NDd and I thought this one was “funny”. Not sure how to attribute:
I’ve discussed the Credit Suisse Global Wealth Reports before, an excellent source of data for both wealth and wealth inequality. The most recent edition, from November 2016, shows the United States getting wealthier, but steadily more unequal in wealth per adult and dropping from 25th to 27th in median wealth per adult since 2014. Moreover, on a global scale, it reports that the top 1% of wealth holders hold 50.8% of the world’s wealth (Report, p. 18).
One important point to bear in mind is that while the United States remains the fourth-highest country for wealth per adult (after Switzerland, Iceland, and Australia) at $344,692, its median wealth per adult has fallen to 27th in the world, down to $44,977. As I have pointed out before, the reason for this is much higher inequality in the U.S. In fact, the U.S. ratio of mean to median wealth per adult is 7.66:1, the highest of all rich countries by a long shot.
The tables below illustrate this. First, I will present the 29 countries with median wealth per adult over $40,000 per year, from largest to smallest. The second table also includes mean wealth per adult and the mean/median ratio, sorted by the inequality ratio.
|5. New Zealand||$135,755|
|9. United Kingdom||$107,865|
|12. France||$ 99,923|
|13. Canada||$ 96,664|
|14. Netherlands||$ 81,118|
|15. Ireland||$ 80,668|
|16. Qatar||$ 74,820|
|17. Korea||$ 64,686|
|18. Taiwan||$ 63,134|
|19. United Arab Emirates||$ 62,332|
|20. Spain||$ 56,500|
|21. Malta||$ 54,562|
|22. Israel||$ 54,384|
|23. Greece||$ 53,266|
|24. Austria||$ 52,519|
|25. Finland||$ 52,427|
|26. Denmark||$ 52,279|
|27. United States||$ 44,977|
|28. Germany||$ 42,833|
|29. Kuwait||$ 40,803|
Source: Credit Suisse Global Wealth Databook 2016, Table 3-1
Now that I’ve got your attention, let me remind you why this low level of median wealth is a BIG PROBLEM. Quite simply, we are careening towards a retirement crisis as Baby Boomers like myself find their income drop off a cliff in retirement. As I reported in 2013, 49% (!) of all private sector workers have no retirement plan at all, not even a crappy 401(k). 31% have only a 401(k), which shifts all the investment risk on to the individual, rather than pooling that risk as Social Security does. And many people had to borrow against their 401(k) during the Great Recession, including 1/3 of people in their forties. The overall savings shortfall is $6.6 trillion! If Republican leaders finally get their wish to gut Social Security, prepare to see levels of elder poverty unlike anything in generations. It will not be pretty.
Let’s move now to the inequality data, where I’ll present median wealth per adult, mean wealth per adult, and the mean-to-median ratio, a significant indicator of inequality. These data will be sorted by that ratio.
|1. United States||$ 44,977||$344,692||7.66|
|2. Denmark||$ 52,279||$259,816||4.97|
|3. Germany||$ 42,833||$185,175||4.32|
|4. Austria||$ 52,519||$206,002||3.92|
|5. Israel||$ 54,384||$176,263||3.24|
|6. Kuwait||$ 40,803||$119,038||2.92|
|7. Finland||$ 52,427||$146,733||2.80|
|8. Canada||$ 96,664||$270,179||2.80|
|9. Taiwan||$ 63,134||$172,847||2.74|
|11. United Kingdom||$107,865||$288,808||2.68|
|12. Ireland||$ 80,668||$214,589||2.66|
|14. Korea||$ 64,686||$159,914||2.47|
|15. France||$ 99,923||$244,365||2.45|
|16. United Arab Emirates||$ 62,332||$151,098||2.42|
|20. Netherlands||$ 81,118||$184,378||2.27|
|21. New Zealand||$135,755||$298,930||2.20|
|23. Qatar||$ 74,820||$161,666||2.16|
|24. Malta||$ 54,562||$116,185||2.13|
|25. Spain||$ 56,500||$116,320||2.06|
|26. Greece||$ 53,266||$103,569||1.94|
Source: Author’s calculations from Credit Suisse Global Wealth Databook 2016, Table 3-1
As you can see, the U.S. inequality ratio is more than 50% higher than #2 Denmark and fully three times as high as the median country on the list, France. As the title says, this is not even close.
The message couldn’t be clearer: Get down to your town halls and let your Senators and Representatives know that it’s time to raise Social Security benefits and forget the nonsense of cutting them.
Cross-posted from Middle Class Political Economist.
by New Deal democrat
4th Time in a row to the sweet 16 . . . Go Badgers. Not a repeat year; but, it was fun to watch.
Via Econospeak from Sandwichman:
by Barkley Rosser (originally from Econospeak)
Tyler Cowen has published his most successful book yet, The Complacent Class, now on the Washington Post nonfiction bestseller list and getting reviewed by everybody from The Economist to the New York Times and on. It is the Book de Jour that all are commenting on one way or another. Is America declining because so many of its people have become complacent? (Shame on them.)
The book has much to offer. It is chock full of many interesting facts, although many of them Tyler has publicized at one point or another on his blog, Marginal Revolution. He even pushes some newly fashionable ideas that have been in the dark for too long, such as a sort of cyclical theory of history. And he certainly makes the case that there are lots of trends that seem to show the American people not being as energetic or adventurous as they used to be, with headline data including reduced interstate migration, reduced changing of jobs, reduced patenting, and reduced entrepreneurial startups, among other things. He does note some external matters that may be adding to some of this, with building codes and land use restriction in economically dynamic urban areas a big culprit as it makes it harder for many to take advantage of the high paying jobs in those areas. He has also noted that we may be running out of new scientific knowledge to learn or discover, which makes it harder to find dramatic things to patent, and indeed he wrote a previous book about this, blaming this as a major reason for secular stagnation.
