Editore"s Note
Tilting at Windmills

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September 7, 2006
By: Kevin Drum

THE SILVER BULLET SYNDROME....Jared Bernstein, reacting to a David Brooks column in which he channels the conventional conservative wisdom about increasing income inequality (it's not happening, and if it is happening it doesn't matter because sales of plasma TVs are up), makes a general comment about news reporting and analysis on this kind of thing:

As is too often the case, journalists who cant find a factor that explains 51% of the phenomenon in question dismiss everything. Brooks argues that declining unionization is not a driving force because it only explains 10-20 percent of the rise in inequality. But thats as big as any other force that economists have measured.

Roughly speaking, the decline in the real value of the minimum wage explains about that much (more for female wage inequality). And globalization is generally cited as accounting for around this share of the increase as well. Im not aware of any inequality analysis that dismisses these changes because they are not driving forces (i.e., they individually account for less than half the growth).

Call it the Silver Bullet Syndrome. Unfortunately, as much as we'd like it to be otherwise, the world is a complex place. If you want to know why middle class wages have stagnated over the past 30 years, while business executives have been taking home pay packets that would make Boss Tweed blush, you're just not going to find it in a single explanation. It's partly unionization, it's partly monetary policy, it's partly the minimum wage, it's partly globalization, it's partly increasing returns to education, and it's partly a dozen other things as well.

Brooks wants to find a single explanation that fits his worldview, so he chooses to focus on increasing returns to skills. This is despite the fact that the vast majority of the increase in inequality has been due to skyrocketing compensation in the top 1%. Does Brooks really believe that corporate executives have more "social and customer-service skills" than their counterparts did 30 years ago?

I don't think he does. But it serves his purpose to pretend otherwise, since he doesn't like government intervention in the economy and this is an explanation that government policy can do little about.

But is it a true explanation? It seems unlikely. Increasing returns to skills are a part of the picture, but that's been true ever since WWII, yet middle-income stagnation began only in the mid-70s. What's more, it's been true throughout the world, yet middle-income stagnation has hit the U.S. far harder than other developed countries. Why? Because there's more to it. Unfortunately, part of that "more" includes things that the government can influence, and that's inconvenient for the conservative worldview.

If you don't care about stagnant middle-income wages, you'll do what Brooks does: dismiss it. But if you do care, there really are things we can do about it. There's no single magic bullet, there's probably no way to solve 100% of the problem, and there's no way to fix things immediately. But if we can find half a dozen things that solve 50% of the problem over the next decade, that sure seems worthwhile to me.

Kevin Drum 1:16 PM Permalink | Trackbacks | Comments (63)

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Comments

Any ideas will have to wait. Congress is kinda busy with the WoT for awhile.

Posted by: wishIwuz2 on September 7, 2006 at 1:30 PM | PERMALINK

The world is not a complex place. Only you libruls think so. There's just the good guys (that's me) and the evildooers. Everybody else is either French or a Democrat.

Posted by: George W. Bush on September 7, 2006 at 1:36 PM | PERMALINK

I'm always bemused when middlebrow Brooks writes a column involving economics. He should stick to what he knows: pop psychology.

Posted by: SavageView on September 7, 2006 at 1:38 PM | PERMALINK

There's no single magic bullet, there's probably no way to solve 100% of the problem, and there's no way to fix things immediately.

Unfortunately, this isn't just a political problem. This is how business works too ("Tell me the number one thing I can do to increase sales/cut costs/improve quality/get the ratings up/etc"). It's partly human nature, and it's made worse by a certain kind of American belief in simple magic coupled with a distinct lack of patience.

Posted by: craigie on September 7, 2006 at 1:38 PM | PERMALINK

I have a hunch the "Fall Full of Fear Tour" is going to fizzle.

I would love to hear ideas for dealing with stagnant wages.

The first might be an increase in the minimum wage. That will push wages up across the board. I am not sure that kind of wage growth would trigger inflation. It seems to me that there is a lot of excess money floating around corporations looking to be used. I might be wrong.

Any other bright ideas?

Posted by: Ron Byers on September 7, 2006 at 1:41 PM | PERMALINK

Make it illegal to hire permanent replacement workers to replace strikers.

To do that, elect Democrats to the House, Senate and Presidency.

Posted by: Cal Gal on September 7, 2006 at 1:42 PM | PERMALINK

If you don't care about stagnant middle-income wages, you'll do what Brooks does: dismiss it.

As does the Republican Party and its apologists, I might add. Of course, I suspect that the middle class does care about stagnant middile-income wages, so there's a plum ripe for the Democrats' picking -- if they bother to do it.

Posted by: Gregory on September 7, 2006 at 1:43 PM | PERMALINK

Plutocraty is government by the wealthy and Pluto was the god of the underworld. Connect the dots....

