The sad truth in the USA, as we explained in great detail here, incentives to ‘work’ are increasingly non-existent. Thanks to a never-ending stream of benefits from the great and powerful Oz, as CNBC’s Rick Santelli notes, Disability payments (of which there are 14 million people covered in the US – none of which count towards the unemployment rate) pay around $ 13,000 per year (versus $ 15,000 for minimum wage work). However, Santelli exclaims, the people on disability get healthcare; and this program costs the US $ 300 billion per year. Is it any wonder that only 1% of those who were on disability in Q1 2011 have left? Santelli comments, “I’m not saying there aren’t people that are on disability that shouldn’t be, but much of it is illnesses like back pain… it’s a judgment call,” adding that, “without incentives, large issues go …totally unfixed.”
Tuesday, March 26, 2013
Friday, March 1, 2013
Reflections on the "Wage Recession"
As bad as the current job recovery has been — and it’s by far the weakest since World War II — the recovery in wages has been far worse.Five years after the recession began in December 2007, total wages in the economy have yet to fully recover in real terms, Commerce Department data show. In other words, the wage recession continues.
click on chart for sharper image
By comparison, the longest previous post-war wage recession, which began with the 2001 downturn, was over in 2-1/2 years, even though that jobs recession lasted four years.
In recoveries past, wage recessions have ended long before payrolls hit new highs. But in the current expansion, wages and employment are on the same slow track to recovery. Both remain about 2% below their old peaks.
Real Disposable Income
Instead of looking at wages, let’s consider real disposable income as a measure of the “wage recession”. Here is a chart from Doug Short at Advisor Perspectives on Nominal vs. Real Income.
Real Disposal Personal Income Per Capita
click on any chart for sharper image
That chart shows an income recession for six years. I suggest the wage and income recession is even longer if one looks a breakdown of median income.
I commented on this previously in Top 1% Received 121% of Income Gains During the Recovery, Bottom 99% Lose .4%; How, Why, Solutions.
Also consider my followup post Reader Asks Me to Prove “Inflation Benefits the Wealthy” (At the Expense of Everyone Else).
Real US Household Incomes
In “real” (CPI-adjusted) terms, 50% of households are no better off than they were in 1988. Let’s dig a litter deeper.
Growth in Real Household Income by Quintile
The above chart shows percentage income growth by quintile since 1967. Since 1988, the bottom, 4th and middle quintiles (a combined 60% of households) have negative real income growth. The next chart shows the same thing in a different way.
Real Household Income by Quintile
No matter what your timeframe, only the top quintile did well. And from 1980 until 2000 the top 5% got the lion’s share of income gains.
How Long a Recession?
Those in the top quintile have arguably had an “income recession” for 13 years! Only those in the top 5% have had real gains.
Those in the bottom three quintiles have not seen any improvement in real income since 1988 or longer (25 Years)!
To be fair, some people have moved up from quintile to quintile (or up within a quintile). However, unless someone moved up to the top quintile (if not the top 5%), inflation adjusted income growth has been a real struggle for a long time.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
Reflections on the "Wage Recession"