Category Archives: Education

American Middle-Class Now Second Class — Take Two

It’s nice to have successful friends of diverse opinion. When a couple of them are capitalists in the truest sense of the word — i.e., they increase their wealth and incomes by moving their funds around the globe chasing rates of return and potential asset value — are sought after for their investment advise, and have their own financial and economic publications, they also get to disagree with you in the open. In response to “American Middle-Class Now Second-Class To Canada — It Didn’t Have To Be This Way,” I was treated to two alternate views of why I am wrong on specific points.

Pay rose with productivity and then it didn't

BENEFITS “RE-COUPLE” THE DECOUPLED PAY & PRODUCTIVITY

————————————————————————————————–

First, one such individual referenced a couple of British economic analysts who had addressed the observation I pointed out in my article when writing:

They show that when you add in benefits to pay and use the same measure of inflation for both pay and productivity, the disconnect between worker pay and productivity goes away, both in the US and Britain.

Their conclusion? “Middle-class stagnation and the ‘decoupling’ of pay and productivity are illusions. Yes, the U.S. economy is in the doldrums, thanks to a variety of factors… But by any sensible measure, most Americans are today better paid and more prosperous than in the past.”

Yes, but this is only a sleight-of-hand trick that these partisans pontificate to advance their own agenda, not because it is meaningfully accurate — it is just technically accurate.

Notably, using the “same measure of inflation for both pay and productivity” is a non-starter as that is not how productivity increases over time, nor is this how it’s measured in real terms. It’s just a mathematical trick to reduce or deflate actual productivity growth to bring it closer in line with stagnant incomes. Monetary inflation and production productivity are not connected in this fashion and doing so is disingenuous.

Truth is that what used to not show up on workers’ ledgers now shows up on their ledgers, and truth is that the component now has less value in real terms than it did prior to reassignment to the workers’ ledgers. The analysts also conflate wealth and incomes inappropriately.

What we are both referencing is the change from defined benefits for workers to defined contributions.

For example, as average life spans increased, the financial pressures exerted on organizational pension systems grew overwhelming and a shift occurred across the private and public sectors from traditional pension programs where one received a defined amount per year after retirement for the balance of their lives to one predicated upon 401k and IRA programs and the like where one received a defined contribution from their organization with no guarantee of what that looked like at retirement.

Several things occurred in this transition. What used to show up as an asset of the organizational pension now was moved to the ledger of the worker as an asset in the form of 401k’s etc. But, that move did not make the worker wealthier in reality nor improve their incomes — both are simply mechanisms through which retirement incomes derived. It just changed where things resided accounting-wise and controlled organizations’ costs.

All things equal, the worker is no better off and no worse… as long as the final retirement income remains unchanged. But all things are not equal, and final incomes are not guaranteed, thus we see today retirees not having the same incomes as those previously based upon traditional retirement pensions. So, there is a net loss of income to the worker overall, even while it appears their wealth increased.

Moreover, these 401k programs require more significant worker contributions to obtain the largest matching employer contributions. This reduces the net-net income of a worker and is not reflected in the aggregate numbers used by these analysts. So their view assigns an asset value to workers that is just an accounting move and inappropriately shows increased wealth while also not including the decreased net-net incomes from the move.

Finally, the “benefits” to which they refer are inclusive of health benefits. As we all know, these costs have increased dramatically over the decades. This alone adds an illusory increased benefit to workers when, in fact, they, too, are paying larger premiums for that health benefit, and worker costs are up dramatically more in deductibles, co-pays, and out-of-pocket maximums… Thus, all contributing to reduced net-net incomes — not the improved financial standing these analysts would have us believe.

The “benefit” appears more significant because of cost inflation yet the worker is no better off and receives the same basic benefit of health care provision they received when the “benefit” appeared at lower cost. Now the worker is made poorer on a net basis by the increased direct costs from the benefit’s cost-sharing mechanism. Moreover, just because the benefit cost grew larger on the employer’s ledger does not mean the income of the worker increased accordingly or that the benefit had more “income value.”

Oy vey!

washdry timecost

“TIME COSTS” OF APPLIANCES HEALS ALL WOUNDS

————————————————————————————————–

Second, another individual posited that my position ignores the relative increase in incomes and wealth of workers because improved productivity and globalized production have reduced the “time costs” of attaining and maintaining a middle-class lifestyle. The writer maintains that costs of clothing, major appliances, cars etc. (the lifestyle asset cost of middle-class life) cost less today in terms of how many hours one must work to attain them… and the middle-class person is better off today.

