The U.S. Middle Class Is Being Wiped Out

[dmcowen674]

You guys are bringing tears to my eyes, keep it up :thumbsup:

 

[drebo]

So what? The point is, Americans employed with living wages can and will spend more money and won't burden social services. If you and I have to spend a little more on shit at Wal-mart, so be it. We'll get it back in the form of increased spending at our respective employers, more potential buyers for our homes, and a lower national debt.



The poor don't have any buying power because their jobs barely provide anything to spend. Why can't the wealthy take a cut for a change?

There's that term again..."living wages". What, exactly, are "living wages"? Are they the wages that the government says that everyone can "live" on? How can one determine a "living wage" without considering supply and demand?

Americans employed with "living wages" will be able to buy no more and no less than they would whether those "living wages" were determined through supply and demand in the labor market or dictated by the government. The prices of goods are directly related to the cost to produce those goods, and labor costs are by far the largest contributor of those goods, from the extraction and production of raw materials all the way up to the packaging and shipping of goods and stocking on shelves.

If Americans are producing the goods and being paid your "living wages", those goods are going to be SIGNIFICANTLY more expensive than if they were being produced at market labor rates. Buying power is not going to be increased just by paying those workers more. In fact, one could say that buying power will likely decrease because costs associated with labor (which are ALL costs, both on the front and the back ends) will go up.

As I said before, allowing the labor market to determine wages, at worst, result in a net zero as far as domestic buying power goes. It will, however, make our products competitive in the global market.

 

[HumblePie]

Oh, I fully understand the value of intellectual property. However, if 90% of the human effort is expended on "thinking" about how to produce the wealth (or, as actually happens, how to distribute it and move it around) and only 10% is actually spent on producing the wealth then we're going to be impoverished--you can't eat ideas. At some point the tangible wealth has to be produced.

Why do you think that Americans are magical creatures capable of having skills, both manufacturing and intellectual, that exceed what the Chinese and other people are capable of having? (The average Chinese IQ is 105 while the average American IQ is 98, I think.) What do you think we can do better than people in other countries (other than making movies and rap music)?

Even if Americans are more highly skilled, they have to be more highly skilled such that they can compete against fifty-cents-an-hour without labor and environmental regulations.

There's just no easy way around this. Our problem is global labor arbitrage and not one of productive ability. If Americans don't throw off their free market dogmatism and face reality, global labor arbitrage will transform them into a third world country. This "recession" that we are experiencing is not merely a cyclical recession. It's a semi-permanent long-term structural change brought about by global labor arbitrage.

http://en.wikipedia.org/wiki/IQ_and_the_Wealth_of_Nations

Not quite 105.

Not that it matters because when you are willing to work for 50 cents and hour as slave labor in horrid conditions, that doesn't say much about the collective intelligence or the average there either. I'm not saying that Chinese people aren't smart or that there aren't brilliant Chinese people, but that as a whole they have way more labor less willing to make use of their brain power to achieve than we do.

Also, if you look at that IQ and wealth chart, most of the top countries from all categories are NOT manufacturing based. They are skill and service based economies. There are cultural differences that may account for why they are still succeeding where we are now failing though.

If you actually read my post, it was the point to the abstract and to poke a hole into a few assumptions people have been posting. I was never posting or postulating an answer. I have ideas, but like most of them around here it's about as armchair quarter back of an idea as the rest. I was hoping to pop a few assumptions some have made and formed ideas based upon, but alas it doesn't seem to have the affect I wanted. Guess I'll just run around outside like chicken little and claim the sky is falling.

 

[dmcowen674]

Not that it matters because when you are willing to work for 50 cents and hour as slave labor in horrid conditions, that doesn't say much about the collective intelligence or the average there either.

Someone should pick you up and plop you in the middle of the continent and see how you do.

I suspect you would be very happy with 50 cents an hour very quickly.

