We have been having a pretty intense discussion on poverty over at the European Tribune, in this thread, which I can only encourage you to read if the topic is of any interest to you.
One of the most interesting comments came from afew, with the following graph, which I will comment below:
click on any graph to have a bigger version
Poverty is usually defined as having less than 50% of median income of the population (the 2004 threshholds can be found here). Many of you are undoubtedly familiar with the difference between the median income and the average income.
- The median is the level at which half the population is above, and half is below.
- The average income is the sum of all incomes divided by the number of people.
To simplify: median levels tell us how the middle class does. If only the rich get richer, then the average will increase, but the median will not move. If the poor get richer, both will increase.
So, how has median income done?
(from http://www.census.gov/prod/3/98pubs/p60-200.pdf)
So, so… It’s been basically stagnant since the lates 60s, in fact. This page provides more recent numbers. They are not directly comparable to those in the graph above (in 2003$ vs 1997$ – about a 15% difference), but you can tell that median income increased until 2000 and then declined – back to the 1997 level in 2003). More interestingly, this graph (from from here) details what’s happened:
Male median income has been declining steadily, but has been complemented by growing female income. However, for young people, neither male nor female incomes have been growing for the past 20 years, which suggests that female income growth is going to stagnate now that female work participation has reached close to maximum possible levels.
But back to poverty. Poverty numbers seem to follow median income pretty closely:
(from http://www.census.gov/hhes/www/poverty/poverty04/pov04fig03.pdf)
The most recent numbers are pretty damning though: poverty numbers are increasing despite the economy officially being out of a recession (and median income is still declining. How is that possible?). Note thatthis happened under BOTH Bush presidencies…
How about – because inequaility is rising – as this graph from the Census bureau demonstrates)
And if you wonder why, here’s a reminder:
The income of the top 1% is growing, but not that of others, and the Bush tax cuts have only reinforced this:
(from http://usa.usembassy.de/etexts/econ/eop/2004/eop-ch1.pdf)
Post tax incomes grew faster than pre-tax incomes – but guess for who?
Which brings us back to our initial graph:
the left-hand number represents the percentage of children in households under the poverty line, before social and fiscal transfers, i.e. on the basis of income. The right hand number represents that same percentage after such transfers – i.e. on the basis of actual living standards. The percentage change refers to the change in the left hand number between 1991 and 2000. See afew’s comment for more detail
Poverty levels in the USA and Europe are not too different to start with, but what government does is starkly different: it does a lot in Europe, and pretty much nothing in the USA. And Bush is clearly worsening things.
It would be interesting to take the inflation adjusted chart for the DJIA and compare to the US census chart of the number of people in poverty. At a guess they would track closely. Qualitatively this makes sense as people in poverty are almost by definition marginalized in the labor force.
I would assert, as there is no way to currently prove it, the world’s economy is undergoing a shift to massive overproduction of goods relative to the purchasing power of most of the world’s population. Both the US and EU are high labor wage rate areas so manufacturers are moving production to low wage rate environments and arbitrage the difference. This can only work for a limited time as eventually price competition leads to a drive of the high wage rate to low wage rate levels – and a drop in purchasing power in the high wage rate area – unless extraneous factors, too many to list, intervene.
Economists, policy makers, and legislators I think miss the easiest means of “curing” the problem: raise the floor. Tie the minimum wage to 110% of the poverty level for a family of two, and mandate medical coverage. (Roughly $7.35/hr + medical).
I would also require true cost of living to be determined at the State level. In higher cost areas, like California, the wage would likely be over $9/hr. + medical.
a couple of years ago, average housing cost was between 3 and 4 times minimum wage, $15/$16, I don’t remember the exact figure. That would not include utilities, food, medical treatment, transportation, etc. And of course if there are dependence, the actual cost of survival for all would be higher.
The old capitalist notion that a day’s labor – anybody’s labor, should be at least equal to the value of a day’s survival has gone the way of the equally obsolete idea that any man (or woman) who works 40 hours a week no matter what their job, should be able to count on earning enough to support the worker and a couple of dependents, not a life of luxury, or even plenty, but meet the basic needs.
Today such talk is considered socialist.
Hmmm — I think that notion — that a day’s work should sustain a day’s survival — never was a capitalist notion. Which is why, during the hey-day of those gloriously moral Victorian mill owners and mine owners, life expectancy in Manchester, among mechanics, labourers and their families was approximately seventeen years.
The conditions in which the working classes families in Manchester were expected to live were such that 57% of children born to working class families never reached their fifth birthday. IMO this was due both to inadequate wages and a lack of public investment in civic infrastructure.
To the limited extent that the notion ever took hold in capitalist countries, that for a day’s work one should receive at least sufficient for a day’s survival for oneself and one’s dependents, I think the credit belongs to Chartists, socialists, communists and trade unionists.
And I think it no coincidence that the decline in ‘real pay’ in the U.S. occurs in a context where most unions obligingly declawed themselves during the McCarthy era — after which many were, for their pains, defanged by legislation outlawing strike action.
