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I was look­ing at real unem­ploy­ment data, and in doing the hyper­link dance ran across an old doc­u­ment I remem­bered from last year. This doc­u­ment was a real eye opener when it was pub­lished in Octo­ber of 2010 and I thought it would be good to share it.  Due to Quan­ti­ta­tive Eas­ing  this year, the Reces­sion is being pro­longed with real cur­rent unem­ploy­ment at 23% and ris­ing. Chair­man Bernake wants a new round of eas­ing (he hasn’t even thought up a name). They are mak­ing up new rules as they go along. This is the true dan­ger, not the Debt Ceil­ing Cri­sis.  By sat­u­rat­ing the econ­omy with money, the value of the Amer­i­can cur­rency is being debased, caus­ing it to lose all value.  It is being done will­fully and method­i­cally right in front of the people.

One Amer­i­can


David_Cay_Johnston

Scary New Wage Data

David Cay John­ston | Oct. 25, 2010 04:35 AM EDT

Now for some really scary break­ing news, from the lat­est pay­roll tax data.

Every 34th wage earner in Amer­ica in 2008 went all of 2009 with­out earn­ing a sin­gle dol­lar, new data from the Social Secu­rity Admin­is­tra­tion show. Total wages, median wages, and aver­age wages all declined, but at the very top, salaries grew more than fivefold.

Not a sin­gle news orga­ni­za­tion reported this data when it was released Octo­ber 15, searches of Google and the Nexis data­bases show. Nor did any blog, so the cit­i­zen jour­nal­ists and pro­fes­sional econ­o­mists did no bet­ter than the news­room pros in report­ing this basic infor­ma­tion about our economy.

The new data hold impor­tant lessons for eco­nomic growth and tax pol­icy and take on added mean­ing when exam­ined in light of tax return data back to 1950.

The story the num­bers tell is one of a strength­en­ing eco­nomic base with income grow­ing fastest at the bot­tom until, in 1981, we made an abrupt change in tax and eco­nomic pol­icy. Since then the base has fared poorly while huge eco­nomic gains piled up at the very top, along with much lower tax burdens.

A weak foun­da­tion can­not prop­erly sup­port a mas­sive super­struc­ture, as the lean­ing Tower of Pisa shows. The lat­est wage data show the dis­as­trous results some of us warned about, although like the famous tower, the econ­omy only lists badly and has not collapsed.

Mea­sured in 2009 dol­lars, total wages fell to just above $5.9 tril­lion, down $215 bil­lion from the pre­vi­ous year. Com­pared with 2007, when the econ­omy peaked, total wages were down $313 bil­lion or 5 per­cent in real terms.

The num­ber of Amer­i­cans with any wages in 2009 fell by more than 4.5 mil­lion com­pared with the pre­vi­ous year. Because the pop­u­la­tion grew by about 1 per­cent, the num­ber of idle hands and minds grew by 6 million.

These fig­ures show, far more pow­er­fully than the offi­cial unem­ploy­ment mea­sure known as U3, how both wide­spread and deep the loss of jobs was in 2009. While the offi­cial unem­ploy­ment rate is just under 10 per­cent, deeper analy­sis of the data by econ­o­mist John Williams at http://www.shadowstats.com shows a real under– and unem­ploy­ment rate of more than 22 percent.

Only 150.9 mil­lion Amer­i­cans reported any wage income in 2009. That put us below 2005, when 151.6 mil­lion Amer­i­cans reported wages, and only slightly ahead of 2004, when 149.4 mil­lion Amer­i­cans held at least one pay­ing job.

For those who did find work in 2009, the aver­age wage slipped to $39,269, down $243 or 0.6 per­cent, com­pared with the pre­vi­ous year in 2009 dollars.

The median wage declined by the same ratio, down $159 to $26,261, mean­ing half of all work­ers made $505 a week or less. Sig­nif­i­cantly, the 2009 median wage was $37 less than in 2000.

To give this some per­spec­tive, from 1992 to 2000 the num­ber of peo­ple earn­ing any wages grew by 21 mil­lion, but nine years later just 2.8 mil­lion more peo­ple had any work.

