Would it have mattered if Trump stuck to his words?
Eight years after the Great Recession ended, the economy is steadily churning out jobs, and the unemployment rate is at a 16-year low. Yet for most Americans, a key measure of economic health — pay growth — still lags behind pre-recession norms.That isn't likely to change
Trump promised to "Make America Great Again" through bringing back employment to the US, which was a major appeal to many Americans as the campaign continued (among many other, uh, spicy topics). After reading this article though, I started thinking -- would it have even mattered if Trump did succeed?
Forecasts have speculated that unemployment rate is at a steady 4.3%, the lowest it's been since 2001. Yet hourly pay wages only rose 2.6%, lagging behind the usual 3-3.5% of a healthy economy. The young'uns in 2016 who earned $34,800 -- compared to the Baby boomers of the 1975 (age 24-35) after adjusting for inflation, the young babies lose out to the baby boomer's $36,900.
This is a pretty important topic for many of the younger folks on WSO to consider when we take into account our future capacity in being able to purchase land and property.........uh, that's the only one I can think of at the top of my head right now. Anyways, this has also been the central topic behind the latest "Avocado toast" accusation so it is definitely something on Americans' minds at the least.
So it's all good and well (if we were to entertain the thought...) if Trump did bring back manufacturing jobs, but the real questions then become
1. Would the current pay ranges for non-management employees (basically people who aren't "higher-ups" but also includes people who aren't on the bottom of the chain either) be at a sustainable range in improving the purchasing power of Americans?
2. Which American generation do you think has the most indulgent spending habits? Millennials, Gen X, baby boomers? (Pretty sure those are the only three we have to choose from who still make a large impact on the US economy). Feel free to answer this from anecdotal experiences too.
3. Have businesses become stricter in granting wages... or are more people simply lacking the skillfulness for a raise to be reasonable?
So would it have even mattered if Trump was somehow or another able to bring back jobs?
interesting question to think about. if I'm understanding you correctly, what you're wondering is even if Trump does what his agenda says, can we reverse our deflationary environment? also, what does it all mean for the future? I enjoy thinking about these sorts of things and am blessed to have a clientele and a firm with very smart people whose brains I can pick. Here's what I've gathered.
we live in a deflationary environment created and exacerbated by technology. this will not change regardless of who's president (under the assumption we don't outlaw the internet and go to central planning or something crazy like that).
this has a number of implications, but the biggest one is that technology evolves faster than the workforce. I've used this example a lot, but it bears repeating: mccormick's reaper. before, crop harvest was done by hand, now this machine comes along and it's a helluva lot easier, cheaper, and quicker to make thousands of those than keep doing things by hand. what inevitably happens is workers get left behind as technology moves faster than their retraining and resistance efforts. move that to the present day, where you have generations of people who thought a high school diploma could get you a manufacturing job. you may have heard about robots and automation, but it's a lot easier to just stay put and hope these things don't happen to you instead of trying to scrape together a few extra dollars to go to night classes at community college to learn accounting, data analysis, etc.
these periods will always happen, where economic boom times disrupt the workforce, lead to massive income inequality, and then those left behind will throw their hands up going WTF?! at which point policymakers begin to pay attention. look at the first 30 years of the 20th century, same shit happened.
in the context of these big, secular cycles, it doesn't matter who's president. POTUS may prioritize certain things over others, but I firmly believe nascent forces exist within every populace to better themselves and evolve, policies can certainly help or hurt things, but they can't turn the tide. for example, W couldn't have prevented the tech bubble burst and the RE bubble, I doubt Nixon/Ford could've completely turned the oil crisis of the 70s around, and I doubt that the 50s boom would've been different if we had different presidents, the nascent forces were there.
additionally, politics is tricky because of election cycles and our 3 branches of gov't. even if as in this case GOP gets a sweep, they're on the clock to get shit done because campaigns for open seats will start this fall for elections next fall, leading to a slowing (not stopping) of legislation. you'll have one more clean year (no elections) and then the POTUS election cycle starts up. very little meaningful change can get done because these people are about 2 things: being remembered and being reelected. that doesn't work well with large structural changes that need to happen (incentivizing STEM degrees, entitlement reform, paying off nat'l debt, improving primary education, cleaning the oceans, and so on), because those aren't "sexy."
the issues you describe could be read as painting a bleak picture, but I dispute that thesis. my generation is better off than my grandparents' without a doubt. we don't have polio, we have air conditioning, prenatal care is great, contraceptives are available, schools aren't segregated, information is ubiquitous, and so on. adjusting wages solely based upon inflation without relating that to standard of living is an often used tactic by doomsayers who believe our best days were behind us. great example: color TVs. a 19" sony color TV in 1975 cost $590 sticker price. in today's dollars, that's ~$2680. Today, a Sharp 40" that's WAY better costs $200 at best buy, 0.5% of the average salary today, versus the tiny Sony costing 7.2% of the average 1975 salary. technology does this, it decreases costs of goods so that people don't need to make as much money.
