economic club of phoenix the economic minute march 19, 2013
TRANSCRIPT
Economic Club of Phoenix
The Economic Minute
March 19, 2013
Economic Club of Phoenix
Observations onWage and Income Inequality
Inequality is Holding Back the Recovery
• Consumers spend less
• Can’t afford education
• Pay less in taxes
• Cycles become worse
Says
Joseph Stiglitz Nobel Laureate
January 20, 2013
How is Income Determined in a Market Economy?
“From each according to his ability, to eachaccording to his needs?”
“From each according to his ability, to eachaccording to his work?”
“From each according to his ability, to eachaccording to the value ofhis marginalProduct?”
Low Productivity Low Wages
High Productivity High Wages
It’s Simple Economics!
So…wages will always increaseas productivity rises…that’s it?
Productivity is up ButReal Hourly Worker PayLittle Changed Since 1978
Most Americans Are Not Benefitting From Greater Productivity
Source: Economic Policy Institute, http://stateofworkingamerica.org/
Greatest Income Gains to Top 1%
Top 1%
Family Income Growth 1979 - 2007
Who Are the Top One Percent of Earners? (Household Income > $500,000 yr.)
Occupation Percent
Executives/Managers 31.0Medical 15.7Financial 13.9Lawyers 8.4Technical/Engineering 4.6Skilled Sales 4.3Real estate 3.2Own Business 3.0Professors/Scientists 1.8Arts/Media/Sports 1.6
Top 5 OccupationsAccount for 74%Of Top One Percent
Source: Jobs and Income Growth of Top Earners and the Causes of Changing Income Inequality: Evidence from U.S. Tax Return Data
http://web.williams.edu/Economics/wp/BakijaColeHeimJobsIncomeGrowthTopEarners.pdf
What Has Caused IncomeInequality to Increase?
•Technology?
•Globalization?
Share of Income Going to the Middle Class Has Declined Since Late 1970s – WHY?
Middle Income HouseholdsHave not Benefitted FromTechnology & Globalization
Technology Enhances Knowledge Jobs - ReplacesRoutine Middle Income Jobs
Education Level Top 1% Bottom 99%
College Degree 72% 31%
Graduate Degree 49% 16%
Some College 19% 32%
High School (or <) 8% 37%
Educational attainment “is the greatest difference between the wealthiest 1 percent of Americans and everyone else” Gallup Poll analysis (61 surveys)
Education Pays – Wages Higher andUnemployment Lower For Grads
Lower Rates ofUnemployment
Higher Wages
Source: U.S. Bureau of Labor Statistics, Current Population Survey
Source:The Falling Time Cost of College: Evidence from Half a Century of Time Use DataPhilip S. Babcock, Mindy Marks
National Bureau of Economic ResearchWorking Paper No. 15954Issued April 2010
Economic Club of Phoenix
The Economic Minute Moral
“If you want to be paid more you must make yourself worth more.”
In 1930, how did Babe Ruth explain why hissalary of $80,000 was higher than that of U.S. President Herbert Hoover…?
“The Babe” said… That’s because I had a better year than Hoover!
Economic Club of Phoenix
The Economic Minute
March 19, 2013