Posts Tagged ‘United States’


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A new report from McKinsey & Company, “Poorer than Their Parents? Flat or Falling Incomes in Advanced Countries” (pdf), confirms many people’s worst fears. As it turns out, the trend in stagnating or declining incomes for most workers (including the middle-class) is not confined to the United States, but is a global phenomenon.

Brexit and Trump are just the tip of the iceberg. Because of flat or falling incomes, many workers across the rich countries are angry and want change.

According to the authors of the report, as much as 70 percent of the households in 25 advanced economies saw their incomes drop in the past decade. That compares to just 2 percent of households that saw declining incomes in the previous 12 years.*


In the United States, fully 81 percent of households suffered a decline in market income between 2005 and 2013. But, as it turns out, after taxes and transfers, falling market incomes were turned into flat disposable incomes. (The situation elsewhere, such as in France, the Netherlands, the United Kingdom, and Italy, was even worse, in terms of both market and disposable incomes.)

Here’s what the U.S. numbers mean: employers were able to take advantage of declining labor incomes (since only upper-income households experienced strong wage growth, which is really just a distribution of the surplus to most of them), thus increasing corporate profits; while workers, through taxes on their wages (and thus not a distribution of the surplus), were forced to pay to finance programs that helped reverse some of the effect of declining market incomes.


Another major consequence of flat or falling incomes is a dramatic increase in inequality over the course of the past two decades. Since I’m quite critical of comparing inequality indicators (e.g., Gini coefficients) across countries (as I explained here), what is most relevant is the change in inequality indicators for individual countries and, especially, the difference between market-income and disposable-income indicators. Thus, for example, when the authors of the report calculate “net Gini” (market Ginis minus the effect of taxes and transfers, the middle line for each country in the chart above), the United States ends up reversing market inequality the least—scoring 35 in 1993 and 37 in 2005 and 2012.**


The final major economic consequence, in the United States and elsewhere is that today’s younger generation—regardless of level of education—is increasingly at risk of ending up poorer than their parents. As readers can see in the chart above, wage incomes declined for all segments of the labor force in the 2002–12 period but, in all three countries, wage income declines were most severe for younger workers (under the age of 30). The average decrease in the wage income of these young workers ranged from 2 percent (for higher educated workers in France) to 27 percent (for medium educated workers in Italy). In the United states, lower educated young workers faced a decline of 15 percent, similar to that of medium educated workers; while even higher educated young workers saw a decline in their incomes.


And then, of course, there are the political consequences of flat or declining incomes. The authors of the report note that

The people who felt they were not advancing and believed this was a persistent problem expressed sharply negative views of foreign trade and immigration. They were nearly twice as likely to believe that “Legal immigrants are ruining the culture and cohesiveness of our society” as those who were advancing or neutral, and one-and-a-half times as likely as those who were not advancing but hopeful about the future. Nearly 70 percent of them also agreed with the statement “Cheaper foreign labor is creating unfair competition to our domestic businesses,” compared with 43 percent of those who were advancing or neutral. Fifty-six percent of them also believed that “The influx of foreign goods and services is leading to domestic job losses,” compared with 29 percent of the advancing or neutral respondents and 41 percent of those who were not advancing but hopeful about the future.

By implication, failure to correct flat or falling incomes could lead to a rise in the number of people who see flat or falling incomes as a persistent problem and lose faith in tenets of the global economic architecture.

That’s the source of the challenge to the self-professed expertise of mainstream economists (who tend to celebrate a market-based global economy), as well as movements as diverse as Brexit, the Trump campaign, and the insurgency within the Democratic Party represented by Bernie Sanders.

But the authors of the report are not done. The natural final question is, what are the prospects for the future? Their conclusion is, to say the least, sobering. If present trends continue—including the decline in labor unions, the continuation of job-displacing digital technologies, the rise in temporary and part-time work, and overall slow growth—it is likely

an even larger proportion of income groups in advanced economies—from 70 to 80 percent—could experience flat or falling real market incomes in the next decade to 2025 than did during the 2005–12 period.

As I see it, the existing set of economic institutions can neither accommodate nor preclude the possibility of an even larger portion of flat or falling incomes for the foreseeable future. The current economic system has failed, even on its own terms.

The situation is so dire that the authors of the report (who, remember, did this research for McKinsey, the most prestigious management consultancy in the world) note that “the idea of a guaranteed basic income has attracted renewed interest as policy makers seek to grapple with flat or falling incomes in the middle class, high youth unemployment, and the prospect of further job losses to digitization.”

A universal basic income is certainly a start. It’s a recognition of how dire the current situation is and how ominous the future prospects are for the majority of the population—workers, the middle-class, call them what you will—within the advanced countries.

But it’s only a start. The widespread nature of flat or falling incomes in the United States and across the rich countries, and then the dire forecast looking forward, mean it’s time to imagine and create a radically different way of organizing economic and social life.