where this issue actually gets bad is in things like housing, medical care, and education (3 essentials). rather than going down in cost as the technology gets better, they increase. I hope this eventually turns but I don't think it will, so we need structural changes to make it work. I'm optimistic we'll make it happen (people won't go quietly from living in suburbs to squalor), but because it's in the future, who knows what that'll look like. perhaps autonomous cars that can go hundreds of miles an hour or the hyperloop will reduce the time cost of living far away from a city and therefore RE supply instantly explodes. imagine: you work in SF but live in Denver for the skiing, can get to work in 45 mins on the hyperloop. or you work in NYC but want to live in the poconos, your autonomous car can get you there in 30 mins while you read the paper and have your coffee. NO BRAINER! real estate prices would adjust in super desirable locales as the frictional costs of convenience flattens.
the future has plenty of opportunity, and these people who say there will be no jobs left for people are short sighted in my opinion. the future will have jobs we don't know exist yet. for example, do you think anyone raising a child in the 80s thought it'd be a good idea to train them to be a data scientist? or how about kids of the 60s and 70s, think any of them thought about teaching their kids software engineering or app development? these things start out as cottage industries and then explode or fizzle.
a common rebuttal optimists hear is about the environment. the planet is going to be destroyed so it doesn't matter how good technology is. malarkey. environmentalists consistently overstate the imminence of disaster. we've been worried about peak oil since Taft was president, the ice caps forever, and I've seen commercials about extinct wildlife ever since I can remember watching TV. species come and go (except the alligator and sharks apparently), we always find new ways to get energy so that even if all of the hydrocarbons in the entirety of the planet go away, that will be so far in the future that alternative energy sources will be cheap enough that it doesn't matter. as for arable land? the entire globe's population could fit inside the state of texas with only the population density of Manhattan, meaning we could farm the rest of the planet. this is hyperbole to illustrate the fact you shouldn't worry about our resources.. now if the shiite lobbyists would lighten up on something like golden rice and we could slowly fix the corruption problems in the third world, world hunger would be a distant memory. pollution? fuck yeah it's a problem, but again, technology is helping. there's a new way to drink water that is zero waste yet it comes individually packaged capsules which are edible or compostable. eventually I think technology will lead us to be a neutral to the environment. I don't think we can stop pushing species out of their habitats, but I'm also not convinced there's no available land for species to go. so yes, the environment isn't important, but stopping human progress is not the solution.
I'm excited, not scared, about what the future holds. there will be growing pains but we'll always adapt. also, life's a helluva lot more fun as an optimist.
Personally, I love donald j trump even though I get called a coon by my own family.
This should be front page of FT and WSJ - no joke. Well said sir.
VERY nicely done analysis. I'm going to disagree on this point though. While it may be true that the politicians have limited ability to improve economic conditions, their actions and attitude shape the public's response. America tends to have ultimately constructive politics but don't think for a second that a revolution a la France 1789 or Russia 1917 can't happen here, and we've already had one civil war. Keeping people engaged is priority #1, and if anything ensures the public doesn't become despondent, then angry.....and then vicious.
It's one thing to say that change is going to be hard, it's another to not care, or worse, to revel in the misery of the governed. Right now, I have to be honest, the scumbags in charge seem to take pleasure in screwing over the public.
With any luck we'll have more sensible management soon...and I frankly don't care which party supplies it.
Probably one of the best posts I've ever seen on this site.
AndyLouis should give it its own thread
good idea, will do, title?
Great post, but let me follow up on this. What are the 3 industries that government subsidizes or otherwise inordinately controls? Housing, medical care, and education. Since Fannie Mae expanded its role in the housing business in the early 1990's, the increase in housing has far outpaced inflation. Since the federal government expanded its role in lending and in making grants for higher education in the early 1970's, costs for college have far outpaced inflation. And in healthcare, government controls a vast portion of the American healthcare industry through subsidies and regulation (it is one of the most regulated industries in America).
I would argue that the cost curve could bend in all 3 of these industries if the government abandoned its efforts to expand "housing affordability", "access" to higher education, or "access" to health coverage. The free market almost never fails to create superior products for lower prices, and the law of supply and demand is an almost omniscient, omnipresent "higher force" that cannot be regulated or subsidized away.
Maybe this is true for education and housing, but I don't see freer markets solving the healthcare conundrum.
There is government inefficiency in the administration of programs like Medicare, as seen in waste numbers and fradulent claims.
