The NYT says American productivity is stagnant. Here's a theory why.

The New York Times observes that American productivity is stagnant, and considers three theories why.

During the 2008 recession, labor productivity soared. Was this because employers laid off their least productive workers first? Because everybody worked harder, fearful for their jobs? Or was it a measurement problem as government statistics-takers struggled to capture fast-moving changes in the economy? We don’t know for sure.

None of the Times' three theories use this armchair psychoanalysis to consider one obvious reason American workers aren't more productive these days:

It isn't friggin' worth it.

Since the end of the Great Recession, Americans have become more and more aware — aided by growing discussion of income inequality and movements like Occupy Wall Street — of two very salient points:

• For decades, American productivity has soared.

• During those same decades, worker wages have stagnated.

Here's The Atlantic, reporting in February 2015:

Though productivity (defined as the output of goods and services per hours worked) grew by about 74 percent between 1973 and 2013, compensation for workers grew at a much slower rate of only 9 percent during the same time period, according to data from the Economic Policy Institute.

That increased productivity has been good for the bottom line of a lot of businesses, but it hasn't meant boo to most workers. (Top earners, though, have seen their income and wealth soar.) Why have Bernie Sanders and Donald Trump been so successful this  election cycle? Because a fundamental American promise — worker harder, you'll probably do better — seems to be broken.

I come from the news industry, where we've spent most of the last couple of decades under constant pressure to do more with less, more with less, more with less. At some point, there's no more to be wrung from less. And if giving more won't gain you more, why not just put in your time, clock out at the end of the day, and stress out a little bit less?

This isn't the kind of thing that economists measure, I don't suppose. But maybe productivity is declining because workers are tired of the cycle. Maybe they need incentives.

Charles Murray and the deepening class divide

Ben and I talk about Charles Murray's new book, "Coming Apart: The State of White America, 1960-2010" in this week's Scripps column. We jointly note: "He argues that America is increasingly, dangerously divided between an out-of-touch upper class and a lower class that has abandoned the virtues of industriousness, honesty, marriage and religiosity." My take:

Here's the good news: Somebody influential on the right -- and Murray is beloved by many conservatives -- is acknowledging the growing class divide in America. That is a breakthrough.

The bad news: Murray is big into victim blaming. If life among America's working class has declined during the last 50 years, Murray says it's because its members have abandoned the habits of work and marriage that made the country great. He offers a lot of statistics to prove his point.

But there's a crucial piece missing in Murray's story.

It is most apparent when he describes the "real" Fishtown, a Philadelphia neighborhood several miles from where I live. Murray describes in great detail the rise of single motherhood and jobless men in the neighborhood.

But he never mentions Fishtown's most-defining feature: It was once a center of manufacturing and industry -- particularly the textile industry -- and now it isn't. The factories are gone. Residents can no longer walk out of the neighborhood school and into a decent job that can sustain a family.

That's precisely what happened across the country over the last 50 years: The manufacturing sector withered -- jobs went overseas -- and so did the wages of many Americans. Read The Atlantic's January cover story, "Making It In America," and you'll find many manufacturing jobs that mostly go to Americans with a costly college degree in science or math.

Simple hard work doesn't get you as far as it used to. This matters.

Murray talks about the disintegration of the working class, but not the disintegration of the work. "I focus on what happened, not why," Murray writes. Without the "why" though, he cannot and does not offer plausible solutions.

Instead, Murray urges the elites to preach more about virtue to the working class. Workers don't need a lecture, though. They need real opportunity. That can't be found in Murray's book.

Ben says "America's ruling elite has much to answer for." Mostly, they have to answer about sex. You'll have to go to the link to read his take.

UPDATE: The sex comment was kind of a cheap oversimplication on my part. I apologize to Ben.

Doesn't economic growth cause income inequality?

A commenter asks: "Can liberals and conservatives politely agree that the only time an economy can grow is when 'income inequality' is widening?"

Sure. Absolutely. In a hypothetical case where everybody's income was growing 10 percent a year, that 10 percent would add up to a lot more dollars for the rich guy than the poor guy. But a chart depicting their incomes would show more or less the same rate of growth rising in concert with each other, even as the gaps between the lines grew wider. That might eventually produce a problem—but then again, it might not.

That's not really the situation in the United States, though. Here's a chart from the CBO's October report about income inequality.

The 21st through 80th percentiles—essentially, the middle class—barely see their income edge up between 1979 and 2007. The Top 1 Percent? With a brief break for the post-9/11 recession, their income curves sharply, sharply up, diverging from the other lines pretty dramatically. It's true the economy was generally growing during these periods. But it's also true the gains from that growth went almost entirely to the top of the distribution curve. To me, that suggests something is out of whack.

