Posts Tagged ‘inequality’

Chart of the day

Posted: 24 April 2015 in Uncategorized
Tags: , ,

airbus-income

This is what the three-class seating on an Airbus A330-300 would look like if it were reconfigured to represent the distribution of income in the United States?

In Air Gini’s three-class layout, some things look familiar and some things are a bit different. Economy Class makes up just under eighty percent of the passengers. Passengers seated there correspond to everyone who makes less than about $97,000 a year. Their share of total income in the US is just below fifty percent, and thus so is their share of the seating space. On the regular airline it was about fifty eight percent, so for these working stiffs the new arrangement is even more cramped than on our ordinary international flight. Economy Class passengers on Air Gini should expect less overhead bin space and more passive-aggressive interactions with the guy in front of them who insists on reclining his seat.

Up with the managers, meanwhile, things have become more compressed, too. Business Class travelers are just over eighteen percent of passengers, but now they get only fifteen percent of the space. That’s obviously still much better than Economy class, but it’s down from the thirty percent or so they had in the original plane. These fliers are almost all in the top quintile: in real-life terms, they correspond to everyone from just below the 80th percentile of the US income distribution up to just above the 96th percentile. Roughly, that’s households making between $97,000 and $280,000 a year. Yet many of them feel a little angry about how little space they have. Strange though it seems, some of those in the seats closest to the front of their section even feel somewhat poor—at least by comparison to those a bit further up the plane. Air Gini understands their situation and compensates them with a complimentary in-flight snack.

What has happened to make Business Class more cramped? The answer is to be found in Ruling Class. Sorry, I mean, First Class. On Air Gini, those eight most-valued passengers—three and a half percent of those on board—get thirty five percent of the available seating space. That’s a lot of legroom. So much, in fact, that as First Class passengers have spread out to take up the first third of the plane, Air Gini has been forced to replace the luxurious Business Class seats in the real-life configuration with still-comfortable but noticeably smaller chairs.

Not to worry, though. Air Gini’s eight First Class passengers can really enjoy themselves, which is the important thing. And yet, even here at the head of the aircraft, Air Gini’s layout hints that inequality may extend all the way up to the flight deck. Two of the first class seats are close to the front of Business Class, and behind a bulkhead. Awkward. Those passengers make about $300,000 a year. The passenger in the very front row, meanwhile, makes a hell of a lot more than that and has even more room to relax in than his peers. All things considered, you have to wonder exactly who is flying this plane—and more importantly, perhaps, who owns it.

decline

Finally, attention is being paid to how much workers have been hammered over the course of the last couple of decades.

Neil Irwin, based on a report from the Hamilton Project [pdf], focuses on workers with less education (with either no high school diploma or with a high school degree or perhaps some college). And for good reason. As a result of a double shift—a shift away from manufacturing and other jobs that once offered higher pay to lower-paying food service, cleaning and groundskeeping jobs and, simultaneously, the fact that pay levels are declining in almost all of the fields that employ less-educated workers (so even those who have held onto jobs as manufacturers, operators and laborers are making less than they did a generation ago)—less-educated American workers saw a dramatic deterioration in their real wages from 1990 to 2013: a decrease of 20 and 13 percent in median wages for the respective groups of men and a decrease in 11.7 percent for women without a high school diploma (and only a 3.2 percent increase for women with a high school degree or some college).

Clearly, the majority of American workers (69 percent of men and 64 percent of women age 30-45) are being left far behind.

But so are more-educated U.S. workers. While they’ve seen their wages rise in real terms over the same period (6.5 percent for men with a bachelor’s degree, 12.8 percent for those with an advanced degree, and even more for women: 12.8 percent and 21.2 percent, respectively), it is still the case that their wages have not kept up with the enormous increase we’ve seen at the very top: 56 percent (which is the gain in average real income, with capital gains, of the top 1 percent from 1990 to 2013)!

chart

So, even though there are clear differences in the path for workers with different levels of education, their respective gains and losses over the past 23 years pale in comparison with the real winners: the tiny group at the top.