But the true sources of rising healthcare costs and relatively poor outcomes are information asymmetry, industry lobbies, and lack of spending on public health - non of which can be addressed by the "free market".
Leave the pocket-sized copy of Atlas Shrugged home.
I'm always frustrated when inflation-adjusted earnings today are compared to the 1960's or early 1970's with the implication being that the failure of wage growth is a failure of neo-liberal economics, free trade, or "globalism." The reality is, the 1970's was the dawn of modern feminism, and with it came the mass entry of women into the labor force. Adjusted for population growth, we've massively increased available labor over the last 45-50 years. The fact that we haven't seen more wage compression than 5.7% is actually pretty remarkable--to me it's a testament to neo-liberal economics. Double the pool of labor but realize only a 5.7% decrease in wages.
Wow I definitely didn't think about modern feminism affecting economics through sheer volume of new workers. Whenever I think of women and the workforce, I always think about more gender-related topics like gender stereotypes of women always serving as the secretary or doing boring clerical work (specifically, topics that only relate to white women since that was the prominent topic in the 1960s and 1970s, unsurprisingly). I always assumed that was the bulk of the work women as a workforce was doing at the time (hence there were problems) and that they didn't have any more of a significant impact as any other groups of people at the time.
Frankly, the economic and employment numbers just don’t support this narrative. It’s more a product of convenient, motivated reasoning than reality. The composition of the labor force has changed more drastically than the actual size. From the 1970’s to present date, the labor force has increased by about 1%-1.5% a year. However, women have gone from roughly ¼ of the labor force to representing nearly half.
Your supposition that there was a massive influx of labor participants due to feminist movements just doesn’t bear out. The growth has been relatively uniform over this time period. Additionally, you’re wrongly implying that neo-liberalism helped preserve wages over this period instead of erode them-- the economic evidence is not on your side here either.
Over nearly the same time period, corporate profits as a percentage of GDP have nearly doubled from 6% to 11%, while wages, as a percent of GDP, have fallen by roughly the same amount. That’s close to a trillion dollars a year in wages that would have previously been distributed among the broader economy that is now being siphoned off to a concentrated pool of executives and shareholders. Not to mention, GDP growth has far outpaced the labor force growth over this period as well. An important consideration that is nowhere to be found in your ode to neo-liberalism.
To recap, since the 1970s, the US has seen its real GDP quadruple and its labor force less than double. Profit’s as a percent of GDP has never been higher, and wages as a percentage of GDP has never been lower. Yet, struggling Americans have neo-liberalism to thank for minimizing the fallout in their wages? You can champion neo-liberalism all that you want, but don’t do so on an account that it has been beneficial for the wages of the majority of working class citizens.
There are lies, damn lies, and statistics. Another way to word your statement is that the size of available human labor increased by 25% but real wages decreased 5.7%. EDIT: actually, 50% increase in available human labor if women went from 25% to 50% of the labor force (100 people, 75 men, 25 women; women increase by 50 people to match men = 50% increase in available human labor).
In a vacuum what you're saying is true. But again, there are lies, damn lies, and statistics. Neo-liberalism (i.e. market economics, global trade) vastly improved the quality of human life over the last 50 years, at the expense of real wages of 5.7%. There are two problems using statistics alone: 1) How do you measure "quality of life"? From medical advancement to auto safety to pollution to job safety--how much better is life today compared to 1967? 25% better? 100% better? 2) Inflation-adjustments are only viable statistics when comparing commodity prices between years, such as a gallon of milk in 1967 to a gallon of milk in 2017. However, inflation adjustments don't measure things like the cost and quality of a TV or the percentage of income spent on necessities.
For example, between 1900 and 2000 households went from spending 50% of their income on food and clothes to https://www.theatlantic.com/business/archive/2012/04/how-america-spends…
This is asinine and is asinine on its face. "Corporate profits" are newly generated wealth. You're talking about corporate profits as if there is a single bucket of money from which money is distributed between wages and profits. Corporations create wealth (generate profits) and in the process they (reluctantly and against their desire) pay wages as the cost to doing business. Wealth is not some sort of set number. Comparing wages as a % of GDP is completely invalid unless you live in a Marxist utopia where wealth is a static number to be distributed.
Yes, capitalism has been in the 300-year process of relieving grinding human poverty that was common for the first 200,000 years of human existence. In the U.S. where we've seen falling real wages in the last 50 years we've also seen huge improvements in the quality of life and the cost of goods.
I think you would've gotten more hits on this if you had a different title. great discussion, it's a shame it didn't get more attention
Haha yeah, I'll change the title. I wanted to leave it on here in case people didn't get the chance to see it yet.
