Globalization and the shrinking middle class

[d0zer]

I was listening to Dan Carlin talk about the 2012 US elections and he was making the comment that for all the "job creation" rhetoric, there was no discussion of the actual underlying issue for the lack of jobs. He's suggesting that the abysmal job market in the west is a product of globalization, and no politician wants to touch that with a 10 foot pole. Expensive western workers with all their rights and benefits are forced to compete with the 3rd world, and they've been losing for the last generation or so. People do benefit from the cheaper products globalization has brought, but is that enough to compensate for lower wages and a far more competitive job market?

I'm sure the shrinking middle class has to be more complicated than that, but it also seems that introducing cheap 3rd world labor to corporations has had to have some basic supply & demand effects given that the supply of cheap labor is so much more available today than it ever has been. I don't really intend this to become an anti-globalization thread as I believe that it's basically impossible to turn back the clock on globalization...but why IS the middle class shrinking?

[Renton]

Can you give us some facts to establish that the middle class is in fact shrinking? It seems to me that more than anything globalization is freeing up domestic labor to do more productive things i.e. for a greater wage. It's possible though that it provided such a shock to the system in countries like the U.S. that it may take a while to fill that void of jobs again, but once that happens we'll be stronger for it.

And most importantly you can't ignore what a great effect this is happening on the world as a whole. The countries that get outsourced to are being rapidly pulled out of poverty.

[wufwugy]

I tried to hit on a few different ways of looking at this



I disagree with the premise of a shrinking middle class. Globally, it's rapidly expanding. The US and western Europe had a leg up for a long time due to regional expansion of industrialization pre-WW2. Post-WW2, US was far ahead of the rest due to the destruction of factories in all other modern states and by being a mass creditor to those states' rebuilding. This allowed Europe (mainly Germany) and Japan to become industrial pioneers in high tech and top quality. The US was complacent in its position as top dog. Then Japan became complacent in its position as tech top dog. Germany hasn't become complacent, because, well, that's just how Germans are, I guess. This complacency was combined with an increase in competition by countries playing catchup. This competition simply reduces the demand for US manufacturing.

Another way of looking at this is the educational direction of the US has created a greater number of anti-education people while also vilifying manufacturing. Mike Rowe talks a lot about this. He's not an economist, but he makes an incredibly important point. We have become enamored with the concept of greatness. We all go to college to become quasi-intellectuals who never learned or appreciated a dirty job. There's a shitload of money to be made in middle-tier jobs as mechanics, machinists, and all sorts of what we call grunt work, but nobody wants to do it because we think it's beneath us. We think that progress into the new age is a shunning of the trades. Additionally, it's anti-intellectualism, where to many, it's totally cool to not know wtf you're doing. Read at an 8th grade level? Doesn't matter, still graduating. But oh wait now I can't get a job and potential manufacturing firms aren't even building plants around here because it couldn't find workers that can follow instructions and think critically.

Another issue, which may be vastly underrepresented, is the increase of women in the workforce. For a variety of reasons, women gravitate towards the service sector and not towards the manufacturing sector, and this makes a very healthy manufacturing sector look sick. In all honesty, I think this is the real factor. US manufacturing is far better than people think. Every sector is better than people think. Every sector is the best in the world, actually. Farming and resource extraction is the best, manufacturing is still huge, service is the best by far, and tech is the best by far.

Regardless, it's just not popular or easy to become a manufacturer. The people who get into it are mainly just the ones who are born into the culture. They're the people who never developed fantasies about going off to college and writing books or becoming CEOs. And colleges have completely dropped the ball on incorporating into the workforce. We need a vast expansion of private industry working with colleges on job programs. Notice that college courses are all CHEM, POLS, HIST, etc. There's no MACHINIST accreditation. This is largely because colleges are still using the old medieval model of higher education revolving around a broad intellectual scholasticism.

Manufacturing expanded rapidly in this country when there was a romance to it. Now there is no romance to it. People always talk about it, but it's funny that everybody who talks about it aren't people who actually want to do it. There's a shitload of money in it, but you have to get greasy and abandon your dreams of grandeur to do it

[wufwugy]

Can you give us some facts to establish that the middle class is in fact shrinking? It seems to me that more than anything globalization is freeing up domestic labor to do more productive things i.e. for a greater wage. It's possible though that it provided such a shock to the system in countries like the U.S. that it may take a while to fill that void of jobs again, but once that happens we'll be stronger for it.

And most importantly you can't ignore what a great effect this is happening on the world as a whole. The countries that get outsourced to are being rapidly pulled out of poverty.