A recession is a crappy way to reduce income inequality

Since I harp on income inequality a bit around here, it's important to take note of this New York Times story today:

The share of income received by the top 1 percent — that potent symbol of inequality — dropped to 17 percent in 2009 from 23 percent in 2007, according to federal tax data. Within the group, average income fell to $957,000 in 2009 from $1.4 million in 2007.

If the Top 1 Percent saw its share of income reduced, that means other groups saw their share of income rise. Good news, right? Well, not really. The same recession that kicked the Top 1 Percent in the teeth did the same thing to everybody else. The median household income has actually dropped in recent years, thanks also in large part to the recession.

The problem with growing income inequality isn't merely that the rich are getting richer. That happens. The problem has been that the rich have gotten richer while everybody else has seen stagnating incomes to go along with increased productivity, and often needed to add a second person in the household working just to keep up.

There are some people who will probably be plenty happy to see the rich become less rich, but not me. I want to see working- and middle-class folks be able to get ahead. A recession-fueled flattening of the economic bell curve isn't really cause for celebration. And as the Times notes, it's probably short-lived anyway—history shows the Top 1 Percent will likely start to pull away again. It probably won't be because a rising tide is lifting all boats. The problem still exists.

Matthew Continetti tries to take a pass on income inequality

In the newest Weekly Standard, Matthew Continetti makes the case that conservatives don't really have to care about income inequality—whether it's growing or not—because it's not government's job to address such issues. 

Inequalities of condition are a fact of life. Some people will always be poorer than others. So too, human altruism will always seek to alleviate the suffering of the destitute. There is a place for reasonable and prudent actions to improve well-being. But that does not mean the entire structure of our polity should be designed to achieve an egalitarian ideal. Such a goal is fantastic, utopian even, and one would think that the trillions of dollars the United States has spent in vain over the last 50 years to promote “equality as a fact and equality as a result” would give the egalitarians pause.

That sounds principled, and maybe even a little bit appealing if you're of the right temperament. But it fundamentally ignores one simple fact: By virtue of taxing and spending, and even of making laws, the federal and state governments have some bearing on how wealth is distributed in this country—even if they're not in redistributionist mode. 


To get a sense of how this might be the case, here is Derek Thompson's graph showing how various income groups would fare under Rick Perry's flat tax plan:

Perry's plan, in essence, would exacerbate inequality by raising taxes on the poor while giving millionaires a tax cut equal to the median income of 10 American households.

Now, I expect the conservative response to this is: "But that's their money, not the government's." Sure. But nobody except a few libertarians is advocating that we do away with taxes entirely, and that we stop paying for government at all. Until we get to that point, there will be taxes. And how taxes are structured will affect how wealth is distributed—even if affecting that distribution isn't the aim.

The laws and regulations formulated by government have a similar effect. During the pre-Reagan era, for example, the strength of unions was credited for raising income and living standards for the entire middle class—including non-union members, who enjoyed a spillover effect as non-union employers competed for workers. The decline of union strength over the last 30 years is believed to be one reason that middle class wages have stagnated during that time. Right now, though, there are efforts in several states—including my home state of Kansas—to further undermine the ability of private-sector unions to organize and advocate on behalf of their members. That, too, seems likely to affect the income inequality situation in the United States.

Now, I don't think it would be unreasonable to conclude from the above examples that many Republicans (and more than a few Democrats) tend to pursue policies that exacerbate inequality, often at the best of rich supporters. But there are clearly some conservatives—David Frum, Ross Douthat, Reihan Salam, Michael Gerson among them—who see inequality as a problem, and want the broader movement to do something to address it.

Not every conservative believes that rising income inequality exists, or that it's a problem. Continetti's point is different: That conservatives don't have to care about it, policy-wise, because such income inequality isn't the government's business. If conservatives believe that inequality is rising, and that it's a problem, then I imagine there are conservative paths to addressing the issue. It may not be the state's role to address income inequality (in the conservative vision) but that doesn't matter: The state affects the situation nonetheless. Conservatives who simply wash their hands of the situation signal where their real priorities lay.

The flat tax is bad

So says I in this week's Scripps Howard column with Ben Boychuk:

The flat tax is Republican-led class warfare. It makes the rich richer and the poor poorer, for no better purpose than making the rich richer and the poor poorer.