I also wasn't sure if you had taken the words out of everyone's mouth so there was nothing left to be said haha
EDIT: Oh nooo, looks like WSO won't let me change the title... Oh well. Hopefully more people will check out the discussion. Thanks to you and @Dances with Dachshunds" for the commentaries though, I definitely learned a lot. I like talking about economics on here, everyone tends to share really insightful things.
AndyLouis
You ever tell someone you love them and then months go on and the relationship gets stale so you find yourself making googly eyes at some random cashier? Words don't mean anything, all about action.
Automation and outsourcing isn't going to stop. But that doesn't mean you should do nothing. Tens of millions of Americans have seen their wages cut in half and in exchange, saved 5k in cheaper consumer goods. Shitty deal.
If people think ignoring this or telling people to retrain is an exceptable solution, I'd recommend they look at history and see what happens when large scale unemployment happens. Especially in a nation armed to the teeth and seeing two Americas emerged.
Trump is a canary in the coal mine and all these idiots keep talking about Russia. How about we work together and help people on both sides of the isle.
@TNA" this is an unpopular opinion but one I take to heart and have always focused on: "Be responsible for yourself because no one else will."
We live in a country where a vast majority of Americans have moved away from self-responsibility and have instead stuck their heads so far up their asses and complain about things like "The GOP wants to take away MY healthcare."
I see an America vastly different than the one that went through the Great Depression or even before then when people moved out West and fended for themselves.
Presently very few Americans are prepared to take care of themselves and continually depend on the government (aka taxpayer) to keep them alive from cradle to grave.
This needs to change fast because if our fiscal health doesn't improve automation will make people irrelevant and only those who continually adapt to the changing world will survive.
Trump is indeed the proverbial "Canary in the Coal Mine" and to be a bit of a dick those who cannot and will not fend for themselves deserve whatever tragic end they meet (exceptions for those that were born with genetic defects and such) but those that are able bodied and refuse to give two shits about themselves and survive on the tit of the taxpayer deserve the situation they're in and much worse.
Largely agree. Obamacare is 8 years old, already failing and people act like it's been etched in stone. The majority of health care Illnesses are self inflicted through diet, smoking, sedentary lifestyle. The bulk of healthcare costs are end of life as people throw every hail Mary possible because fuck it, someone else is paying. The USA subsidizes the world with out R&D.
And people blame trump for trying to fix a shitty healthcare bill.
I frankly wish Hillary had won. We'd have men using women's bathrooms and all the feelz imaginable, as the USA Titanic rams right into the iceberg of reality. I only pray they increase taxes to 100% so the phrase "pay your fair share" can go as extinct as the American dream and this countries greatness.
Side note - let's bring socialized healthcare. I'll simply pay a premium or cash for good healthcare and all the sheeple who don't want to take care of themselves can deal with "free" and shitty healthcare.
1) Nobody wants to be dependent.
2) "Very few Americans are prepared to take care of themselves." As of 2015, 21.3% of Americans used welfare systems (https://www.census.gov/newsroom/press-releases/2015/cb15-97.html). That means that 78.7% of Americans were able to take care of themselves. Properly run welfare systems help people such that they are not continually depend on the government. A total of 21.3% of the population was on welfare at some point. Of these people, 74.3% of people were able to get off of public assistance in less than 48 months.
seems thoreau and emerson aren't required reading anymore...
I think COAL jobs are the NEXT BIG THING. Coal is BELOVED by all, and is experiencing ENORMOUS growth within the ENERGY SECTOR.
Seriously, are you Ken M. from the Yahoo message boards?
We should obviously erect trade barriers that will rescue our manufacturing industry, and impose wage floors that will enable non-college graduates to make 6 figure salaries working on an assembly line.
Industries like COAL, are this nation's BACKBONE. Cam Brady, 012
lol this
We should obviously erect trade barriers that will rescue our manufacturing industry, and impose wage floors that will enable non-college graduates to make 6 figure salaries working on an assembly line.
Industries like COAL, are this nation's BACKBONE. Cam Brady, 012
No, what we should do is destroy the illegally passed, unconstitituional income tax and fund the government through tariffs as was originally intended.
NAFTA!
TAXATION IS THEFT!
This is the 21st century gilded age. I think this time period most resembles the late 19th century where new tech, management innovation, and financial innovation led to the corporatization of america. This was rolled back with the new deal and FDR post-depression. If the Fed and Paulson botched 2008 worse (if they let AIG fail or if they didn't force liquidity injections) and we went full depression then I think we would currently be in a revisionist new deal type regime. That's really how I got elected, because middle america is still incredibly angry over how bad the street (elite america) f****ed up in 2008 and how we're still not back to pre-2008 economic times.
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