 

[desy]

I think globalization will have to 'average' the standard of living
I also think we are better off for sure in the last 50 years as I'm 45 and have seen it, however I'm unsure if this is because we went to more people working with two wage earners or energy effciency per GDP output that technology has netted.
Both probably but at what %
I do feel that my kids future ' I have 2' will be less rich and optioned to mine, however I don't think they will be unhappier if food shelter and clothing are being met

 

[drebo]

But labor costs aren't all of the costs. You're assuming that the price of goods can decrease faster than the wages. You're also assuming that we can maintain a zero-dollar trade deficit.

I'm not assuming anything.

I am fully aware that wages will decrease more quickly than the prices of goods, which is why we've completely fucked ourselves both now and in the future.

I'm also not assuming a zero dollar trade deficit. This is not desirable. We should be aiming for a net POSITIVE trade deficit. We should be exporting more than we import.

Why not just keep wages and prices where they are and decrease the value of the dollar to make American goods and services more affordable for buyers overseas?

I don't think manipulating the value of the dollar will help us for long. Any way you slice it the equation is simple--hordes of impoverished people in other countries are willing to work for far less compensation and in far worse conditions than Americans. By merging the American labor market and economy with the third world, standards of living will average out, resulting in a huge decrease in the standard of living and quality of life for Americans.

Because that's not the way it works. "The dollar" is an arbitrary unit of value. Value is determined mostly by supply and demand, even if the government tries to manipulate it. Freezing the "price" of an item does not change the value of that item. If a dollar is only worth half as much, prices will double to keep the value of that item in line with the price of that item in accordance with its supply and demand curve. Devaluing the unit of value does not lower the value of the item you are valuing.

You can't create wealth (the sum of all value in a system) out of thin air. If you print more money, the overall value of the system remains the same. This is why prices go up when inflation occurs. It's also why inflation hits the lower class harder than it hits the upper class.

There's no way around the huge worldwide supply of impoverished labor in the supply/demand equation without some manner of trade protectionism.

Technology. We do have superior technology, and thus our efficiency is generally greater than those impovershed third-world countries. This can help to keep price per unit down. Certainly, there will be a bit of a disparity, but remember that the bulk of the wealth of the world is in developed nations, and they are our customers. Many people may pay slightly more for "made in the USA" items, but they're not going to pay much more. Depending on the item, you might get away with a 5-10% premium.

Protectionism will not encourage domestic manufacturing because it will still be cheaper to make the stuff in China.

 

[SammyJr]

There's that term again..."living wages". What, exactly, are "living wages"? Are they the wages that the government says that everyone can "live" on? How can one determine a "living wage" without considering supply and demand?

Americans employed with "living wages" will be able to buy no more and no less than they would whether those "living wages" were determined through supply and demand in the labor market or dictated by the government. The prices of goods are directly related to the cost to produce those goods, and labor costs are by far the largest contributor of those goods, from the extraction and production of raw materials all the way up to the packaging and shipping of goods and stocking on shelves.

If Americans are producing the goods and being paid your "living wages", those goods are going to be SIGNIFICANTLY more expensive than if they were being produced at market labor rates. Buying power is not going to be increased just by paying those workers more. In fact, one could say that buying power will likely decrease because costs associated with labor (which are ALL costs, both on the front and the back ends) will go up.

As I said before, allowing the labor market to determine wages, at worst, result in a net zero as far as domestic buying power goes. It will, however, make our products competitive in the global market.

What do you consider a living wage?

I consider a living wage enough for an American to have modest living accomodations (an apartment or small house, depending on location) plus food, transportation to and from work, and a reasonable amount left over for discretionary purposes. Its called a living wage because its a wage that covers the cost of living in America.

When you think about it, all Americans get a living wage by that criteria, its just that the U.S. Government steps in and fills the gap between the employer and what they need to live. Our current situation merely transfers labor costs from the employer to the taxpayer, subsidizing the former's profits. And then you have unemployment and other social services that are used when people don't have jobs of any kind.

So you pay more on the front end and pay people to work or you pay for it in taxes and subsidize the profits of the wealthy.

 

[SammyJr]

Is it possible that the upper classes are receiving more wealth than they deserve? Is it possible that the expectations of the rich are too high?

Of course, but its not the place of Serfs to question their Lords.

 

[1prophet]

No, that's how you drive up inflation and lower the standard of living amonth the lower-middle and lower classes.

