economics

Cross-posted at Reports From the Economic Front.

The media generally talk about the economy in national terms — as if economic trends affect us all equally and we all share a common interest in supporting or opposing the same economic policies.  This comforting view tends to promote political passivity — since we are all in the same “boat,” it makes sense to leave policy making to the experts.

A recently published study on income distribution by economists Anthony Atkinson, Thomas Piketty and Emmanuel Saez stands as a welcome corrective.  Uwe E. Reinhardt discusses some of the main implications of their work in his New York Times blog.

Reinhardt’s Figure 1 shows average annual income growth for households in the United States and the different experiences of the top 1% and the bottom 99%.  From 1976 to 2007, average household income grew at an average annual rate of 1.2%.  Over the same period, the top 1% of households experienced an average annual income gain of 4.4% while the bottom 99% of households gained only 0.6% a year.  Household income gains were higher in both subperiods (1993-2000 and 2002-2007), in large part because these subperiods were recession free.

Figure 2 shows the share of total income growth in each time period that was captured by the top 1% of households.  Over the years 1976 to 2007, these households captured 58% of all income generated.  Their share was an astounding 65% in the period 2002 to 2007.

This skewed income distribution means that average income figures present a highly misleading picture of the American experience.  As Reinhardt explains:

So if an American macroeconomist — a specialist who tends to think of nations as people — or high-level government officials or politicians mimicking a macroeconomist boasted on a television talk show that “average family income grew by 3 percent during 2002-7, more than in most European economies,” about 99 percent of American viewers, reflecting on their own experience, would probably scratch their heads and wonder, “What is this guy talking about?”

Figure 3 highlights the growth in real GDP per capita and median household income from 1975 to 2007.  The data show a growing divergence between what working people produced and what the average household received from that production.  Real GDP per capita rose by an annual compound rate of 1.9% while real median household income increased by less than 0.5%.

As Reinhardt points out: “Other than national pride in league tables, that 1.9 percent average economic growth does not mean much for the experience of the median household in the United States.”

This brings us back to the issue of whether it makes sense to talk in “national” terms, especially given the dominance of the top 1% of households.  According to Anthony Atkinson, Thomas Piketty and Emmanuel Saez:

Average real income per family in the United States grew by 32.2 percent from 1975 to 2006, while they grew only by 27.1 percent in France during the same period, showing that the macroeconomic performance in the United States was better than the French one during this period. Excluding the top percentile, average United States real incomes grew by only 17.9 percent during the period while average French real incomes — excluding the top percentile — still grew at much the same rate (26.4 percent) as for the whole French population. Therefore, the better macroeconomic performance of the United States and France is reversed when excluding the top 1 percent.

None of this is to suggest that U.S. society is best understood in terms of a simple division between the top 1% and the bottom 99%; the latter group is far from homogeneous.  Still, this division alone is big enough to establish that talking in simple national terms hides more than it illuminates about the American experience.  Said differently, just because the top 1% of U.S. households have reason to celebrate the U.S. economic model doesn’t mean that the rest of us should join in the celebration.

College is a good investment. Yes, still.  But, as this graph sent in by Deeb shows, entry level wages for college graduate, controlled for inflation, have shown quite a bit of variance over the last 30 years.  Starting salaries are consequential.  For many jobs raises are calculated as a proportion of your existing salary, such that starting salaries have cumulative effects over the lifetime.

Today’s college graduates, according to the Economic Policy Institute, will have an average starting salary of $1.00 less than ten years ago:

Lisa Wade, PhD is an Associate Professor at Tulane University. She is the author of American Hookup, a book about college sexual culture; a textbook about gender; and a forthcoming introductory text: Terrible Magnificent Sociology. You can follow her on Twitter and Instagram.

Whether you are in college or not, fall semester 2011 is upon us. Below, courtesy of Everyday Sociology, is a graph illustrating the rising cost of college, controlled for inflation.

