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Economics

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Sep 7, 2016 Laura Tyson and Anu Madgavkar

伯克利—如今，不平等性争论常常聚焦于美国和其他发达经济体的极小部分家庭的收入和财富积累。不太受到关注但害处不遑多让的一个趋势是大部分家庭收入下降或停滞。

在直到21世纪初的大部分战后时期，发达经济体GDP和就业增长强劲，这意味着几乎所有家庭都经历了收入增加，不管是税收和转移支付之前还是之后。因此，一代又一代人都期望比父辈过得更好。但据麦肯锡全球研究所的新研究，这一趋势不再笃定。

在过去十年中，发达国家大部分家庭的收入增长戛然而止，那些以单身女性为主或受教育程度较低的年轻工人组成的家庭受影响最为严重。25个发达经济体收入分布中的这部分家庭中，有三分之二即超过2亿人，来自工资和资本的家庭真实收入在2014年比2005年更低，相反，这些经济体只有不到2%的家庭收入保持不变或下降。

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Laura Tyson

Writing for PS since 2012
113 Commentaries

Laura Tyson, a former chair of the President’s Council of Economic Advisers during the Clinton administration, is a professor at the Haas School of Business at the University of California, Berkeley, and a member of the Board of Advisers at Angeleno Group.

Anu Madgavkar

Writing for PS since 2014
19 Commentaries

Anu Madgavkar is a partner at the McKinsey Global Institute.

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0 Comments on this paragraph, 25 Comments on this article

Martin Screeton Sep 30, 2016

If the economy was delivering a $9.15 an hour job to me in 1979 at the bottom 5th of the economy and is still delivering that same job in 2016... for $9.50... then you have a terminal problem that is not going to be solved by the free market. You fired up the Fed printing press for billionaires... They kept the money... Like they have kept the money since the 1980's when you gave them 30% of the treasury. Lesson--> Quit Giving Rich People Money! They are not the Economy! :)
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Robert REYNOLDS Sep 11, 2016

Laura and Anu, you say that. "A major culprit behind this reversal is the deep recession and slow recovery following the 2008 economic crisis in the advanced economies." I would put it to you that the main underlying cause of increasing inequality (in terms of both income and wealth accumulation) is the neo-liberal economic rationalist model that was adopted over the last 30-40 years or so. Deregulation and privatization are integral parts of this model. Repeal of the Glass–Steagall Act which, as I understand it, was put in place in 1933 in response to the Great Depression, is a case in point. This insidious and toxic economic rationalist model was arguably the main cause of the 2008 recession.

In free-market capitalism the main aim is to relieve your fellow human beings of as much of their wealth as possible and put it into your pocket. It is a ‘dog-eat-dog’ free-for-all’. It is ‘winner-take-all’. So when this system is adopted why should anyone be even mildly surprised when the gap between the rich and poor widens. It would be ‘jaw-dropping’ if this did not happen. Let's be honest, it is what is supposed to happen! The adoption of this system has enabled the capitalist robber barons to go on a wealth-accumulating rampage without the mild checks and balances that were in place before the early 1980’s.
- Martin Screeton Sep 30, 2016
  
  Robert, you hit it on the head there!
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Bob Bronson Sep 11, 2016

This info is not new. This issue is how much of the stagnation problem should be addressed by government policy, and exactly how, vs. leave the cyclical markets unfettered to effect their corrective (re)actions.
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Douglas Leyendecker Sep 11, 2016

Do we have a minimum wage problem, or do we have a problem creating jobs that pay more than the minimum wage? Our problem is dysfunctional economic policy. Mandate wages rather than empower economic activity is putting a band aid on a head wound.
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Per Kurowski Sep 11, 2016

It is difficult for me to understand how McKinsey has been able to completely ignore the distortions of the allocation of credit to the real economy, that the risk weighted capital requirements for banks cause. That piece of risk-adverse regulation condemns us to income stagnation.

