Solution to Economic Stagnation (1 Viewer)

[distraff]

Many of us have the impression that despite the claims of economic progress over the last several decades, we are not getting any richer. We are saving less than we used to, things seem to get more expensive faster than our incomes rise, and two job households is becoming a necessity where it once was optional.

Reporters always talk about GDP growth or the growth in the total US economy. Here is the US GDP.


Things still look great, but the problem is that price inflation is 3% per year so these numbers are not exactly accurate, and the population has increased.

Here is Real GDP per capita adjusted for inflation:


This is not quite as impressive but still shows significant growth.

The problem with this figure is that the incomes of the rich have been rising much faster than everyone else and so much of that growth actually did not reach the middle class. I want to look at the growth of normal Americans. The best way is to find the median (middle) income.

Here is real median household income:


The problem with this data is that it doesn't take into account the fast that more and more households have two incomes. People are working more and more. The best way to find how well we are really doing is to look at inflation adjusted median hourly wage.

Here is both median and mean hourly wage:
https://www.minneapolisfed.org/~/media/images/pubs/region/07-09/figure1.jpg?la=en

https://www.minneapolisfed.org/publications/the-region/has-middle-america-stagnated

This website won't let me display the image because apparently it is invalid. Whoever wrote the image upload validation should be fired.
What this figure shows is real growth in median hourly wage since 1975.

I have two questions.

Why have median hourly incomes not risen, and how can we fix this problem?

 

[DaveFagan]

An infrastructure that creates jobs in new areas must be initiated. Welfare is not the solution, nor is more expensive dollars. The fiat money "faith"economy is a paper tiger that is serving the wealthy by wheeling and dealing paper investments that create no jobs, but generate profits. The USA infrastructure is the 99.9%, not 1/10th of the 1%. The 1/10th of the 1% is getting all the US Treasury's money. How's that workin' for ya'?

 

[Reformedfindlay]

An infrastructure that creates jobs in new areas must be initiated. Welfare is not the solution, nor is more expensive dollars. The fiat money "faith"economy is a paper tiger that is serving the wealthy by wheeling and dealing paper investments that create no jobs, but generate profits. The USA infrastructure is the 99.9%, not 1/10th of the 1%. The 1/10th of the 1% is getting all the US Treasury's money. How's that workin' for ya'?

It's working fine.

You jealous?

 

[TextDriversKill]

Why have median hourly incomes not risen, and how can we fix this problem?

The chart shows median hourly income adjusted for inflation is the same as 40 years ago. Is that really so bad?

 

[distraff]

An infrastructure that creates jobs in new areas must be initiated. Welfare is not the solution, nor is more expensive dollars. The fiat money "faith"economy is a paper tiger that is serving the wealthy by wheeling and dealing paper investments that create no jobs, but generate profits. The USA infrastructure is the 99.9%, not 1/10th of the 1%. The 1/10th of the 1% is getting all the US Treasury's money. How's that workin' for ya'?

I agree that we need to address income inequality and that welfare is not a solution to stagnation. I suspect that an oversized government is part of the problem. I am wondering how more infrastructure is a solution.

 

[distraff]

The chart shows median hourly income adjusted for inflation is the same as 40 years ago. Is that really so bad?

Is stagnation the best we can do?

 

[joG]

Many of us have the impression that despite the claims of economic progress over the last several decades, we are not getting any richer. We are saving less than we used to, things seem to get more expensive faster than our incomes rise, and two job households is becoming a necessity where it once was optional.

Reporters always talk about GDP growth or the growth in the total US economy. Here is the US GDP.
View attachment 67183805

Things still look great, but the problem is that price inflation is 3% per year so these numbers are not exactly accurate, and the population has increased.

Here is Real GDP per capita adjusted for inflation:
View attachment 67183807

This is not quite as impressive but still shows significant growth.

The problem with this figure is that the incomes of the rich have been rising much faster than everyone else and so much of that growth actually did not reach the middle class. I want to look at the growth of normal Americans. The best way is to find the median (middle) income.

Here is real median household income:
View attachment 67183808

The problem with this data is that it doesn't take into account the fast that more and more households have two incomes. People are working more and more. The best way to find how well we are really doing is to look at inflation adjusted median hourly wage.

Here is both median and mean hourly wage:
https://www.minneapolisfed.org/~/media/images/pubs/region/07-09/figure1.jpg?la=en

https://www.minneapolisfed.org/publications/the-region/has-middle-america-stagnated

This website won't let me display the image because apparently it is invalid. Whoever wrote the image upload validation should be fired.
What this figure shows is real growth in median hourly wage since 1975.

I have two questions.

Why have median hourly incomes not risen, and how can we fix this problem?

Interesting graphs, though, they would be better if they all went back to the same date in the past. Take 1870 or so for normalized perspective and then, if you want to focus on the short term, take something around 1960.
Also, you might want to consider that the story probably is more complicated. How have income levels and immigration correlated or take a look at income levels at the bird's eye view of globality. How have imports from Germany or China compared with income levels in China or Germany and those in the USA.

You are right to bring in, what looks like an exponentially exuberant graph of public debt. But how do we bind it into the story?

 

[joG]

Is stagnation the best we can do?

Sometimes stagnation can be remarkably good.

 

[joG]

The chart shows median hourly income adjusted for inflation is the same as 40 years ago. Is that really so bad?

Think of it this way. I bought a doughnut for a Euro yesterday. When I was a kid they were two for 5 cents. I did this yesterday using that little thing in the back pocket of my jeans that I use to look up stuff in Wikipedia instead of going home for the Britannica, listen to this morning's new song, make a call for help or love on instead of searching for a box next to the street and a nickel, read the news on or make this forum entry with, to pay. And I am doing all this 4.000 miles from home.

 

[joG]

An infrastructure that creates jobs in new areas must be initiated. Welfare is not the solution, nor is more expensive dollars. The fiat money "faith"economy is a paper tiger that is serving the wealthy by wheeling and dealing paper investments that create no jobs, but generate profits. The USA infrastructure is the 99.9%, not 1/10th of the 1%. The 1/10th of the 1% is getting all the US Treasury's money. How's that workin' for ya'?

Oh, there I take issue. The wheeling and dealing paper investments created almost 2 billion jobs by moving huge masses of earth and cement and steel. Building factories and mines and roads and power plants enough to turn the aire in Asia's cities a paler shade of gray.
Oh, there were jobs created, where the value they added were highest.

 

[DaveFagan]

Oh, there I take issue. The wheeling and dealing paper investments created almost 2 billion jobs by moving huge masses of earth and cement and steel. Building factories and mines and roads and power plants enough to turn the aire in Asia's cities a paler shade of gray.
Oh, there were jobs created, where the value they added were highest.

You're absolutely correct. The money moved to lower labor rate Nations and I am happy for the jobs created in those Nations, but it was USA economic policy that inadvertantly caused this to happen and the sacrifice is the USA economy. A carefully scripted call to the citizens of the USA to lower labor rates USA wide and supported by documentation and a coalition of Corporate/Labor/Government participants initiating a phased/planned deflation of USA costs could have solved the problem for the 99%, but the 1/10th of 1% would have suffered. Our corrupt banking system requires inflation to survive and that is the problem.