Posted by: The Liberal Avenger on September 7, 2006 at 1:46 PM | PERMALINK

The other day I drank a latte in a cafe in Kansas with a poster of George Bush on the wall. No one was wearing a NASCAR hat. Take that David Brooks.

Posted by: brooks_is_shallow on September 7, 2006 at 1:48 PM | PERMALINK

Gregory,

The professional Democrats have far more in common with David Brooks and professional Republicans than with any middle income worker whose wages are stagnant. I think we might have to hit them over the head with the opportunity.

Posted by: Ron Byers on September 7, 2006 at 1:48 PM | PERMALINK

The real problem is that American business (its executive leadership, in particular) has become disconnected from the overall economy. Well-known wild-eyed leftist Henry Ford was smart enough to realize that the health of his company and others depended on the creation and maintenance of a vibrant and growing middle class. That's why Ford paid what were at the time astounding wages to his workers. As a result, not only did his workers buy the very cars they built, they also supported the creation of innumerable other businesses both locally and nationwide.

Today, the sole focus of business is the bottom line 3 months from now. It doesn't matter what happens 3 months and one day from now--just make those quarterly numbers. And the easiest path to such short-term success is suppressing labor costs. Over the next three years, they will begin to see the economic depressing effect this has on the nation as a whole.

Posted by: Derelict on September 7, 2006 at 1:49 PM | PERMALINK

Other items that have contributed

Increasing corporate concentration (huge merger boom)
Reduced regulation etc

basically anything that increases corporate power and decreases competitiveness, increases corporate profits and profit margins which disproportionately flow to the top 1%

Kevin is right that a whole slew of factors, many, if not most of which can be at least inluenced by the government, have led to where we are now

Posted by: michael on September 7, 2006 at 1:50 PM | PERMALINK

If torturing a few overpaid CEO's could solve the increasing income inequality gap, I'm all for it.

Posted by: Charlie on September 7, 2006 at 1:52 PM | PERMALINK

But if we can find half a dozen things that solve 50% of the problem over the next decade, that sure seems worthwhile to me.

No, follow the 80 / 20 rule. Typically, 80 percent of the effect results from 20 percent of the causes, and the reverse.

The focus one's efforts on the primary causes so identified.

An alternative strategy would be to focus on the factors giving rise to Brooks' income. Since he thinks income maladjustment is not a big problem, he could hardly object to being subjected to some downward mobility himself.

Posted by: Thinker on September 7, 2006 at 1:53 PM | PERMALINK

If you don't care about stagnant middle-income wages, you'll do what Brooks does: dismiss it.

or just scream "class warfare".

Am I missing something? It doesn't seem that hard to figure out why there's stagnation in middle class incomes. Healthcare premiums have shot through the roof; college costs are out of sight; housing costs as a per centage of income have quadrupled. Now, energy costs are on their way to the moon. CEO's have shamelessly grabbed increasing profits while buying tax relief from the best government money can buy. During all of this corporations have been very, very reluctant to share the wealth with the workers. In an age when unions are practically on life support the average worker is nervous and doesn't even dare peep. Is all this too micro for macroeconomics whizzes like Brooks to understand?

Posted by: ExBrit on September 7, 2006 at 1:57 PM | PERMALINK

Just met an Indian Software Engineer on a flight home. He is employed by a company headquartered in New Jersey, but is based in India. His company has placed thirty such engineers in a local corporation in a single project. They are all on L1 visa (as the company is headquartered is USA), the number of which is unlimited. This kid lives in an apartment close to the office and walks to work like everyone else, works 10 hour days, and is not allowed to leave USA except at the end of eleven months of his stay here.

With this sort of highly submissive, compliant, and low cost labor pool available to the corporations, there is no way the American engineers can find the types of jobs that were available in the late nineties.

When the likes of Brookes start talking about skills, they really mean skills at low cost that are available in countries like India.

We are all screwed.

Posted by: gregor on September 7, 2006 at 1:59 PM | PERMALINK

And let's not assume that there is actually increasing returns to skills. The top 1% tends to have gone to college, so their income is factored in. There are plenty of people with college and graduate degrees who are part of the middle-class squeeze.

My prediction (and I rarely predict) is that there is already less of a college premium than there used to be; we just can't see it yet because of the timeframe involved. The jobs aren't there for the vast majority of degreed people, and the cost of higher education keeps increasing well above the rate of compensation.

Perhaps that's why young males are starting to shy away from college. If you can become a plumber and make at least as much as an accountant or software developer, and work the four or five years that you would have spent in college, and be free from crushing college debt, why wouldn't you forgo the ivy-covered walls?

