(Roughly) Daily

Posts Tagged ‘free market

“An imbalance between rich and poor is the oldest and most fatal ailment of all republics”*…

In a stark sign of the economic inequality that has marked the pandemic recession and recovery, Americans as a whole are now earning the same amount in wages and salaries that they did before the virus struck — even with nearly 9 million fewer people working. 

The turnaround in total wages underscores how disproportionately America’s job losses have afflicted workers in lower-income occupations rather than in higher-paying industries, where employees have actually gained jobs as well as income since early last year.

In February 2020, Americans earned $9.66 trillion in wages and salaries, at a seasonally adjusted annual rate, according to the Commerce Department data. By April, after the virus had flattened the U.S. economy, that figure had shrunk by 10%. It then gradually recovered before reaching $9.67 trillion in December, the latest period for which data is available. 

Those dollar figures include only wages and salaries that people earned from jobs. They don’t include money that tens of millions of Americans have received from unemployment benefits or the Social Security and other aid that goes to many other households. The figures also don’t include investment income… 

The figures document that the vanished earnings from 8.9 million Americans who have lost jobs to the pandemic remain less than the combined salaries of new hires and the pay raises that the 150 million Americans who have kept their jobs have received.

The job cuts resulting from the pandemic recession have fallen heavily on lower-income workers across the service sector— from restaurants and hotels to retail stores and entertainment venues. By contrast, tens of millions of higher-income Americans, especially those able to work from home, have managed to keep or acquire jobs and continue to receive pay increases.

“We’ve never seen anything like that before,” said Richard Deitz, a senior economist at the Federal Reserve Bank of New York, referring to the concentration of job losses. “It’s a totally different kind of downturn than we’ve experienced in modern times.”

The figures also underscore the unusually accelerated nature of this recession. As a whole, both the job losses that struck early last spring and the initial rebound in hiring that followed have happened much faster than they did in previous recessions and recoveries. After the Great Recession, for example, it took nearly 2 1/2 years for wages and salaries to regain their pre-recession levels…

One reason why the job losses have had relatively little impact on the nation’s total pay is that so many of the affected employees worked part time. The average work week in the industry that includes hotels, restaurants and bars is just below 26 hours. That’s the shortest such figure among 13 major industries tracked by the government. The next shortest is retail, at about 31 hours. The average for all industries is nearly 35 hours. 

The recovery in wages and salaries helps explain why some states haven’t suffered as sharp a drop in tax revenue as many had feared. That is especially true for states that rely on progressive taxes that fall more heavily on the rich. California, for example, said last month that it has a $15 billion budget surplus. Yet many cities are still struggling, and local transit agencies, such as New York City’s subway, have been hammered by the pandemic.

The wage and salary data also helps explain the steady gains in the stock market, which have been led by high-tech companies whose products are being heavily purchased and used by higher-income Americans, such as Apple iPads, Peloton bikes, or Amazon’s online shopping.

This week, the New York Fed released research that underscored how focused the job losses have been. For people making less than $30,000 a year, employment has fallen 14% as of December. For those earning more than $85,000, it has actually risen slightly. For those in-between, employment has fallen 4%… 

Some companies have cut wages in this recession, but on the whole the many millions of Americans fortunate enough to keep their jobs have generally received pay raises at largely pre-recession rates. Some of those income gains likely reflect cost-of-living raises; the Commerce Department’s wage and salary data isn’t adjusted for inflation…

Truman Bewley, a retired Yale University economist who wrote a book about the concept of sticky wages, said that most companies have a key core of workers they rely on through hard times and are reluctant to cut pay for them. 

And there’s another reason, Bewley said, why many companies cut jobs instead of pay. While researching his book, he said a factory manager told him why his company did so: “It gets the misery out the door.”  

More at: “Sign of inequality: US salaries recover even as jobs haven’t.”

See also “More Than 33 Million Americans Have Filed for Unemployment During Coronavirus Pandemic.” source of the image above.

And to compare the U.S. to other countries, try this nifty interactive visualization.

* Plutarch

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As we examine equity, we might send foundational birthday greetings to Pierre le Pesant, sieur de Boisguilbert; he was born on this date in 1646. A French lawmaker and a Jansenist, he is best remembered as one of the inventors of the notion of an economic market– he championed free trade in opposition to Colbert‘s mercantilist views (which generated government revenues through duties and tariffs).

But he is also noteworthy as the champion of a single tax on each citizen (in lieu of all tariffs, customs, and other trade-related fees) that in some ways presaged Henry George‘s proposals.

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“Science is what we have learned about how to keep from fooling ourselves”*…

 

… or at least that’s the idea.  Here, another of our occasional looks at the intellectual history of the cultural moment that we’re in:  how a concern with Commies in California’s universities led to “Cold War philosophy”– the yoking of rational choice theory to the scientific method– and how it embedded the free-market mindset in US society:

Cold War philosophy also influences US society through its ethics. Its main ethical implication is somewhat hidden, because Cold War philosophy inherits from rational choice theory a proclamation of ethical neutrality: a person’s preferences and goals are not subjected to moral evaluation. As far as rational choice theory is concerned, it doesn’t matter if I want to end world hunger, pass the bar, or buy myself a nice private jet; I make my choices the same way. Similarly for Cold War philosophy – but it also has an ethical imperative that concerns not ends but means. However laudable or nefarious my goals might be, I will be better able to achieve them if I have two things: wealth and power. We therefore derive an ‘ethical’ imperative: whatever else you want to do, increase your wealth and power!

Results of this are easily seen in today’s universities. Academic units that enable individuals to become wealthy and powerful (business schools, law schools) or stay that way (medical schools) are extravagantly funded; units that do not (humanities departments) are on tight rations. Also on tight rations nationwide are facilities that help individuals become wealthy and powerful but do not convey competitive advantage on them because they are open to all or most: highways, bridges, dams, airports, and so on.

Seventy years after the Cold War began, and almost 30 after it ended, Cold War philosophy also continues to affect US politics. The Right holds that if reason itself is rooted in market choice, then business skills must transfer smoothly into all other domains, including governance – an explicit principle of the Trump administration. On the Left, meritocracy rules: all three of Barack Obama’s Supreme Court nominees attended law school at either Harvard (as Obama himself did) or Yale (as Hillary Clinton did). The view that choice solves all problems is evident in the White House press secretary Sean Spicer’s presentation of the Republican vision for US health care, at his press briefing last March 23: “We’ve lost consumer choice … The idea is to instill choice back into the market.”…

How this happened and what it wrought– the remarkable (but true) tale in its entirety: “America’s hidden philosophy.”

* Richard Feynman

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As we question authority, we might recall that it was on this date in 1956 that Congress authorized “In God We Trust” as the U.S. national motto.

The phrase had appeared occasionally (as had variations on the theme) on coinage since Civil War times; regularly– despite Theodore Roosevelt’s conviction that it was sacrilegious– from 1908.   But it didn’t appear on bills until 1957…

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Written by (Roughly) Daily

July 30, 2017 at 1:01 am

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