We have progressive taxation -- in which people with higher incomes pay a higher tax rate than those at the lower end of the scale -- for a reason: People on the low end are less able to pay. Flat taxes invert that logic, giving the rich a huge tax break and often burdening the poor.

The Tax Policy Center says a low-income family making $31,000 a year would lose its $5,147 tax return under Perry's plan, for example.

(Herman Cain's plan is worse. Nearly everybody making under $50,000 would see a huge tax increase.)

Perry's plan was unveiled the same day as a new Congressional Budget Office report showing economic inequality is widening in this country.

From 1979 to 2007, people in the richest 1 percent grew their after-tax income by 275 percent. The three-fifths of people in the middle class saw less than 40 percent income growth during the same period -- and the bottom fifth grew incomes just 18 percent.

The gap is getting bigger. Even before the recession, the middle class was being left behind. Perry's plan would exacerbate the problem -- and likely balloon the deficit even further.

"But I don't care about that," Perry says. He should.

In the new book "The Darwin Economy," economist Robert H. Frank points to research that high levels of income inequality are correlated to slow economic growth. "Larger shares (of income) for poor and middle-income groups were associated with higher growth rates," Frank writes.

Flat taxes burden the poor, make income inequality worse, and in so doing put a stranglehold on an already-strangled economy. Other than that, Mrs. Lincoln, how did you like the play?

Ben, in his portion of the column, points out that Perry's plan would let people opt to stay under the current tax structure. Fair point. The likely result of that is top earners would choose the flat tax and lower earners would stick with the current tax structure—meaning the Perry plan is to make the rich richer, and let the poor spin their wheels. That's not quite as awful as the picture I paint, but it seems kind of pointless—particularly in an era of ballooning deficits. Nobody's made a serious suggestion that I'm aware of that the problem with the economy is that rich people don't have enough money; I'm skeptical that such a plan would actually deliver good results for the rest of us.

Dennis Prager: Occupy Wall Street is like Hitler

Dennis Prager goes there in his column for NRO today:

The major difference between Hitler and the Communist genocidal murderers, Stalin, Mao, and Pol Pot, was what groups they chose for extermination.

For Hitler, first Jews and ultimately Slavs and other “non-Aryans” were declared the enemy and unworthy of life.

For the Communists, the rich — the bourgeoisie, land owners, and capitalists — were labeled the enemy and regarded as unworthy of life.

Hitler mass-murdered on the basis of race. The Communists on the basis of class.

Yes, this is a column about the Occupy Wall Street movement. And it's clear that Prager would rather resort to tired old anti-Communist tropes rather than seriously examine the complaints of the protesters. Here's Prager, not getting it:

Being on the left means that you divide the world between rich and poor much more than you divide it between good and evil. For the leftist, the existence of rich and poor — inequality — is what constitutes evil. More than tyranny, inequality disturbs the Left, including the non-Communist Left. ... Non-leftists who cherish the American value of liberty over the left-wing value of socioeconomic equality, and those who adhere to Judeo-Christian values, do not regard the existence of economic classes as inherently morally problematic. If the poor are treated equally before the law, are given the chance and the liberty to raise their socioeconomic status, and have their basic material needs met, the gap between rich and poor is not a major moral problem.

I'll distill that last sentence down to three rules: If the poor get to play by the same rules as the rich, have an opportunity for economic mobility, and can feed and house themselves, there's no problem.

Here's the problem: At least two of those three conditions aren't met in America today. First: Do the poor get to play under the same rules as the rich? We already know that if a poor man and a rich man step into court charged with the same crime, the rich man is much more likely to walk away free. Beyond the arena of criminal law, though, I outsource my commentary to one of Andrew Sullivan's readers:

When the financial industry came to the brink of collapse because of the reckless behavior of these "too big to fail" corporations, we saw an amazing ability for our government to come together to bail them out. In return, they've repaid the favor by working night and day to lift the already watered-down provisions of the Dodd-Frank reforms so they can continue with their same insanity, and to basically act like spoiled, entitled brats towards those of us who saved their butts in the first place.

Contrast this with any legislation in Congress that might actually help out rank-and-file Americans, and suddenly everything becomes gridlocked and impossible to achieve. From out here, it appears that when you have a lobby on your side, government works, and if you don't, well tough luck.

Rich financial institutions get bailed out; regular Americans are left to flounder. One of the three legs on Prager's stool is looking mighty shaky.

