Tuesday, August 26, 2014

Tuesday, August 19, 2014

It is getting much harder to earn big bucks in America, my new analysis of official wage data shows.
The number of workers making $2 million or more per year declined almost 5 percent, from 39,650 in 2000 to 37,714 in 2012. This decline is especially remarkable, given 11 percent population growth.
These top jobs paid less too, despite 22 percent real growth in the economy over those 12 years. Measured in 2012 dollars, average pay at the top was $5.04 million, down from $5.27 million in 2000. That’s 4.3 percent less pay per top worker.
Combined, the decline in big bucks jobs and average pay meant top earners got a smaller slice of the national wage pie. The pie grew 7.2 percent. But the $2 million and up workers saw their slice shrink from 3.4 percent to 2.9 percent.
Now why should the typical worker care about this trifecta of bad news for high earners? After all, just one worker in about 4,100 makes this kind of money. What does it possibly matter to ordinary Americans that bosses who make as much in a year as they may earn for a lifetime of labor are squeezed a bit?
It matters because falling pay at the top can become a powerful tool for change. U.S. representatives and senators may not care much what a typical constituent thinks, but they do care about what the highest-paid Americans think, because they donate to campaigns.
If those at the top come to see that they share the travails of most other Americans, it increases the prospect of government policy changes that will grow our economy. We need to invest in the future of America for our economy can grow, which will make everyone, from custodians to CEOs, better off.

Up or down together

This is a story about the income of high earners. Income and wealth are not the same. Wealth is property — assets, from stocks and land to fine art. Income is earnings, primarily from work. Assets are soaring in value, but not paychecks.
The declines in inflation-adjusted top pay show that workers are all in this together, rich and poor — a lesson President Theodore Roosevelt taught as he fought for policies that helped create America’s middle class and a century of prosperity. We need to inject his wise words into our civic debate.
“The fundamental rule in our national life — the rule which underlies all others — is that, on the whole and in the long run, we shall go up or down together,” he told Congress in 1901. 
Let’s talk about how overall, U.S. workers earn less today than they did in 2000.
By cutting investments in the future of America, Congress is making us worse off than need be. Spending more on basic research, on fixing up and improving our infrastructure and investing in higher education will more than pay for itself today and make us all richer in the future.
The mentality that taxes rob us holds America back. On the contrary, tax dollars can enrich everyone — a core idea that the Constitution’s framers knew and taught but that we have forgotten, along with Roosevelt’s insight.
The eye-opening figures on the earnings of those making $2 million or more come from the most comprehensive, precise and reliable source of income data in the U.S. It covers just one component of the money people receive — wages and salaries — but that explains roughly 70 cents out of each dollar of total individual income.
W-2 forms show wages, salaries, overtime, bonuses and profits from stock options, which are taxed as cash wages. Most fringe benefits are excluded from this data, meaning it provides an excellent though not quite perfect measure of cash compensation. When it comes to people’s sense of financial security and freedom to save or spend as they choose, it is cash income that matters the most.
Employers send W-2 forms to their workers and to the Social Security Administration. Social Security then adds the W-2s down to the penny and each year breaks them into fine categories, as small as $5,000 brackets, with a top bracket of $50 million or more.

