How the Luckiest Generation lived the American Dream
Sunday, June 19, 2011 at 12:20PM I'm just back from my 50th class reunion at The College of Wooster where I was invited to summarize in ten minutes how we experienced the economy during our lives. I showed graphs of key statistics in PowerPoint about jobs, incomes, upward mobility, and effects on longevity. A fundamental conclusion was, "No job, no income, no American Dream, premature death." The most common comment I got was to the effect of, "I'd seen these bits of information before, but never all pulled together like this." There were numerous requests for copies, but since not a lot of retired septuagenarians have PowerPoint, I've converted the presentation to a narrated movie and posted it on YouTube. Click the icon to view it. (If the YouTube icon doesn't show in your email or RSS update, you may have to click through to this Realitybase post to see it.)
This is a revised version of the video; the original version is here. If you have PowerPoint you can download this narrated presentation in .PPT [revised 3/14/12 to add missing captions to one slide] and see the links to data sources.
Skeptic
"Although everyone does benefit from lower-priced goods and services, people also care greatly about the chance to be productively employed and the quality of their work. Declining employment opportunities feel real and immediate; the rise in real incomes brought by lower prices does not. For example, according to recent surveys, a substantial number of Americans believe that their children will have fewer opportunities than they have had. The slow recovery from the recent economic crisis may be affecting these perceptions, which means that they might dissipate as the situation improves and growth returns. But the long-term structural evolution of the U.S. and global economies suggests that distributional issues will remain. These must be taken seriously."
. . . .
"The structural trends affecting the U.S. economy cannot be explained by changes in technology alone."
. . . .
"If giving technology as the preferred explanation for the U.S. economy's distributional problems is a way to ignore the structural changes of the global economy, invoking multinational companies (MNCs) as the preferred explanation is a way to overstate their impact. MNCs are said to underpay and otherwise exploit poor people in developing countries, exporting jobs that should have stayed in the United States.
"MNCs do, indeed, play a central role in managing the evolution of the global economy. They are the principal architects of global supply chains, and they move the production of goods and services around the world in response to supply-chain and market opportunities that are constantly changing. MNCs have generated growth and jobs in developing countries, and by moving to those countries some lower-value-added parts of their supply chains, they have increased growth and competitiveness in advanced economies such as the United States. A June 2010 report by the McKinsey Global Institute estimated that U.S.-based MNCs accounted for 31 percent of GDP growth in the United States since 1990."
. . . .
"What is needed instead of benign neglect is, first, an agreement that restoring rewarding employment opportunities for a full spectrum of Americans should be a fundamental goal. With that objective as a starting point, it will then be necessary to develop ways to increase both the competitiveness and the inclusiveness of the U.S. economy. This is largely uncharted territory: distributional issues are difficult to solve because they require correcting outcomes on the global market without doing too much damage to its efficiency and openness. But admitting that not all the answers are known is a good place to begin."
. . . .
"As important as education is, it cannot be the whole solution; the United States will not educate its way out of its problems. Both the federal and state governments must pursue complementary lines of attack. They should invest in infrastructure, which would create jobs in the short term and raise the return on private-sector investment in the medium to longer term. They should also invest in technologies that could expand employment opportunities in the tradable sector of the U.S. economy at income levels other than the very top. The private sector will have to help guide these investments because it has much of the relevant knowledge about where these opportunities might lie. But this effort will also require the participation of the public sector. The U.S. government already invests heavily in science and technology but not with job creation as its primary focus; that has generally been viewed only as a beneficial side effect. It is time to devote public funding to developing infrastructure and the technological base of the U.S. economy with the specific goal of restoring competitiveness and expanding employment in the tradable sector."
. . . .
"But even these measures may not be sufficient. Globalization has redefined the competition for employment and incomes in the United States. Tradeoffs will have to be made between the two. Germany clearly chose to protect employment in the industries of its tradable sector that came under competitive threat. Now, U.S. policymakers must choose, too.