Public College/University Tuition, Room and Board (held constant in 2007-2008 dollars):

Consequent to this increase, the average student in 2008 graduated with twice the debt as a student in 1996, from $12,750 to $23,200.

The pay-off of a college education, however, is higher than ever. So why don’t more people go?

In the seven-and-a-half minute video below, UC Berkeley Professor Michael Hout gives a history of higher education putting all of this in perspective. The answer is class-specific and how different classes think about debt and possibility. More:

Lisa Wade, PhD is an Associate Professor at Tulane University. She is the author of American Hookup, a book about college sexual culture; a textbook about gender; and a forthcoming introductory text: Terrible Magnificent Sociology. You can follow her on Twitter and Instagram.

We have posted a number of times about the unequal effects of the current economic crisis: the worsening of the racial gap in homeownership, the more severely negative economic situation of African Americans and Latinos than of Whites, including among African American and White college graduates, higher unemployment for men than for women (this post also has a lot of info about race, sex, and job loss), the fact that older workers who lose their jobs remain unemployed longer than younger workers, that job losses have been accompanied by increased corporate profits, and that wealthier households have weathered the crisis better than less prosperous ones.

Dmitriy T.M. sent along an April 2011 Gallup poll that asked 1,013 Americans about their perceptions of the economy. Overall, results were more positive than when the same question was asked in September 2008, when the economic meltdown really became apparent. Though more than half of respondents said the U.S. is in either a recession or a depression, that’s down significantly from the 69% who said so in late 2008, while the 27% who said the economy is growing is an enormous jump compared to the mere 3% who thought it was in September 2008:

But perceptions of the economy differed significantly by income level. Nobody thought it was doing great; over half of every income group still thought the economy was in either a recession or a depression. However, those making less than $30,000 a year had a notably more negative outlook on the economy than those with higher incomes. Not only were they more likely to think the economy is doing poorly, but nearly half thought we’re experiencing a depression — twice as high as the proportion of those making $75,000/year who thought so:

Interestingly, perceptions of the economy also varied widely by political affiliation, with Democrats feeling much more positive about the economy than any other group, and Republicans and Tea Party supports feeling markedly more negative:

Meanwhile, the Gallup daily tracker poll on the state of the economy (which only shows overall results) shows a marked downturn in Americans’ perceptions of the economy throughout the summer of 2011, with 77% now reporting the economy is “getting worse”:

For more on the economic crisis and its uneven effects, see Philip Cohen’s post on race and job loss, differences in optimism about the future, unemployment by race/sex/education, occupation, median earnings, and race, and the geography of job loss.

Sangyoub Park, an Assistant Professor at Washburn University, sent in a link to a story by NPR about the racial gap in homeownership rates, a gap that has worsened during the recession. For instance, while over 70% of White households owned their home in 2010, less than half of African American households did:

This graph from the Census Bureau also shows the rate for Hispanics and “all other races” — the only group whose homeownership rate is still significantly higher than it was in the early ’90s. Hispanics are only slightly more likely to own their home than are African American households:

NPR also has a page with interactive maps that show foreclosure rates, unemployment, and median income (though unfortunately it doesn’t break information down by race/ethnicity). You can roll over a county and get the specific data. Here’s the foreclosure information for Clark County, Nevada, home to Las Vegas, me, and, as far as I can tell, the highest proportion of homes in foreclosure in the nation — 1 in 99:

Also see our related posts on African American and White job loss during the recession, the growing racial wealth gap, and more on racial differences in the severity of the economic crisis.

Cross-posted at Reports from the Economic Front.

The mainstream media works hard to convince us that Republicans and Democrats are locked in heated battle, with each side advocating dramatically different economic policies.  Although there are differences between the two sides, members of both parties generally share common ground in opposing any fundamental changes to the workings of our economy.