Posted by: Eric on September 7, 2006 at 1:59 PM | PERMALINK

Kevin writes of David Brooks: "But it serves his purpose to pretend otherwise, since he doesn't like government intervention in the economy"

I don't think that's accurate. David Brooks is a bought-and-paid-for shill for the ultra-rich, increasingly hereditary, right-wing extremist, neo-fascist corporate ruling class of America.

Ever-increasing concentration of income, wealth and power in the hands of this tiny ("the top one percent") oligarchic elite is the essence of their agenda, which is the Republican Party's agenda, and is of course the agenda of their bootlicking servants like David Brooks.

It's not that Brooks "doesn't like government intervention" -- like all fake, phony pseudo-conservative poseurs he loves government intervention, when it enriches and empowers his owners. What Brooks doesn't like is anything that stands in the way of concentrating income, wealth and power in the hands of the ultra-rich.

Posted by: SecularAnimist on September 7, 2006 at 2:02 PM | PERMALINK

I was reading a paper recently on the influence of lucky number years on the birthrate in Vietnam. It seems lucky number years swell the birthrate by up to 3%.

Among demographers, that is a VERY big number.

Posted by: brooksfoe on September 7, 2006 at 2:03 PM | PERMALINK

I thought the point of having a liberal arts education was to get exposure to a broad range of fields. If Brooks and co. had studied a little science and statistics, it would have been apparent that finding a single reason would not pass the chi-square smell test.

Noone today believes that Mendel didn't fudge some of his data - it was just too close to the expected values. The chance of it being that close is really remote. And considering he did the experiments for the first time, it's completely improbable.

Similarly, finding a single cause to explain a huge gamut of changes is really unlikely. So if someone produces one, a priori one would have reason to disbelieve the claim.

Posted by: Name on September 7, 2006 at 2:07 PM | PERMALINK

This is an insane thing to write on this particular blog, but one thing I can't help shaking as the force behind wage stagnation, is the simple fact that the supply of potential employees has been growing now for 30 years pretty much uninterrupted.

It was really interesting the graph you posted about a week and a half ago here Kevin where it showed men's wage stagnating for the past 30 years while womens wages slowed climbed up to that of men's. (Although still only 77% of men's, up from 60% from 20 years ago).

It seems like a big part of the "wage stagnation" is a result of increasing supply of labor by women's increasing participation in the workforce. Certainly, not a bad thing, but we have got to see that increasing the supply of labor is going to drive down labor prices, and because wages are "sticky" it makes sense that men's wages would stagnate while women's wages rise to eventually match that of mens, when both will probably rise together.

Posted by: Gov98 on September 7, 2006 at 2:10 PM | PERMALINK

Increasing CEO compensation isn't independent from declining unionization. Wage increases drop as the number of unionized employees falls. This lack of bargaining power creates an environment in which CEOs and other managers can claim an increasing share of profits. Because of this, the declining unionization rate actually is more influential than you posit in this column.

Posted by: b on September 7, 2006 at 2:11 PM | PERMALINK

Seems to me that a degree of income inequality is essential for the economy. If all jobs had identical pay, difficult skills would not be developed. New workers would be paid the same as workers with 20 years experience, etc.

OTOH, if one person made all the income in the country, that's pretty bad too.

So i guess the question is, what is the optimum level of inequality and where are we compared to that point.

And as incomes rise for the poor, i would think that inequality becomes less an issue. If the poorest of the poor in America could live a lifestyle equal to Bill Gates, no one would much care if others were 10,000 times richer.

Posted by: dennisBoz on September 7, 2006 at 2:12 PM | PERMALINK

the simple fact that the supply of potential employees has been growing now for 30 years pretty much uninterrupted.

Meanwhile, the number of jobs is fixed by nature!

Posted by: craigie on September 7, 2006 at 2:12 PM | PERMALINK

SecularAnimist: It's not that Brooks "doesn't like government intervention" -- like all fake, phony pseudo-conservative poseurs he loves government intervention, when it enriches and empowers his owners.

Yup, that's economist Dean Baker's favorite point. He even wrote a book about it:

The Conservative Nanny State

(buy it or read it online).

He also wrote a paper suggesting some fixes (pdf):

Beyond the Conservative Nanny State: Policies to Promote Self-Sufficiency Among the Wealthy.

Posted by: alex on September 7, 2006 at 2:13 PM | PERMALINK

I have to say that I think that if we had stuck to the resolutions outlined in the Millinium Development Goals (which were agreed to by most nations on earth in 2000 for the eradication of world poverty, etc. More information can be found at www.borgenproject.org) that we wouldn't even need to discuss this issue at all.
We would have, by now, been able to tackle the issue of extreme inequalities betweeen rich and poor nations.

Posted by: stephanie on September 7, 2006 at 2:16 PM | PERMALINK

Meanwhile, the number of jobs is fixed by nature!