Recognizing that American wages and expectations are too high, and then fixing them, is how you restore America's competitiveness in the global manufacturing market.

Protectionism doesn't work. Just because the liberals think something should be economically viable does not make it magically so. Taxing imports like that only drives up costs to the point where the government now has to subsidise the purchase of those products. It's not going to move manufacturing stateside because it still won't be economically viable.

I agree with the part in bold 100% because I know the poster includes upper management like golden parachute executives among the overpaid Americans.

 

[Acanthus]

Actually, I make my statements based on anecdotes and assumptions and an economics degree, but whatever.

I'm an Econ major too.

Some people just don't grasp the basics, even after being shown in a course... So people who are indoctrinated to believe otherwise just will.

 

[Acanthus]

There's that term again..."living wages". What, exactly, are "living wages"? Are they the wages that the government says that everyone can "live" on? How can one determine a "living wage" without considering supply and demand?

Americans employed with "living wages" will be able to buy no more and no less than they would whether those "living wages" were determined through supply and demand in the labor market or dictated by the government. The prices of goods are directly related to the cost to produce those goods, and labor costs are by far the largest contributor of those goods, from the extraction and production of raw materials all the way up to the packaging and shipping of goods and stocking on shelves.

If Americans are producing the goods and being paid your "living wages", those goods are going to be SIGNIFICANTLY more expensive than if they were being produced at market labor rates. Buying power is not going to be increased just by paying those workers more. In fact, one could say that buying power will likely decrease because costs associated with labor (which are ALL costs, both on the front and the back ends) will go up.

As I said before, allowing the labor market to determine wages, at worst, result in a net zero as far as domestic buying power goes. It will, however, make our products competitive in the global market.

With no price floor on wages, wages will fall to Chinese levels. This problem is exacerbated by our "gain wealth at any cost" corporatist attitude toward our own people and the world.

Without any action, in 40 years we will be in the gutter. Period. Oh, except for the top 1%.

 

[drebo]

With no price floor on wages, wages will fall to Chinese levels. This problem is exacerbated by our "gain wealth at any cost" corporatist attitude toward our own people and the world.

Without any action, in 40 years we will be in the gutter. Period. Oh, except for the top 1%.

Some wages would...for jobs that could be done by great numbers of people. Why should those jobs be worth more just because Americans are doing them?

Skilled jobs, for which there is great demand in the work place, would still be relatively high paying.

Getting rid of wage floors does not automatically mean everyone makes $0.01/hr. That's not the way supply and demand works. Suply and demand works in such a way that workers and employers will negotiate a wage that is acceptable for all parties involved. If your wage requirements are too high, no one will hire you. They'll hire the guy next to you that is willing to work for 10% less. If companies want to attract top talent, they will, of course, offer more money.

Getting rid of the wage floor will halt inflation and, generally, lower prices. Buying power of those at the bottom will not get worse because their wages relative to the cost of goods does not go down. However, it does open us up to be able to export to more markets, which is the only possible way gain wealth.

Additionally, a "gain wealth at any cost" attitude runs completely contrary to wage floors and corporate welfare, except at the corporate level. I'm not talking about the corporate level, I'm talking about the national and global levels. If we want to become competitive as a manufacturer (and even in some service sectors) on the global level, we need to get rid of our wage floors and corporate welfare. Otherwise, as a system where we run a trade deficit in perpetuity, we will shrivel up and die.

 

[drebo]

I agree with the part in bold 100% because I know the poster includes upper management like golden parachute executives among the overpaid Americans.

To some extent, yes, though not for the same reasons as you do. You view executives as profiting off the backs of their employees in a vindictive nature. I don't.

 

[dmcowen674]

Getting rid of wage floors does not automatically mean everyone makes $0.01/hr.

You are full of it and you know it.

Corporations would absolutely lower wages to .01 an hour in an instant of they were allowed to do so.

 

[drebo]

You are full of it and you know it.

Corporations would absolutely lower wages to .01 an hour in an instant of they were allowed to do so.

Have you ever even worked a day in your life?

If what you say were the case, everyone would be making $7.50/hr right now. Guess what? I make a hell of a lot more than that.