Update

The endpoints data probably also misses the fact that the wages of more-educated workers have stagnated since 2000. See these numbers from the Economic Policy Institute.

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Special mention

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Bui

Here, in one chart (by Quoctrung Bui), is a summary of changes in the distribution of income from the early-twentieth century (1913) to the present (2012) in the United States.

The story is, grosso modo, one of declining inequality until the late-1970s (with average incomes of the bottom 90 percent growing much faster than those of the top 1 percent) and growing inequality thereafter (with stagnant incomes of the bottom 90 percent and huge gains at the top).

We can also see that sharp right turn by calculating the 1:90 ratio (the ratio of average incomes of the top 1 percent to the average incomes of the bottom 90 percent, both including capital gains and expressed in 2013 dollars). They are:

1917: 26.8*

1943: 16.6

1973: 12.4

2013: 35.36

As Bui explains,

In theory, it should be possible for incomes to rise for everyone at the same time — for the gains of economic growth to be broadly distributed year after year. But the takeaway from these graphs is that since World War II, that’s never really happened in the U.S.

Bui’s chart is basically a summary of the information contained in these two charts (from the World Top-Incomes Database):

chart copy chart

 

*The first year for which data for the bottom 90 percent are available.

LFP

source

Capitalism, I’ve often argued, is not natural. It requires a lot of work. It required a lot of work to get it going in the first place. And it requires a lot of work to keep it going today.

A lot of that work involves getting people to work for someone else.

The problem of getting people to work is the foundation of the recent discussion (or, better, revival of the discussion, if we trace it back to Alvin Hansen) of “secular stagnation” [pdf]. Central to the current framing of the question—at least among mainstream economists—is the decrease in the number of available workers, created by declines in the rate of population growth and the labor force participation rate. The worry is that, looking forward, there simply won’t be enough workers to sustain the rates of potential economic growth we saw in the years leading up to the most recent crisis of capitalism.

It shouldn’t be surprising, then, to witness the spectacle of economists such as Regis Barnichon and Andrew Figura [pdf] claiming that the decline in the labor force participation rate in the United States is “a decline in desire to work among individuals outside the labor force, with a particularly strong decline during the second half of the 90s.” For them, it’s not a decline in the number of decent, high-paying jobs, but instead the unwillingness on the part of individuals who are currently not counted as part of the labor force to enter the labor force in order to work for someone else. And the reason?

Looking across different sub-groups, the decline in the number of nonparticipants who want to work is due mainly to prime-age females, and, to a lesser extent, young individuals. Moreover, the decline is mainly a low-income and non-single household phenomenon, and is stronger for families with children than without.

Precisely in order to overcome that supposed aversion to work, Laura Tach and Kathryn Edin praise the earned-income tax credit, because, as the nation’s largest cash anti-poverty program, it goes mostly to parents of children who are willing to work. And working for someone else is, for Tach and Edin, “tantamount to a badge of citizenship.” To which they add:

The dignity-building nature of this cash transfer is reinforced by the way it is administered, through tax preparation offices. Here, low-wage workers are customers served with a smile, not supplicants seeking a handout.

That, of course, is the proverbial carrot for the poor. And then there’s the incentive for employers themselves: the enormous subsidies provided by the government so that employers will hire and keep low-wage workers. As Ken Jacobs explains,

After decades of wage cuts and health benefit rollbacks, more than half of all state and federal spending on public assistance programs goes to working families who need food stamps, Medicaid, or other support to meet basic needs. Let that sink in — American taxpayers are subsidizing people who work — most of them full-time  (in some case more than full-time) because businesses do not pay a living wage.

But if poor people are still unwilling to take one of the low-wage, deadend jobs available, there’s always the stick of Kansas-style welfare reforms.

The measure — called the HOPE Act by supporters — “provides an opportunity for success,” Brownback said in a statement after signing the bill. “It’s about the dignity of work and helping families move from reliance on a government pittance to becoming self-sufficient by developing the skills to find a well-paying job and build a career.”