Of course it's not, but if the growth in supply of labor is going to exceed the growth in demand, we are going to have wage stagnation.

Posted by: Gov98 on September 7, 2006 at 2:19 PM | PERMALINK

There is a simple silver bullet.

Wage disparity rises as higher income citizens gain a greater return from government services. It is the one thing that correlates over Reagan, Clinton, and Bush. It is a factor that goes back to George Washington donning his uniform and chasing down the culprits in the Whiskey Rebellion. It is the reason that Jefferson, the founding father of the Democratic party, wanted progressive taxation and small government, and felt the two go together.

This effect was known to Hamilton, arguably the founder of Republicanism, who wanted federal government services to lead the expansion of the west. Expanding government services on behalf of the wealthy drove Lincoln and caused the civil war.

Our education system is designed to help business gain cheaper labor at lower cost. Prescription drug bill needs no further explanation. The Iraq war is designed to expand free trade into the middle east, where the lower incomes get a reduction in their return on investment while business expands their return.

Economists are "doing" the numbers. Examine your tax rate, compute accurately your return from government services, and you see who wins and who doesn't. It is a subtle effect because over time we call certain government services "patriotic" and "normal" but we forget why they are there and who pushed it.

There is a lot to be said aboout the old conspiracy theory that "they" control so much.

Posted by: Matt on September 7, 2006 at 2:25 PM | PERMALINK

Unfortunately, as much as we'd like it to be otherwise, the world is a complex place. If you want to know why middle class wages have stagnated over the past 30 years, while business executives have been taking home pay packets that would make Boss Tweed blush, you're just not going to find it in a single explanation. It's partly unionization, it's partly monetary policy, it's partly the minimum wage, it's partly globalization, it's partly increasing returns to education, and it's partly a dozen other things as well.

Not a single thing you list, Kevin, has anything to do with the gross disparity between what rank-and-file employees or even middle-management are paid versus upper-management are paid.

The board of directors of 99% of all corporations that have them are what set compensation for CEOs. And as most board memebers are themselves independently wealthy individuals and/or CEOs, it's merely a matter of like individuals taking care of one another. It is no more complicated than that.

Posted by: JeffII on September 7, 2006 at 2:34 PM | PERMALINK

I herby put my vote up to the highest bidder.Please cash only!

Posted by: Mann Coulter on September 7, 2006 at 2:50 PM | PERMALINK

JeffII How about calling it what it is PURE GREED!!!! But they can make as much as they want because as we all know the richest people are very misrable.I would rather be poor and happy then rich and sad,lonely,greedy,ect ect.

Posted by: Mann Coulter on September 7, 2006 at 2:53 PM | PERMALINK

"...like all fake, phony pseudo-conservative poseurs he [Brooks]loves government intervention, when it enriches and empowers his owners."

Grazie, SecularAnimist. Well said.

I'll add this: this country can't fully deal with income inequality because it has yet to honesty deal with the great American neurosis: RACISM.

The cunning of our masters is to perpetuate income inequality by promoting the subliminal message that "economic justice" really means treating blacks and brown as equals (as if "they" are as blessed as my christ loving self).

Many red-states whites are so lacking in self-worth they would prefer LESS income if that means maintaining a warped feeling of relative cultural and racial superiority. Hee, hee.

Posted by: hotspur on September 7, 2006 at 2:55 PM | PERMALINK

So how would have Iraq turned out if Haliburton had hired thousands of Iraqi's instead of outsiders to rebuild there country.Money in the pocket does alot of talking.

Posted by: Mann Coulter on September 7, 2006 at 2:56 PM | PERMALINK

Another point you might make about the CEOs is that they appoint compensation committees, which are subcommittees of corporate boards. In effect, CEOs set their own salaries. This system of self dealing has long been what economists call a "moral hazard."

It's one thing for an owner-founder to pay him (or her) self what he cares to. It's another for corporate hired hands to do the same, with shareholders' money.

Between 1945-1980, CEOs were relatively fair about what they paid themselves because everyone in that generation had fought in WWII or Korea and understood that if the gap between "officers" and "enlistees" gets too great, team unity suffers. Since Reagan was elected in 1980 the rule has been: every man for himself, devil take the hindmost.

As for the potential of corporate self dealing, it is this separation of ownership and control that makes the system vulnerable. Adolph Berle and Gardiner Means laid it out in, "The Modern Corporation and Private Property," back in 1934.

Posted by: Sunlight on September 7, 2006 at 3:18 PM | PERMALINK

Sunlight: As for the potential of corporate self dealing, it is this separation of ownership and control that makes the system vulnerable. Adolph Berle and Gardiner Means laid it out in, "The Modern Corporation and Private Property," back in 1934.

Adam Smith also talked about it in "An Inquiry into the Nature and Causes of the Wealth of Nations" in 1776.

