This morning I read a couple of articles. The first linked here:
http://www.brookings.edu/research/papers/2015/03/05-income-growth-decline-economic-prosperity-shapiro
And the second is linked here:
http://www.bbc.com/news/business-32824770
Mr. Shapiro's analysis (first article) focuses on income disparity and growth over the last 40 years or so, but divides things up according to age cohort. He notes that when viewed in this way, and not necessarily in aggregate, the income growth curve remains steady - as opposed to the relative drop that others noted. This is an interesting conclusion, and seems to go against the conventional wisdom, as reflected in the second article from the BBC.
It's interesting, because if Mr. Shapiro is correct, the wage growth and disparity increases are a relatively short-term concern/phenomenon, and can be easily rectified. This appears to be more of a policy change than a fundamental issue with the economy.
I think (personally) it's related to NAFTA. As workers were forced to compete with jobs being placed or outsourced overseas, they've had to reduce their demand for higher wages/benefits. This has a short-term negative effect on wages, until people in those industries are able to adapt to the changing conditions and either educate/train themselves to other positions, or they retire.
Mr. Shapiro's report is interesting because it takes into account two major age groups that are moving through the working population - the Boomers and the Millenials (sometimes called the "echo boom"). The boomers are all nearing or are at retirement age, but some of them are most likely still working. This means that they're remaining in the job force but may also drawing a retirement, which also means that they could be accepting jobs that pay less. This might account for the stagnation of their wages indicated by Mr. Shapiro. The Millenials, on the other hand, appear to be doing alright when it comes to wages, because they've grown up in a post-NAFTA world and have learned how to adapt.
Anyway, interesting stuff.
http://www.brookings.edu/research/papers/2015/03/05-income-growth-decline-economic-prosperity-shapiro
And the second is linked here:
http://www.bbc.com/news/business-32824770
Mr. Shapiro's analysis (first article) focuses on income disparity and growth over the last 40 years or so, but divides things up according to age cohort. He notes that when viewed in this way, and not necessarily in aggregate, the income growth curve remains steady - as opposed to the relative drop that others noted. This is an interesting conclusion, and seems to go against the conventional wisdom, as reflected in the second article from the BBC.
It's interesting, because if Mr. Shapiro is correct, the wage growth and disparity increases are a relatively short-term concern/phenomenon, and can be easily rectified. This appears to be more of a policy change than a fundamental issue with the economy.
I think (personally) it's related to NAFTA. As workers were forced to compete with jobs being placed or outsourced overseas, they've had to reduce their demand for higher wages/benefits. This has a short-term negative effect on wages, until people in those industries are able to adapt to the changing conditions and either educate/train themselves to other positions, or they retire.
Mr. Shapiro's report is interesting because it takes into account two major age groups that are moving through the working population - the Boomers and the Millenials (sometimes called the "echo boom"). The boomers are all nearing or are at retirement age, but some of them are most likely still working. This means that they're remaining in the job force but may also drawing a retirement, which also means that they could be accepting jobs that pay less. This might account for the stagnation of their wages indicated by Mr. Shapiro. The Millenials, on the other hand, appear to be doing alright when it comes to wages, because they've grown up in a post-NAFTA world and have learned how to adapt.
Anyway, interesting stuff.
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