Well I've already posted ad nauseum on the subject. Suffice it to say, Thomas Piketty and I are in general agreement re the cause, although I've gone into considerably more detail then he in regard to the U.S. "Capital in the Twenty First Century" is a good read on the subject, and Piketty in the last few chapters touches on the reasons for the extremes in the U.S., as have I. Globalization is a factor of course, but a very minor one.
Protectionism ??
- Thread starter Humpy
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Here is the empirical proof you are wrong. Read it, don't read it, I don't really care at this point.
http://www.epi.org/publication/bp196/
Here is a quick summary:
The key findings indicate:
• In 2006, the impact of trade flows increased the inequality of earnings by roughly 7%, with the resulting loss to a representative household (two earners making the median wage and working the average amount of (household) hours each year) reaching more than $2,000. This amount rivals the entire annual federal income tax bill paid by this household.
• Over the next 10-20 years, if some prominent forecasts of the reach of service-sector offshoring hold true, and, if current patterns of trade roughly characterize this offshoring, then globalization could essentially erase all wage gains made since 1979 by workers without a four-year college degree.
What economic theory actually teaches about globalization and wages
When people argue that economics teaches that liberalizing trade is a “win-win” proposition, what they mean (whether they know it or not) is that trade is “win-win” between countries. The great insight of comparative advantage, the cornerstone of international economics, is that even when one country can produce everything more cheaply than its trading partners, trade still provides benefits to both nations.
An important caveat, however, notes that even as globalization raises national income, it can still reduce the incomes of most workers. Global integration has at least two potential impacts on American wages. First, workers employed in industries directly in competition with low-cost imports from abroad can expect to see immediate job dislocation and/or downward wage pressures. Second, as relative prices change across industries, the return to factors of production, including different kinds of labor inputs, can be expected to change as well. A simple example can capture the essential insights of this second impact (which is almost surely the less intuitive one).
This is a good article, which I have read. The issue here should not be correlation but cause and effect. In the U.S., Globalization, which encompasses offshoring, is correlated with lower real labor wages. Though it seems intuitively obvious that globalization must be the cause of the lower wages, and it is not difficult to make a strong argument backed by data and calculation, here is a case where our intuition leads us astray. One has to explain why the same extent of globalization, or greater, is found within other developed countries economies; yet real wages have kept pace with growth in these other economies. In other words, while globalization seems to be the proximate cause of wage decline among the U.S. labor class, it is apparently not the root cause. It is entirely possible for wages to keep up with economic growth, independent of globalization. One is forced to look elsewhere for the root causes of the decline in wealth among the U.S. labor class. You will find other papers at epi.org which address other aspects of the decline in U.S. labor's fortunes. The extreme wealth disparity found in the U.S. compared with other developed countries is an outlier. The root causes are known.
Piketty's study, done together with his students, is the best source available in book form, and comprehensive with regard to the Western economies. As many of us here are U.S. citizens it is naturally of interest to us why the U.S. is so far out of step with the other developed countries. Quite obviously Globalization is an unlikely cause.
Globalisation is going to happen more and more even if the US pulls up the barriers for a while. The rest of the world is keen to expand trade and cultural ideas. The US can do what it did in the 1930s and turn in on itself if the POTUS wants. Nobody much cares. Other countries will be delighted to take the US's old markets.
Putting their heads in the sand to hide might appeal to ostriches but really ...............
Putting their heads in the sand to hide might appeal to ostriches but really ...............
You are right , of course, Humpy. Globalization is here, we most join in. In any case we can't stop it, and even if we could it would be wrong to do so. And its to everyone's benefit, including labor! Three cheers for globilization!
That word "globilization," however, would make my thoroughly English, fourth grade teacher, Miss Caudron, turn over in her grave. She's the reason I still struggle with "analyse" , "colour", "labour", "humour", and can never figure out whether the comma is inside of outside the quote mark. It's all Miss Caudron's fault. I don't miss the sore knuckles.
That word "globilization," however, would make my thoroughly English, fourth grade teacher, Miss Caudron, turn over in her grave. She's the reason I still struggle with "analyse" , "colour", "labour", "humour", and can never figure out whether the comma is inside of outside the quote mark. It's all Miss Caudron's fault. I don't miss the sore knuckles.
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And even more empirical evidence...
https://www.weforum.org/agenda/2017...l&utm_source=facebook.com&utm_campaign=buffer
https://www.weforum.org/agenda/2017...l&utm_source=facebook.com&utm_campaign=buffer
With all due respect, it's a policy influence paper, so there is very little "proof" or any kind of science in it. Most the income phenomena they have described have brewing since the 60s. NBRA put out a very thorough panel study in April that was going over the income dynamics over the last 50 years, I think I posted a link to it somewhere.
IMHO, at this point the middle class is fucked no matter how protectionist this country gets. We have reached a point when automation is taking lower-level cognitive jobs which were the main driver of the middle class prosperity. Manufacturing jobs are getting automated globally, even in the locations which we would consider low-wage (e.g. in China).
With all due respect, all these studies are policy influence papers. They don't write these for their health. Yes, we are in agreement, the middle class is fucked, I never stated otherwise. I just believe we have the facts as to how that happened. And yes, we are in agreement that no policy, protectionist or otherwise will change that. As I stated before, the trillions have already been made. You can't change that unless you suggest we go around and confiscate assets from people. And for the 100th time, the US is the least protectionist country in the world. And that will never change. In the end, the bankers will always win. They do fund our elections after all.