These wage data, based on the Medicare flat tax on all com­pen­sa­tion, tell us only about the num­ber of peo­ple who earned wages and how much. They tell us noth­ing about whether these indi­vid­u­als were under­em­ployed, had to work more than one job, earned fringe ben­e­fits, or were employed at a level com­men­su­rate with their abilities.

But they do give us a stun­ning pic­ture of what’s hap­pen­ing at the very top of the com­pen­sa­tion lad­der in America.

The num­ber of Amer­i­cans mak­ing $50 mil­lion or more, the top income cat­e­gory in the data, fell from 131 in 2008 to 74 last year. But that’s only part of the story.

The aver­age wage in this top cat­e­gory increased from $91.2 mil­lion in 2008 to an aston­ish­ing $518.8 mil­lion in 2009. That’s nearly $10 mil­lion in weekly pay!

You read that right. In the Great Reces­sion year of 2009 (offi­cially just the first half of the year), the aver­age pay of the very highest-income Amer­i­cans was more than five times their aver­age wages and bonuses in 2008. And even though their num­bers shrank by 43 per­cent, this group’s total com­pen­sa­tion was 3.2 times larger in 2009 than in 2008, account­ing for 0.6 per­cent of all pay. These 74 peo­ple made as much as the 19 mil­lion lowest-paid peo­ple in Amer­ica, who con­sti­tute one in every eight workers.

 

Aver­age Median Wages, 1990 to 2009 (in 2009$)

pdf download

 

Back in 1994, when the top cat­e­gory the gov­ern­ment reported on was $20 mil­lion or more of com­pen­sa­tion, only 25 peo­ple were in that rar­efied atmos­phere, and their aver­age earn­ings came to just under $45 mil­lion in 2009 dollars.

What does this all mean? It is the lat­est, and in this case quite dra­matic, evi­dence that our eco­nomic poli­cies in Wash­ing­ton are under­min­ing the nation as a whole.We have cre­ated a tax sys­tem that changes con­tin­u­ally as politi­cians manip­u­late it to extract cam­paign dona­tions. We have enabled ‘‘free trade’’ that is noth­ing of the sort, but rather tax-subsidized mech­a­nisms that encour­age Amer­i­can man­u­fac­tur­ers to close their domes­tic fac­to­ries, fire work­ers, and then use cheap labor in China for prod­ucts they send right back to the United States. This has cre­ated enor­mous down­ward pres­sure on wages, and not just for fac­tory workers.

Com­bined with gov­ern­ment poli­cies that have reduced the share of private-sector work­ers in unions by more than two-thirds — while our com­peti­tors in Canada, Europe, and Japan con­tinue to have highly union­ized work­forces — the net effect has been dis­as­trous for the vast major­ity of Amer­i­can work­ers. And of course, less money earned from labor trans­lates into less money to finance the United States of America.

This sys­tem­atic destruc­tion of the work­ing class and mid­dle class has come dur­ing an era notable for cel­e­brat­ing the super-rich just for being super-rich. From the Forbes 400 launch in 1982 and Robin Leach’s Lifestyles of the Rich and Famous in 1984 to the faux real­ity of the mul­ti­ply­ing Real House­wives shows, money voyeurism has grown in tan­dem with stag­nant to falling incomes for the vast major­ity. There has also been huge income growth at the top and the eco­nomic chil­dren of income inequal­ity: bud­get deficits and malign neglect of our commonwealth.

This orgy of money exhi­bi­tion­ism has cre­ated a soci­ety in which com­mas — it takes three to be a bil­lion­aire — count more than char­ac­ter. We have gone so far down this path that we bailed out bankers, allow­ing them to keep the untaxed wealth in their defer­ral accounts and, with a few excep­tions, retain­ing share­holder value, while wip­ing out investors in Gen­eral Motors and Chrysler as a con­di­tion of their bailouts. And while autowork­ers had to take severe pay cuts, bonus time on Wall Street is at new record levels.

The Amer­i­can econ­omy in the three decades before Ronald Reagan’s elec­tion did not pro­duce a mass audi­ence for cel­e­brat­ing wealth. In that era, books that empha­sized char­ac­ter sold bet­ter than today.

Dur­ing the years from 1950 to 1980, the share of total income going to those at the top declined, and the real incomes of the vast major­ity grew much more quickly than did nearly all incomes at the very top.