Therefore, if it cost 3000 hours to purchase a standard car back in the 1960’s and now costs 1200 hours to purchase today’s standard car, then the real incomes of average middle-class persons have increased relative to the past. His point is that while this situation may not show up on balance sheets cost-adjusted for inflation, it is a very real phenomenon that means the middle-class is larger and more robust than we believe it to be.

Thus was written:

Bottom Line: The comparison of the “time cost” of appliances over time above confirms what Aparna finds in her analysis – average (and low-income) Americans are much better off today than they were 20, 30, 40 or 50 years ago, thanks in large part to the significant reductions in the cost of common household appliances like refrigerators, washers and dryers, and TVs. The reasons for the significant reductions in the cost of appliances include innovation, technology improvements, supply chain efficiencies, increases in productivity and other market-driven efficiencies that drive prices lower and lower year by year, measured in what is most important: our time, and the amount of labor it takes to earn the money to purchase household appliances and other goods and services. As much as we hear about declines in median income, economic stagnation, the disappearance of the middle class, falling real wages, increasing income inequality, the data tell a much different story: The rich are getting richer and the poor are getting richer.

“The poor are getting richer” — Argh!

To be certain, technology has improved such that the “standard” has shifted and provided a lifestyle unimaginable or unattainable in the past; i.e., today, nearly all persons of age have a personal cell phone and internet access (hence access to instant communications); access to music proliferates on numerous mobile devises (not just families able to afford large stereo systems, or further back, their own music chambers); and the list goes on.

As they say, though, all things are relative. And, thus, to say that one has access to “absolutely” more of something now, or to something that never previously existed, or to say that it takes less working time to purchase a particular staple item of the middle-class lifestyle is not to say that they have access to more or better… relative to what their predecessors had relative to their own time. Standards change.

The average middle-class lifestyle requires more and different inputs than that same lifestyle from 1940. It’s not just a car, a refrigerator, and a radio. It is also a middle-class lifestyle relative to itself over time and those levels above it and below in any given year. As society evolves one would hope that the absolute standard improves (i.e., having only 1940 middle-class assets or household items today may mean you are “poor” today and not [or no longer] middle-class), and that is reality.

The middle-class standard and what it costs to maintain that standard have moved upward. This is called progress and something that we should desire for society. The lifestyle of today’s middle-class may appear to have obtained things impossible for the middle-class in times past, but that same cultural standard is relative to its position of the other classes.

If the death rate from cancer devolved back to that from 1960, would it be correct to say that’s acceptable because even then it was better than the survival rate from the 18th century? Of course not. Standards improve, and if the average person in a period can’t maintain their relative position over time in that moving standard, then we have declined as a society. Here is where America rests today. Fewer American families are able to stay in the current standard of the “middle-class.” Moreover, they are not able to stay in the same income percentile on a global basis — reference again this table of percentiles.

Now, in the second decade of the twenty-first century, it requires well more than two earners working to equal the wages of a one-income household of 40 years ago. In fact, wages have plummeted so low that a two-income household is now (on average) 15% poorer than a one-income household of 40 years ago.

With the year 2000 as a base, real wages peaked in 1970 at around $20/hour. The average worker today earns $8.50/hour — more than 57% less than real earnings in 1970. Moreover, as the average wage directly determines society’s standard of living, it may accurately be said that the average standard of living in the U.S. has plummeted by more than half over the last 40 years.

Inflation for the last 40 years has hidden the 57% collapse in the standard of living for the average person. Nonetheless, if you’re fortunate enough to be at or successful enough to have earned a place at the top of the income charts, the situation is significantly reversed in your favor. While average American workers have seen their real wages plummet by 57% over the past 40 years, in just 15 years (1992-2007) the 400 wealthiest Americans saw their incomes rise by 700%.

Now we have the complete picture: real wages crumbling steadily lower year after year, decade after decade for “The 99%,” while earnings skyrocket for “The One Percent.” Is that acceptable? I don’t know… is going back to the cancer death rates of 1960 acceptable to you because that’s still better than it was in 1700?

middle_class 1

middle_class 2

Advertisements

American Middle-Class Now Second-Class To Canada — It Didn’t Have To Be This Way

America’s middle class has been richest in the world for several generations, but we’ve lost that distinction to our northern neighbors.

