Posts Tagged ‘chart’

20150228_gdc200

As the Economist explains,

Inflation rates around the world have been sinking over the last three years. Pervasive economic weakness in the rich world and a slowdown in Chinese growth drove the initial decline. Lately tumbling oil prices have helped to push inflation into negative territory across much of the euro area. America, Britain and China, where inflation rates have dropped below 1%, may soon join Europe in deflation. Falling prices for things like petrol have been “unambiguously good” for consumers, in the words of Mark Carney, the governor of the Bank of England. But broad and persistent deflation is not a healthy thing for a modern economy. It will make big debts harder for households and governments to repay, and it could hinder central banks looking to perk up slumping economies.

Milanovic

This chart, devised by Branko Milanovic, illustrates the remarkable economic recovery that has taken place in the United States beginning in 2010—a recovery, that is, not for the vast majority of people, but for a tiny minority at the top.

Consider the first period (blue line). It is remarkable that real income of all groups declined. But the hardest hit were the rich, with percentage losses increasing as we move toward to right portion of the graph, and the very poor.  I am not an expert on US welfare system, but it seems to me that the system failed to protect the poorest people from substantial income losses between 2007 and 2010. But for the bulk of the population, the years of the Great Recession meant a modest real income decline. The median person’s real income went down by a little over 3 percent. The upper middle class (the people between the 80th and 90th percentiles) did not see much change in their real income. But the top 10% clearly lost out: notice how the blue line starts decreasing ever more steeply as you move toward the top 1%. The Gini coefficient decreased by less than 1 point.

Now, look at the red line which shows the real change in the second period. It is almost a mirror-image of what happened in the first. The growth was zero or positive along the entire distribution, the strongest among the very poor (around the lowest 5th percentile) and among the rich (the top 10%). Median inflation-adjusted per capita income decreased by just under 1%. For the two top percentiles, which got clobbered by the recession, real income growth was in excess of 10%.

In other words, those at the very bottom lost a great deal during and immediately after the crash and, as a result of special measures (like an expansion of the food stamp program and increases in state minimum wages), they’ve managed to claw back some of what they lost—and they’re still poor. For pretty much everyone else, they lost out (as a result of growing unemployment and stagnant wages) and they still haven’t recovered (even though the unemployment rate has declined but their wages are still pretty much where they were before the crash). And those at the top? They lost a great deal (because of the initial decline in corporate profits and the stock market crash) and, as a result of the nature of the recovery (which has successfully restored the profits of large corporations and Wall Street equities), have now recovered most of what they lost—and they’re still rich.

So, after a brief hiatus (in 2009), the United States is back to having the most unequal distribution of income of all the rich countries on the planet.

And, unless things change (and I don’t mean the Fed’s tinkering with interest rates or one or another corporation raising wages above the federal minimum), that obscenely unequal distribution of income is only going to continue to get worse.

Chart of the day

Posted: 21 February 2015 in Uncategorized
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wages-2007-14

As the Economic Policy Institute explains,

Figure A depicts some of the data presented in Table 1 by showing the cumulative change in real hourly wages for the 10th, 30th, 50th, 70th, and 95th percentiles between 2007 and 2014. After a sharp increase in real wages between 2008 and 2009, due primarily to negative inflation, wages for most groups fell through 2012. While there was an increase between 2012 and 2013, the increase was short-lived, and wages for most groups have fallen again over the last year. Wages for nearly all groups are lower in 2014 than they were at the end of the recession in 2009.

The only exceptions? Real wages for the top 5 percent have risen (by 2.2 percent) since 2007. And real wages for the bottom 10 percent of workers have increased since 2012, mostly because inflation has been low and many states enacted increases in the minimum wage.

Overall, real wages for the bottom 80 percent of workers were lower at the end of 2014 than they were in 2007.

productivity

To get a sense of how far workers are falling behind, productivity in the U.S. economy increased by about 12.6 percent over that same period.

NA-CE690_ADJUNC_16U_20150216114806

According to the Wall Street Journal, an extraordinary 70 percent of the instructors on the campuses of U.S. colleges and universities were (as of 2011) adjuncts and other contingent workers. That’s up from an already-high 43 percent in 1975.