For this reason and others, I don't even consider the drop in manufacturing an issue. American high tech adores foreign growth because that's exports, and these are very high paying jobs. The sorts of manufacturing the US has lost is textiles and stuff we never really did much of in the first place (like cell phone assemblage). The big bits of manufacturing are not ones that can be outsourced (automobiles), and the drop in that has a lot to do the dip in growth since the 90s (which I think is mainly just a monetary policy and regulatory issue)

Being a good plumber isn't hard and they make bank. But who says they want to be a plumber? Granted that's service and trade, but it's on the same bandwidth as manufacturing

Also, manufacturing tends to require relocation. People don't wanna move, so they have to work in service. We have achieved enough of the American Dream that new generations take it for granted that they can find work so easily


It may be interesting to look at the manufacturing thing as a regional thing. If it wasn't for the Midwest, we wouldn't be talking about any of this shit. We consider this a country-wide thing, but it isn't. Maybe it's something about Michigan and Ohio that people just don't like. Wait, I've got it! The Sun Belt Migration! They invented air conditioning, and that opened up slews of migration from the Midwest and Northeast down to the sun belt. This demographic shift spell turmoil for the manufacturing belt. Instead of constant in-migration of hopeful laborers, it got out-migration of people who wanted to get away from the continental coldness. I don't know if that's all true, as I just came up with it, but I'd certainly look into it

[sah_24]

I don't know where you live but it is not easy to find a job on the planet I live on , unless your gonna work part time at places like Mcdonalds .

http://www.politifact.com/truth-o-me...ob-opening-ob/

We have way more people that need to join the workforce than jobs being created , and that is not even counting all the people that have stopped trying to look for work .

http://www.washingtonpost.com/local/...a3b_story.html

[Renton]

D0zer can you agree that at worst, the middle class worldwide is rapidly expanding due to globalization? Cause then we move into an area where you diagnose a country or region (for example the U.S. and Canada) with a pathology but acknowledge that the world at large is better off.

And again, I'd like to see some data to back up the statement that the middle class in America and/or Canada is shrinking. I don't doubt the possibility that this is true, I just think its something that's easy for people to say almost regardless of how the economy is going. Kind of like how aging pessimists always harp on about things are getting worse and worse in general, and pine for the "times when things were better." But then we look back objectively and realize, "hey things are actually getting a lot better."

And I'm not looking for that tired line chart that shows household incomes stagnating since the 50s or whatever. That chart has been largely debunked by a lot of things, including the fact that households have gotten smaller, benefits (if not wages) have increased significantly yet aren't covered by the chart, and purchasing power of currency (i.e. standard of living) has dramatically increased as well.

[d0zer]

I've been thinking about a response, and in doing reading I'm not as confident in my own premise anymore. Yes I'm talking about the middle class in the U.S. and I agree that globalization is increasing the middle class worldwide.

If we accept the American middle class doesn't have it tougher today, we still have to answer why the issue of "job creation" was such a hot-button issue in the 2012 election. Obviously the 2008 market crash has a lot to do with this as unemployment rates increased significantly. I still think that times are tougher now generally for the middle class than they were in the post-WWII "golden age", where secure jobs were much easier to come by with little education, and unions were stronger and fought (often successfully) for higher wages and greater benefits for largely unskilled labor. I think this set up expectations for a generation that were passed down to the next. This doesn't mean that the middle class is doomed of course, but it does suggest a more competitive world that perhaps can be written off by "the golden age couldn't last forever".

Now, the American economy is transitioning more into the Tertiary sector, and away from manufacturing. This isn't bad news for the middle class per se, but it does mean that they have to be more educated than ever to keep up, and I think a lot of (mostly older) people are falling behind because they've been riding the wave of the golden age that's been over for a while now. I suppose that's an inevitability of a transitioning economy and perhaps accounts for some of the feelings of discontent that seem to exist in the public.

Here's an article that covers some of the symptoms of the increased difficulties of today's middle class. It contradicts your assertion that purchasing power has increased.

Still, that was no match for the 56 percent jump in the cost of housing, the 155 percent leap in out-of-pocket spending on health care and the double-digit increase in the cost of college.

I'm sure that purchasing power has increased for some things, but the costs mentioned above aren't trivial, and the increased cost of college is especially worrisome given the increased dependence on higher education.

[d0zer]

And since I know you're bored as I saw your absurdly detailed and entertaining analysis of that "under the bridge" cover, here's some fluffy infographics that support my point that you can pick apart one by one:

http://www.huffingtonpost.com/2013/0...n_3386157.html

[Renton]

And since I know you're bored as I saw your absurdly detailed and entertaining analysis of that "under the bridge" cover, here's some fluffy infographics that support my point that you can pick apart one by one:

http://www.huffingtonpost.com/2013/0...n_3386157.html

Somehow this post slipped by me. I took a look at it. I'm generally skeptical of graphs like this because income doesn't tell the whole story. I was about to post that and shove it in your grill but it appears they did do a little work comparing costs of living as well. It's still difficult to use simple charts to prove something like this because dollars in 1970 are a lot different than dollars today. I'm not even talking about inflation, just the costs of all goods have changed since then. New needs have emerged. Most people in America have high speed internet, that's a bill that they would never have paid in 1970. It's IMO hard to argue that the standard of living of the American middle class is down from the 70s. It's probably down since the great recession though of course.

No doubt folks have been ailing since that time, and no doubt the upper classes are more equipped to recover from it. Those charts don't feel like an exposé to me really. I'm not surprised at what they depict, I'm just not sure there's a lot that the federal government can do to remedy these ails. The housing crash wouldn't have happened to begin with if we used market based interest rates or didn't subsidize the shit out of home-owning. And the recovery from the crash probably wouldn't be so sluggish if we didn't tax the shit out of businesses and income.

[d0zer]

I'm just trying to establish that the middle class is shrinking or hurting more in any measurable ways than 1970-1980. I first thought globalization, but in reading I think that globalization was more like a 10-20% factor. The increased housing, healthcare & education costs are massive nerfs to the mids. It may be just a balancing effect that will plateau, but the trend helps explain some of the public discontent.