How about the second leg? Can Americans live the Horatio Alger dream and transform themselves from nothing into something by dint of hard work? Maybe. But it doesn't seem to happen as often as it used to. The Brookings Institution (PDF) analyzed the situation in 2008:

The view that America is “the land of opportunity” doesn’t entirely square with the facts. Individual success is at least partly determined by the kind of family
into which one is born. For example, 42 percent of children born to parents
in the bottom fifth of the income distribution remain in the bottom,
while 39 percent born to parents in the top fifth remain at the top. This is
twice as high as would be expected by chance. On the other hand, this
“stickiness” at the top and the bottom is not found for children born into
middle-income families. They have roughly an equal shot at moving
up or moving down and of ending up in a different income quintile than their parents.

There is less relative mobility in the United States than in many other
rich countries. One well-regarded study finds, for example, that the
United States along with the United Kingdom have a relatively low rate
of relative mobility while Canada, Norway, Finland, and Denmark
have high rates of intergenerational mobility. France, Germany, and
Sweden fall somewhere in the middle.

In sum: inequalities of income and wealth have clearly increased, but the
opportunity to win the larger prizes being generated by today’s economy
has not risen in tandem and has, if anything, declined.

In short: If you're born rich or poor, you're likely to remain rich or poor. Those born middle class have more mobility up or down—but remember, this is before it became clear what devastation was being wrought by the Great Recession. In any case, you have a better chance of rising up if you're born in a socialist hellhole like Canada than you are in the United States. The opportunities just aren't there like they used to be. The second leg of Prager's three-legged stool is also increasingly shaky.

Finally: Do the poor have their basic material needs met? Prager might have his strongest case here: America's poor are more likely to have cars, TVs, microwaves and other items that might be considered luxuries ... if one compares them to the very poorest people on earth. On the other hand, the U.S. Department of Agriculture (PDF) estimated in 2010 that 14.5 percent of all households were "food insecure" —meaning at some point in a year, there wasn't enough access to food "for an active,
healthy life for all household members." In 5.4 percent of households, some people had to do without meals because there wasn't enough money to buy food. But I acknowledge: Your mileage may vary whether you consider this an indictment of our entire society.

Still, it would seem by Prager's own estimation, we're facing a real problem of inequality in this country. The playing field isn't even and hard work (if you can find it) won't help you get ahead. Meanwhile, the rich can fail and still be fabulously successful—not because of nest eggs or smarts, but because the government had their backs.

I doubt that Prager would agree with this assessment. But in his leap to compare the OWS protesters to genocidal tyrants, he fails to consider that they might actually have something to protest against. He fails to contemplate that many of us who are sympathetic to the protesters don't hate the rich—we just don't want them consolidating their gains through government action unavailable to the rest of us. Some conservatives are sympathetic to that notion. Too bad Prager isn't.

What I saw at Occupy Philly

Occupy Philly: Oct 9, 2011 from Joel Mathis on Vimeo.

The Occupy Philly movement, as far as I can tell from my visit today, is dominated by neither fringe conspiracists nor the middle-class mainstream. Mostly, it seems to be made up of plucky twentysomethings who seem to have expected that the world they grew up in—the go-go 1990s and the "go shopping in the face of disaster" aughties—was the world they would inherit, and are cranky they didn't.

Yes, there were Marxists and Socialists and anarchists scattered among the crowd. But the tired "dirty, smelly hippie" stereotype doesn't fit what I found. Much of the crowd was, to all appearances, Standard Urban Hipster—not exactly suburbanites, exactly, but not nearly so outré as to alienate the masses either.

What it did seem to be, in fact, is a movement of privilege. The protesters were overwhelmingly white, overwhelmingly literate—and Philadelphia, for all its greatness, isn't really either. Most of the faces of color on Dilworth Plaza belonged, frankly, to homeless panhandlers who were sleeping there long before all the kids with liberal arts degrees showed up. Why not more minority participation? It could be that a big chunk of Philadelphia's population has gotten the short end of the stick for so long that the current crisis doesn't seem like that much of a crisis—only more of the same. The people who are protesting who the ones who had something to lose in the first place, and lost it.

For all that, there wasn't a lot of rage to be found at City Hall either. The spirit, in fact, seemed to be upbeat. Some protesters were helping gather and distribute food. There was a library set up, as well as an area for wi-fi use and tech support. One area was designated for a solar-powered battery to charge up; volunteers collected litter. There was even a stickball game on the north side. Speakers reminded the crowd that the plaza, for now, is their home—and to treat it as such. But far from the air of petulant, hypocritical entitlement that some media reports had led me to expect, what I found was a bunch of young people in the act of building—in miniature—the kind of society that they seek. That's nothing to scoff at.