Must be because too many banks of those that mostly maximize their returns on equity by minimizing equity are McKinsey’s clients.

http://subprimeregulations.blogspot.com/2016/09/the-basel-committee-injected-cowardice.html
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john Fahy Sep 11, 2016

As salaries in the US are if one is fortunate enough to be employed in the US are increasing at about 2%/annum and the cost of living in increasing at about 3%/annum we have at least a base for falling incomes.
However, hidden in these figures is in real terms a reintroduction on the feudal system as corporations are now moving their production facilities to where every it appears to be financially advantageous and ensuring governments allow products produced in these locations to be sold in more wealthy countries which allows for greater profit.
Corporations are also allowed to gouge the market and the relevant authorities are not prepared to take any action to curb these practices.
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Neil Gundel Sep 10, 2016

"In the US, in particular, the ability of labor to protect its share of national income, and of lower- and middle-income households to protect their share of the wage pool, eroded substantially."

Yes, but let's not forget that as the Baby Boom generation has accumulated very large assets in preparation for their retirement, it has been a "design goal" for the U.S. economy that income from these assets would grow as a % of GDP - that was the purpose of saving for retirement. In other words, investment income was SUPPOSED to grow relative to wages.
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Ott Toomet Sep 9, 2016

Interesting story. However, I would like to know what would be the conclusion if one includes the main destinations of outsourcing -- China, India, Bangladesh, etc. Would we still see the income stagnation, or would we see a rise of "the global middle-class" instead?
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Jose araujo Sep 9, 2016

The decline of incomes is a political policy, it can be easily reversed.

Actually it will be reversed, if not Karl Marx willl be proven right.
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Michael Public Sep 8, 2016

Stagnation is caused by money not circulating in the economy. There is virtually no investment into entrepreneurial efforts as compared to investment into rent seeking investments.

Simple solution - a tax on all passive investments (shares, bonds, property, cash) and this tax collection is transferred to entrepreneurial efforts. (Of course, if you propose that they will fire you at McKinsey/Berkley before the ink has dried.)
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john werneken Sep 8, 2016

Incomes stagnate when STUPID PROGRESSIVES try to keep them rising, without risk without pain without any rational economic policy.
- Jose araujo Sep 9, 2016
  
  Stupid progressives are the ones who took you out of the trees and the caves.
  
  If you had any clue you would realize that the wage stagnation is a social design option.
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Godfree Roberts Sep 7, 2016

'Sweden, where median households received a larger share of the gains from output growth in the 2005-2014 period, has bucked this negative trend.'
Um, so has China, where wage growth often outruns GDP growth...
- Walter Gingery Sep 8, 2016
  
  Actually, more often, it's been just the reverse -- household income has lagged GDP. This is partly because, in China, like the US, the rich and well-connected local elites have been the biggest gainers from economic growth.
  But also it's been the result of the government's policy of wage and interest repression. For example, after the debt crisis fifteen years ago, China effectively forced the debt-servicing cost onto household savers -- mostly during the first decade of this century.
  
  With nominal GDP growth ranging between 16% and 20% and a GDP deflator between 8% and 10%, lending rates should have probably been at least 13-15%, but instead they were set much lower, between 6% and 7%, and deposit rates even lower, between 2.5% and 3.5%.
  
  Negative real lending rates effectively granted insolvent borrowers (mostly local elites) debt forgiveness every year equal to at least 6-9 percentage points for a decade or longer. Depositors (households) effectively paid for the full amount of the debt write-down as well as to recapitalize the banks.
  Forcing the cost of the write-down onto HOUSEHOLD SAVERS worsened China’s imbalances significantly, however. The household consumption share of GDP FELL from an already very low 46% in 2000 to an astonishing 35% in 2010. (The share in the US is about 70%) This was not a coincidence.
  
  I
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Andreas Samatas Sep 7, 2016

The Great Income Stagnation starts from the early/mid 1990's. The household income growth during the first decade of this period as mentioned in this article is actually equivalent to stagnation. Especially comparing it GDP growth rates of the time. The great gaps between GDP growth and the relatively flatlined household income growth were filled with the corresponding growing household debt in support for the seemingly growing demand of the 1995-2007 period. Today is just the outcome of that phenomenon and not something new and separate.
- yw yap Sep 8, 2016
  
  ...the 1995-2007 period? That was the prime time when big biz corps chased profits by lowering cost and fed the developed societies with abundant of cheaper goods? That was when the ppl in the developing economies slogged blood, sweat & tears to provide those goods? That some have enjoyed their good times?
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Jerry F. Hough Sep 7, 2016

This, however, is only half the story and hides a major source of the anger that is likely to elect Trump as President.