But now, fortunately, the academic precariat is starting to organize:

Since late November, adjuncts have won unionization votes at eight colleges, from Boston University to Dominican University of California. Last week, full-time, nontenure-track faculty at Tufts University’s College of Arts & Sciences voted to unionize.

Those union victories come after more than 15,000 part-time teachers at 40 schools joined unions in the 2012-13 academic year, bringing the total number of unionized, part-time teachers to about 172,000, according to the National Center for the Study of Collective Bargaining in Higher Education and the Professions at Hunter College in New York. The National Labor Relations Board in December issued a ruling opening the door for more union action at private religious schools, and a national adjunct walkout day is scheduled for Feb. 25.

Chart of the day

Posted: 11 February 2015 in Uncategorized
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SocialSecurityInequality-fig1

I’ll admit, I’ve considered many different consequences of growing inequality over the years but I hadn’t thought of this one: the effect on Social Security.

According to the Center for American Progress,

Rising income inequality poses a direct threat to Social Security’s financial health. By virtue of the capped payroll tax, Social Security’s funding is directly tied to the full wages that low- and middle-income workers earn—but not to the full wages that higher-earning workers receive. Upward redistribution of income in the United States has meant that income has shifted away from workers whose full earnings are taxed and toward high-income workers whose additional dollars are exempt. At the same time, low-income workers whose wages remain stagnant contribute less in payroll taxes than they would if their wages were rising, while their benefits rise faster than their payroll tax revenue due to the progressive structure of Social Security’s benefits formula.

Thus, a significant portion of the expected shortfall of Social Security funds would have been reduced if either workers’ wages had kept pace with productivity or if the earnings cap had been raised to cover 90 percent of taxable income.

P1-BS611A_TWOTI_16U_20150128171805

As the Wall Street Journal explains,

American spending patterns after the recession underscore why many U.S. businesses are reorienting to serve higher-income households, said Barry Cynamon, of the Federal Reserve Bank of St. Louis.

Since 2009, average per household spending among the top 5% of U.S. income earners—adjusting for inflation—climbed 12% through 2012, the most recent data available. Over the same period, spending by all others fell 1% per household, according to Mr. Cynamon, a visiting scholar at the bank’s Center for Household Financial Stability, and Steven Fazzari of Washington University in St. Louis, who published their research findings last year.

The spending rebound following the recession “appears to be largely driven by the consumption at the top,” Mr. Cynamon said. He and Mr. Fazzari found the wealthiest 5% of U.S. households accounted for around 30% of consumer spending in 2012, up from 23% in 1992.

Indeed, such midtier retailers as J.C. Penney , Sears and Target have slumped. “The consumer has not bounced back with the confidence we were all looking for,” Macy’s chief executive Terry Lundgren told investors last fall.

In luxury retail, meanwhile: “Our customers are confident, feel good about the economy in general and their personal balance sheets specifically,” said Karen Katz, chief executive of Neiman Marcus Group Ltd., last month. Reported 2014 revenues of $4.8 billion for the company are up from $3.6 billion in 2009.

top shares

The share of total income captured by the top 1 percent actually shrunk in 2013, falling from 21.22 percent to 18.98.

But, as Emmanuel Saez [pdf] explains, that decline is probably a statistical anomaly:

The fall in top incomes in 2013 is due to the 2013 increase in top tax rates (top tax rates increased by about 6.5 percentage points for labor income and about 9.5 percentage points for capital income). The tax change created strong incentives to retime income to take advantage of the lower top tax rates in 2012 relative to 2013 and after. For high income earners, shifting an extra $100 of labor income from 2013 to 2012 saves about $6.5 in taxes and shifting an extra $100 of capital income from 2013 to 2012 saves about $10 in taxes. Realized capital gains are particularly easy to retime, explaining why the drop in top income shares in 2013 is more pronounced for series including capital gains than for series excluding capital gains.

If we take that income-shifting into account (and thus use the average of top-1 percent incomes for 2012 and 2013), we can see that, while average incomes in the United States increased (in real terms) by only 3.5 percent from 2009 to 2013 (from $53, 860 to $55,740), the average incomes of the top 1 percent soared by 24.7 percent (from $975,884 to $1,217,002).

In other words, thus far all of the gains of the so-called recovery are continuing to go to the top 1 percent.