A Tale of Two Countries and Labor
I struggled with whether to add this to Sandwichman’s post or start anew. This is along the lines of what he might talk about in preserving Labor by limiting hours when there is only so much work to be done. Take note on how Sweden handled it as compared to the US.
In the US, in particular, the ability of labor to protect its share of national income, and of lower and middle-income households to protect their share of the wage pool, eroded substantially. As a result, real growth in median disposable income slowed by nine percentage points from 1993 to 2005, and by another seven percentage points from 2005 to 2014.
Sweden, where median households received a larger share of the gains from output growth in the 2005-2014 period, has bucked this negative trend. In response to the growth slowdown of the last decade, Sweden’s government worked with employers and unions to reduce working hours and preserve jobs. Thanks to these interventions, market incomes fell or were flat for only 20% of households. And generous net transfers meant that disposable incomes increased for almost all households.
To be sure, the US also intervened after the crisis, implementing a fiscal stimulus package in 2009 that, along with other transfers, raised median disposable income growth by the equivalent of five percentage points. A four-point decline in median market income thus became a one-percentage-point gain in median disposable income. But that did not change the fact that, from 2005 to the end of 2013, market incomes declined for 81% of US households.
Similarly, recent research by Berkeley’s Emmanuel Saez shows that real market income for the bottom 99% in the US grew in both 2014 and 2015 at rates not seen since 1999. Nonetheless, by the end of 2015, real market incomes for that group had recovered only about two-thirds of the losses borne during the 2007-2009 recession. In other words, while disposable income did not fall in either Sweden or the US, the US approach was to compensate for a decline in market incomes, which Sweden had managed to head off.
The Great Income Stagnation Laura Tyson and Anu Madgavkar, Project Syndicate.
I don’t have a comment to make, but rather a question to ask. Has any economist, or anyone for that matter, looked at the relationship between the rising income levels of the top 1%, 2%…5% and the seemingly continuously falling income levels of the rest of the working population. Are those at the top reaping more by denying income growth to those below themselves? How closely connected are the losses of the many to the gains of the few? Inquiring minds need to know.
Jack (good name!);
I think the argument is that to the extent that the profits resulting from increased productivity are used to enrich management and stockholders, employees relying on the corporation for their income are denied a share in those profits at least to the extent their income remains stagnant.
JackD:
I think it is a combination of factors Capital Gains being one, less Labor required for various reasons (efficiency, Labor intensive jobs going overseas, higher tech, etc.)
Run, I agree but basically it means that the profits aren’t being shared with labor.
By the way, what’s with the autocorrect? Why would “remains” come out “rains”?
Good question. But I will fix it for you.
Interesting post on another blog at : http://ritholtz.com/2016/09/cant-find-qualified-applicants-raise-pay/ showing that right now there are only 1.6 unemployed workers per job opening down from 6.6 in 2009. As the blog article suggests employers are going to have to raise wages since the labor pool is getting tight. It may be this tightening that is the cause of the recent labor share increase. (Recall that to attract workers of the quality desired many places such as Wal-Mart and some McDonalds have raised wages above the minimum, partly to decrease the costs of turnover). Over time we do know that when labor starts getting scarce, then eventually wages rise, look at wages during the peak of the boom in Williston ND.
Lyle:
There are still a lot of people wanting to work who employers will not put to work.
“Sweden, where median households received a larger share of the gains from output growth in the 2005-2014 period, has bucked this negative trend. In response to the growth slowdown of the last decade, Sweden’s government worked with employers and unions to reduce working hours and preserve jobs. Thanks to these interventions, market incomes fell or were flat for only 20% of households. And generous net transfers meant that disposable incomes increased for almost all households.”
Obviously, this is nonsense. Ronald Reagan said, “The most terrifying words in the English language are: I’m from the government and I’m here to help.” And as y’all know, Ronald Reagan was right about everything. (No, no; CORRECT about everything.)
Then again, when Sweden’s government worked with employers and unions to reduce working hours and preserve jobs, all the participants probably were speaking in Swedish, not English. So I guess that’s the key.
I’m thinking that my question about a direct link between executive largess and working class continuous impoverishment doesn’t have a clear answer. I assume its not an area seem as ripe for study. When I think about it I’m hard press to identify how funding for such research would be obtained. The ivory towers of academia have long been over seen by the executive corp of corporate America. Has no one who might study these phenomenon routinely looked closely at where all that executive compensation comes out of? I’d bet that if USA Inc. wanted to find a way to shift funding from one expense to another it could set up very exact measures for how to do the most good where wanted and what could be given up with the least pain if the need were significant enough. And what could be more worthwhile than huge quantities of executive wealth?
The simple answer to where the executive compensation comes out of is the board of directors. Why do they do it? I don’t know that research is needed. They are elected by stockholders who are largely controlled by large institutional investment entities who are primarily concerned with the value of the stock. Increase the stock value, keep getting elected, and keep paying the executives who seem to be producing the stock value.
Jack, isn’t that essentially what Picketty wrote about in “Capital in the 21st Century” (2014)?