What the data show

My column last week showed, using this data, that over the same 12 years the lowest-paid workers in the United States got a real pay increase while those making $20,000 to $40,000 in 2012 dollars saw their average pay dip slightly. The under-$20,000 workers enjoyed a small real average increase in pay because of three minimum wage hikes promoted by Democrats and passed with votes from 82 House Republicans and all but four Senate Republicans. President George W. Bush signed the hikes into law.
Social Security issues finely detailed breakdowns of wages by income brackets, but the brackets are fixed, which typically means that inflation adjustment of the same income groups is not possible. But since 2012 prices were exactly a third higher than in 2000, we can make some comparisons using inflation-adjusted dollars.
The wage bracket from $1.5 million to $3 million in 2000 is equivalent to the $2 million to $4 million bracket in 2012. And that means we can also look at jobs paying $4 million or more. Here in the rarified air of the top earners, something really interesting took place.
First, consider those making $2 million to $4 million: Their numbers plummeted, down 41 percent, from the 29,866 such workers in 2000 to 17,750 in 2012. Their average pay fell too, from $3 million in 2000 to $2.4 million in 2012.
For workers paid $4 million or more, the story is nuanced. Their ranks more than doubled — from 9,784 in 2000 to 20,164 a dozen years later. But their average pay plummeted by $4.7 million — a 39.2 percent decline. Average pay was $12 million in 2000 but $7.3 million in 2012.
Consequently, the highest of the very highly paid are dominating, yet they are not being paid nearly as well as their 2000 counterparts, probably because of smaller profits from exercising stock options.
These shrinking jobs and pay figures, together with those reported in last week’s column, should transform our debate about pay. The data demonstrate that the bottom two-thirds of workers and the highest paid few have a common cause in seeking pay raises.
Let’s start talking differently about our economy. Let’s talk about how overall, U.S. workers earn less today than they did in 2000. Let’s talk about how to get America a pay raise, both for workers paid under $40,000 and those paid than $2 million. Let’s talk about how all workers are in this together.
David Cay Johnston, an investigative reporter who won a Pulitzer Prize while at The New York Times, teaches business, tax and property law of the ancient world at the Syracuse University College of Law. He is the best-selling author of “Perfectly Legal,” “Free Lunch” and “The Fine Print” and editor of the new anthology “Divided: The Perils of Our Growing Inequality.”
The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera America's editorial policy.
An extraordinary shift in wages paid to American workers took place from 2000 to 2012, a change that holds powerful lessons about the minimum wage, government policy and unions.
The lowest-paid workers — those making less than $20,000 a year — saw their average pay rise by more than the rate of inflation. There were nearly 61 million workers in this group in 2012, and they averaged $8,255 in wages annually. Compared with the year 2000, that was a real increase of $95, or 1.2 percent.
That’s not much, but it’s better than what happened to workers just above them, those earning $20,000 to $40,000. Their 2012 average wage slipped a tad, down $104, to $29,420, from 2000.
Many factors are at work in this shift, but one appears crucial: minimum wage laws.
Workers at the bottom enjoyed on average a real pay raise despite a surplus of unemployed people and a weak economy. These bottom-of-the-wage-ladder workers, generally unrepresented by unions, are powerless.
But government can be a proxy for unions. In this case the wage hike was signed by none other than President George W. Bush, helped by 82 House Republicans and all but four Senate Republicans.
In 2007, Bush signed into law increases in the minimum wage that took effect in 2007, 2008 and 2009. Each raised the minimum by 70 cents, lifting it to $7.25 an hour. Before Bush signed the increases into law, minimum wage workers had gone a decade with no increase. By 2007, inflation had reduced the value of their hourly pay to 77 cents on the 1997 dollar.
Commentators often note how inflation robs retirees on fixed incomes, but less frequently about how it ravages the pocketbooks of the lowest-paid workers, many of whom then turn to the government for food stamps, medical care and other costs that society must bear.
Because of Bush’s signature, the 2012 minimum wage was 40 percent higher than in 2000. That is significantly more than the 33 percent increase in prices caused by inflation over those dozen years.
Typically such comparisons cannot be made because the federal government reports most data by fixed income categories, which are not adjusted for inflation.
But while reviewing wage statistics published on the Social Security Administration website, I recalled a delightfully convenient fact from the Bureau of Labor Statistics inflation tables: To adjust 2000 prices to 2012, you multiply by 1.333. That means  $15,000 in the year 2000 is equivalent to $20,000 in 2012.
That meant, in turn, that I could compare workers making under $15,000 in 2000 with those making $20,000 in 2012. The same is true for $30,000 to $40,000, and for $75,000 to $100,000 and so on, as long as the 2012 category is a third higher.
Higher pay draws more people into the labor market, and it means workers have more to spend on goods and services, which creates more demand to hire more workers as well as generating more profits for business owners.
However, there is no comparable way to assess workers at $50,000 in 2000, for example, with those at $66,666 in 2012, because no such category exists in the official data.
Still, this analysis covers a huge swath of workers. In 2012 nearly 61 million workers, or 39 percent of the workforce, made less than $20,000. In 2000 almost exactly the same share of the workforce made $15,000 or less.
Only a minority of these lowest-paid workers earned the minimum wage. But those who made up to about $2 an hour above the minimum also benefited from its increase, as their pay also rose because of what labor economists call the spillover effect, one of the best-documented and most studied areas of how minimum wage increases affect the economy. Raising the minimum wage in steps until it reaches $15 in today’s money would benefit workers making as much as $20 an hour because of this spillover effect.
To understand the concept, imagine you are a minimum wage worker and get promoted to shift supervisor. Your added responsibilities bring an extra 50 cents an hour.
Then Congress and the president raise the minimum wage by 50 cents. To maintain that premium for your added responsibilities, your employer will raise your wage by the mandated amount and may even bump it by a bit more, say 55 cents extra an hour.
When I was a 17-year-old minimum wage worker, the absentee owner of a Baskin-Robbins franchise promoted me to store manager and gave me a desperately appreciated extra 15 cents per hour. Then the federal minimum wage rose by 15 cents, and the owner said the crew would get the same as me — until I started to untie my apron, at which point he agreed to retain my 15-cent-an-hour premium.
And how did the franchise cover the cost of the higher wages? I tried to make store operations more efficient to shave costs, and the owner raised the price of a single scoop by a penny, to 11 cents. That increase was a little less than the 12 percent hike in the minimum wage. We suffered no loss of customers.
Spillover effects weaken the farther one’s pay is above the minimum. For a worker making $15 an hour, the spillover effect from increasing the minimum wage is essentially zero.
But the spillover effect still benefits a large number of workers. Consider someone who works 50 weeks at $15 an hour, or $30,000 a year. More than half of U.S. workers — 53 percent in 2012 — make $30,000 or less. Consequently, if cities, counties, states and Uncle Sam raise the minimum wage in steps until it is $15 in today’s dollars, the spillover would improve the pay of the almost 2 out of 3 workers who make less than $20 an hour.
There is no free lunch, of course. But neither economics nor higher pay is a zero-sum game, as opponents of the minimum wage often assume. Higher pay draws more people into the labor market, and it means workers have more to spend on goods and services, which creates more demand to hire more workers as well as generating more profits for business owners. It also means less demand for food stamps and other government benefits, easing taxpayer burdens, even as prices rise a bit to cover higher labor costs.
Seven years ago, a Republican president who famously said his base was “the haves and the have-mores” signed into law a raise for the lowest-paid workers. In the House of Representatives, 82 Republicans voted to raise the minimum wage. That kind of bipartisanship today would do America a lot of good.
Average wages, 2000 and 2012