All of that, both theoretically and in terms of policy, is meant to force people to have the freedom to participate in the labor force. But that still doesn’t mean they’re going to do the requisite amount of work, even after they’ve landed one of those jobs.

According to Ronald Aslop [ht: ja], the problem is particularly acute among young people, who in his view are engaged in a constant struggle to keep their minds focused on the matter at hand and block out email and other digital distractions.

These distractions are shortening attention spans and making it difficult for young people to concentrate and stick with demanding assignments at school and work. In fact, researchers have found that millennials are more likely than Gen Xers or baby boomers to report that their productivity suffers at work because of smartphone distractions and “cyberslacking” on the Internet.

That means employers have to step in “to eliminate some of technology’s temptations” (which apparently involves limiting the use of digital technology and, my favorite, suggesting that distracted employees learn meditation and yoga).

What we’re learning is that it takes a lot of work to keep capitalism going. But notice that all that effort is directed at the masses of people who actually do the work, not at the tiny minority at the top who actually make the decisions about if, when, and how the jobs people are expected to do are actually created.

Apparently, focusing on those decisions—especially as corporate profits soar and economic inequality continues to grow—would require too much work.

Update

Now, according to the New York Times, workers are using stimulants like Adderall, Vyvanse, and Concerta to improve work performance: “many young workers insist that using the drugs to increase productivity is on the rise — and that these are drugs used not to get high, but hired.”

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. . .and students go on food stamps.

According to a new report by Moody Investor’s Service (cost: $550), the richest American universities are getting even richer.*

The coffers of the nation’s 40 wealthiest universities, including Harvard University, Stanford University and the University of Michigan, are filling at a faster rate than those of other schools, thanks to particularly strong investment performances and generous donors, according to a report to be published Thursday by Moody’s Investors Service.

“It’s really a tale of two college towns, if you will, or cities,” said Karen Kedem, vice president and senior credit officer at Moody’s. “Looking ahead, the expectation is that this [gap] will only widen.”

The 10 richest institutions held nearly one-third of total cash and investments at four-year schools in fiscal 2014, while the top 40 accounted for two-thirds. Wealth was concentrated among elite schools at similar rates before the financial crisis, but the gap shrunk as top schools lost big on more-volatile investments in 2008 and 2009.

They have more than recovered since then. Schools on Moody’s top-40 list saw assets grow by 50% between fiscal 2009 and fiscal 2014, significantly outperforming other schools with strong credit ratings but smaller asset bases.

Meanwhile, with tuition skyrocketing and wages remaining stagnant, more and more students are forced to rely on food stamps.

the price of tuition has risen 1,120% between 1980 and 2010. Tuition at four-year public colleges has gone up 25% since 2007. Many students are forced to choose between low-wage jobs to help pay for tuition and unpaid internships for credit to build experience in their chosen field.

Colleges, aware of the financial troubles their students face, have begun opening food banks on their campuses. In Massachusetts, 12 of the state’s 29 public college campuses operate pantries, according to the Boston Globe, and about 200 colleges nationwide now operate pantries, reports the Wall Street Journal.

It’s no surprise then that on Wednesday, Fight for $15 campaign organizers expected students from 170 campuses to join in what was the largest US protest by low-wage workers.

“It’s important for students to be involved because even if we aren’t working for McDonald’s or Walmart, we are still on McDonald’s or Walmart type of wages,” Robert Ascherman, a student activist from NYU, told the Guardian on Wednesday. He says some students have to choose between buying food or buying textbooks.

From 2001 to 2010, the percentage of US students on food stamps has more than doubled to 12.6%, up from 5.4%, according to a 2013 analysis by Philip Trostel, professor of economics and public policy at the University of Maine.

*Here are the lists of the ten wealthiest private and public universities in the United States:

universities universities-public

Disclaimer: I relied on food stamps in graduate school, until the Reagan administration cut back the program. I now work for one of the 10 richest private universities in the country.

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Special mention

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