Posted by: alex on September 7, 2006 at 3:23 PM | PERMALINK

Just met an Indian Software Engineer on a flight home. ...
With this sort of highly submissive, compliant, and low cost labor pool available to the corporations, there is no way the American engineers can find the types of jobs that were available in the late nineties....
When the likes of Brookes start talking about skills, they really mean skills at low cost that are available in countries like India.
Posted by: gregor on September 7, 2006 at 1:59 PM | PERMALINK

Yeah, but I bet the guy has a 401k and a great health plan, and he can buy DVD players for less money now, because the Boskin Comission says that the CPI overstates inflation by 1% or more. (/GOP)

Seems to me that a degree of income inequality is essential for the economy. If all jobs had identical pay, difficult skills would not be developed.
Posted by: dennisBoz on September 7, 2006 at 2:12 PM | PERMALINK

Difficult skills, yeah, like being born super-wealthy, and well connected.
Let me tell you, the allure of all those hundreds of millions of dollars is calling me. So I'm up all night studying on how to be born super-wealthy, and have a dad who can introduce me to saudi princes and get me out of being drafted, and get me installed as an oil company CEO.

And as incomes rise for the poor, i would think that inequality becomes less an issue. If the poorest of the poor in America could live a lifestyle equal to Bill Gates, no one would much care if others were 10,000 times richer.

This is not a "slippery slope" argument. Nobody is saying that everyone should earn the same. I don't think even Marx was for that. We're saying that if we have a common goal of Meritocracy, our current system is far from that.

Look at Carly Fiorina (former HP CEO) and her 9-figure income. The day after she resigned, HP's market cap shot up $5 Billion. (go look it up! it's true!) She was such an awful CEO she drove that company to the brink of destruction (it's still not clear that HP has much of a future, moving forward, after she gutted it of engineering talent). And yet, somehow, the board saw fit to keep pipelining a huge proportion of the company's profits into her golden parachute for nearly half a decade.

The system of executive compensation in American corporations is hopelessly broken. If that's not obvious, and if you think that this argument is really some kind of sneaky leftist attack to get everyone earning the same amount of income, then maybe you need to get back on the short bus and go back to school and figure some things out.

Posted by: Osama_Been_Forgotten on September 7, 2006 at 3:30 PM | PERMALINK

Objection: Assumption of facts not in evidence. Every bracket is better off than it was fiftyyeras ago, so where's the problem? The quality of life is steadily rising. We're on the right track.

Posted by: American Hawk on September 7, 2006 at 3:31 PM | PERMALINK

A current book about CEO greed:
"The Battle for the Soul of Capitalism" by John Bogle.

http://tinyurl.com/dfbu4

Posted by: ExBrit on September 7, 2006 at 3:32 PM | PERMALINK

Shorter AH: Apples taste better than they did 50 years ago, who cares about the oranges?

Posted by: Osama_Been_Forgotten on September 7, 2006 at 3:36 PM | PERMALINK

"Objection: Assumption of facts not in evidence. Every bracket is better off than it was fiftyyeras ago, so where's the problem? The quality of life is steadily rising. We're on the right track."

Doesn't constant douchebaggery get tiring?

Posted by: The Tim on September 7, 2006 at 3:44 PM | PERMALINK

I'm surprised nobody has mentioned the Republican tax cuts, that mostly helped the uber rich, as part of the disparity.

Posted by: AkaDad on September 7, 2006 at 3:46 PM | PERMALINK

Kevin, as you briefly mentioned, a big part of what is happening to middle class wages and jobs is due to globalization and emerging markets in India, China, South America and Eastern Europe. Though, by indentifying I'm still not sure what solution there may be.
I just think it's a large scale economic change via a shift in the framework and structure of corporations. This shift may be on par with the Industrial Age. The middle managers and outsourced engineers of today may be the buggy whip makers and kerosene lamp casters of yesteryear. It royally sucks, but I'm not sure what can be done about it.

Posted by: Johnny Tremaine on September 7, 2006 at 3:52 PM | PERMALINK

"It seems like a big part of the "wage stagnation" is a result of increasing supply of labor by women's increasing participation in the workforce."

Right, a big, big part in the 1970s and 1980s. But the female workforce participation rate peaked in 2000 and is now down to the same level as 1994. I would guess that immigration is now playing the same role that increasing female work force participation played for a long time in increasing the supply and thus decreasing the price of wages.