Average wages for workers making $1k-$20k and $20k-$40k

Total wages, 2000 and 2012

Total wages for workers making $1k-$20k and $20k-$40k

David Cay Johnston, an investigative reporter who won a Pulitzer Prize while at The New York Times, teaches business, tax and property law of the ancient world at the Syracuse University College of Law. He is the best-selling author of “Perfectly Legal,” “Free Lunch” and “The Fine Print” and editor of the new anthology “Divided: The Perils of Our Growing Inequality.”
The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera America's editorial policy.

min to ave....min to med various oecders

are we close to there yet ?

. "There" is to  "full employment."

regardez the hacks from FED Atlanta

"...observers cite in defense of an approaching full-employment and growing wage pressures is the following chart. It shows a rather strong correlation between survey data from the National Federation of Independent Business (NFIB) on the proportion of firms planning to raise worker compensation over the next three months and lagged wage and salary growth (see the chart).
Businesses' Response to Tightening Job Market
  "......if you are looking for a sign of impending wage pressure, the chart above certainly looks compelling. Well, except that a pretty large gap has opened up between the behavior of the NFIB survey data and the actual growth trend in compensation since 2011. "

. But

".... our survey data aren't showing the same rise in compensation expectations that we see in the NFIB survey data (see the tables). "
Firm's Compensation Expectations

" Our survey data are not directly comparable to the NFIB since the NFIB survey asks firms about their plans during the next three months, and we ask about plans during the coming 12 months."

"Moreover, the NFIB surveys small businesses—roughly 75 percent of the businesses in the NFIB survey employ fewer than 20 workers, and about 60 percent employ fewer than 10.  "

". The first observation we note is that as the size of the firm shrinks, so does the proportion of small firms planning to increase wages. "

"This result isn't especially surprising since the small firms in our panel report considerably worse prevailing business conditions than do the large firms"

money line:.

" On net in August, 53 percent of the firms that employ fewer than 20 workers expect to raise worker compensation during the next 12 months. ..."

"That percent is down
from 69 percent of similarly sized firms in May 2013. "  !!!!!!!!!!!!!!!!!

"Further, the average amount that firms expect to increase wages (2.7 percent) is also about unchanged from 15 months ago (2.8 percent), and this result is rather consistent by firm size and industry."

" If anything, our panel of businesses reports less expected compensation pressure in the year ahead than when we last asked them in May 2013"


"  maybe this is missing the big point of the figure that kicked off this post."

"Since about 2011, there appears to be a growing discrepancy between the recent trend in the NFIB survey on compensation increases and actual compensation increases."