Canada is officially home to the richest middle class on the planet, according to figures released from the Luxembourg Income Study Database. The flowing chart details 30 years of destruction to America’s lower and middle classes, the loss of standing internationally, and the concentration of income to the wealthy class in the U.S. (Click Chart For Larger View):

Screen Shot 2014-04-22 at 9.06.29 AM

How did we lose the lead? It’s no secret really; economists have been sounding the alarm for twenty-five years, and Americans have continued supporting the policies (both Republican and Democrat, alike) that have furthered their own economic erosion, even as they believe, individually, they are immune to the deleterious aspects of these political and economic choices (privatization, deregulation, free-trade agreements, free-floating exchange rates, globalization, dismantling of the safety net, poor school systems, conservatism, economic libertarianism).

Kevin Phillips wrote about the situation in a 1991 book I read when it came out: “The Politics of Rich and Poor: Wealth and the American Electorate in the Reagan Aftermath.”

Blame three broad factors encompassing the above issues: 1) Canada’s education attainment is outpacing the U.S. and most of the world; 2) American middle-class market wages (driven by globalization) aren’t keeping up with overall economic growth; and (3) Other governments are doing more to redistribute income to poorer families in other countries, particularly in western and northern Europe (the social safety net and progressive taxes).

As a result of America’s belief in the divinity of unfettered virginal markets and the evils of progressive government policy, after-tax middle-class incomes in Canada grew markedly higher than in the United States, while the poor in most of Europe now earn more than poor Americans.

Economic growth in the United States remains as strong or stronger than other industrialized nations, but only a small, elite percentage of American households fully benefits income-wise from that growth. The middle-class wallow in stagnation with no noticeable inflation-adjusted income progress in a decade. The plight of the U.S. poor is even starker than those of the middle class. A family at the 20th percentile of the income distribution in this country makes significantly less real income than in decades past and less than a similar family in Canada, Sweden, Norway, Finland or the Netherlands. Thirty-five years ago, the reverse was true.

Make no mistake, economic statistics — per capita gross domestic product — continue to show the United States maintains the lead as the world’s richest large country. Crucially, those numbers are averages, which do not measure the distribution of income. Here is where America fails: in distribution of incomes. The U.S. is the most unequal in income of mature industrialized nations.

With the majority share of income gains in the U.S. now flowing to an extremely small percentage of high-earning households, for the next generation or more, most Americans will not keep pace with their counterparts around the world — nor will they obtain the economic levels of their parents. Implement progressive policy changes, and this situation may begin to slowly improve. Stay the course and past will be prelude to the average American’s diminished future.

I may be an economic and social liberal with a clear preference, but the facts are undeniable, as are the reasons for these changes. Read ‘em and weep:

9-13-11pov4

median-income-by-age-and-gender

final-salary-map2

global_middle_class


Silhouette Man Wonders “What” Is Wrong With Americans

slihouettemanwonderswtf


What If The Cure For Cancer…

2014-01-21 09.36.28 copy


Thomas Jefferson — The Paramount Founding Father, The Intellectual Voice Of America, On Religion As A Founding Principle

Thomas_Jefferson_21. “I contemplate with sovereign reverence that act of the whole American people which declared that their legislature should make no law respecting an establishment of religion, or prohibit the free exercise thereof, thus building a wall of separation between church and state.”

~Thomas Jefferson, letter to the Baptists of Danbury, Connecticut, 1802

2. “In every country and in every age, the priest has been hostile to liberty. He is always in alliance with the despot, abetting his abuses in return for protection to his own. It is error alone that needs the support of government. Truth can stand by itself.”

~Thomas Jefferson, in a letter to Horatio Spofford, 1814

3. “Question with boldness even the existence of a God; because, if there be one, he must more approve of the homage of reason, then that of blindfolded fear.”

~Thomas Jefferson, letter to Peter Carr, August 10, 1787

5. “I am for freedom of religion and against all maneuvers to bring about a legal ascendancy of one sect over another.”

~Thomas Jefferson, letter to Elbridge Gerry, January 26, 1799

6. “History, I believe, furnishes no example of a priest-ridden people maintaining a free civil government. This marks the lowest grade of ignorance of which their civil as well as religious leaders will always avail themselves for their own purposes.”

