Jane Galt's Live from the WTC points to an interesting table from the Census:
Mindles H. Dreck, before whose intelligence and erudition I kneel in awed admiration, has posted this table from the Census showing the income-to-poverty ratios from the census. This tells you, for each quintile (fancy word for fifth of the population, divided by income), what their income was as a percentage of the poverty line. What does it show? The bottom quintile held steady, or slightly faltered, from 1967, ground zero for Paul Krugman's edenic economic paradise. The second-from-the-bottom increased slightly. The middle quintile increased markedly. The second-from-the-top increased even more markedly. And the top quintile increased very markedly...
I would put it differently: between 1970 and 1995 we got much slower growth in average incomes than in any other quarter-century, and a huge increase in inequality--so that in a quarter century the middle fifth got the kinds of income gains that we used to expect in a decade. That's not a well-performing economy.
And, as Piketty and Saez were the first to teach me, looking at fifths of the population misses much of the story--which is the extraordinary growth of incomes in the top percentile, the top thousandth, and the top ten-thousandth.
Nevertheless, the numbers are interesting to look at (footnotes omitted--they can be found at <http://www.census.gov/hhes/income/histinc/f21.html>:
Table F-21. Average Income-to-Poverty Ratios for Families: 1967 to 2001
(Families as of March of the following year)
----------------------------------------------------------------------
Number of
families Lowest Second Middle Fourth Highest
Year (thous.) fifth fifth fifth fifth fifth
----------------------------------------------------------------------
2001 74,340 1.06 2.39 3.64 5.23 10.78
2000 30/ 73,778 1.10 2.45 3.68 5.25 10.85
2000 29/ 72,388 1.11 2.45 3.68 5.26 10.78
1999 72,031 1.06 2.41 3.67 5.26 10.61
1998 71,551 1.02 2.36 3.58 5.10 10.40
1997 70,884 0.99 2.30 3.45 4.93 10.02
1996 70,241 0.96 2.22 3.37 4.78 9.55
1995 25/ 69,597 0.97 2.22 3.33 4.70 9.33
1994 24/ 69,313 0.92 2.17 3.26 4.67 9.22
1993 23/ 68,506 0.88 2.10 3.19 4.60 9.07
1992 22/ 68,216 0.89 2.15 3.26 4.55 8.39
1991 67,173 0.94 2.22 3.28 4.60 8.40
1990 66,322 0.99 2.27 3.35 4.70 8.61
1989 66,090 1.01 2.30 3.43 4.79 8.90
1988 65,837 0.99 2.27 3.39 4.73 8.48
1987 21/ 65,204 0.99 2.28 3.39 4.68 8.36
1986 64,491 0.99 2.25 3.32 4.62 8.16
1985 20/ 63,558 0.96 2.17 3.20 4.43 7.80
1984 62,706 0.95 2.15 3.15 4.38 7.48
1983 19/ 62,015 0.91 2.07 3.06 4.26 7.13
1982 61,393 0.92 2.05 3.01 4.11 6.94
1981 61,019 0.99 2.10 3.04 4.14 6.79
1980 60,309 1.03 2.17 3.11 4.20 6.82
1979 18/ 59,550 1.11 2.28 3.25 4.38 7.18
1978 57,804 1.12 2.29 3.24 4.36 7.14
1977 57,215 1.10 2.21 3.18 4.27 6.91
1976 17/ 56,710 1.10 2.19 3.14 4.14 6.70
1975 16/ 56,245 1.08 2.13 3.04 4.01 6.55
1974 16/15/ 55,698 1.13 2.24 3.11 4.12 6.69
1973 55,053 1.12 2.27 3.15 4.19 6.99
1972 14/ 54,373 1.09 2.22 3.07 4.09 6.90
1971 13/ 53,296 1.05 2.08 2.89 3.82 6.47
1970 52,227 1.04 2.10 2.88 3.80 6.38
1969 51,586 1.06 2.13 2.91 3.80 6.35
1968 50,823 1.04 2.06 2.80 3.64 6.13
1967 12/ 50,111 0.97 1.94 2.67 3.51 6.06
Posted by DeLong at October 27, 2002 04:55 PM
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How do these income stats relate to consumption? In particular has the ratio of consumption to income for poor households changed? If not, given that consumption of items like consumer durables has risen, for what items has consumption declined? The intuitive answer is "those for which relative prices have gone up" e.g, housing and health care. Is this correct?
Posted by: John Quiggin on October 27, 2002 06:42 PMWell, it is hard to know who to hold responsible forthis, but the cover of the NY Times magazine featuring Prof. Krugman's article says, in big red letters,
"The End of Middle-Class America".
