Our favorite economist, Martin Hart-Landsberg, has written a detailed account of what is causing the rise of income inequality around the world. Here I’d like to highlight just one of his really interesting observations.
While we usually think that rising income inequality is caused by the rich getting richer and the poor getting poorer, a more complex picture is emerging. The graph below plots the hourly wages of the 90th percentile (Americans who make more than 89% of the population) relative to the wages of the 50th percentile (the purple line) and the wages of the 50th compared to the 10th percentile (the dotted blue line).
In English: it asks how quickly the richest people (90th) are pulling away from the average person (50th) and how quickly the average person is pulling away from the poorest (10th). The answer? Income inequality has been increasing since the 70s but, since the late ’80s, rich people have continued pulling ahead of the average American, but the average American has not been gaining on the poor.
Another indicator that the middle class is shrinking is changes in the share of jobs that are low-, middle-, or high-paid. The next graph shows that, across a wide range of countries, high- and low-paying jobs are on the rise, but middle-paying jobs are on the decline. So, middle income jobs are disappearing, but there are more of both high- and low-income jobs.
Hart-Landsberg suggests that the reason for this shift in the economy involves the globalization of production. For more, visit Reports from the Economic Front.
Paraphrasing Donald Rumsfeld, there are things we know and things we don’t know, and things we know we don’t know, and things we don’t know we don’t know.
One thing many working people in American don’t know that they don’t know is how poor our social benefits are compare with those enjoyed by workers in other countries. No doubt one reason is the general media blackout about worker experiences in other countries. A case in point: vacation benefits.
The Center for Economic and Policy Research recently completed a study of vacation benefits in advanced capitalist economies. Here is what the authors found:
The United States is the only advanced economy in the world that does not guarantee its workers paid vacation. European countries establish legal rights to at least 20 days of paid vacation per year, with legal requirements of 25 and even 30 or more days in some countries. Australia and New Zealand both require employers to grant at least 20 vacation days per year; Canada and Japan mandate at least 10 paid days off. The gap between paid time off in the United States and the rest of the world is even larger if we include legally mandated paid holidays, where the United States offers none, but most of the rest of the world’s rich countries offer at least six paid holidays per year.
Even though paid vacations and holidays are not legally required in the United States, some employers do provide them to their workers. The table below shows the paid vacations and paid holidays offered in the U.S. private sector based on data from the 2012 National Compensation Survey. The first two columns show the percentage of private sector workers that receive paid leave, vacation and holidays. The next two columns show the average number of paid vacation and paid holidays provided to those employees that receive the relevant benefit. The last two columns show the average number of paid vacation and paid holidays for all private sector workers, meaning those that receive and those that do not receive the relevant benefits.
Thus, on average, private-sector workers in the United States receive ten days of paid vacation per year and six paid holidays. This total still leaves U.S. workers last in the rankings even when compared with the legal minimums highlighted above. And many employers in these other countries also offer more paid leave than legally required.
Moreover, several countries require additional paid leave for younger and older workers, additions that are also not included in the legal minimums highlighted above. For example, “in Switzerland, workers under the age of 30 who do volunteer work with young people are entitled to an additional five days of annual leave. Norway offers an additional week of vacation to workers over the age of 60.”
And some countries provide additional leave for workers with difficult schedules. For example, “Australia offers some shift workers an additional work week of leave. Austria offers workers with ‘heavy night work’ two to three extra days of leave, depending on how frequently they do this shift work, and an additional four days of leave after five years of shift work.”
Several countries offer additional paid leave for jury service, moving, getting married, or community or union work. For example, “French law guarantees unpaid leave for community work, including nine work days for representing an association and six months for projects of ‘international solidarity’ abroad and leave with partial salary for ‘individual training’ that is less than one year. Sweden requires employers to provide paid leave for workers fulfilling union duties.”
Austria, Belgium, Denmark, Greece, and Sweden even require employers to pay workers at a premium rate while they are on vacation.
There is more to say, but the point should be clear. Ignorance of experiences elsewhere has narrowed our own sense of possibilities.
According to an op-ed in the Times, America is the global leader in broadband, with high speeds and great service. And it’s all because the government restrained “onerous” regulation and let companies like Verizon do what they want and charge what they want.
It was written by the CEO of Verizon, Lowell McAdam.
I pay Mr. McAdam’s company about $115 each month for my land line, wi-fi, and cable (all FIOS). Mr. McAdam compares the U.S. favorably with Europe, “where innovation and investment in advanced networks have stagnated under an onerous regulatory regime.” I asked a friend who lives in Paris what he pays for his FIOS phone, wi-fi, and cable. The monthly bill: 39.90€ ($52) or half of what I pay Verizon. Maybe there’s an upside to stagnant and onerous.