 ". Correlation is different than causation, and many correlations coming from the labor market in recent years appear to be deviating from their historical norms. Isn't that the takeaway of the two earlier macroblog posts? "

"We're not brave enough to say that we know for certain that the economy isn't on the verge of an accelerated pace of compensation growth. But, if we were brave enough, we'd say our survey data indicate that such acceleration is unlikely. "

the zany faux chicken shit authorian  trio

Photo of Mike Bryan
Photo of Brent Meyer
Photo of Nicholas Parker

ECON CON ; a radically historical science ...enter Agent Based Models

The GE paradigm
Despite polite deference
is hanging by its finger nails

And has been for decades
The academy needs to pursue ABM
In fact I'd scrap the whole dsge Rat ex single rep agent paradigm
It reminds me of string theory
Neither has advanced our knowledge after 40 years of clever elaborations
Yet both may well have served a number of preliminary preporatory purposes
Both positive and negative
That may well have been required in some sterile form
Prior to the arrival of a fertile form of ABM

the task

Recall rugged long lived paradigms
fail for lack of internal consistency

Once abandoned by the community
of orthodox experts
a paradigm simply stagnates
Its ability to self expand
to innovate
To push out the depth and breadth
of its coverage
is simply not tested anymore
clever thinkers
".... in theory .. robustness is key"
not always
epicycles can produce any pattern of celestial motions one might observe
but that paradigm after a nice run was abandoned
similarly the celestial aether was abandoned
as the4 ultimat6e stuff
only to re appear as the sub planck scale
stuff of M theory
these metaphysical postulations are endless
they never die
only the community
that hatches and nurtures them die
Euclidian immortality
locus paleoclassicus Semiticium
the first book of Moses
Quality control?
Sim science
Is about causal story lines
Like natural evolution
sim science is radically
history based
economics is a radically historical science like natural evolution

look at nippon

Sunday, August 3, 2014

pretty poison "“protect workers, not jobs" and hank C

protect scarce jobs  or
dole out to the job less

macro job rationing leads to this "trade off "

heat up job markets till
the Chinaski effect
 is visible in the turnover numbers


constant wages boom pressure

rehire is near instantaneous

Saturday, August 2, 2014

"good krugman ....good krugman.....but "

comes the big contraction  in 1929  and ....

"....Wages fell as the economy was slumping, but bounced back thereafter even though unemployment was high"

". Applying modern arguments to these data one could easily have concluded
that the economy was near capacity in, say, 1939..."

"..... in fact many economists argued at the time that most unemployment was structural, due to the mismatch between skills and the requirements of the modern economy, and could not be cured with more demand."

"But then came massive fiscal stimulus in the form of rearmament and war — and it turned out that there was plenty of slack in the economy, and American workers were just fine."

yup no structural unemployment
come war
full job force remobilization...

and then sum
plenty sum

 riviters out of Roses

 only required adequate spending ...

but notice post  jan  1936 wages go on a second boomer until  pole axed

does wage rate control
trump full remobilization of the potential job force ?

what else  led to this macro policy contrived
   sharp and deep re-contraction

this is the episode most like the recent stunted recovery

the beveridge path


dated over view but ....

say job separations (S) and hires (H)
 run around  9 % of employed quarterly
and job  destructions(D) and creations  (C) 3.5 %

averaged over the cycle



more on "zero real"

" real interest rates are expected to be only slightly above growth rates. "
that is a usual way to tip toe past
the  bug a boo of a debt trap

the trap ?

pk again :
"It’s true that if current policies are continued with no change
 we’re highly likely to face an unsustainable fiscal gap"

" ...a gap that can’t go on forever ..."

" if we look far enough..."  ahead . Stein’s Law  applies:

" if something can’t go on forever, it will stop"

". Sooner or later,
 we will have some combination
                               of benefits cuts and/or revenue increases"

yikes !!

but what nonsense !

 nothing prevents the FED from adopting
a "zero real " infinite horizon "safe"
interest rate policy
nothing except ..... wall street
a zero real policy
would uncap public nominal debt
to support any necessary maximum mobilization macronautics
we would rely on
"the discretion
of the American people "
to govern fiscal deficits

"Russia's bumpy transition away from central planning ..." as told by tubby timmy


post gosplan declines wildly  understated ?

  no sez timbo

" The sharp declines in economic growth in the 1990s are probably overstated"

"... Russia's economic output in 1991 was inflated by all the peculiar practices of the earlier central planners"

, and

..." Russia's economic statistics for the 1990s
failed to capture much  of the unreported "underground" economy. "

can raw markets determine opportunity costs ? NOOOOOOH !!!

in macrotopia there will be NO DOLE !!!!!!!! NO DOLE !!!!!! NO DOLE !!!!!!!

zero real and the new macrotopia

stabilize the real long term safe rate at zero and with this the limitless vista of burdenless public spending opens up ahh but what of responsible governance by the people ?