My Budget 360There is always a trade-off in economics. The adage about a free lunch comes to mind to the rise of low wage capitalism in America. It is a complicated web driven by financial cronyism and a system largely driven by ignoring the plight of the working class. The story of US manufacturing is probably one tiny example of how we exported our middle class in exchange for cheaper goods and a massive amount of income inequality at the top. Yet there is a winner here as well. While the US middle class is shrinking the middle classes of China and India are growing and so is our income inequality. This trend tends to grow the economies overseas bus has placed a large burden on the unskilled and working class in the US. This is possibly an inevitably given the global nature of our markets. When you get addicted to low cost goods, you may find yourself in a race to low wage capitalism. In the US and Europe people would not take on the jobs that pay near wage-slave levels and have terrible working conditions in countries that are now booming. While the top wage earners in the US are doing fantastic protected by Wall Street and Washington D.C. (many are diversified across the world), those who get paid in US dollars and come from the working and middle class are having a tough time adapting. The trade-off has been coming home to roost in a big way.
A low wage bias
While the recession ended in the summer of 2009, the jobs that have been added since then have largely tended to favor low wage employment. Hard to export cashiers and food service workers (although the industry is getting closer to automating those jobs as well). Nothing happens at once. The gradual erosion of the working and middle class goes back a generation. So it is no surprise that this recovery has largely been one of low wage employment. This is why young American workers are in such a tough position with student debt, wages, and being able to purchase a home.
The low wage hiring bias is evident:
A large amount of hiring has come in the form of lower paying and temporary work. You might say this is simply the modern way of things. Yet the massive financial bailouts during the crisis have protected the financiers of Wall Street to the point that they are fully recovered. The crisis occurred largely because they systematically gambled America away by creating instruments of debt to implode the economy. Some hedge funds actually made wealth by betting America’s economy would fail and encouraged the pushing of additional bad mortgage debt to increase their gains when things went bust.
The problem of course is that we have a system where austerity is the new game in town for working and middle class Americans while the financially connected get to fail and put the bill on those who least can afford it. Take a look at the drop in manufacturing jobs and the growth of our financial sector:
In 1960 you had roughly 8 manufacturing jobs for each one in finance. Today this is less than 2 manufacturing jobs per each job in finance. In the real economy, we still purchase goods that have to be made (i.e., cars, real estate, etc). Yet we have a giant industry that for the most part, is rent seeking. Is high frequency trading making things better? What about the crazy unrestricted derivatives market? With real estate most of the recent sales are going to investors. In other words, the shifting of current real assets in the world into the hands of fewer people.
Even in the once stable construction field, we see weak job growth in spite of a booming real estate market.
Why? Because most of the trading is going to investors looking for deals, not new families pushing for new demand on new homes. New home sales are still weak. Of course that should be expected when the typical American worker is making something like $27,000 a year and the median household income is $50,000 a year. Adjusting for inflation, this is now back to levels last seen in the 1980s:
The tradeoff has been tough but people like cheap goods. It is easy to offshore this development and have workers on the other side of the world work for menial wages so people can buy cheap goods. Yet at a certain point, the market hits an equilibrium and the pain comes back home. Once this happens it can be very quickly as we are seeing now with the middle class being hollowed out. At least we’ve done a good job exporting our middle class outside of the US.
http://www.mybudget360.com/us-biggest-export-middle-class-jobs/
The law of supply and demand dictates that an increase in supply results in a lower price.
An increase in the supply of labor, results in lower wages.
If you want to cut wages in half, double the workforce.
Almost half of the US population is here due to the Immigration Reform Act of 1965 and its subsequent iterations. Add to that the massive amount of work visas, student visas, and refugee visas, and you have doubled the labor market.
Comprende?
Not rocket science, is it.
The problem is these Communist bastards won’t allow any of us to go into business ourselves and do whatever we want because they are regulating the shit out of us. We can’t even make our own garden or lemonade stand for cryin’ out loud. How the hell are we supposed to do anything or make money? And that’s the whole idea. Screw the jobs going overseas. End the friggin’ regulations!