[wufwugy]

If I had to guess, I would say the two main reasons for an appearance in dropping middle class incomes are tax incentives to over-consume healthcare and houses. These can be fixed super easy by making it illegal for businesses to offer health insurance and to eliminate the mortgage tax deduction. The worst of the two is the growth of healthcare spending fueled mainly by businesses offering attractive healthcare benefits instead of wages. This makes wages look lower and increases aggregate healthcare costs due to over-consumption. Businesses didn't use to do this until the government implemented some regulation several decades ago that changed their incentives. I don't remember what it is specifically. It's silly that in order to fix the problem, the government might have to make the practice illegal for a spell. Obamacare doubled down on the business mandate, which is bad news. Both Democrats and Republicans already agree these tax distortions should be eliminated, but they're non-starters with the public.

[boost]

Somehow this post slipped by me. I took a look at it. I'm generally skeptical of graphs like this because income doesn't tell the whole story. I was about to post that and shove it in your grill but it appears they did do a little work comparing costs of living as well. It's still difficult to use simple charts to prove something like this because dollars in 1970 are a lot different than dollars today. I'm not even talking about inflation, just the costs of all goods have changed since then. New needs have emerged. Most people in America have high speed internet, that's a bill that they would never have paid in 1970. It's IMO hard to argue that the standard of living of the American middle class is down from the 70s. It's probably down since the great recession though of course.

The working class today has a higher standard of living and is far better off than the working class of 1910. The working class of today's standard of living is probably closest to that of the upper middle class of 1910. What does this mean? What relevant deductions can we make from this?

Classes are relative to each other. Also you point out that the internet didn't exist, much less would it be a bill that is essentially necessary today. This to me seems to hinder your point. What am I missing?

No doubt folks have been ailing since that time, and no doubt the upper classes are more equipped to recover from it. Those charts don't feel like an exposé to me really. I'm not surprised at what they depict, I'm just not sure there's a lot that the federal government can do to remedy these ails. The housing crash wouldn't have happened to begin with if we used market based interest rates or didn't subsidize the shit out of home-owning. And the recovery from the crash probably wouldn't be so sluggish if we didn't tax the shit out of businesses and income.

What is this in response to? I kinda skimmed the article/charts, I read the thread a bit more carefully, but I'm not sure when anyone suggested the federal government was the solution. d0zer seems to have only asked what people think about this-- whether it's true, whether it's a problem, and what can be done about it. Please kick me in the balls if I completely missed a post or something.

[boost]

wufwugy, there certainly is accreditation for manufacturing positions. There is the ASE certifying body, and then a ton of manufacturing jobs which fall under the "engineering" umbrella and would have students graduating with degrees in applied sciences.

As for the manufacturing sector crumbling in the midwest because people don't like cold weather-- well, I'm just glad you, yourself, admitted that you were talking out of your ass. I like thinking outside the box, but I think it's well established that manufacturing left, and so labor left, not the other way around. Labor may have caused it to leave through the demands of unions, but it wasn't because their toes were cold.

[Renton]

The working class today has a higher standard of living and is far better off than the working class of 1910. The working class of today's standard of living is probably closest to that of the upper middle class of 1910. What does this mean? What relevant deductions can we make from this?

I think you mean 1970, but no matter. The deductions to be made are that regardless of facile comparisons of wages or costs of goods between the two points in time, it's clear that standards of living have been continually on the rise since then.

Classes are relative to each other. Also you point out that the internet didn't exist, much less would it be a bill that is essentially necessary today. This to me seems to hinder your point. What am I missing?

Forgive the poor wording. The point is that high speed internet is a "need" that has emerged that people almost take for granted. People who are below the poverty line have high speed internet and smart phones. Again, this is a sign of a much greater standard of living than in prior decades.

Measuring inflation is really more art than science. Adjusted for inflation numbers are kind of meaningless when discussing these things. The important thing is how much quality of life does the average wage buy today in comparison to 1970. I think its pretty clear that it buys more overall. Certainly though its easy to find exceptions to this, such as energy.

What is this in response to? I kinda skimmed the article/charts, I read the thread a bit more carefully, but I'm not sure when anyone suggested the federal government was the solution. d0zer seems to have only asked what people think about this-- whether it's true, whether it's a problem, and what can be done about it. Please kick me in the balls if I completely missed a post or something.

I'm just pre-empting. Whenever we talk about things like this and ask "what can we do to remedy this?", then government can really be the only answer. The state is the only body that can swoop in and take resources by force to distribute them elsewhere it sees fit.

The huffington post is a progressive liberal media entity. An article like this is meant to inflame middle class people into supporting a liberal agenda, hating rich people or corporations, or embracing protectionism again in spite of all of the progress globalization has made.

We're not meant to come to the conclusion that maybe the solution is that there is no grand solution, no broad sweeping change we can make to the system to make it work.

[boost]

I think you mean 1970, but no matter. The deductions to be made are that regardless of facile comparisons of wages or costs of goods between the two points in time, it's clear that standards of living have been continually on the rise since then.

