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Old 27-06-2020, 01:32 AM
ruslanv7 ruslanv7 is offline
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The typical American isnít doing so well. Though not everyone has suffered as badly as median income, and modest losses in real wages since 2008 have been as steady and hard to reverse as they have been prolonged.

Last week, the Conference Board estimated that real wages fell by 2.7 percent in 2017 after adjusting for inflation. The year before, real wages fell by almost 2 percent. But both of those were really on top of the Great Recession, and both years included some positive annual readings. Hereís a chart from the Cleveland Fed showing the average real wage without inflation:

The decline is particularly sharp in low-income areas of the country. The collapse is still too diffuse to really describe, but it has been happening.

Wages fall in two ways: either youíre losing ground in absolute terms, as wages generally decline in recession or recover after a recession, or your wages are falling because of the relative deterioration of your bargaining position, as real wages fall in industries or occupations where you donít have bargaining power. In a different way, we also can think of wages by their volume or value ó percentage of total output, in other words. This is easy enough to think about. When we compare the actual income growth over time of, say, the top 10 percent and the next 10 percent, and then the next 10 percent, we have whatís known as the Gini coefficient. Itís always running below 1, even when the share of income obtained by the top 10 percent is above 20 percent, which has been the case since the 1990s.

In 2017, the Gini coefficient was a little lower than 1 for the country as a whole, so that means as a group Americans are making gains relative to the rest of the world. But thereís a further decline, which looks to have continued in 2018, putting American incomes below their average value since the late 1990s. And this looks like a major problem. Inequality is a particularly bad kind of inequality. Itís a situation where one group is making up losses elsewhere ó gains made elsewhere are lost here.

I find this problem the most troubling and relevant for the nation. It goes to the heart of the question we should be asking: Is there a true role for big government in the economy? I think the answer is yes. The idea that the private sector will step in to help the poor, the sick and the elderly and, with a little help from the state, the middle class is absurd.

So why should we care what theyíre making? Like income inequality, itís not about fairness ó when wealthy individuals have outsized positions and resources, no one is getting a windfall. But itís about the size of the state and how it should operate.

Liberal regimes that are transitioning from the colonial model are required to lower barriers to starting a business. But they also have to ease barriers to high taxation for high earners. Even without government active intervention, incomes tend to rise somewhat (but with plenty of volatility). The liberal regime that replaces a dictatorship tends to intensify that tendency, and help out those who really need the help.

By contrast, I donít think either of the Republican regimes that replaced the Democratic regimes that succeeded the Progressive Democratic regime could really cope with this pattern. Thereís no institutional way to maintain a rising tide thatís led to rising boats, with an adequate defensive cushion in case the tide goes out.

So as much as I and others are railing against the Trump administration, and siding with the Democratic Party, I still think that itís urgent for progressives to focus on this underlying problem. From that angle, the question is no longer whether itís possible to restore some kind of progressive regime, but whatís the best regime.

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