The Dow Jones average was 750 in 1982, 3300 in January 1993, 14,100 in October 2007. 6,500 at the bottom in 2009. Now it is 18,000.

The extreme imbalance between the market and income should have caused a revolution some time ago. It is beginning not only here but throughout Europe. The compelling case for Trump is that maybe he will be able to do something with the Democrats in Congress and forestall someone much worse in 2020.

By any reasonable definition, the top 20-25% are rich, the 25%-75% are middle income, and the bottom 25% are the poor. Top 25% is family income of around $120,000. The rich are scapegoating the top 1% or top .1% to hide the fact that they themselves are grossly undertaxed.

It is the top 25% who own the stocks. Naturally they know they lifetime income has risen much more rapidly than annual because the stock market means their standard of income will remain high in retirement. Those whose median income has fallen have no savings--and the little they have is earning 0%.

It is crucial to calculate imputed lifetime income, not simply current.

Naturally the rich--those in Marin and Westchester--like Eisenhower Republicans like the Clintons and Obama who promise not to raise their taxes on income under $250,000. They don't mind if Obama and Clinton cut Social Security and raise Medicare age to 67 instead of lowering it to zero. That keeps their taxes down.

The time has come to reverse the tax revolution. Cruz's idea of abolishing the Social Security tax and replacing it with a VAT is truly great if the rate is set high enough. The rich in Marin say piously that this is regressive, as if they weren't the big consumers of non-food goods and the Social Security were progressive.

We should go back to US saving bonds with 5% interest for the first, say, $100,000. We should abandon the evil asset stimulus program (trickle down, officially announced by Bernanke) but followed by Bill. All it does is inflate assets for the rich 25%. Taxes or something should reduce the rewards for stock buybacks and M and A. We should really go after the FANG stocks--Facebook, Apple, Netflix. Google--whose loopholes were deliberately created to help their stock prices since they are big part of the stock indices.

We should, of course, have a reasonable foreign policy. The absolutely stupid policies in Libya and Syria have produced the flood of refugees that is the final straw bringing about the revolution.
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M M Sep 7, 2016

With the greatest respect to both authors, inequality must not be confined to the narrow interpretation of a household's income. With live in a globalised world (still) and anything that happens in say Australia or China,mound affect the US or GB and so on. Inequality is a malice brought about by numerous factors I shall state herein some of them: Corruption, Fraud, Inconsistent and irregular fiscal and monetary policies, lack of real growth and real jobs creation policies (across the board), incompetent political and financial leadership (to include their highly esteemed advisers), etc...
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dan baur Sep 7, 2016

Income Stagnation is one thing while Income Inequality another. With your credentials you don't know the difference?!?

Sweden is one of many small, homogeneous country. Why would an anecdotal episode (likely misinterpreted too) from their history be at all relevant to the US?
- Walter Gingery Sep 8, 2016
  
  Dan, what about the small, homogeneous countries that are not rich, like Greece, Portugal, or Tunisia? Obviously, the Swedes must be doing something right, and the US should find out what that is and apply it.
  
  I agree with your implication that the US is not homogeneous, at least, if by that you mean that many US citizens are people of color. You didn't mean, by any chance, though, that it's OK to give white citizens a better deal than the others in terms of income, did you?
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- dan baur Sep 8, 2016
  
  @michael public
  Are you serious? Comparing US, a nation of immigrants, to Sweden. You're a waste of time.
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- Michael Public Sep 8, 2016
  
  Why on earth would Sweden be more homogeneous than America? Why on earth would a country with 10 million be workable while a country with 52 states averaging less people per state be unworkable?
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stephan Edwards Sep 7, 2016

As none of the losers in the great income stagnation are big political contributors and the ones doing well out of the current situation are. I anticipate our beloved political "Elites" will do absolutely nothing. Any kind of change in income distribution will upset the political classes owners, I mean masters oops I meant Donors that's it. The politicians will give many speeches send out many tweets but in the end not a thing will change.
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