~Thomas Jefferson: in letter to Alexander von Humboldt, December 6, 1813

7. “Because religious belief, or non-belief, is such an important part of every person’s life, freedom of religion affects every individual. State churches that use government power to support themselves and force their views on persons of other faiths undermine all our civil rights. Moreover, state support of the church tends to make the clergy unresponsive to the people and leads to corruption within religion. Erecting the “wall of separation between church and state,” therefore, is  absolutely essential in a free society. We have solved … the great and interesting question whether freedom of religion is compatible with order in government and obedience to the laws. And we have experienced the quiet as well as the comfort which results from leaving every one to profess freely and openly those principles of religion which are the inductions of his own reason and the serious convictions of his own inquiries.”

~Thomas Jefferson: in a speech to the Virginia Baptists, 1808

8. Christianity neither is, nor ever was a part of the common law.”

~Thomas Jefferson, letter to Dr. Thomas Cooper, February 10, 1814


Scandinavian Countries Global Leader In Social Justice/Cohesion

English-speaking countries rank above average; immigration levels statistically insignificant

Denmark, Norway, Sweden and Finland have the highest levels of social cohesion, followed by Canada, the US, Australia, and New Zealand, according to the Social Cohesion Radar, a study released July 16 by the Bertelsmann Foundation, a German-based think tank, and Jacobs University in Bremen, Germany. The study examines 34 countries in the EU and the OECD: the 27 EU member states and seven OECD countries: Australia, Canada, Israel, New Zealand, Norway, Switzerland and the US.

While many conservatives continue to bash the liberal social program paradigm as an unwieldy welfare state of dependency…

differentracesScandinavian countries have the most equitable societies in Europe, according to research by the Bertelsmann Foundation, a German-based think tank — finding the strongest social cohesion in Denmark, Norway, Finland and Sweden.

In these Nordic countries, which consistently rank at the top, a universal welfare state actively redistributes wealth and promotes equality of opportunity — the heart of Faustian urGe “Economic Morality: EQUALITY of advancement opportunity and treatment under the law and social memes — EQUITABILITY of rewards and outcomes [economic and social].” The quality of these countries’ institutions is also unusually high. These appear to be the factors behind the strong social cohesion in the Nordic pattern.

Most of Western Europe—Switzerland, Austria, Luxembourg, Germany, the United Kingdom, France and Spain—feature above-average to average social cohesion. Lithuania, Latvia and the southeast European countries of Bulgaria, Greece and Romania suffer from low social cohesion.

SOCIAL COHESION?

Social cohesion is defined as how well members of a community live and work together. A cohesive society is characterized by:

  • resilient social relationships,
  • a positive emotional connectedness between its members and the community and
  • a pronounced focus on the common good.

“Social cohesion is crucial for any society’s future and has a profound impact on a person’s perceived well-being. More cohesion equals more life satisfaction”, said Liz Mohn, vice chairwoman of the Bertelsmann Foundation’s executive board.

Thusly, an increasing amount of academic research indicates — what one might logically expect — that “socially cohesive” countries are more likely to have lower levels of crime, substance and alcohol addiction, and higher levels of social mobility.

The report attempted to identify levels of cohesion in society by assessing people’s social networks, levels of public trust in others, confidence in social and political institutions, willingness to help others, and participation in public activities.

• High living standards • Low levels of income inequality and • Technological process toward achieving a knowledge society stand apart as the three most important socio-economic factors to promoting a cohesive society.

The report, therefore, compared metrics such as • national wealth as measured by gross domestic product (GDP) • a country’s income gap as measured by the Gini coefficient, and its • level of development towards a modern information society as measured by the Knowledge Index:

  • First, greater national wealth has a correlation to greater social cohesion.
  • Second, a country’s income gap has a moderately strong and inverse correlation to social cohesion, indicating that less equal societies tend to be less cohesive. Few countries with a large income gap (e.g., the UK or Ireland) manage to avoid below-average scores on the social-cohesion index.
  • Third, a country’s level of development towards a modern information society has a more profound effect on social cohesion than national wealth. The higher a country’s ranking on the Knowledge Index, which measures the diffusion of modern communication technology, the more likely that country is to show high social cohesion.

SOLIDARITY FROM DIVERSITY & IMMIGRATION

Moreover, the study dispels the popular belief/misnomer that immigration is intrinsically harmful to social cohesion. The share of immigrants in a country’s population shows no statistically significant effect on social cohesion. Why?

Modern societies are based not on solidarity rooted in similarity, but on solidarity rooted in diversity and mutual interdependence“, said Stephan Vopel, Bertelsmann Stiftung program director. “Therefore they need an inclusive form of social cohesion that… accepts a multitude of lifestyles and identities and views them as a strength.”