 

[WhipperSnapper]

I don't. I think that an American free market would be exactly what we need to fix a lot of the issues we're having.

However, that market needs to actually be FREE and not encumbered by artificial wage floors and overreaching regulation.

What we're arguing here is whether or not American manufacturing can be viable in the global market. The answer, currently, is "no."

The answer will continue to be "no" until Americans are willing to live in third world poverty without environmental and labor regulations.

We're also discussing whether or not protectionist tarriffs would be a viable method to make American manufacturing viable in the domestic market. The answer to that, currently, is also "no."

It would be impossible to tax foreign-produced goods enough to make most American goods economically viable, and it isn't because of "back-end" costs. It's because of labor costs.

Why do you think that Americans are incapable of producing wealth and exchanging value for value with one another voluntarily for mutual benefit? How did our nation ever survive prior to globalization? You make it sound as though wealth production in the United States is metaphysically impossible.

You almost seem to be implying that by allowing foreign-made goods into the U.S. that we are somehow getting something for nothing--that we aren't actually paying for the value of those goods. (You might be able to argue that we're not paying the environmental costs, which end up as an externality to the Chinese people.) We aren't getting these goods for free; we're racking up a large trade deficit and national debt and we're ultimately paying for it by selling long-term capital assets (business ownership, real estate), impoverishing ourselves in exchange for ephemeral consumer goods.

 

[dmcowen674]

Have you ever even worked a day in your life?

If what you say were the case, everyone would be making $7.50/hr right now. Guess what? I make a hell of a lot more than that.

$7.50 is exactly what all Walmart employees were getting here until recently.

They only raise the wage when forced to.

One of the Managers was overheard that he would like to see minimum wage go down to at least $3.00 an hour.

http://www.city-data.com/forum/chicago/371546-news-minimum-wage-rises-7-75-a.html

 

[drebo]

The answer will continue to be "no" until Americans are willing to live in third world poverty without environmental and labor regulations.



Why do you think that Americans are incapable of producing wealth and exchanging value for value with one another voluntarily for mutual benefit? How did our nation ever survive prior to globalization? You make it sound as though wealth production in the United States is metaphysically impossible.

You almost seem to be implying that by allowing foreign-made goods into the U.S. that we are somehow getting something for nothing--that we aren't actually paying for the value of those goods. (You might be able to argue that we're not paying the environmental costs, which end up as an externality to the Chinese people.) We aren't getting these goods for free; we're racking up a large trade deficit and national debt and we're ultimately paying for it by selling long-term capital assets (business ownership, real estate), impoverishing ourselves in exchange for ephemeral consumer goods.

I'm not sure what you're reading in to my posts, but it isn't what I'm saying.

We are running a trade deficit because we are importing more than we are exporting. The reason for that is because we are not competitive in the global manufacturing market. Protectionist tarriffs won't make that so, and we'll still run a trade deficit. We do not get something for nothing by importing goods. I agree that imports are harmful to our economy. But, the fact is, if we close our system entirely by making imported goods ungodly expensive, we will shrivel up and die.

I would argue that our country, as a whole, has NOT survived globalization. We are still stuck in the mindset that we're better and more deserving than everyone else. That may be true, but when China can build a widget just as well as we can for 1/10th the cost, our superiority means nothing in the global market. We have a finite amount of wealth in the US. By running a trade deficit, we are moving that wealth to other countries. The only way to bring wealth in is by running a trade surplus, which we cannot do until we are competitive in manufacturing.

There are international standards that many countries require products to meet before they can be sold in those countries. If a product meets these standards, who cares where that product was produced and by whom?

 

[WhipperSnapper]

Why should every American household be a "middle class?"

Would you be willing to agree that American households comprised of responsible, hard-working, ethical, rational people should be able to be at least lower-middle class given the current state of technology and our nation's resources?

If they can work for it and afford it then great. If not you won't find me shedding a tear.

Are you capable of feeling empathy for the types of people I described above who simply cannot find work that will allow them to afford a lower-middle class lifestyle? Do you think that they are unworthy people or that some people should be part of a slave class?