But the big question is whether the title is an accurate representation of what is in the book, which has come up in a series of inconclusive blogposts about “Who is the Complacent Class?” Frankly, it is not clear that there is one, or if there is one, they are not the people who are responsible for the data he puts forth as supposedly claiming there is one. If there is a complacent class in the US, it is the top 1 or 2 percent of the wealth and income distribution, who get lots of attention, but who are not the people who are not moving across state lines or changing jobs. That is going on in the other 98 percent mostly.
I think we have three really important functions.
First, to explain our basic concepts and most important insights in plain English. Famously, Paul Samuelson, the founder of modern macroeconomics, was asked whether economics told us anything that was true but not obvious. It took him a couple of years, but eventually he gave an excellent and topical example – simply the theory of comparative advantage.
Similarly, I often say that the most useful thing I did in my 6 years as Chief Economist at DWP was to explain the lump of labour fallacy – that there isn’t a fixed number of jobs in the economy, and increased immigration or more women working adds to both labour demand and labour supply – to six successive Secretaries of State. So that’s the first.
Second is to call bullshit.
O.K. I call bullshit. What Portes explained “to six successive Secretaries of State” was a figment of the imagination of a late 18th century Lancashire magistrate, a self-styled “friend to the poor” who couldn’t understand why poor people got so upset about having their wages cut or losing their jobs — to the extent they would go around throwing rocks through windows, breaking machines and burning down factories — when it was obvious to him that it was all for the best and in the long run we would all be better off… or else dead.
I call bullshit because what Portes explained to six successive Secretaries of State was simply the return of the repressed — the obverse of “Say’s Law” (which was neither Say’s nor a Law) that “supply creates its own demand,” which John Maynard Keynes demolished in The General Theory of Employment, Interest and Money and that John Kenneth Galbraith subsequently declared “sank without trace” in the wake of Keynes’s demolition of it.
I call bullshit because when Paul Samuelson resurrected the defunct fallacy claim that Portes explained to six successive Secretaries of State, he did so on the condition that governments pursued the sorts of “Keynesian” job-creating policies that the discredited principle of “supply creates its own demand” insisted were both unnecessary and counter-productive.
But the lump of labor argument implies that there is only so much useful remunerative work to be done in any economic system, and that is indeed a fallacy. If proper and sound monetary, fiscal, and pricing policies are being vigorously promulgated, we need not resign ourselves to mass unemployment. And although technological unemployment is not to be shrugged off lightly, its optimal solution lies in offsetting policies that create adequate job opportunities and new skills.
[Incidentally, as Robert Schiller has noted, the promised prevention of mass unemployment by vigorous policy intervention did not imply the preservation of wage levels. Schiller cited the following passage from the Samuelson textbook, “…a decrease in the demand for a particular kind of labor because of technological shifts in an industry can he adapted to — lower relative wages and migration of labor and capital will eventually provide new jobs for the displaced workers.”]
I call bullshit because what Portes explained to six successive Secretaries of State was not even Paul Samuelson’s policy-animated zombie lump-of-labour fallacy but a supply-side, anti-inflationary retrofit cobbled together by Richard Layard and associates and touted by Tony Blair and Gerhard Schroeder as the Third Way “new supply-side agenda for the left.” Central to that agenda were tax cuts to promote economic growth and “active labour market policies” to foster non-inflationary expansion of employment by making conditions more “flexible” and lower-waged:
Part-time work and low-paid work are better than no work because they ease the transition from unemployment to jobs. …
Encourage employers to offer ‘entry’ jobs to the labour market by lowering the burden of tax and social security contributions on low-paid jobs. …
Adjustment will be the easier, the more labour and product markets are working properly. Barriers to employment in relatively low productivity sectors need to be lowered if employees displaced by the productivity gains that are an inherent feature of structural change are to find jobs elsewhere. The labour market needs a low-wage sector in order to make low-skill jobs available.
by Barkley Rosser (originally from Econospeak)
Trumpcare Saves Social Security By Killing People!
Yes, there it is in black and white in Table 3 footnote f on p. 33 of the Congressional Budget Office (CBO) official report on the proposed American Health Care Act, aka Trumpcare. Between now and 2026 spending by the Social Security Administration is projected to decline by $3 billion if Trumpcare passes. This is due to a projected 1 out of 830 people dying who would not under the status quo, this based on a study of what happened to death rates in Massachusetts after Romneycare came in. The projected deaths are about 17,000 in 2018 and up to about 29,000 in 2026.
Another great thing? There will be a reduction in accumulated deficits of about $300 billion, with a reduction of revenues of about $0.9 trillion and a reduction of outlays of about $1.2 trillion. The former will be due to cuts in taxes on high income people while the latter will be due to eliminating subsidies to help poorer people pay for health insurance on the exchanges as well as cutbacks in Medicaid spending for even poorer people. How fortunate can we get?
by New Deal democrat
The unemployment rate, at 4.7%, is generally acknowledged to be decent, although not great. But what of the underemployed?
Typically as an economy expands, the U6 (unemployed + underemployed) rate has declined more than the U3 (unemployed only) rate, as shown on the below graph which subtracts U3 from U6, thus leaving us with just the underemployed:
As the recovery matures, the two move in tandem. As the economy weakens into a recession, the underemployed tend to feel it fist, as U6 increases more than U3.
So the good news for now is that U6 is still declining more than U3.