BOTTOMLINE:
1/3/12: More Americans fell into poverty last year than has ever been recorded before.
But the reason is probably not what you think!
There is no miracle!
THE ACTUAL CAUSES
Global competition!
Benefitted Americans through cheaper goods, which Americans go for, producing more jobs overseas
Lower skill Americans have too much easy global competition, driving down wages
Need to produce greater value
Low skill jobs will continue to be low paid generally (artificially propping up is not the answer)
Higher skill, mostly knowledge workers is what it will take - we have not adjusted to this!
Educate and reallocate to higher pay areas - the solution for the future
THE FACTS
The middle shifted!
Median wage is affected by what happens at the bottom, not just the middle. More people are coming in at the bottom! (And that drops the average!)
Compare comparable items
Increase in cost of living index 65%
Increase in median income
High schools and below 60%
College educated workers and above 100+% [They are better off!]
The problem is not for higher educated workers.
The problem is that the mix has changed.
There are more less educated workers (immigration, cultural trends), so educational mix is lower!
Increase in median wages (Notice the differences!)
High school and below 60%
Bachelor's degree 100%
Master's degree 100%
Professional degree 122%
Doctorate 126%
Unemployment rate now: college degree or not
With college degree 4.4%
Without college degree 9.7%
Notice this fact: Median wage is affected by what happens at the bottom, not just the middle. More people are coming in at the bottom! (And that drops the average!)
College degrees required for sixty percent of US jobs by 2018:
"The unemployment rate for people who have never gone to college is more than double what it is for those who have gone to college," says Dr. Mary Hawkins, president of Bellevue University. "And during the next 10 years, nearly eight in 10 new jobs will require workforce training or a higher education. These statistics make it clear that completing some form of higher education is the best tool to meet the challenges of a 21st century economy."
Manufacturing and realistice change
The U.S. can't compete in labor intensive manufacturing, because the key driver of labor intensive manufacturing costs is wages – and wages are a lot lower beyond America's borders. On the other hand, the U.S. might be able to compete in technology intensive manufacturing. Unfortunately, by definition, this realm of manufacturing depends on technology, not very large numbers of people. I.e., it won't solve our very large jobs problem.
VIEWS ABOUT "FREE TRADE"
People without knowledge fail to see the savings that we all get from "comparative advantage."
"The globalism and "free trade" that our politicians and business leaders insisted would be so good for us have had some rather nasty side effects. It turns out that they didn't tell us that the "global economy" would mean that middle class American workers would eventually have to directly compete for jobs with people on the other side of the world where there is no minimum wage and very few regulations. The big global corporations have greatly benefited by exploiting third world labor pools over the last several decades, but middle class American workers have increasingly found things to be very tough."
"But today, U.S. workers are "less attractive" than ever.the number of "chronically unemployed" is absolutely soaring."
That's the complaint and the characterization/twist of how bad politicians and business people are. But the question is what is the solution?
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MISCELLANEOUS DATA (Not for most people)
1970 10.7%
1980 16.2
1990 20.3
2000 24.4
85% 25 and over have a high school diploma
27 % 25 and over have college degree
At age 24, men are a third less likely to have earned a bachelor’s degree
Bachelor's degree
1990 2008
Median annual income
Bachelor's degree 39,328 82,197
Increase from 1991 - 2008, ratio of rise
Ratio of rise
(1 = O% rise)
High school, to 9th grade plus $33,435 1.6
High school 43,165 1.61
Bachelors Degree 82,197 2.0
Master's Degree 99,516 2.0
Professional degree 166,065 2.22
Doctorate 129, 773 2.26
Cost of living index
1991 - end 130.7
2008 - end 215.303
Increase ratio 1.65 (65% increase in cost of living)
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Notes for redistribution:
The problem areas:
Oil prices - We can't afford to not produce our own - jobwise certainly and economics wise
High cost of American products
Health insurance costs
Increased cost of big ticket fixed expenses - houses
We must distinguish between wrong cause and right cause if we want to solve a problem. Readers must distinguish between complaints and asking for an easy way out - and substance, where the end objective is to solve the problem, not to bemoan it or place blame.
The rich are getting richer and the poor are getting poorer at a staggering rate. Once upon a time, the United States had the largest and most prosperous middle class in the history of the world, but now that is changing at a blinding pace.
Typically, blame for this lands on families themselves. They're spending themselves into penury by buying designer clothes for their kids and indulging in $4 lattes, say social commentators.
What has substantially changed, Warren reports, is the cost of big-ticket, fixed expenses.
Read more: America's middle-class collapse - Pittsburgh Tribune-Review http://www.pittsburghlive.com/x/pittsburghtrib/opinion/columnists/guests/s_576040.html#ixzz1mNrwXJEw
New America Foundation
•The number of good jobs continues to decrease.
•The rate of inflation continues to outpace the rate that our wages are going up.
•American consumers are going into almost unbelievable amounts of debt.
•The number of Americans that are considered to be "poor" continues to grow.
•The number of Americans that are forced to turn to the government for financial assistance continues to go up.
Manufacturing is the engine that drives American prosperity. It is central to our economic security and our national security
"If manufacturing production declines in the United States, at some point we will go below critical mass and then the center of innovation will shift outside the country and that will really begin a decline in our living standards." While, manufacturing is not likely to fall below critical mass in this generation, it may in the next generation. Mark Zandi, chief economist at Moody's Economy.com calculates that 20.5 percent of the manufactured goods bought in American in 2005 were imported. This was up from 11.7 percent in 1992 and 20 percent in 2004.