One of the tenets of capitalism was the notion that the worker would make money for management, who would in turn reward the worker for this, thus adding to the worker’s living wage an additional sum which would, at least in theory, permit that worker to amass, well, capital.
He could then use this capital to start his own business, maybe compete with his employer, giving the employer the incentive to make a better product, which would benefit not only the consumer, but both competitors, and enable them to obtain more capital.
The idea is to get money – capital – into more hands, not fewer, to build and sustain an upwardly mobile society with a thriving middle class comprised of both small business owners and workers who choose to use their discretionary income – their capital – to purchase additional goods and services, obtain further education, save for a larger goal, like college for their kids, or a vacation home, whatever.
In the current US feudal system, however, there is no chance that the worker, no matter how hard he works or how much money he makes for his employer, is going to amass any capital.
Can’t remember the name but a year or so ago, a very mainstream and conservative business journal pointed out that the current generation of Americans will be the first to be poorer than their parents.
Those union jobs are for the most part, gone.
Collective bargaining does not really have a place in a feudal system.
Can’t remember the name but a year or so ago, a very mainstream and conservative business journal pointed out that the current generation of Americans will be the first to be poorer than their parents.
Those union jobs are for the most part, gone.
With the exception of the word “feudal,” we’re in complete agreement here, I think.
Where I think we part company is over distinctions between capitalism and feudalism: namely what you call feudalism, I would call capitalism. And what you appear to be calling capitalism (or at least the situation that you are describing as a tenet of capitalism), I would call capitalism impeded by
trade union movements or social justice movements — or some impetus towards the redistribution of wealth that is sufficiently powerful that the state is constrained to reflect its interests to some degree, albeit in a limited, contingent and temporary fashion.
And on this one, my honorary grandfather, I think I’m right. (The shocking arrogance of youth today)
I guess what I’m basically saying is that for the most part I buy Marx’s account of capitalism. I think he does a pretty good job of describing the phenomena that you’re describing here — the collapse of the middle class, the increasingly desperate straits of the working classes and the concentration of capital, with its attendant increases in inequalities.
Here are the particular bits I’m thinking of:
and
The lower strata of the middle class — the small tradespeople, shopkeepers, and retired tradesmen generally, the handicraftsmen and peasants — all these sink gradually into the proletariat, partly because their diminutive capital does not suffice for the scale on which Modern Industry is carried on, and is swamped in the competition with the large capitalists, partly because their specialised skill is rendered worthless by new methods of production. Thus the proletariat is recruited from all classes of the population.
Here’s the trick. No ism is an island. Any time an ism becomes the goal, and is put ahead of the welfare of the people, you got a failed state. Or, since you’re feeling argumentative, just to make you feel more comfortable, you have no state. You got a cartel, or a gang, or a den of thieves, but a state it is not.
My favorite and much-overused illustration is a four year old child and his supper. Feed him only cake, and he will sicken. Feed him only broccoli and without incentive of cake, he will become bored, reject the broccoli, and sicken.
So once a state has fed and housed and doctored its people, for dessert it gets to have a big bowl of capitalism with whipped free market on top, and that’s how it grows up to be a state.
Nobody has to name any isms, just use common sense.
And common sense says that when addressing Americans, the notion that a day’s labor must be at least equal to the value of survival for that person, and one or two dependents must always be framed as a uniquely American, 100% true blue capitalist concept 😀
=)
I stand chastised. </blush>
And relieved.
We do agree about -isms, I think, even though I’m lacking in common sense tonight. (Stalin provides some compelling reasons to think carefully about means and ends and how they should be related and alas, he’s not alone)
But (doves being obstinate birds, and youth not being famed for pragmatism 😉 ) I still worry that letting capitalism off this hook — even for framing purposes — may be storing up trouble.
Though I’m prepared to concede that my penchant for quoting Poppa Karl is probably not a viable strategy in this situation, even though he does write like an angel . . .
Lots of dishes, take a little bit of this, a little bit of that, so many people have come up with so many theories, written so many words, ever since that first cave family discovered that by cooperating with the family in the next cave over, both families got through the winter without going hungry.
Perform an Act of Marxist Resistance. Make a double batch of fudge and secretly leave a plate of it on a poor family’s doorstep, then flee before the running dogs can catch you. 😉
Excellent diary, Jerome. Thanks for putting it together.
I would like to see statistics like those presented in this diary treat discretionary time as valuable, on a par with income. Not all free hours are of equal value — there are decreasing returns to scale of leisure — yet a household with income X in which all adults spend 14 hours per day earning money gains less net value from employment than does a family in which a single worker makes income X by working an 8 hour day. The rise of two-income families is well known, yet no attempt is made, in standard statistics, to treat the resulting loss of discretionary time as comparable to a decrement in income.
Likewise, workers trade income for vacation time at an ascertainable marginal rate, yet changes in vacation time are seldom treated as changing the package of net income-like value. How would production per capita in France compare to that in that in the U.S. if the production of vacation time were included in the accounting?