There’s nothing wrong with getting what you can afford, and it occurred to me that U.S. broadband is the best because we can afford more. Onerous regulations or no, most other countries are not as rich as the U.S. What if you looked at broadband and per capita GDP?
The OECD did just that with data from June 2012 (their several spreadsheets on this are here). The purple bars are broadband penetration and the bumpy red line is GDP per capita. Do you see a correlation?
Consider France: As of a year ago, the country had greater broadband penetration despite a lower per capita GDP than the U.S. ($35,133 vs. $46,588); that’s 25% more broadband on 33% less income and at half the cost to consumers.
If you re-rank the OECD countries factoring in per capita GDP, the line-up changes. Notably, the U.S. and Luxembourg drop well below the OECD average, despite being among the wealthiest countries.
Of course, not all broadbands are equally broad. Verizon sold me on fiber-optic with their assurance that it was dazzlingly faster than their DSL that I had been clunking along on. This graph breaks down broadband into its various incarnations.
The U.S. is slightly above average on all broadband, but when it comes to a high fibre diet, we are ahead of several other countries that have greater total penetration. On the other hand, the Scandinavian countries are ahead of us, as are, impressively, the Asian countries.
This is not to deny U.S. advances. TechCrunch summarizes more recent data from Akamai on these changes:
the U.S. is currently second in the price of broadband for entry-level users. The nation is also third in network-based competition, second in the fiber-optic installation rate, first in the adoption of next-generation LTE, ahead of Europe in broadband adoption, and doing quite well in Internet-based services.
Still, the U.S. lags behind other, less wealthy countries. InnovationFiles, using Akamai data for different variables, has a less congratulatory view.
The U. S. has picked up one place in the “Average Peak Connection Speed” that’s the best measurement of network capacity, rising from 14th to 13th as the measured peak connection speed increased from 29.6 Mbps to 31.5 Mbps.
In terms of the “Average Connection Speed,” widely cited by analysts who don’t know what it means, the U. S. remains in 8th place world-wide. but we’re no longer tied for it as we were in the previous quarter; Sweden is right behind us on this one.
In terms of “High Speed Broadband Adoption”, the proportion of IP addresses with an Average Connection Speed greater than 10 Mbps, we remain in 7th place, but now we’re tied with Sweden.
The title of CEO McAdam’s op-ed is “How the US Got Broadband Right.” Given the content, I guess “We’re Number 13!” wouldn’t have been appropriate. Even “We’re Number Seven (Tied With Socialist Sweden)!” doesn’t quite have that affirmative zing.
After the outcry in response to this revelation began, IKEA responded by called the removal of women a “mistake” “in conflict with the IKEA Group values.” IKEA seems to have agreed with its critics: erasing women capitulates to a sexist society and that is wrong.
But, there is a competing progressive value at play: cultural sensitivity. Isn’t removing the women from the catalog the respectful and non-ethnocentric thing to do?
Susan Moller Okin wrote a paper that famously asked, “Is Multiculturalism Bad for Women?” The question led to two decades of debate and an interrogating of the relationship between culture and power. Who gets to decide what’s cultural? Whose interests does cultural sensitivity serve?
The IKEA catalog suggests that (privileged) men get to decide what Saudi Arabian culture looks like (though many women likely endorse the cultural mandate to keep women out of view as well). So, respecting culture entails endorsing sexism because men are in charge of the culture?
Well, it depends. It certainly can go that way, and often does. But there’s a feminist (and anti-colonialist) way to do this too. Respecting culture entails endorsing sexism only if we demonize certain cultures as irredeemably sexist and unable to change. In fact, most cultures have sexist traditions. Since all of those cultures are internally-contested and changing, no culture is hopelessly sexist. Ultimately, one can bridge their inclinations to be both culturally sensitive and feminist by seeking out the feminist strains in every culture and hoping to see those manifested as it evolves.
None of this is going to solve IKEA’s problem today, but it does illustrate one of difficult-to-solve paradoxes in contemporary progressive politics.
Over at The Global Sociology Blog, SocProf put up some interesting visuals about social mobility, the likelihood that you have a significantly different economic status than your father. Social mobility is important because it measures the degree to which a society has a caste system (in which you are restricted to the class you are born into, by whatever means) or one that gives people equal opportunities to ascend or descend the class hierarchy according to their hard work and talent.
SocProf, however, asked a question I’ve never seen asked before: does this mobility differ by gender? It does. She found that daughters are more upwardly mobile than sons.
This first graph shows the percent of sons, born to a low-earning father, who will end up the top 40% of earners (orange) or the bottom 40% (blue). Social mobility in the U.S. is lowest among the countries featured; almost 70% of American sons of low-earners stay in the bottom 40%.