"Some will argue that global market forces should simply be allowed to operate without interference. Tampering with market outcomes, the argument goes, risks distorting incentives and reducing efficiency and innovation. But this is not the only approach, nor is it the best one. The distribution of income across many advanced economies (and major emerging economies) differs markedly. For example, the ratio of the average income of the top 20 percent of the population to the average income of the bottom 20 percent is four to one in Germany and eight to one in the United States. Many other advanced countries have flatter income distributions than the United States, suggesting that tradeoffs between market forces and equity are possible. The U.S. government needs to face up to them."
. . . .
"The United States will not be able to deduce its way toward the solutions; it will have to experiment its way forward."
Skeptic
Tim Rutten reports in LAT today:
He [Toby Harndon of Britain's Daily Telegraph] goes on to cite one recent poll that found 39% of Americans now believe the recession-battered economy is in "a long-term permanent decline" from which it "will never fully recover," and another survey that reported 57% of those questioned believe their children never will achieve the same standard of living they've enjoyed.
. . . .
The consequences of this lingering joblessness are amplified by the pervasive insecurity of those who are working — uncertainty about further job cuts and anxiety about the future, which growing numbers will face with little but underfunded 401(k)s and increasingly threatened Social Security and Medicare guarantees. Moreover, the decade just past was even worse for real private sector income growth than the 10 years following the onset of the Depression in 1929.
Skeptic
Henry Blodget has posted an excellent presentation on Business Insider explaining, with the aid of 41 stunning charts, what the Wall Street protesters are so angry about. Hat tip Miguel at Simoleon Sense.
Skeptic
A recent Pew Research Center study of Census data shows that after 40 years of setting up independent households, starting in about 1980 Americans are increasingly living in multigenerational households for economic reasons.
Skeptic
Another way in which differences in family income are increasingly important is in college entry, persistence, and graduation rates, especially for women, according to Gains and Gaps: Changing Inequality in U.S. College Entry and Completion by Martha J. Bailey and Susan M. Dynarski. The Abstract:
We describe changes over time in inequality in postsecondary education using nearly seventy years of data from the U.S. Census and the 1979 and 1997 National Longitudinal Surveys of Youth. We find growing gaps between children from high- and low-income families in college entry, persistence, and graduation. Rates of college completion increased by only four percentage points for low-income cohorts born around 1980 relative to cohorts born in the early 1960s, but by 18 percentage points for corresponding cohorts who grew up in high-income families. Among men, inequality in educational attainment has increased slightly since the early 1980s. But among women, inequality in educational attainment has risen sharply, driven by increases in the education of the daughters of high-income parents. Sex differences in educational attainment, which were small or nonexistent thirty years ago, are now substantial, with women outpacing men in every demographic group. The female advantage in educational attainment is largest in the top quartile of the income distribution. These sex differences present a formidable challenge to standard explanations for rising inequality in educational attainment.
Several useful graphs are appended to this PDF paper.
Skeptic
In the PowerPoint presentation, the link to source data for the 21st slide is broken, but the same content is available here: http://stateofworkingamerica.org/chart/swa-mobility-figure-3u-elasticities-family/
Skeptic
Two interactive graphics, The Decline of the American Job, 1974— and The Collapse of the American Job, 2008— in a special report, The 40-Year Slump, by Harold Meyerson in The American Prospect show where we are compared to our own past and currently to other developed nations, and what the trends are. The graphics are fully consistent with the disheartening Luckiest Generation story.
Skeptic
It's not just me. Mac Deford's 50th reunion classmates express sadness and pessimism about what they see as America's decline and bleak future for their grandchildren.
Skeptic
The best comprehensive prensentation I have seen so far is by Jared Bernstein and Ben Spielberg. It is introduced on Bernstein's blog where there is a link to the PowerPoint presentation. This is a direct PP link. This is not a bullet point presentation that makes the reader figure out what the presenter would say if he/she were presenting. Instead, it is rich with graphs, other data, links to professional studies, and clear prose to tie everything together. It covers the facts of rising inequality since the 1970s, the several ways in which that has had adversely affected society, and a policy agenda to ameliorate or reverse the process. A key item on the policy agenda is full employment. Kudos to Bernstein and Spielberg.