We then see, in parentheses and much smaller type-face
"(and the Triumph of the Plutocrats)"
Inside, the article is described in the table of contents as
"For Richer : How the permissive capitalism of the boom destroyed American equality."
Well, that last bit is closer to Prof. Krugman's argument. But the cover doesn't connect to the story, or to the stats presented above.
OK, who is going to go after Michael Lewis's piece, which appears this week as part II?
Regards,
>>> looking at fifths of the population misses much of the story--which is the extraordinary growth of incomes in the top percentile, the top thousandth, and the top ten-thousandth. <<<
Yes, it's an interesting story, but the question in this discussion is whether it is a *bad thing*.
For instance, as there are so few major league baseball players, is it a *bad thing* that their average salary has risen 11,800% since 1967, to $2.6 million from $19,000. (Does this put baseball players among the "triumphant plutocrats"?)
All Americans pretty much know about this, but not many seem upset by it as if they consider it a bad thing. And if any should be, what's the alternative? That the money should go to the owners instead? Would that be less plutocratic?
It hardly seems likely that such an increase in baseball salaries resulted from any change in social attitudes (though it may shape such attitudes going forward). Rather, it pretty clearly resulted from the huge growth in the market for baseball due to developments in media and communications. Once players' salaries came entirely out of ticket revenue collected from the fans in the stands. Then revenue from local radio was added. Now there's revenue from a host of media that reach a billion people around the world.
Pretty simple economics would seem to indicate that the limited number of major league baseball players would be get a *big* increase in pay as result. And by the same logic, so would others who benefit from the same type of growth in their markets -- other top pro athletes and star-level entertainers, writers, producers, business people and even economist-pundits -- pretty much anyone who can reach these growing markets.
Of course, these folks are still only a small part of the entire population. (Webvan proved that the local grocer can't reach a billion people.) How much are they of the top income percentile? The top 1,000th? I don't know. But it looks like they must be a good part of what's happened there.
If so, is this "baseball salary effect" really a bad thing? And what's the alternative?
As to its political effects, personally I have a hard time worrying about baseball players swelling the ranks of a new plutocracy. And a harder time worrying about pro basketball players (average salary $4.6 million) becoming plutocrats. But economist-pundits ... maybe. And Barbra Streisand -- sure thing! But I still don't see any alternative.
>> I would put it differently: between 1970 and 1995 we got much slower growth in average incomes than in any other quarter-century, and a huge increase in inequality--so that in a quarter century the middle fifth got the kinds of income gains that we used to expect in a decade.... <<
True enough -- but between 1970 and 1995 productivity growth slowed to below the level of other periods, so income growth would slow. As has been well documented on this site, productivity has since taken a good jump up. And as Professor DeLong pointed out in a post earlier, most of these productivity gains have been bid away from companies to workers in the form of higher wages and lower prices. (On reason why consumer spending has held up so surprisingly well during the current profits recession is that incomes have continued to rise.)
Hmmm, I can't find the Professor's earlier post by googling his site, but it pointed to this story in the May 9 issue of The Economist, http://www.economist.com/finance/displaystory.cfm?story_id=1120568
(you may have to be a subsriber to get it) ... "workers (who are, naturally, also consumers) were virtually the sole beneficiaries of the new economy, in the shape of faster real wage growth ..." [Indeed, investors overestimating how much of the productivity gain companies would keep in profits may have driven the stock market bubble.]
The Census also reported at the end of the boom how income was increasing fastest from the bottom of the income distribution:
"Increases in income and declines in poverty were again widespread in 1999 .... median household income rose in 1999 by 2.7% to $40,800 -- the highest amount ever ... For the first time, households in the United States have sustained five consecutive annual statistically significant increases in their real median income"
... the bottom quintile's income rose 5.4% compared to the top quintile's increase of 3.9% ... poverty dropped for all racial and ethnic groups for the first time since 1969 ... poverty rates for all racial and ethnic groups set or equaled all-time historic lows (except for Whites) ... http://www.census.gov/hhes/income/income99/prs00asc.html
All showing why it was a good idea not to be too hasty to pop the bubble ... but I digress into another subject.
A notion to throw out is that productivity is the key -- when the economy returns to healthy growth, the increased productivity gains will go mainly to workers as before, and we'll be in the midst of a *new* 25-year period for people to talk about.
Jim, a few points:
Re: baseball salaries
>>All Americans pretty much know about this, but not many seem upset by it as if they consider it a bad thing<<
Even as a non-American, cursory reading of the coverage of the most recent strike would suggest otherwise to me. Furthermore:
1. Baseball players don't get involved in corrupting the political process in the main, so they are less to be worried about.