*In general, the analysis in the report appears to be carefully done. I do, however, have one criticism. The major comparison is between two periods: 1993-2005 (when most incomes were rising) and 2005-2014 (when they were falling). That’s fine. All of the data of which I am aware (such as real wages and average 90-percent incomes) confirm much the same trends. The problem is, it was in the mid-1990s that workers’ incomes were at their lowest. If we extended the analysis back to the mid-1970s, then we’d discover that, across the entire 1973-2014 period, workers’ incomes have been generally flat (with both short-term increases and decreases within that long-term trend).

**On a scale of 0 to 100, where a score of 100 indicates complete inequality (one person earns all of the income) and a score of 0 represents completely even distribution of income across the population (each citizen earns the same amount). Numbers in the high 40s for market income and high 30s in the net Gini coefficient (after taxes and transfers) indicate an obscenely unequal distribution of income in the United States.


Many observers of the 2016 campaign have been surprised by Donald Trump’s popularity with Christian voters.

But they shouldn’t be.

Chris Lehmann, like Jeff Shalet before him, explains the key role the Prosperity Gospel has played in white evangelical Protestants’ making their peace with Trump.

Trump’s bromance with evangelicals looks unexpected only because we’re approaching it backward. It’s not so much that Trump has somehow hoodwinked or bullied the true-believing American right into an awkward set of ill-fitting cultural and political postures. It’s that a large part of the Protestant world has for decades now been embracing the brash capitalist gospel of Trumpism.

The key bulwark of faith-based Trumpism is the prosperity gospel — a movement rooted in Pentecostal preaching that holds that God directly dispenses divine favor in the capitalist marketplace to his steadfast believers.

As I explained back in May 2015,

Capitalism is not a natural phenomenon; it required a great deal of work, historically, to bring it into being, and it requires a lot of ongoing work, socially, to reproduce it over time. And part of that work, historically and socially, has involved the production of a whole set of identities and meanings that celebrates the winners and blames the losers, all the while creating the hope that everyone is a potential winner.

And that’s exactly the what the Prosperity Gospel does. Like much of Trump’s campaign rhetoric, it’s all about celebrating the winners and blaming the losers.

In my piece, “American Hustle,” which was published in the Journal of Cultural Economy, I tried to explain how that hustle works. Here are a few extracts:

the Prosperity Gospel movement has, against all odds, grown and expanded—from the wrong-side-of-town tent revivals and prayer meetings to mainstream religious, media, and even political status, at least within that vast landscape of nondenominational Protestantism. And it’s all because of an enormously successful hustle.

The movement is propelled by preachers who manage to convince people that, if they believe they control their own destiny, as long as their hearts and faith are in the right place and they fork over a large share of their income to demonstrate their commitment, they can overcome psychological and physical obstacles and achieve financial success. It’s a strategy that, of course, serves to line the burgeoning pockets of the Prosperity Gospel evangelists themselves. . .

And it’s as American as apple pie (or, if you prefer, extreme diets and beauty makeovers). What we have here is hustle that dates back at least to “40 acres and a mule” and continues through railroad speculation (which, when it went bust, brought on the First Great Depression, later renamed the Panic, of 1873), real-estate bubbles (remember the Marx Brothers’ movie The Cocoanuts) and “painting the tape” stock-market boom (which collapsed on Black Thursday in October 1929, ushering in what we now refer to as the First Great Depression), and, closer to our own time, the dot-com bubble (which had its origins in Clinton’s economic program, but which was subsequently blamed on Bush), the solution to which created the conditions for the next and most recent financial hustle: subprime mortgages and the derivatives that, with the collapse of Lehman Brothers in September 2008, represented the beginning of the Second Great Depression.

As we know, every hustle (like any game of Three-card Monte) requires three characters: a dealer (who places three cards face down on a table, often on a cardboard box, which provides the ability to set up and disappear quickly), a victim or “mark” (who is tricked into betting a sum of money, on the assumption that they can find the money card among three constantly moving, face-down playing cards), and a shill (who pretends to conspire with the mark to cheat the dealer, while in fact conspiring with the dealer to take advantage of the mark). . .

The basic structure of the hustle is also a reminder that it needs a third party, a supplement. It’s not enough that there are hustling dealers and ready-to-be-hustled marks, who are willing to face one another over the cardboard box. The hustle doesn’t work unless there’s a shill, which gives the hustle its allure and legitimacy.

And that’s what the Prosperity Gospel movement accomplishes for the economic system as a whole. It both signifies there’s a hustle taking place (otherwise why would anyone need a special relationship with Jesus to succeed?) and provides cover for the hustle (since it’s made out to be the only game in town, all we can do is make the appropriate spiritual and financial investment and hope to receive our just reward).

Which is exactly how American capitalism works. There’s a basic economic structure—of a majority of workers who are dependent on a small minority of capitalists for their livelihoods. And that’s important, since the workers’ pay is enough to allow them to consume the commodities they need in order to go back to work the next day but not so much that they don’t have to go back to work the next day. Thus, most people continue to be forced to have the freedom to sell their ability to work to their corporate employers on an ongoing basis.

Trump’s genius is, at one and the same time, to highlight the existence of an unfair hustle and to put himself forward as the leader who can help everyone—both those who have lost and those who are already winners—become winners within the hustle.

Just like him. And that, too, is as American as extreme diets and beauty makeovers.


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