In those years, Amer­ica had the money, and vision, to invest in the future through edu­ca­tion, research, and infrastructure.

In nearly three decades of Rea­gan­ism, how­ever, we have become a soci­ety of mine-here-and-now. Now what we hear from Wash­ing­ton is about today, not tomor­row. War with­out sac­ri­fice (or a con­gres­sional dec­la­ra­tion). Sav­ings with­out inter­est. More gov­ern­ment ser­vices while low­er­ing taxes.

In this era, the incomes of the vast major­ity have barely grown while incomes at the top have soared. Rea­gan­ism has trimmed the base of the income lad­der while plac­ing a much heav­ier weight on the top. Nar­row­ing the base while adding weight to the apex does not make a sta­ble struc­ture. Here are some num­bers that may sur­prise those ages 50 and under, taken from the lat­est analy­sis of tax return data by Emmanuel Saez and Thomas Piketty, who have won world­wide praise for their ground­break­ing work exam­in­ing changes in income distribution:

Bot­tom 90 Per­cent Income Share Changes
1950 64.44 per­cent
1980 65.37 per­cent
Change +0.93 per­cent­age points increase
2008 Change 51.77 per­cent
Since 1980 –13.59 per­cent­age points decrease


So a three-decade era in which the bot­tom 90 per­cent increased their share of all income slightly was fol­lowed by a 28-year period at whose end income had fallen sharply. The 2009 data show that it has only got­ten worse since then.

While the vast major­ity must get by on a much smaller share of the national income pie, the re-slicing resulted in con­cen­trated ben­e­fits at the top. The top 10 per­cent enjoyed a nearly 40 per­cent increase in their share of the income pie. But within the top 10 per­cent, the re-slicing of the income pie between 1980 and 2008 was also heav­ily weighted to the top.

Those in the 90th to 95th per­centile income cat­e­gory saw their income share rise by just 0.24 per­cent­age points. The 95th to 99th income cat­e­gory got 2.43 per­cent­age points more slice of the national income pie.

That means that of the 13.59 per­cent­age points of increased pie going to the top 10 per­cent of Amer­i­cans, the top 1 per­cent earned almost 11 per­cent­age points of it. Now look at how the pie was sliced within the top 1 percent:

 

Income Share Gains, in Per­cent­age Points,
in 2008 Over 1980 for Top 1% of Earners
99 to
99.5
99.5 to
99.9
99.9 to
99.99
99.99 to
100
1.21
2.73
3.23
3.76

Notice that as you move to the right, the num­bers of tax­pay­ers shrink, but the per­cent­age points grow. The theme: more and more for fewer and fewer.

Income shares tell us about how groups are doing rel­a­tive to one another. But you can’t spend income shares, so let’s look at incomes.

From 1950 to 1980, the aver­age income of the bot­tom 90 per­cent grew tremen­dously. Not so since then:

 

1950
1980
Increase
% Increase
$17,719
$30,941
$13,222
74.6%
1980
2008
Increase
% Increase
$30,941
$31,244
$303
1%

 

Had income growth from 1950 to 1980 con­tin­ued at the same rate for the next 28 years, the aver­age income of the bot­tom 90 per­cent in 2008 would have been 68 per­cent higher, instead of just 1 per­cent more.

That would have meant an aver­age income for the vast major­ity of $52,051, or $21,110 more than actual 2008 incomes. How dif­fer­ent Amer­ica would be today if the typ­i­cal fam­ily had $406 more each week — less debt, more sav­ings, and more consumption.

So how about the top? This is where the changes in incomes in these two eras become inter­est­ing, very interesting.

What the fig­ures below show is that the closer you got to the top of the lad­der in the era from 1950 to 1980, the smaller your rel­a­tive increase in income, except for the very top, whose gains were slightly more than those of the bot­tom 90 per­cent. Since 1980, how­ever, the bot­tom 90 per­cent of Amer­i­cans have seen their incomes go nowhere, while on the high­est steps of the income lad­der, the fur­ther up you are, the greater your gains.

Add in today’s decreased num­ber of jobs, and all these data add up to poli­cies that can be described with one word: failed.

 

tables continued

Source tax.com

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