As for your second point... wow, just wow. I am all for trying to better the "plight" of my fellow man. But I'm not doing so with a romantic notion about it. I realize some people are unskilled. If they want more from life, they need to figure out how to get it and not have it handed to them.

Given the technology and resources we have, even hard-working unskilled labor that meets the conditions I set out above should be able to attain lower middle-class (working class) status.

What makes you think that your skills are so amazingly valuable and unique, btw? Right now we have an oversupply of PhD. scientists and people with all sorts of professional and advanced college degrees. The only real thing that makes many people unique today is the fact that businesses hate having to hire inexperienced college graduates and provide them with specific training. Part of it is a class-based form of discrimination against the unemployed and underemployed--they couldn't possibly imagine hiring someone with the proper degrees for a lower wage than an experienced person and then training them to do the job. (Ideally, even the holier-than-thou experienced professionals shouldn't have safe jobs in this economy; the risk of people willing to work for 25% the price to get their feet in the door should be a concern.) So, try not to be so smug.

 

[drebo]

$7.50 is exactly what all Walmart employees were getting here until recently.

They only raise the wage when forced to.

One of the Managers was overheard that he would like to see minimum wage go down to at least $3.00 an hour.

http://www.city-data.com/forum/chicago/371546-news-minimum-wage-rises-7-75-a.html

How many people are capable of being Wal-mart greeters in the US? 200 million, or so?

With that kind of suppy for a position, the wage for that position should be lower. Remember, as supply goes up and demand remains constant, wages go down.

If you're not comfortable making $7.50/hr or whatever going rate for a Wal-mart greeter is, learn a skill and get a better job. Equality of opportunity, remember?

 

[WhipperSnapper]

http://en.wikipedia.org/wiki/IQ_and_the_Wealth_of_Nations

Not quite 105.

Not that it matters because when you are willing to work for 50 cents and hour as slave labor in horrid conditions, that doesn't say much about the collective intelligence or the average there either.

I kind of wonder what their IQ might be if they had better living conditions. That may or may not affect IQ, I don't know; I'm just putting the idea out there.

I'm not saying that Chinese people aren't smart or that there aren't brilliant Chinese people, but that as a whole they have way more labor less willing to make use of their brain power to achieve than we do.

If we measured people using Dungeons & Dragons stats, you might say that they are intelligent (IQ) but lack wisdom (philosophy). They're recovering from a couple decades of communism. From what little I know about the Chinese economy, they seem to be advancing quite rapidly. I almost admire them.

Also, if you look at that IQ and wealth chart, most of the top countries from all categories are NOT manufacturing based. They are skill and service based economies. There are cultural differences that may account for why they are still succeeding where we are now failing though.

I couldn't find the Wealth chart, so I don't to comment too extensively. It might be possible that developed nations just tend to have more "skill and service based economies" than undeveloped nations. Heck, the U.S. has a more "skill and service-based economy" in those regards. Some of those top countries might also benefit economically from the "Rationality Factor", which is another important component of prosperity.

(The Rationality Factor is a measure of things like the crime rate, drug use, whether or not people have more children than they can afford, etc. Greater rationality allows for greater prosperity since fewer resources get squandered or spent on dealing with those kinds for problems.)

I would also wonder whether many of those nations have large populations such as the U.S.'s 310 million. At some point they have to produce some sort of service that people in other nations find valuable. It might also be possible that a few select nations with small populations can carve out a niche exporting a few services but that the vast majority or nations around the world would be unable to sustain themselves by doing that. The wealth has to be produced at a factory, somewhere.

My guess is that most of these nations have small populations, do have some manufacturing base, and benefit greatly from a high Rationality Factor. I am interested in learning more about how these nations have been able to develop prosperous economies.

 

[WhipperSnapper]

I'm also not assuming a zero dollar trade deficit. This is not desirable. We should be aiming for a net POSITIVE trade deficit. We should be exporting more than we import.

I think that would be great, but I have difficulty conceiving of how that would happen. Perhaps it would be possible if a wondrous new essential product were invented that could not be reverse-engineered or produced elsewhere whose manufacturing process were kept secret and somehow constrained to the U.S.