2. Krugman actually discussed this, with citations to the literature, to prove that the effect you're talking about in that post couldn't have been what was at work.
and
>>And as Professor DeLong pointed out in a post earlier, most of these productivity gains have been bid away from companies to workers in the form of higher wages and lower prices<<
Brad hasn't pointed this out and in all probability won't. Labour share of GDP has fallen precipitously during the 1990s.
Posted by: Daniel Davies on October 28, 2002 01:13 AMMichael Lewis' article, Part II was interesting, to say the least. He actually tried to argue that Blodgett really believed in the Web and therefore not to be blamed.
My beef with analysts and their sponsors (brokerage firms) was not that they were spectacularly wrong and incompetent. It is that they could not possibly have been right. What kind of real world technology experience did Blodgett have that qualified him to pass judgement on Amazon or the Internet?
We expect crime scene analysts to have studied crime scenes and military analysts to have been in the military.
Michael Lewis' "defense" sounded awfully like baiting. I am debating myself if I should rise to it...
Posted by: Suresh Krishnamoorthy on October 28, 2002 06:09 AMFWIW, I have a brief take on the Lewis piece up on my blog, but it's not really balanced --- too much on Lewis's silly strawman version of Spitzer v. Merrill Lynch, too little on the article's other arguments, which also ring false, at least to me...
Posted by: Charles Dodgson on October 28, 2002 07:28 AMRe: the baseball salary argument, D-squared said:
"Krugman actually discussed this, with citations to the literature, to prove that the effect you're talking about in that post couldn't have been what was at work."
Well, let's go to the videotape!
From Krugman's article:
"We became a middle-class society only after the concentration of income at the top dropped sharply during the New Deal, and especially during World War II. "
Sorry, I couldn't resist. That so distorts the causation presened by Saez and Piketty as to be laughable. Iy was the Great Depression that caused the Great Compression.
Anyway, I am looking for the quote:
"Finally, the ''superstar'' hypothesis -- named by the Chicago economist Sherwin Rosen -- offered a variant on the technological story. It argued that modern technologies of communication often turn competition into a tournament in which the winner is richly rewarded, while the runners-up get far less. The classic example -- which gives the theory its name -- is the entertainment business...
The debates among these hypotheses -- particularly the debate between those who attributed growing inequality to globalization and those who attributed it to technology -- were many and bitter. I was a participant in those debates myself. But I won't dwell on them, because in the last few years there has been a growing sense among economists that none of these hypotheses work.
I don't mean to say that there was nothing to these stories. Yet as more evidence has accumulated, each of the hypotheses has seemed increasingly inadequate. Globalization can explain part of the relative decline in blue-collar wages, but it can't explain the 2,500 percent rise in C.E.O. incomes. Technology may explain why the salary premium associated with a college education has risen, but it's hard to match up with the huge increase in inequality among the college-educated, with little progress for many but gigantic gains at the top. The superstar theory works for Jay Leno, but not for the thousands of people who have become awesomely rich without going on TV.
The Great Compression -- the substantial reduction in inequality during the New Deal and the Second World War -- also seems hard to understand in terms of the usual theories. "
Sorry, yet another linking of the Great Compression to the New Deal. Never says "Great Depression" in the article. Too depressing.
Anyway, that is the rebuttal - the superstar theory explains Jay Leno on TV, but no one else. Not even Britney Spears. Not superstar bankers, lwayers, doctors, researchers, software developers - only Jay Leno.
OK, I am kidding a bit, but this is a wildly unconvincing argument. Really, it is just an expression of his opinion - economists had bitter disagreements, this is what I think, take my word for it - well, OK, but at this point his partisan backgound becomes extremely relevant.
I will come prowling for the Michael Lewsi stuff.
Regards,
Brad,
Do you know what the income numbers are for the pre WWII era? I have heard that the 1945-1972 era was actually pretty anomalous and that the post 1972 era growth and income figures were actually similar to pre WWII numbers.
I am particularly interested in how the numbers on the low end tie in with immigration. My guess is that income stagnation on the low end may partially reflect the increase in low skill workers from abroad.
Let's see if I have this straight, we launched the Great Society-War on Poverty in the mid sixties, the Civil Rights Movement-Affirmative Action, Women's Liberation, Environmentalism, Tune-in, Turn-on, Drop-out....and a few other "social norms" I've left out changed roughly at the same time.
And we're SURPRISED that incomes of lower quintiles has grown more slowly than in the two decades PRIOR?