No, I meant 1910. But I could have used any year. The point is that we are discussing classes, and classes are relative to each other. So we can compare the middle class of whatever time, as it relates to the other classes, to the middle class of today, as it relates to other classes. Standard of living have generally been improving at a historically noticeable pace for thousands of years, and at a pace noticeable to a contemporary for a few centuries. But that has nothing to do with the present day contraction of the middle class. If you don't think that wealth disparity is an issue (which I'm pretty sure I know you don't) then go ahead and say it-- but you seem to be trying to mask it as something it's not.

Forgive the poor wording. The point is that high speed internet is a "need" that has emerged that people almost take for granted. People who are below the poverty line have high speed internet and smart phones. Again, this is a sign of a much greater standard of living than in prior decades.

Measuring inflation is really more art than science. Adjusted for inflation numbers are kind of meaningless when discussing these things. The important thing is how much quality of life does the average wage buy today in comparison to 1970. I think its pretty clear that it buys more overall. Certainly though its easy to find exceptions to this, such as energy.

I agree it is a sign of a higher standard of living-- but it is also requiring a higher monetery output to be competitive, and that becomes an interesting dynamic when coupled with incomes which have stagnated for decades.

Art, science, whatever you want to call it, it's a useful tool to analyze the situation, so long as you weigh its input properly. Tossing it out because it doesn't fit your narrative is disingenuous. I mean, how much more of a science is "standard of live?" And I am honestly asking that, and don't mean to rest my point on it.

I'm just pre-empting. Whenever we talk about things like this and ask "what can we do to remedy this?", then government can really be the only answer. The state is the only body that can swoop in and take resources by force to distribute them elsewhere it sees fit.

The huffington post is a progressive liberal media entity. An article like this is meant to inflame middle class people into supporting a liberal agenda, hating rich people or corporations, or embracing protectionism again in spite of all of the progress globalization has made.

We're not meant to come to the conclusion that maybe the solution is that there is no grand solution, no broad sweeping change we can make to the system to make it work.

Meh, you're consistently pushing the discussions in this direction. Whatever the author meant, the article does not explicitly say any such thing, d0zer never pushed that agenda, and taken at face value the article provides interesting information which is relative to the discussion.

Is government the only answer? If government is the only answer, is it actually an answer? Is it possible that any of this could be a cultural issue? Maybe it's something that could be solved by a shit in culture-- ushering in a new zeitgeist through a shift of values instead of policy. I really don't know, but none of these things will get discussed if we constantly and pre-preemptively devolve our socio-economic discourse into these poliicy-based dichotomies.

[wufwugy]

wufwugy, there certainly is accreditation for manufacturing positions. There is the ASE certifying body, and then a ton of manufacturing jobs which fall under the "engineering" umbrella and would have students graduating with degrees in applied sciences.

Engineering is elite level stuff that doesn't account for most kinds of trade and manufacturing work. The accreditation I was referring to is the university stuff. As far as I know, accreditation for trades still doesn't carry much weight there

As for the manufacturing sector crumbling in the midwest because people don't like cold weather-- well, I'm just glad you, yourself, admitted that you were talking out of your ass. I like thinking outside the box, but I think it's well established that manufacturing left, and so labor left, not the other way around. Labor may have caused it to leave through the demands of unions, but it wasn't because their toes were cold.

I wasn't talking out of my ass about the Sun Belt Migration. That's legit, and it's largely climate driven. What I additionally posited is that the primary mover could have been the Sun Belt Migration, which could have sparked a cycle away from manufacturing in the Manufacturing Belt

[Renton]

No, I meant 1910. But I could have used any year. The point is that we are discussing classes, and classes are relative to each other. So we can compare the middle class of whatever time, as it relates to the other classes, to the middle class of today, as it relates to other classes. Standard of living have generally been improving at a historically noticeable pace for thousands of years, and at a pace noticeable to a contemporary for a few centuries. But that has nothing to do with the present day contraction of the middle class. If you don't think that wealth disparity is an issue (which I'm pretty sure I know you don't) then go ahead and say it-- but you seem to be trying to mask it as something it's not.

The stagnating wages of middle class people is mostly stat cooking. The poor and middle class have gotten richer (in America) during the last 30 years. It's valid to say that the rich have gotten richer at a faster rate, though. This is probably due to globalization more than anything. The money isn't being displaced from the poor and middle class in our country, it is being created by free trade with other nations.

Re. wealth disparity, it exists because people are disparately productive in the economy. Pure egalitarianism is a vulgar concept because it supposes that incomes and standards of living should in no way reflect how much we contribute to the economy. So yes, I believe that in a free market you will have some disparity, and it is not inherently a problem. Its only a problem when things stop becoming continually better for us all, which hasn't happened.

This is the part where I extoll the virtues of free markets. I'll try to go as little on faith as possible. A completely free market and free society approaches a state of higher equality by increasing everyone's standard of living. It does this by continually reducing the costs of everything we need and desire through competition, increased efficiency via capital accumulation, and decreased inefficiency through the profit and loss system. So while there will be wealth disparity, even the poorest people will be able to afford healthcare when the industry hasn't been cartelized by a state. We approach a state of basically infinitely cheap goods/services and infinite wealth to spend on goods/services, and nearly everything a government does slows down this process by some degree.

I really don't know, but none of these things will get discussed if we constantly and pre-preemptively devolve our socio-economic discourse into these poliicy-based dichotomies.