Posted by: Steve Sailer on September 7, 2006 at 3:55 PM | PERMALINK

The Republican party believes it is in its interest to make every sector of the society a community of victims. CEO's, Enterpreneurs, Whites, Males, Warmongers, Hereditary Royalty, the rich, radio pundits, UAE Princes, Christians, people who are so frustrated they blow up federal buildings, people who are so frustrated they lie about evidence to invade other countries, people without responsibility, people whose servants drive autos made prior to 1995, people who smuggle cuban cigars, people who lie about the nicotine content of their product to trick their customers into getting addicted, cattle ranchers who feed their cattle BSE-infected meat, people who are college-buddies of George Bush's freinds, people who don't have to work, but do anyway, people who don't have to work and don't, people who don't work too hard because they were born rich, people on corporate welfare, people who can't get corporate welfare, people who get into Harvard because their dad donated $10 million they stole from the government, men who marry non-billionaire women and can't get them to submit, people who take vacations when they're supposed to be doing their fucking job, private prison owners, cult members, people who own Wal-Mart, people who falsely accuse others of crimes, war criminals, and NOW the upper class which Bush carried in 2004- which is what this campaign is all about. Feel sorry for yourselves, those of you who earn $600,000 and up. Vote Republican and they will take care of you. Too.

Posted by: Osama_Been_Forgotten on September 7, 2006 at 3:56 PM | PERMALINK

"a big part of what is happening to middle class wages and jobs is due to globalization and emerging markets in India, China, South America and Eastern Europe."

Certainly a carefully targeted, surgical nucular attack or three could reverse that unfortunate emerging trend...

Posted by: dennisBoz on September 7, 2006 at 3:56 PM | PERMALINK

Derelict nailed it! Those who treat the American middle class with disdain, like Mr. Brooks, have disdain for all that makes America great.

It ain't the wealthy that have made this a great country!!!

Posted by: The Conservative Deflator on September 7, 2006 at 3:59 PM | PERMALINK

BTW, If the Republicans are successfull in killing the Estate tax, the disparity will grow even further.

Posted by: AkaDad on September 7, 2006 at 4:01 PM | PERMALINK

mhr: The Democrat party believes it is in its interest to make every sector of the society a community of victims.

It's such a great schtick that the Republicans have borrowed it:

The wealthy are victims of the estate tax (and any other tax that they have to pay).

The middle class are victims of the estate tax (even though they don't pay it).

Businesses are victims of the law of supply and demand (usually expressed as a "shortage" of certain workers). Immigration law must have special provisions (H-1B, L-1) or special non-enforcement (illegal immigration) to compensate these poor victims.

Credit card companies were victims of reasonable bankruptcy laws (note: see Shay's rebellion for why the Constitution explicitly gives Congress the right to pass uniform bankruptcy laws).

Halliburton was a victim of the silly competitive bid process that was used for federal contracts.

Publically traded corporations are victims of legal requirements for honest financial disclosures.

Posted by: alex on September 7, 2006 at 4:03 PM | PERMALINK

This shift may be on par with the Industrial Age. The middle managers and outsourced engineers of today may be the buggy whip makers and kerosene lamp casters of yesteryear. It royally sucks, but I'm not sure what can be done about it.
Posted by: Johnny Tremaine on September 7, 2006 at 3:52 PM | PERMALINK

The industrial age was a result of new manufacturing technology and energy sources.

The era of globalization is a very simple attempt to game the system of various national sovereign laws, to give an overwhelming advantage to capital by exploiting labor in places they're weakest, and using that to cross those goods over into a different market. By internationalizing, corporations put themselves above the law, and they now live in an anarcho-capitalism world, where anything goes, and the winner takes all.

Pay Mexican wages, sell at American prices. Don't pay Mexican taxes to improve their infrastructure or help them build a middle class. Soon, the American middle class will be gutted, and they'll have nobody to sell to.

Then they can return to the pre-Industrial age status where there was no middle class.

This is not the next phase of world economic development.

It's just an undoing of the last phase, and an eventual return to the Feudal Age (with corporations, instead of kings and barons).

That's why they call it "Conservativism" they want to conserve the old ways, they don't want a post-enlightenment world. They want the Dark Ages - for ever.


Posted by: Osama_Been_Forgotten on September 7, 2006 at 4:08 PM | PERMALINK

"There's no single magic bullet, there's probably no way to solve 100% of the problem, and there's no way to fix things immediately."

Does this mean we have to stop saying everything bad is Bush's fault, and it will all get better when someone else takes office?

Posted by: dnc on September 7, 2006 at 4:10 PM | PERMALINK

The biggest contradiction to Brooks' theory that the explanation for the high income of the wealthy is skills and knowledge is that Brooks himself is in this group.

Am I to believe that Brooks is really so smart and skilled that he deserves the money and fame he has more than many that don't have it?

Consider that this "intellectual" blathered on about red/blue state differences making the astute observation that in red states, it's hard to order a meal over $20 and very easy to find Chicken Fried Steak.

My gosh, I'd rather pay $20 for Chicken Fried Steak than $20 for his dufous blatherings in that book he wrote on blue/red states.