A recent International Monetary Fund report on the U.S. economy sheds light on why this is so.  The report includes the following four color-coded charts which compare economic recoveries (including our current one) according to various criteria (each recovery is along the left; criteria of recovery are along the top; red = weakest recoveries, green = strongest recoveries).

As you can see from the red boxes in the first chart (the one titled “Real GDP and components”), our last two recoveries have been quite weak compared with previous recoveries in terms of growth in GDP, personal consumption, and investment in nonresidential structures.  This indicates a growing problem with our economic fundamentals.

The red boxes in the second chart (”Households and employment”) indicate that our last two recoveries have also not been kind to working people as measured by the growth in nonfarm payrolls, unemployment, and disposable income.

However, things look quite different in the last two charts. The green boxes in the third chart (”Business sector”) make clear that the last two expansions have generally been good for nonfinancial corporations.  And the dark green boxes in the fourth chart (”Financial”) highlight the enormous gains made by financial corporations in the last two expansions, and especially the current one.

The take-away from these charts is that business leaders experience our recent recoveries very differently than do the great majority of people.  Despite the fact that growing numbers of workers find it hard to distinguish our expansions from our recessions, business profits keep climbing.  And that is what matters to business. Not surprisingly, then, our corporate leaders are lobbying our political leaders hard not to change existing economic arrangements.  If some austerity is needed to maintain stability–so be it.  And, this lobbying has proven successful.

The connection between deteriorating economic and social conditions and high corporate profitability deserves careful study as does the question of whether this is a stable relationship. Regardless, these charts provide important insight into our national policy-making nexus.  As long as our large corporations are prospering we should not expect our political process to produce meaningful change.  The problem isnt a lack of good ideas for how to strengthen our economy and generate jobs, it is the lack of interest on the part of our elected leaders — on both sides of the aisle — to seriously consider them.  It appears that meaningful economic change will have to await either a further unraveling of our economic and social infrastructure or the rise of a powerful social movement with a new economic vision.

Attention upper-middle class white women: help save poor Indian women from a life of forced prostitution, all from the comfort of your hammock! Simply purchase some comfy, trendy pants.

(Image from International Princess Project, the organization behind Punjammies)

Aliyah C. wrote to us about a series of photos on a website for a product called Punjammies. The images offer a stark illustration of the racial, classed, and gendered nature of many “development” initiatives.

According to their website, Punjammies claims to offer Indian women who have escaped forced prostitution a chance to rebuild their lives by providing them with the marketable skill of manufacturing clothing.

Images in the Punjammies catalogue make it clear who the target market is: They feature exclusively white women, luxuriously lounging about in Punjammies attire.

Meanwhile, images on the “About” page depict the women purportedly empowered by this operation, conducting manual labour to produce Punjammies products.

Consumerism-driven development initiatives like Punjammies fail to challenge the inherent inequalities at play in a situation where wealthy, white women in the developed world are seen as benevolent and charitable for making a purchase, while women in developing countries manufacturing the products are portrayed as beneficiaries. Furthermore, as Barbara Heron might argue, Punjammies is a prime example of how development initiatives often play into notions of white female subjectivity as compassionate and caring, dependent upon the Othering of women of colour in the south.  In fact, since colonialism, the advantages that accrue to those of us in developed countries have been linked to the disadvantages faced by the rest of the world. Our economies are not separate entities, they are intimately linked.

Reflecting upon images like these should remind us to remain critical of the ways in which “development” is marketed to us, and how it can perpetuate rather than challenge inequalities.

Reference: Heron, B. (2007). Desire for Development: Whiteness, Gender and the Helping Imperative. Waterloo: Wilfred Laurier University Press.

Hayley Price has a background in sociology, international development studies, and education. She recently completed her Masters degree in Sociology and Equity Studies in Education at the University of Toronto.

Katrin let us know about this great clip from PBS News Hour (and posted at Boing Boing) about inequality and Americans’ perceptions about how wealth is distributed in the U.S. It’s a great clip:

PBS posted the pie charts used in the video as well.