Because that's not the way it works. "The dollar" is an arbitrary unit of value. Value is determined mostly by supply and demand, even if the government tries to manipulate it. Freezing the "price" of an item does not change the value of that item. If a dollar is only worth half as much, prices will double to keep the value of that item in line with the price of that item in accordance with its supply and demand curve. Devaluing the unit of value does not lower the value of the item you are valuing.

You can't create wealth (the sum of all value in a system) out of thin air. If you print more money, the overall value of the system remains the same. This is why prices go up when inflation occurs. It's also why inflation hits the lower class harder than it hits the upper class.

OK, fair enough. I wouldn't have a problem with a decrease in wages as long as prices decreased proportionally with them, keeping buying power the same. But of course you know what I think; we have to surrender this notion of competing with the third world and figure out a way to internalize our wealth and increase the amount of wealth we produce.

Technology. We do have superior technology, and thus our efficiency is generally greater than those impovershed third-world countries. This can help to keep price per unit down. Certainly, there will be a bit of a disparity, but remember that the bulk of the wealth of the world is in developed nations, and they are our customers. Many people may pay slightly more for "made in the USA" items, but they're not going to pay much more. Depending on the item, you might get away with a 5-10% premium.

The problem is that advanced manufacturing technologies can simply be implemented abroad. What technological advantage do we have? Where do we have a technological advance in manufacturing that other nations do not or could not have? If an American engaged in innovation and invented a more efficient way of manufacturing something, why wouldn't that idea simply get implemented in a Chinese factory?

Protectionism will not encourage domestic manufacturing because it will still be cheaper to make the stuff in China.

Why would it not encourage domestic manufacturing for U.S. consumption? The only way to sell a good or service in the U.S. would be to produce it in the U.S. Do you think that Americans would become paralyzed and unable to produce wealth?

 

[WhipperSnapper]

With no price floor on wages, wages will fall to Chinese levels. This problem is exacerbated by our "gain wealth at any cost" corporatist attitude toward our own people and the world.

Without any action, in 40 years we will be in the gutter. Period. Oh, except for the top 1%.

Could you please explain this in greater detail? Why would wages fall to Chinese levels? What is the economic mechanism that would cause American wages to fall to Chinese levels?

(Oh, I don't disagree with you, i just want to see you explain it in economic terms so that other readers can read it and so that it will have the imprimatur of coming from someone who is studying economics rather than from myself.)

 

[Zebo]

LOL @ drebo preaching the same right wing garbage that has 2/3 of our people dependdnt on Gov't to eat now.

Never before in history has so many people been dependent on government spending. It's half of GDP between states, fed and munis! As production collapsed, government has been forced to take over control of 'production' via debt to maintain the functionality of their people they oversee.

Same ole story repeated in history 100x. Top gets control of all resources and there will always be those ardent defenders to the end, the end, which is called revolution and we start all over with sensible necessary redistribution.

 

[WhipperSnapper]

Some wages would...for jobs that could be done by great numbers of people. Why should those jobs be worth more just because Americans are doing them?

Skilled jobs, for which there is great demand in the work place, would still be relatively high paying.

I'm not convinced of this because I take a holistic view of the economy--all economic activity is connected in some sort of a way. We're actually seeing this right now in the form of "credential inflation" and the "education arms race". When options for earning a middle class lifestyle disappear in certain fields, people will rush into those other fields where it is still possible, increasing the supply of available labor in those fields and decreasing the wages. We're witnessing this right now with respect to the value of a college education and advanced degrees.

Getting rid of the wage floor will halt inflation and, generally, lower prices. Buying power of those at the bottom will not get worse because their wages relative to the cost of goods does not go down.

Doesn't that assume that the prices of goods and services decrease commensurate with the decrease in the wages? It seems like a 50% decrease in wages would only decrease prices by the decrease in the cost of production, whatever that is. If a 50% wage reduction results in only a 40% decrease then it seems like it would be impossible for prices to drop as much as wages.

You might argue that employment taxes paid would also decrease, but arguably that tax revenue is also a form of wages in various ways since it goes to fund government services.