What a dorkus-malorkus. Me thinks he is way overpaid for his skills.

Posted by: david on September 7, 2006 at 4:11 PM | PERMALINK

Right, a big, big part in the 1970s and 1980s. But the female workforce participation rate peaked in 2000 and is now down to the same level as 1994. I would guess that immigration is now playing the same role that increasing female work force participation played for a long time in increasing the supply and thus decreasing the price of wages.

This is almost certainly false. In the 1960s and early 70s, the work force was growing more rapidly than in the 1980s and at least as rapidly as during the 90s (primarily due to the maturation of babyboomers and the increase in female workplace participation) and yet the former period enjoyed faster wage growth than the latter two periods. Moreoever, both the general and working age populations in the US have been growing more slowly during the current decade than in the 90s (the immigration rate has also declined), and yet this slow down apparently has had no positive impact on wages.

It would be nice if merely clamping down on the growth in the working age population were a silver bullet that would give everybody a raise, but alas, it's not.

That's not to say that in theory wages couldn't be depressed by an expansion in the working age population, but it does suggest that the modest numbers we tend to see in America (i.e, between 1% and 2% annually) are easily absorbed by the country's capital-rich economy, which itself receives a stimulus from general population growth. It appears likely that downward pressure on wages is exerted far more strongly by globalization than by the rather unexceptional increases in population experienced by contemporary America. This shouldn't be surprising: the one or two million new workers who join the country's workforce each year can't possibly have the same effect as the several billion willing to perform work for us from their own countries.

Posted by: 99 on September 7, 2006 at 4:33 PM | PERMALINK

Given the last post Kevin had on this subject (the one with the map of the U.S.) reproduced either a gross statistical distortion, if not an deliberate lie, and Kevin hasn't updated that thoroughly inaccurate or dishonest post, there isn't much reason to pay attention to this post either. It'll be interesting to see if the Detroit Free Press runs a retraction, or even acknowledges the gross statistical errors made in their analysis, and whether Kevin does the same.

There is a concise analysis of the DFP's errors, in which the author concedes the fundamental missteps, over at Assymetrical Information. Of course, Jane Galt is not an advocate of central planning, so everything on her site is to be automatically dismissed by the "liberals" in this forum, with a few ad hominem insults tossed in as well.

Posted by: Will Allen on September 7, 2006 at 4:55 PM | PERMALINK

Not having access to Brooks column, I want to focus on your mention of plasma TVs. This reminds me of another columnist, Robert Samuelson, who recently recommended that workers can easily toil on well into their 70s, never mind that the bodies of many are worn out much earlier from hard physical labor. This lack of touch (all Bobo's cohort have big plasma TVs) comes now from a man who claims often to take the pulse of Americans. How can he have, if he thinks plasma TVs are a sign of widespread wealth??

Posted by: Hedley Lamarr on September 7, 2006 at 4:55 PM | PERMALINK

Conservatives and religion are identical twins and therefore embrace each other with common membership. The notion of inequality at any level or any place begins in church where the "faithful" are guaranteed entry into the kingdom of God and all others are headed to hell. Thus conservatives are the better class of people, in God's favor. This accounts for the clergy such as Pat Robertson and Robert Schuller who have gained enormous personal fortunes they shield in tax free church accounts, collected without accounting, tax deductible to the giver and collected at tax exempt facilities. This is done contrary to the first amendment that forbids laws that establish religion. Taxes are collected by law.

Only religions own real estate in the USA. The rest of us only rent our homes from the government, a thing called real property taxes. Don't pay the real property tax and get evicted. When if ever will Americans wake up? There's a start. http://www.hoax-buster.org has details.

Posted by: BG on September 7, 2006 at 4:57 PM | PERMALINK

No silver bullets. Fair enough, but try this on for size;

The general trend worldwide is a rapid movement towards greater equality. India, China, Eastern Europe, even the middle east, are all making enormous gains.

Why? Technological advances in communications and transportation.

How does this explain what is happening in the US? Some in the US have found themselves strategically positioned to take advantage of the smaller world created by the technological advances. Others leaped on the potential for profit as soon as they recognized it. These folks have been able to leverage this to achieve enormous profits. And of course, some have been hurt. American labor has suddenly found itself in direct competition with billions of overseas laborers.

What does it mean? Hard to say. The process has really just begun. A few predictions; Prices will continue to decline on just about everything, even if the price of energy continues to rise. Wages will continue to decline in the US, Western Europe, and Japan, but will continue to rise in much of the rest of the world. The average number of years spent in school will increase, the average number of years spent in retirement will increase, but the average number of weekly hours and total years spent in the workplace will decline. Real total wealth, though difficult to measure, will rise steadily and the positive effects over our lifetimes will be very dramatic.

Who will be the winners? Pretty much everybody. Though the grumbling will continue because that's what Americans do best.

