. You can’t blame just slow growth because even rapid growth during the 1990s only flung crumbs to lower-income men.

    And Dems keep claiming that we need more immigrants to do the jobs these guys won’t do. Shows where their priorities are! They and the Chamber of Commerce are united against the threat of “labor shortages.”

    It’s not all immigration, it’s not all the trade deficits, and it’s not all slow growth, but the combination is lethal.


    • Smith says:

      Democrats will not have to address the problem why there are no jobs for inner city kids, other than usual call for inner city jobs. There is no pressure on them, no alternative. It would also be extremely rare for a Democrat to point out the obvious, that exploited immigrant laborers are hired first because they can be exploited, paid less, lack labor rights, and thus hurt already disadvantaged and discriminated against groups the most. Identity politics takes over, as politicians build a coalition of minorities and the coalition recognizes a mutual history of exploitation, instead of competing interests. There are a lack of alternatives because Republican economic arguments are obscured by thinly veiled racist elements.
      Even the flawed immigration studies that ignore DNWR show the lowest income highest unemployment demographic groups suffer from increased immigration, the very groups needing the most help.

      No honest person claims immigration is needed to fill jobs. Americans will work if the pay is high enough.

      If you want to help inner city youth get jobs, you have to figure out how average spending per student per year in New York City is $20,000 a year and test scores are still so low. That’s 25 students, 1 teacher, 1/2 a million dollars/year, 12 years. Or for an untypical family of four, father, mother and two children, we spend nearly a 1/2 of a million dollars on their education (12yrs * $20,000 * 2 children) and then what? Tell each parent we will give them $20,000 a year to teach their kid if the kid passes a test…probably not the answer, but more partnership needed…


      • Smith says:

        Just to be clear, it is the exploitation of immigrant labor that hurts the economy. Thus it is only actual amnesty vs. the employer controlled road to citizenship (which ensures continued years of exploitation) that would end the the worst features of our current system.
        Immigration of free labor is a plus in normal economic conditions.


        • Kevin Rica says:

          Smith,

          No, legalization just takes away the small advantage that inner-city kids have over illegal immigrants. If Trump wins and actually does what he says and reduces the illegal immigrant population, that will reduce the number of people looking for low-wage, low-skilled work. Then, the Law of Supply and Demand shows that the wages of low-skilled workers will rise. If you believe the elasticities used to justify higher minimum wages, the wage increases will be quite large (and with much lower unemployment than a minimum wage hike). Even if the demand for labor not as inelastic as advocates of minimum wage hikes claim, the wage bill will certainly rise (the increase in wages offsetting the loss of jobs).

          And let me anticipate the argument that illegal immigrants create jobs by buying stuff. (I know that is coming.) The idea that illegal immigrants create jobs by buying stuff is more parallel universe economics made up by ideologues. If you have to replace the illegal immigrant with a black kid, the black kid gets to buy stuff instead (and maybe with a higher wage).


  5. Amateur says:

    This is going to get uglier before it gets better.

    Why does it often take violence to make a political point?

    And why are the victims of violence always those making the point?

    Is this system salvagable? I’m not sure.


  6. Amateur says:

    I think it is possible that the general population could lose this argument, and they could be subjugated forever. They might be allowed to live, but only if they have a specific need.

    There are science fiction novels to this effect. We were supposed to use those as a warning to change direction, but we haven’t. Why?

    I think it is about the lack of social connection between nations that trade in services.

    But more generally, we have seen it before, but not from a nation of so much power. Previous thoughts were that the cause was economic stress caused by foreign nations. Now the problem is caused by foreign stress caused by the domestic nation forcing citizens to conform to the work conditions of foreign nations.

    This results from the stupidity of very rich people. Those that don’t know what is really happening. The Kochs have bowed out because I think they get it, perhaps. What were you enflaming, Charles and David?

    It is too late, you should have been on the side of workers. The Communist party began not because of poor ideology, but because of poor treatment by the owners of production.

    It can’t be fixed by denouncing those citizens. You have to listen to them and change it democratically.

    So this time is so significant it is unprecedented. I’m not going to root for any particular candidate, but I’m going to try to add the citizen’s view of economics into the mix.

    I’m sorry it is making such a mess, but worse thing would happen if we didn’t do our deeds.


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