This understanding sheds light upon a particular pattern found in the English-speaking countries of Australia, Canada, New Zealand and the United States, as well as Ireland… all of which generally rank right behind the Scandinavian countries. They are equal to the Nordic countries in terms of perception of fairness, and outperform them on solidarity and helpfulness.

It is interesting to note that conditions in these countries are quite different from conditions in the Nordic countries; for example, their welfare systems are less active in redistributing wealth, and their societies are characterized by a larger gap between rich and poor. But… as immigrant societies, the non-European countries are ethnically and religiously diverse; multicultural policies are in place to manage that heterogeneity.

In this group, also, are two relatively religious countries: Ireland and the United States. These countries appear to be able to achieve a level of social cohesion similar to that found in the relatively non-religious Nordic countries, under very different circumstances. Despite conservative political rants, respect for varied religious views ultimately prevails and tolerance — perhaps at times uneasy — holds sway, especially within the United States.

Safari 5

Safari

Safari 3

Safari 4


Can America Become More Obtuse? — Affordable Care Act & The Public’s Profound Ignorance

American Citizens Remain In The Dark On Crucial Aspects Of Health Care Reforms

American Gothic

How many times do we need to take a step back and try to explain health care reform… again? For huge swaths of the American public — for a ridiculously absurd number — it’s just not sinking in.

Forget whether you and I disagree on the merits of the Affordable Care Act. We would engage the debate because we are “aware” and educated about the issue’s facts. I’m not speaking about knowledge-based disagreement; I’m talking about willful ignorance proliferating across the nation.

This is the depressing, discouraging take-away from the monthly Kaiser Health Tracking Poll, published by the Kaiser Family Foundation. And once again in April, the numbers underscore our collective ignorance about the domestic policy issue that has dominated political and business news coverage for nearly four years — not to mention an entire and most expensive presidential election!

  • Only 3 out of 5 Americans understand that the 2010 Affordable Care Act, aka “Obamacare,” remains the law of the land and is being implemented at full speed, according to the April survey of adults from April 15-20.
  • Among the 42 percent who got it wrong, 7 percent think the Supreme Court overturned the law (it didn’t),
  • 12 percent think Congress has repealed the law (it hasn’t), and…
  • 23 percent simply don’t know (where have you been?)
  • Nearly half — 48 percent — of Americans told Kaiser pollsters a month earlier that they have heard “nothing at all” about their State’s debate over whether to set up an online health insurance marketplace, called an “exchange,” and…
  • a stunning 78 percent said they didn’t know whether their state had decided to expand Medicaid, the law’s single largest avenue to coverage for uninsured Americans!
  • 58 percent of respondents in March told Kaiser they believe health care costs are rising more quickly than usual over the past few years… the exact opposite of what has actually occurred!

Kansas Bored of Education

It’s all very nice and easy to explain away or excuse these figures of ignorance about the single biggest influence in business and inflation and personal bankruptcies in America. Sure, “regular people’s” lives are shaped more by youth soccer schedules than by health care policy, so we should cut the public some slack. Right?

A resoundingly negative, No! If you are voting in elections, you need to know truth and facts. If you don’t, then please keep away from election day voting stations. You endanger democracy and societal progress. And we should be calling it and you out for exactly the danger ignorance presents.

Better yet, please don’t offer up opinions on anything more important than Justin Bieber’s incessantly changing hair styles.

More and more, Americans are embracing the logical conclusion that if they don’t know the facts, it’s difficult to form an opinion. D-oh!

In April, a historic high — 24 percent — said they have no opinion when asked if they generally approve or disapprove of the new health care law. That’s progress of sorts, in a dystopian way.

America’s blind and willful ignorance… That’s why…

  • That’s why we went to war preemptively against a nation that not once threatened the US and had not one weapon of mass destruction (that would be Iraq, my fellow Americans)
  • That’s why the knee-jerk reaction to rescuing the financial markets from complete destruction was considered “communistic” and led to the rise of the hateful Tea Party
  • That’s why the “Birther” movement questioning the President’s American birth got traction
  • That’s why it matters that a dullard such as Sarah Palin even existed on the political scene and almost become the second-most powerful person in the world
  • That’s why our schools are failing and the US falls behind every other major industrialized nation on test scores (how can schools succeed with kids molded [or left bereft] by ignorant parents?)
  • That’s why we need strong federal regulations to protect the safety of Americans from their own ignorance
  • That’s why we need Obamacare to mandate and provide necessary insurance to protect Americans’ health from their own ignorance

ignorance