Fair enough, but the thread was titled globalization and a shrinking middle class. And even though dozer stated that he didn't think going back on globalization was the answer, its still an original post that is skeptical of free trade at least on some level.

[boost]

Engineering is elite level stuff that doesn't account for most kinds of trade and manufacturing work. The accreditation I was referring to is the university stuff. As far as I know, accreditation for trades still doesn't carry much weight there

I mean, it all depends how you want to define these things. Engineering casts a large shadow. As for more manual labor orientated manufacturing.. well.. first you don't need a bachelors or even an associates for those positions, and even when you need years of training, the nature of most industry is such that on the job training is much more appropriate.

Even still, I think you'd be surprised what sorts of jobs are filled by people with engineering degrees. Not because they couldn't find a job that matched their degree, but because that is the job that matches their degree.

I wasn't talking out of my ass about the Sun Belt Migration. That's legit, and it's largely climate driven. What I additionally posited is that the primary mover could have been the Sun Belt Migration, which could have sparked a cycle away from manufacturing in the Manufacturing Belt

Are we at Kevin Bacon's doorstep yet?

[wufwugy]

My point was that because academia focuses on the professional services in a world where academia is considered the preferred pathway, we have a reduction in attention to manufacturing and trades. This problem has kept a lot of potential talent out of the middle-tier trades jobs, as well as misplacing many more into the service sector than needed.

There are tons of jobs in trades and manufacturing, but not that many qualified people move into them because the academic system shuns them and virtually all potential talent enters academia. This creates a scenario where mechanics, welders, and carpenters are those who didn't go to college, but because everybody tries to go to college, those trades are underrepresented. What we need is a higher-learning system that includes trades. Countries like Germany have this; US does not

[boost]

The stagnating wages of middle class people is mostly stat cooking. The poor and middle class have gotten richer (in America) during the last 30 years. It's valid to say that the rich have gotten richer at a faster rate, though. This is probably due to globalization more than anything. The money isn't being displaced from the poor and middle class in our country, it is being created by free trade with other nations.

I'm not familiar with your sources on the middle and lower class getting richer during the past several decades, but if I were I'm sure I could claim "stat cooking" just the same. But if we agree that the disparity in wealth has been increasing, I think we share enough common ground to have a meaningful discussion.

Re. wealth disparity, it exists because people are disparately productive in the economy. Pure egalitarianism is a vulgar concept because it supposes that incomes and standards of living should in no way reflect how much we contribute to the economy. So yes, I believe that in a free market you will have some disparity, and it is not inherently a problem. Its only a problem when things stop becoming continually better for us all, which hasn't happened.

Vulgar seems a bit extreme. I think the fact that we appreciate things outside of their monetary value is beautiful. I think the fact that we offer special care for babies, children, and people in general with abnormalities, diminished cognitive fucntions, etc. is a big part of what makes us modern humans. That's the extreme, but you can see that these people aren't contributing their fair share-- at least I assume they're not in your view. But in my view, they are. Taking care of them allows us to live in a world in which people don't die in a ditch because they don't flow with the current ebbs of the market. Again, this is the extreme, but I think it illustrates the point and you can fill in the spectrum of grey from there.

[quote]
This is the part where I extoll the virtues of free markets. I'll try to go as little on faith as possible. A completely free market and free society approaches a state of higher equality by increasing everyone's standard of living. It does this by continually reducing the costs of everything we need and desire through competition, increased efficiency via capital accumulation, and decreased inefficiency through the profit and loss system. So while there will be wealth disparity, even the poorest people will be able to afford healthcare when the industry hasn't been cartelized by a state. We approach a state of basically infinitely cheap goods/services and infinite wealth to spend on goods/services, and nearly everything a government does slows down this process by some degree.
[quote]

I am not sure I disagree with the virtues of your end game scenario, but I don't think I can agree that there is a path that leads there. I think that you ignore the potential destabilizing effects of wealth disparity. When there is a smooth gradient of wealth, and a thick buffer of a middle ground between the absolute destitute and the filthy rich, society will be most stable. The more egalitarian the society, the smoother the transition will be from rich to poor, again having a stabilizing effect. While I like the idea of your endgame, I don't think it can be reached without hitting the critical point of disparity.

As an honest concession, I think on the flip side, total egalitarianism is a pitfall to avoid, because those who work hard won't feel reward for their work. As with most things, I'm under the impression that balance is key here. Middle ground, balance, stability-- funny how they all positives which warn against extremism. Maybe an example of linguistic Darwinism?

Fair enough, but the thread was titled globalization and a shrinking middle class. And even though dozer stated that he didn't think going back on globalization was the answer, its still an original post that is skeptical of free trade at least on some level.

Like you said, fair enough. I don't mean to jump down your throat on this and throw it at you constantly, but I think it's a good thing for us all to look out for. I know I've done it to you-- hell, I even (albeit jokingly) made my whole OP in "Organized Labor" a dichotomatic call out addressed at you. It's just that I think ideas are far more interesting than policy trumpeting and bashing. Of course there will be some of that, but we can at least let discussions naturally plot their course... maybe we'll find some gems along the way.

[boost]

Is the edit function broken for anyone else?