We need to preserve out national and homeland security to be able to produce the goods that allow us to defend America.
us only buys US
Manufacturing provides high-paying jobs for more than 14 million Americans and creates an additional eight million jobs in related industrial sectors.
Is Intergenerational Mobility Lower Now? - Good blog: "The gap in children’s academic performance between high- and low-income families has widened significantly over the last few decades. If this trend persists, it would point to reduced intergenerational economic mobility going forward." Note that this is due not to any "badness" but to the global competition affected the lower income jobs.
While the real wages of low and middle earners were stagnant or falling for much of the period covered by the figure, they rose smartly in the latter 1990s, as the tight job market forced employers to bid wage offers up. Productivity also accelerated in the second half of the 1990s, and the persistently tight job market helped ensure that the benefits of growth were broadly shared. Economic Gains Fail To Reach Most Workers' Paychecks
In recent weeks, the Obama Administration and media have taken to celebrating the upturn in US manufacturing, which they have proclaimed as the solution to the country's economic woes.
the growth in the manufacturing sector has been based on a sharp decline in workers' wages and benefits, fueled by the rapid devaluation of the US dollar. Moreover, it comes after the destruction of nearly 2 million manufacturing jobs, leaving a huge net job loss.
The driving force in manufacturing growth is to be found in the continued productivity upturn in the sector, which has significantly outpaced the rest of the economy
James L. Butkiewicz, a professor of economics at the University of Delaware, said in a phone interview Tuesday that much of the rebound in manufacturing was based on concessions taken from the workforce, particularly in the auto industry. “During the recession, firms sought concessions from the unions to keep them going,” he said. Now that conditions are more favorable, the concessions have stuck, resulting in a rebound in profitability.
Between January 2008 and March 2009, the worst part of the downturn in manufacturing, the relative rate of job loss was twice as high for the manufacturing sector as for the economy as a whole.
In the course of this slump, manufacturing firms aggressively shut down plants and consolidated their workforces. Remaining workers were forced to accept less pay and worse working conditions on pain of losing their jobs.
“Unit labor costs are falling in the US, which, together with the falling exchange rate, are making US exports very competitive,” said Butkiewicz.
In January 2010, Barack Obama pledged to double US exports within five years. Soon afterward it became clear that the administration intended to do this through the combined policy of competitively devaluing the US dollar and driving down the living standards of US workers. In the past year alone, the US dollar has fallen 12.4 percent against the yen and 12.72 percent against the euro. Although China had previously sought to peg the yuan to the dollar, the US currency has appreciated by nearly five percent against the yuan.
The devaluation of the US dollar was the outcome of the Federal Reserve's cheap money policy, which, in addition to reducing the US exchange rate, flooded US corporations with cash that they could use to drive up their profits without additional production.
The Obama administration likewise intervened to restructure the auto industry, overseeing the closure of plants throughout the country and the imposition of a contract that significantly expanded the hiring new workers at $14 per hour. This intervention by the Obama Administration opened the way for other companies to follow suit, pursuing similarly aggressive policies against their own workforces.
doing so, Obama was accelerating the general growth of the tiered-labor system in the auto industry, begun with the splitting off of parts production facilities in the 1990s, in which parts workers were paid half the wages of assembly workers.
The result of this policy was highlighted in an analysis made earlier this month by the Boston Consulting Group, a business consultancy, which predicted a convergence of labor costs between the United States and China in the near future. “We expect net labor costs for manufacturing in China and the U.S. to converge by around 2015,” said Harold L. Sirkin, a senior partner at the group
“Executives who are planning a new factory in China to make exports for sale in the U.S. should take a hard look at the total costs,” said Sirkin. “They're increasingly likely to get a good wage deal and substantial incentives in the U.S., so the cost advantage of China might not be large enough to bother.”
While the cost differences between the United States and China are significant, the fact remains that the continuing downward trend in the costs of US production are leading to wages and working conditions for the US manufacturing sector that resemble those currently existing in China far more than those of the US workforce in an earlier period. US Manufacturing Rebounds on lower wages (Socialist Web site)
While average wage growth has remained flat during the past thirty years, median wage growth only saw a slight increase of 11 percent, despite each individual worker’s contribution to GDP soaring by 59 percent, according to a study by the Economic Policy Institute.
“This modest wage growth was not the result of a broken economy: rather, modest wage growth is the result of the way the economy has been designed to work. Essentially, economic policy of the last three decades has not supported good jobs. The focus instead has been on policies that claimed to make consumers better off through lower prices,” study author Lawrence Mishel wrote in his summary of his findings.
direct result of our failed ‘free’ trade policies. By embracing unregulated trade with no form of economic protections, we have thrown out the baby with the bath water and have made it unprofitable to produce goods and employ workers in this country. Thus, the market has responded with lower wages and fewer jobs.
In order to return to full employment and a robust economy, the U.S. must return to trade practices that originally made this nation great, and that entailed protecting and encouraging the growth of our industrial sector. Manufacturing jobs provide good wages for all education levels (whether it be assembly workers, research and development or management) and spurs the development of other sectors of the economy.
Since embracing ‘free’ trade a few decades ago, our nation has seen declining employment (less people employed now than 10 years ago), stagnant wages (as this study shows) and a declining standard of living as the government and individuals have gone deeper into debt. We cannot solve a problem until we acknowledge there is one, and trade deficits caused by disastrous agreements such as NAFTA and the WTO are the reason for our economic woes, not the solution (as many claim with the current Korean free trade agreement).
Average hourly earnings: manufaction Jan 2002 to Jan 2010 up 21%
Jan 1980 to Feb 2012 6.9 to 18.5 168% increase
