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WHAT OTHERS SAY: Connecting dots shows relationships of economic stories

Thursday, August 29, 2013 | 4:54 p.m. CDT

Let’s take a look at some stories, seemingly unconnected, in the news this summer. Each one gets a dot:

  • Most companies are not using their record profits to create jobs; that continues at a modest pace, and three of every four new hires is for part-time work. Uncertainty over the Affordable Care Act is cited as a reason for a trend that’s been going on for years.

What shows up in the news is often part of the same story, and this is what it is:

“According to every major data source, the vast majority of U.S. workers — including white-collar and blue-collar workers and those with and without a college degree — have endured more than a decade of wage stagnation. Wage growth has significantly underperformed productivity growth regardless of occupation, gender, race/ethnicity, or education level.

“During the Great Recession and its aftermath (i.e., between 2007 and 2012), wages fell for the entire bottom 70 percent of the wage distribution, despite productivity growth of 7.7 percent.”

This quotation is from “The State of Working America,” published annually by the Economic Policy Institute. The think-tank leans left, but the numbers don’t.

The wage-stagnation trend actually dates to 1973. The nation was riveted on Watergate, but forces were at work that would create problems even larger than Richard Nixon’s. Wages would grow in a few years in the late 1990s, but that turned out to be an aberration. The long post-World War II growth of middle-class prosperity peaked in 1973.

Why? Uncertainties about oil supplies and hyper-inflation marked the first few years, but beginning with the Reagan administration, America began redistributing income. Jobs used to be the way income was distributed, and it worked well: Between 1946 and 1973, overall per capita income tracked the GDP, increasing 2.4 percent a year.

But a long series of tax and public policy decisions has created an America that values wealth far more than work. Today America has twice the wage income that it did in 1973, but that income is held in far fewer hands.

Put another way, the average guy making $44,000 in 1973 would be making $97,000 today if wages had grown at 2 percent a year. Instead he’s still making $44,000. Somebody else has his extra $53,000.

So now connect the dots: Walmart, built in part on low wages, is now enduring the blowback. The working poor can’t afford to buy as much, even at low, low prices. Henry Ford paid a decent wage so his workers could afford to buy a Model T. The lesson has been lost.

But more fortunate, better-educated, two-income American families are buying homes again, and that’s good for Home Depot. Some of them are stretching on credit again, one reason President Barack Obama has been preaching against bubble economies.

Americans are buying cars again. The middle-and-upper-income retail sector — where a lot of those part-time workers are found, working fewer hours and without benefits or commission — is rebounding. The luxury goods market is thriving again.

But down below median income, where full-time jobs are scarce and single-parent families can’t afford both rent and a blown fuel pump, people continue to struggle. They line up for rent help. They can’t afford homes in working-class suburbs in north St. Louis County. Their jobs have been computerized or outsourced. Trapped in lousy school districts, it’s less likely than ever that they can qualify for or afford the college that their kids will need.

Ninety-three percent of the benefits of economic recovery in 2010 accrued to 1 percent of Americans. They are not distributing the wealth through jobs like they used to. Next month will bring another threatened shutdown of government because some wealthy Americans and the politicians whom they own back policies that keep many Americans from having a fair shot again.

When you connect the dots, you get a very ugly picture.

Copyright St. Louis Post-Dispatch. Reprinted with permission.


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