[boost]

My point was that because academia focuses on the professional services in a world where academia is considered the preferred pathway, we have a reduction in attention to manufacturing and trades. This problem has kept a lot of potential talent out of the middle-tier trades jobs, as well as misplacing many more into the service sector than needed.

There are tons of jobs in trades and manufacturing, but not that many qualified people move into them because the academic system shuns them and virtually all potential talent enters academia. This creates a scenario where mechanics, welders, and carpenters are those who didn't go to college, but because everybody tries to go to college, those trades are underrepresented. What we need is a higher-learning system that includes trades. Countries like Germany have this; US does not

Oh, right, I completely agree with all of this except the conclusion.

Post secondary schooling for trades and manufacturing is probably not a good idea. There is still a fair amount of manual and/or low skill labor to be done on the job, and so this is a great environment for apprenticeship. Also these industries more quite rapidly, and academia isn't very well suited to rapid shifts. On the job training allows the worker to cruise along with the industry with no risk of being obsolete after dedicating X years to studying for entering said industry.

I do think you have the right idea, I just don't know that your solution is correct. A big reason respect for these jobs has plummeted is due to the jobs leaving. Now if you're union, it's hard to get shifts. People saw their blue collar neighbors go from a steady pay-check they could support a family on and be proud of, to hanging at the local union watering hole since there's no work. The down trodden tradesman is what a lot of parents were seeing or were when raising what are now the 15-35 year olds. They were witnessing the decline of manufacturing and overreacted by pushing their kids to follow the path to a cubicle.

Also, in Germany, and much of the rest of the western world (possibly in the east too, but I really have no clue), you start to head on a path to a trade in secondary school. Pretty much any field your thinking of which carries a BAS is an engineer position. For example, a four year degree in welding sets you up to be a welding engineer. It's still blue collar I guess, but you're not a tradesman, you're most certainly an engineer.

[wufwugy]

I don't know about the trades/manufacturing overlap, but trades have not dropped off like manufacturing. They're a unique high demand mixture of grunt work, technical skill, and services. They're seriously in very high demand and quite lucrative. One reason they're so lucrative to those who are any good is because the supply of new recruits is so short. The supply for these jobs suffer particularly because they require intellectual talent, yet those with that talent don't pursue them

[wufwugy]

Medicine is probably a good example of how the trades should be treated. In a way they are, but the cult sentiments are still really great for medicine yet crappy for the trades. Nobody wants to be a plumber even if they hear that plumbing isn't that hard and pays very well

[wufwugy]

Because my dad is a tradesman, I've known quite a few people in them who make a whole bunch of money, yet still consider themselves uneducated and look up to college smarts as if it's something out of reach to them. Some of these guys have such incredible talent that they make $80/hr installing doors that only a handful of people in the vicinity know how to do. My dad, for the most part, has been a general contractor, and even though he has installed thousands of doors during his career, he sometimes still has to call his door guy who can figure out the toughest door install there is. And he makes buttloads by just installing doors. The same exists in virtually every area of trades, but nobody looks up to it because it's messy work where you build up a sweat and don't wash your hands before you eat. Every person I've known who make a great living in the trades still subtly view what they do less favorably than what college degrees are supposed to get you.

I agree with the Mike Rowe view: we have tricked ourselves into thinking these kinds of jobs suck and the economy suffers significantly because of it. But they're great jobs.

[d0zer]

My point was that because academia focuses on the professional services in a world where academia is considered the preferred pathway, we have a reduction in attention to manufacturing and trades. This problem has kept a lot of potential talent out of the middle-tier trades jobs, as well as misplacing many more into the service sector than needed.

There are tons of jobs in trades and manufacturing, but not that many qualified people move into them because the academic system shuns them and virtually all potential talent enters academia. This creates a scenario where mechanics, welders, and carpenters are those who didn't go to college, but because everybody tries to go to college, those trades are underrepresented. What we need is a higher-learning system that includes trades. Countries like Germany have this; US does not

I'm never going to argue against more education, the increasingly complicated world we live in demands it. A shortage of tradespeople will be and currently is being sorted out by the free market given the decent wages the skilled trades currently have relative to university arts degree grads, especially considering the cost of each. However, the secondary sector has been stagnant for decades and an investment into Tertiary fields seems more important in a country with a mature, first-world economy.

It's very tough to prove that the middle class is shrinking if it's subtle, but there are a few trends to suggest this: stagnant growth, and increased health care, housing, and education costs. At the very least the first derivative isn't good. A plateau would be fine (aside from increased costs), but I think what's worrying people is extrapolating from that first derivative. I don't think it's at all necessary that the second derivative is constant and we could easily see a plateau, but I get the concern.

All this talk of government intervention and what not hasn't even crossed my mind and is jumping the gun for me. I'm honestly just trying understand if this is real or not. Renton you handsome bastard if you re-read the OP I think that's what I was going for. I don't have an agenda, I'm testing a hypothesis I heard on a podcast and I've already admitted weakened support for it based on new information. Believe it or not, this thread is me doing my damndest to curb my biases and objectively look at something and I'll be damned if you guys are gunna derail it like that labour thread that I helped derail

[d0zer]

Also I regret trolling with the hufpo graphs because you guys commented on them instead of the nytimes article I was actually interested in your take on.