Posted by: Patrick R. Sullivan on October 28, 2002 09:11 AMI'm sorry, is Patrick really suggesting that the only logical result of the Civil Rights and Women's Rights movements was a reduction in lower-quintile income?
I knew he was a bit of a rightwing troll here, but this seems... well, I guess I'll refrain from name-calling. But holy shit.
Posted by: JRoth on October 28, 2002 09:52 AMCharles,
A good summary of his article. He repeatedly
mixed up widespread foolishness with deliberate
fraud. Deliberately, IMHO.
J Roth misstates an important point with:
< I said, "has grown more slowly than in the two decades prior", which is something entirely different. For instance, in 1940 blacks' incomes were only 40% of whites, but by 1960 they had risen to over 60%. In the five years before the Civil Rights Act of 1964 the percentage of blacks in professional and other high wage occupations increased at a faster rate than in the five years after passage. And after the incentives were really changed with the Supreme Court's bizarre reading of that Act (about 1971) to require quotas, progress just about halted. Similarly, the numbers and percentage of people living below the official poverty line had been decreasing for 15 years when we instituted the War on Poverty. Shortly thereafter that progress stopped, and then reversed itself. Is it J Roth's contention that the change in incentives had nothing to do with these trends?
The Semi-Daily Journal gremlins ate:
" I'm sorry, is Patrick really suggesting that the only logical result of the Civil Rights and Women's Rights movements was a reduction in lower-quintile income?", in my prior post.
It should have immediately followed my: "J Roth misstates an important point with:"
Posted by: Patrick R. Sullivan on October 28, 2002 04:36 PMOne thing that hasn't been discussed here (I don't know if Jane Galt mentioned it in her original post) is that these are FAMILY incomes--labor force participation among women was a lot lower in 1967 -- 41.1% vs. 60.1% in 2001. Although male participation fell from 80.4% to 74.3%, there likely was a significant increase in how much those families had to work to stay at the poverty line. I couldn't quickly find participation rates by quintile, so I don't know if the above figures exaggerate or understate the effects on the bottom quintile.
To really understand whether the bottom quintile was doing better or worse than this data makes it appear would require more finely-grained data about family composition and work effort. If I can find it, I'll post about it in my blog.
Posted by: matthew wilbert on October 28, 2002 07:06 PMMatthew Wilbert might want to look at Chulhee Lee's work (appendix 5E) at the end of Fogel's "The Fourth Great Awakening". He mentions that employment fell for heads of household in the bottom decile by 20%, while remaining unchanged for the top three deciles, in the 70s and 80s. And hours worked showed similar patterns.
Posted by: Patrick R. Sullivan on October 29, 2002 07:04 AMDoes anybody have more data on either
* changing composition of skills in the workforce over this period
* movement of workers between quintiles/segments over time
Both seem kind of important for policy or qualitative interpretation...
thanks
Posted by: John Browning on October 29, 2002 08:22 AM>> Jim, a few points:
1. Baseball players don't get involved in corrupting the political process in the main, so they are less to be worried about. <<
Well, yes, that's the point. Neither do basketball players with their $4.6 million average salary. Or star economists. Or Barbra Streisand, even. So there seem to be a lot of exceptions to the "top income = political corruption" rule.
Maybe it's only rich Republicans. ;-)
>> 2. Krugman actually discussed this, with citations to the literature, to prove that the effect you're talking about in that post couldn't have been what was at work. <<
Citations? All I saw was "The superstar theory works for Jay Leno, but not for the thousands of people who have become awesomely rich without going on TV".
Which seems rather glib and superficial as it hand waves away the thousands who *did* go on TV. The media stars and baseball and basketball players and Barbra and Professor K himself at $50,000 per speech. Who were the equivalents income-wise of 40 years ago?
We're only talking about the top percentile or 1,000th here. When the basketball players got a 20,000% increase to a $4.6 million average that didn't move the top up?
>> and ...
"And as Professor DeLong pointed out in a post earlier, most of these productivity gains have been bid away from companies to workers in the form of higher wages and lower prices..."
Brad hasn't pointed this out and in all probability won't. Labour share of GDP has fallen precipitously during the 1990s. <<
That would be from 72.2% of national income in 1990 to 72.3% in 2001.
"Compensation of Employees"
http://www.bea.gov/bea/dn/nipaweb/TableViewFixed.asp#Mid
Professor DeLong did provide the link I posted to the Economist article, I am 99% certain. Did you read it?
But in any event, I don't think it's news on Wall Street these days that no boom in profits has materialized to match the boom in productivity, as so many there were expecting just a few years ago. Yet those productivity gains have been going somewhere.
Posted by: Jim Glass on October 30, 2002 08:19 PM