Posted by: Randy on September 7, 2006 at 8:09 PM | PERMALINK

Certainly, not a bad thing, but we have got to see that increasing the supply of labor is going to drive down labor prices, and because wages are "sticky" it makes sense that men's wages would stagnate while women's wages rise to eventually match that of mens, when both will probably rise together.

You're saying that the availability of women willing to enter the workforce at lower wages than men leads to stagnation in men's wages up to the wage point at which all such women have been pulled into the workforce, at which point wages will again begin to rise?

How would you explain wage stagnation in industries which women almost never enter? Like construction or hog butchering?

Posted by: brooksfoe on September 7, 2006 at 9:34 PM | PERMALINK

You're saying that the availability of women willing to enter the workforce at lower wages than men leads to stagnation in men's wages up to the wage point at which all such women have been pulled into the workforce, at which point wages will again begin to rise?

Men's median wages are going to be increased by the long-term effects of the bias that existed in the workplace (and to some degree may still today) because those long-term workers will have high wages by which to offset lower wage paid male employees. Because wages are "sticky," that is wages go up, but they do not tend to go down these built in inequities would remain well after employees entering into the workforce have been equalized. (There are far more male partners at most professional firms than female partners for example, whereas the associate ranks are more distributed.) So the median for men has "stabilized" while the female wage rate increases. Men and women are probably entering the work force at very similar pay rates, but long-term effects are carrying over the difference between the two sexes. And yes, I think once women's median wages match that of men's we could probably expect both to move at at a fairly similar pace.

How would you explain wage stagnation in industries which women almost never enter? Like construction or hog butchering?

I think it is an error to think that just because one particular industry is more gender-specific (something I do not concede, but feel is not worth arguing), that there are not substitution effects from other industries. The wages in "hog butchering or construction" are probably all going to be similar to that class of fairly menial labor position. If women, would not be willing to butcher hogs, but would drive UPS trucks, then even though women are not entering the hog butchering business they have an effect on hog butchering wages because now there is an "excess" of men willing to be hog butchers (those who would of been UPS drivers but are replaced by women.)

I want to make clear this is not to be critical of women working at all. It is just a kind of fact of life problem. I think it is a very good thing for women to have the freedom to persue work or whatever they see fit for themselves.

Just makes it harder for one person (be it male or female) to support the family if one desires to stay home to raise the children or whatever.

Posted by: Gov98 on September 7, 2006 at 11:33 PM | PERMALINK

Even if Brooks happened to be right, and there was an ineluctable trend toward higher income inequality caused by the increasing importance of skills, shouldn't he acknowledge that a good, stiff progressive income tax, coupled with a solid estate tax, would be a very useful corrective?

Posted by: Barry on September 8, 2006 at 7:03 AM | PERMALINK

I agree that rising inequality is mostly not a skills storyskills are part of the story, but so is declining unionization, globalization, and a host of other factorsbut I also think it is clear that government can influence skills aquisition.

Despite all the lip service to skills by conservatives like Brooks, however, we've been going backward as a nation when it comes to making national investments in skills developmentkey examples include the decline in the per person value of Pell Grants and the quite extraordinary decline in federal funding for worker training.

I think conservatives focus on skills, not because they don't like government intervention (they do like intervention, as long as it's of a conservative variety), but because it's probably the only explanation that at least links to some of the key items on their policy agenda, particularly school vouchers. Also, it's much easier to cast skills and education, at least for adults, as matters of "personal responsibility."

Posted by: Shawn Fremstad on September 8, 2006 at 7:46 AM | PERMALINK

Derelict write Well-known wild-eyed leftist Henry Ford was smart enough to realize that the health of his company and others depended on the creation and maintenance of a vibrant and growing middle class. That's why Ford paid what were at the time astounding wages to his workers.

This is a nice story and I've heard it often. I've also heard that Ford was faced with a 330% annual turn-over in his workforce because working conditions on his assembly line were (and probably remain) so horrible. It's far more likely that he had to raise his wages to stem the loss of trained workers more so than any desire to enable them to buy his cars.

That said, while it's not a "silver bullet" I like the shotgun effect of raising taxes on income over one million dollars to 60% (80% for over $10 Million).

Posted by: beb on September 8, 2006 at 8:57 AM | PERMALINK

Dean Baker demolishes David Brooks - empty point by empty point - over at his blog's spiffy new digs (Beat the Press) at the Progressive (where for some mysterious reason, there' still no provision for 'e-mail this').

'The Conservative Nanny State' is a free pdf download. Read it.

No need whatever to actually read the David Brook's column, which is something I don't, in any case, recommend to anyone who cares a whit about reason and logic.

Posted by: CFShep on September 8, 2006 at 8:59 AM | PERMALINK




 

 

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