[Renton]

Vulgar seems a bit extreme. I think the fact that we appreciate things outside of their monetary value is beautiful.

Beautiful to think about. Hurtful economically. Really awful stuff happens to things when you ignore their monetary worth. We've discussed this already.

I think the fact that we offer special care for babies, children, and people in general with abnormalities, diminished cognitive fucntions, etc. is a big part of what makes us modern humans. That's the extreme, but you can see that these people aren't contributing their fair share-- at least I assume they're not in your view. But in my view, they are. Taking care of them allows us to live in a world in which people don't die in a ditch because they don't flow with the current ebbs of the market.

I resist the urge to discuss the welfare of the disabled in context like this because those are extreme cases which would be pretty well taken care of in ANY rich society regardless of enacted egalitarian measures. There's just gonna be enough do-gooders and philanthropists among us to take care of the these few people, and even if we state-subsidize them its such a tiny amount of money (relatively to say the defense budget or the rest of medicare) that I don't care about it one way or the other.


The true welfare argument needs to be made where the money is significant: low-income people who have made poor decisions or just have had bad luck in life. And these are cases that helping these people is hurting the economy many times more than it helps them. And it often just straight out hurts them by giving them warped incentives. If I can work at this low-income job and gain experience and potential mobility for 900 dollars a month, or collect this disability or welfare check for 1100, I will probably choose the 1100, even if it gives me no chance of improving my state in life. Decisions like this are made constantly in the U.S.


Also, a shit load of the supposed egalitarian measures we enact are a subsidy to the middle class at the expense of the poor, not the rich as intended. Social Security, for example, is a regressive tax. The poor usually enter the workforce earlier in life than the middle class (often at age 16-17 as opposed to college grads who often wait until 23), and die younger, thus they pay more into it and receive less. State higher education is also stealing from the poor to give to the middle class and rich. Taxes collected by the states are almost always regressive, often coming from sales taxes. The poor pay a greater percentage of these taxes per their income and are far less likely to go to state colleges.


So what you have aren't egalitarian measures, instead you have a special interest group, the middle class, voting for policies that help them at any cost to others. It's the same concept as corn subsidies and its wrong for the same reasons. It's just harder to recognize this because we're hardwired to think that its all about middle class people and no one else matters.

I think that you ignore the potential destabilizing effects of wealth disparity. When there is a smooth gradient of wealth, and a thick buffer of a middle ground between the absolute destitute and the filthy rich, society will be most stable. The more egalitarian the society, the smoother the transition will be from rich to poor, again having a stabilizing effect. While I like the idea of your endgame, I don't think it can be reached without hitting the critical point of disparity.

I think I can draw the faith argument on this one just like you do with my stuff. I think that society is more stable when it is rich, when resources are distributed to their most valued use, when people are allowed to make their own decisions about their money, and when they have more of it to spend.


I don't think its all about sculpting a middle class that is 90% of the population. And even if I did, I think collectivist thinking would be just about the worst way to achieve that feat.

[wufwugy]

Fantastic post on economic inequality

http://econlog.econlib.org/archives/...ne_theres.html

[boost]

I take issue with the assertion that wealth inequality is a non-issue. Morally it rubs me wrong, but of course this means nothing, so, instead, I've been trying to wrap my head around the economic implications of increased disparity in wealth. This is what I came up with.



High levels of wealth inequality: fewer people able to allocate capital to ideas

Fewer ideas receive funding: economy is less diverse

Lack of economic diversity: increased susceptibility to variance caused by everything from natural disasters to consumer trends

Greater economic variance: decreased societal stability



Thoughts?

[Renton]

I take issue with the assertion that wealth inequality is a non-issue. Morally it rubs me wrong, but of course this means nothing, so, instead, I've been trying to wrap my head around the economic implications of increased disparity in wealth. This is what I came up with.

High levels of wealth inequality: fewer people able to allocate capital to ideas

Fewer ideas receive funding: economy is less diverse

Lack of economic diversity: increased susceptibility to variance caused by everything from natural disasters to consumer trends

Greater economic variance: decreased societal stability

Thoughts?

It makes sense but I think you're missing a point or two.


1) All those things are certainly true of the sort of wealth inequality that exists in poor countries. These countries are typically subject to massive government corruption, rampant nepotism, and most importantly they're just poor and haven't had a chance to develop into mature market economies yet. The fact that 1% of the population is super wealthy and 99% is dirt poor is not the result of free market economics, quite the opposite, actually. As these countries reduce corruption and increase individual liberty and economic freedom, they're being pulled out of dire poverty by the minute.

2) http://en.wikipedia.org/wiki/Capital_accumulation

I'd suggest getting a basic understanding of what this is and what it means for economies. The other sort of income inequality, that is, the one you're worried about that would arise in capitalistic societies, works much differently. A functioning free market economy results in everyone getting rich, but it will also often result in some people getting rich at a different rate than others. The important thing is that the overall pie (the wealth of all society) gets larger, so even if you have a smaller piece of it, you're still better off than with the previous much smaller pie.

Capital is basically property which is used to make other property. A hammer, a bulldozer, a set of learned skills, a loan from the bank. It's something you invest in to be more productive at something. Businesses that make a profit typically recapitalize a large part of it back into the business so they can make products more efficiently, or that are more effective, or on a larger scale meant to sell over a longer period of time. There are two major results to this. One, the product gets cheaper and more available to everyone (standard of living increases). Two, the labor that went into making it becomes more productive, which results in fewer people employed at a higher wage.