Not that there weren't eye-rolling moments. One speaker exhorted protesters to use the readily available public toilets. "Please do not pee on your neighbors," he pleaded—apparently because that had already happened. A young woman took the mic and introduced her boyfriend, a young man who is on a hunger strike "until he gets some answers from Wall Street, or until medical professionals tell him to quit" the hunger strike.

Despite the crankiness at Wall Street—well-represented in the signs I photographed for the video above—I didn't see a ton of radicalism. Again, yes, the Marxists and the Socialists. But the angriest-sounding speaker inveighed heavily against corporate CEOs and their multimillion-dollar compensation packages—but added he didn't want to take those away: He just wants to ensure that everybody else can get by, too. Not exactly "when the revolution comes, you'll be first against the wall" stuff.

I do not know what Occupy Wall Street and all the related protests will become. Maybe they'll peter out. Maybe the fringe radicals will come to dominate. But that isn't what is happening right now. Right now, regular folks—young, smart, educated folks to be sure, but not weirdoes—are frustrated because they don't see a way to claim their piece of the American dream. And yeah: That should make the Top 1 percent very nervous.

Millionaires can afford a tax hike: Some correspondence

Nothing makes middle-class conservatives angrier than suggesting millionaires should be paying more in taxes. One admires such folks for sticking so rigorously to a principle that won't benefit them in the least, but still one wonders—why?

Anyway, I've heard from you in blog comments and at Facebook. I also received a couple of letters on the topic overnight. The first, from John Senuta in Wickliffe, Ohio:

Hey Joel here is another way to look at it .The poor that don't want to
work and live off you they look at you as RICH and they want alot more of your
money to spend.They want your TAX rate to go to 75% so they could live
better,you can afford it RIGHT???? 

And by the way a portion of your phone bill pays for a cell phone for them
to use FREE.Do you have a cell phone????How much are yoiu paying???Let dig a
little deeper into your pocket and help them out....

There's a presumption here that "the poor" are a bunch of lazy panhandlers trying to get their hands into your pocket. But of course, there are four job-seekers for every job opening in America today. And the money raised from a millionaire's tax, in this case, would go towards programs like tax breaks for businesses to hire employees.  So that people can work private-sector jobs. It's shifting the tax burden ... to people who can afford it.

H Kennedy, meanwhile, tells me that my thinking is "narrow and faulty based on a short coming socialist point of view." An excerpt:

Of course, you give no thought to the fact within our present tax structure the top 1% of wage earners already pay 39% of taxes collected. And, I might add, the top 50% of earners pay 97% of the taxes. 97%, that means the entire remaining 50% pay only 3% of all taxes. Yet, avail themselves of all the benefits provided by the greater taxes collected from the others. Perhaps it is your concept is those top 50% should pay 100%. That way all the others shouldn't pay anything. 

As well, many of those 3% not paying any revenue into the system will get 'refunds' under the Earned Income Tax Credit' or Child care Credits. Refunds, I might add, from the taxes paid by those evil rich. 

Additionally, have you given no thought that the 'millionaires' are already paying more taxes? They are paying more in their communities in Real Estate Taxes due to the more and expensive 'upper class' homes. Also, more taxes in licensing fees, sales taxes, and personal property taxes for the cars, boats, etc. they own. So, these greater tax payments support the local fire, police, schools, and support services. And too, pay more to keep the streets, bridges, sidewalks, infrastructure, etc. in their towns and cities.

So, Pay More???? 47% of the population isn't paying anything. Yet, they use those fire, police, EMT, personal. They travel those street, roads and bridges. Those "not so fortunate" share in all these with any cost sharing all due to the payment of the 'evil rich'.

Some mistakes that Kennedy makes:

• I don't think I've said the rich are evil.

• It's incorrect that 47 percent of the population "isn't paying anything." Now: A good portion of the population doesn't pay income taxes, it's true. But they do pay other taxes—FICA, for example, to the feds, plus all manner of local sales taxes and other fees—that go to support the very services Kennedy says only the rich are paying to support.

• As Ezra Klein notes in the link on the previous bullet point, Citizens for Tax Justice (PDF) has added up all the federal and state and local taxes paid by each income group. And this is what they've found:

The Top 1 percent earns 22.2 percent of all income in the United States—and pays 23 percent of all taxes: federal, state, and local combined. Despite what Kennedy says, the rich are not unduly burdened.

And it suggests we can do what I've been saying all week: Raise taxes on the millionaires. They can afford it.