The second graph is the same data for daughters. Mobility for daughters is higher in all countries, but it is especially so in the U.S. While 70% of sons stay in the bottom 40%, we can say the same for less than half of daughters.
Reflecting on the fact that the difference between daughters and sons was higher in the U.S. than in the comparison countries, SocProf suggests that “[g]reater mobility seems to go together with greater gender equality” in mobility.
I want to make sure that we keep America a place of opportunity, where everyone… get[s] as much education as they can afford
After all, Mitt got as much education as he (his parents, really) could afford, so he thought it best if everyone had that same opportunity.
Opportunity – How much is that in American money?
Yesterday, Planet Money posted this graph showing the costs and benefits of a college education in several countries.
The title of the post summarizes the interpretation of the college-educated folks at Planet Money:
“College Costs More In America, But The Payoff Is Bigger”
But what if you look at the data from the other side? Here’s the half-empty-glass title:
“College in the US Costs a Lot, and If You Can’t Afford It, You’re Really Screwed”
…or words to that effect.
What the chart seems to show is inequality — specifically, the inequality between the college educated and everyone else. In advanced economies, like the those of the countries in the chart, education is important. But some of those countries, like the Scandinavian countries, have reduced the income sacrificed by non-college people relative to the college educated. Other countries favor a more unequal distribution of income.
To look a little closer, I looked at the relationship between the payoff of a BA degree for men and a country’s Gini coefficient, a measure of inequality. I used the ten countries in the Planet Money chart and added another ten OECD countries.
The correlation is 0.44. The US is the clear outlier. In the land of opportunity, if you’re a male, either you pay the considerable price of going to college, or you pay the price for not going to college.
With this inequality come the kinds of social consequences that Charles Murray elaborates in his latest book about non-educated Whites — disability, divorce, demoralization, death.
The poverty rate in the US in the mid-2000s was about 17%. In Sweden, the poverty rate was 5.3%; in Germany, 11%. That was the rate after adding in government transfers. In Germany, the poverty rate before those transfers was 33.6%, ten points higher than that in the US. Sweden’s pre-transfer poverty rate was about the same as ours.
Jared Bernstein has this chart showing pre-transfer and post-transfer rates for the OECD countries (click to enlarge):
1. Governments have the power to reduce poverty, and reduce it a lot. European governments do far more towards this goal than does the US government.
2. It’s unlikely that America’s poor people are twice as lazy or unskilled or dissolute as their European counterparts. Individual factors may explain differences between individuals, but these explanations have little relevance for the problem of overall poverty. The focus on individual qualities also has little use as a basis for policy. European countries have fewer people living in poverty, but not because those countries exhort the poor to lead more virtuous lives and punish them for their improvident ways. European countries have lower poverty rates because the governments provide money and services to those who need them.
3. The amount of welfare governments provide does not appear to have a dampening effect on the overall economy.
As I speculated years ago (here and here), it may be hard for Americans to imagine a world where the law guarantees them at least 20 paid vacation days per year. But such a world exists. It’s called Europe.*
Americans are the lucky ones. As Mitt Romney has warned us “European-style benefits” would “poison the very spirit of America.” Niall Ferguson, who weighs in frequently on history and economics, contrasts America’s “Protestant work ethic” with what you find in Europe – an “atheist sloth ethic.”
The graph is a bit misleading. It shows only what the law requires of employers. Americans do get vacations. But here in America, how much vacation you get, or whether you get any at all, and whether it’s paid – that all depends on what you can negotiate with your employer.
Since American vacations depend on what the boss will grant, some people get more paid vacation, some get less, and some get none. So it might be useful to ask which sectors of our economy are beehives of the work ethic and which are sloughs of sloth. (Ferguson’s employer, for example, Harvard University, probably gives him three months off in the summer, plus a week or two or more in the winter between semesters, plus spring break, and maybe a few other days. I wonder how he would react if Harvard did away with these sloth-inducing policies.)
The Wall Street Journal recently (here) published a graph of BLS data on access to paid vacations; they break it up by industry near the bottom.
Those people who are cleaning your hotel room and serving your meals while you’re on vacation — only about one in four can get any paid vacation days. And at the other end, which economic sector is most indulgent of sloth among its workforce? Wall Street. Four out of five there get paid vacation.
How much paid vacation do we get? That depends on sector, but it also depends on length of service. As the Journal says,
Europeans also get more time off: usually a bare minimum of four weeks off a year. Most Americans have to stay in a job for 20 years to get that much, according to BLS data.
* The graph is from five years ago, but I doubt things have changed much. The US still has no federal or state laws requiring any paid vacation days.