There are a few other more controversial results to this process . First is that it's often criticized for increasing unemployment, since higher productivity means fewer jobs hired per business. But that isn't true at all, labor is actually freed to do more productive things under conditions of advanced capital accumulation. This can be seen by the fact that minimum salaries in rich countries are astoundingly high compared with poor countries. In countries with loads of capital, even the least skilled and educated among us can get far more value from our time.

The other result is that it could result in some VERY rich people existing. The so called Gilded Age of the 19th century with Rockefeller, Carnegie, Vanderbilt etc, was a relatively economically free time for the U.S., and the so-called robber-barons were richer than any tycoon of today. But this was also the period of U.S. history with the most marked economic growth, technological innovation, mass-immigration, and standard of living increase we've ever experienced. So basically theres not a lot to suggest that people getting rich is ever a problem so long as society is able to advance and we are all able to live continually better.


So capital accumulation is great stuff, and it's pretty demonstrable that erecting barriers to it only slows down the process of wealth accumulation for society and is ultimately worse for the poor and middle class.

[wufwugy]

I'd add that income is a meaningless statistic in many ways because it's essentially not materialized until it's invested or used for consumption. I think the Sumner post I linked discusses some of how when we view inequality through more concrete measures, it's not nearly as big as when we use more esoteric ones. Maybe that was in a different post though

[wufwugy]

http://econlog.econlib.org/archives/...and_inc_1.html

[Penneywize]

http://econlog.econlib.org/archives/...and_inc_1.html

Careful with that sound logic there, it might hurt people's ears to hear that increased inequality isn't the result of rich people exploiting the poor!

[boost]

What results in income inequality is important only in so much as it will help us stop its increase if the results of income inequality have a detrimental effect on society. If there are no negative effects, then it doesn't really matter.

Pretty much, Mr. Henderson's logic does not follow at all. He quote mines in an attempt to prove income inequality isn't a result of the rich exploiting the poor, then follows with the notion that income inequality isn't bad.

[wufwugy]

The point is based on any quote mining. The amount of wealth concentrated in certain hubs doesn't not add up to amount extracted from non-wealth hubs

[boost]

His conclusion is that wealth inequality does not matter, his supporting evidence is that wealth inequality does not stem from exploitation of the poor by the rich. His logic still does not follow.

[wufwugy]

His point is that the exploitation theory doesn't add up quantitatively (which is true), and thus the issue of poverty can't be explained by inequality (which is also true)

[boost]

He makes a clear and concise conclusion. The body of his argument should rightfully be assumed to be his supporting evidence. On the face of it I don't agree with the notion that wealth inequality is a non-issue, but I think it is a valid position and makes for an interesting discussion. However, "it's not the rich peoples fault, therefore it's not a bad thing" is a specious argument.

Further, you are suspiciously invoking the concept of a zero sum economy to make the point that you wish Mr. Henderson was making. Pretty sure you don't want to be doing this?

[wufwugy]

His point isn't that income inequality is a non-issue, and he doesn't suggest that if it's not rich peoples' fault, it's not a bad thing. I'm not invoking anything zero sum. Poverty is not explained by income inequality, and the point is to point out how those who are today suggesting that income inequality is a cause of poverty, didn't used to think that. Meanwhile the evidence on the issue hasn't changed

[boost]

If it's not a zero sum economy, then the gains of the rich dwarfing the losses of the poor on its own does nothing to prove your point. If the rich are making gains without anyone suffering equitable losses (which I am unsure is what the brief essay is even saying, since "poor" is not defined and could be being used as an antonym for rich or in exclusion of the rich and the middle class) then this is proof that we don't have a zero sum economy and not much else. It certainly does not prove that the gains of the rich aren't made through exploitation.

Also, people are allowed to shift positions. I can quote mine past Renton and wufwugy posts all I want, and I guarantee I can find plenty which contradict both of your current socio-economic stances, but it would in no way disprove your current positions.

[boost]

And I don't know how it can be any more clear. His conclusion:

the income inequality in the United States today cannot be explained by rich people exploiting poor people.

What matters is not whether inequality increases but whether people of all income levels are doing better.

[wufwugy]

Changing of position should be based on evidence. The point is that it wasn't in this circumstance. The zero sum argument is a strange one because nothing in the post or anything I've said suggests it's considered to be the case. Quantitatively, even in the amount of growth, it does not make sense that inequality is a product of exploitation.

I'm not sure what point you're trying to make. We don't have any actual evidence that income inequality causes poverty

[boost]

Points being made by me:

The short essay you linked to makes a huge leap in logic from its support evidence to its conclusion.

I outlined why I brought up zero sum, and why I think you and Mr. Henderson are invoking it's presence in the economy.

A new one:

Your claim that Krugman's shift in position is not evidence based is not convincing in and of itself. I'd be interested to see an actual response to this by Krugman or someone from the other camp, and not just evidence of the lack of evidence in a "he's a flip flopper!" blog post employing poor logic. I guess I need to do some research.

[BennyLaRue]

Pretty sure middle class 'Merica is expanding. I blame Doritos.