Posted on 01/15/2004 12:57:59 PM PST by NutCrackerBoy
It might have been Ross Perot who first used the expression that America is turning into a nation of "hamburger flippers," in reference to the decline in good paying manufacturing jobs replaced by low-pay service sector jobs.
Here's my question: If millions of high-paying jobs are leaving the country only to be replaced by millions of low-paying jobs, what prediction would you make about the trend in our standard of living? It would have to be in steep decline, but the facts don't square with that. Per capita GDP, the population divided into the value of goods and services produced, is one of the methods used to gauge the standard of living. The historical trend, including today, is a rising American standard of living. In fact, our per capita GDP in 1980 was $21,500 and, as of 2002, it was $36,000 -- a 59 percent increase. So how can it be that we're becoming a nation of low-pay hamburger flippers?
How about this pronouncement: The rich are getting richer, and the poor are getting poorer? The Census Bureau just came out with a report saying that 35 million Americans are living in poverty. Robert Rector and Kirk A. Johnson addressed this figure in their recent publication "Understanding Poverty in America," produced by the Washington-based Heritage Foundation.
From various government reports they find that: 46 percent of poor households actually own their homes; 76 percent have air conditioning; the typical poor American has more living space than the average non-poor individual living in Paris, London, Vienna, Athens and other cities in Europe; nearly 75 percent of poor households own one car, and 30 percent own two or more cars; 97 percent have at least one color television; 62 percent have cable or satellite reception; and 25 percent have cell phones.
While "poor" Americans don't live in opulence, they are surely not poor either by international or historical standards in our own country. I'm betting if God condemned an unborn spirit to a lifetime of poverty but He left him free to choose the country in which to be poor, he'd choose United States.
How many times have we heard that the rich are getting richer, and the poor are getting poorer? Contrary to that nonsense, the fact of the matter is that some of the rich are getting poorer, and many of the poorer are getting richer.
According to the 1995 Annual Report of the Federal Reserve Bank of Dallas, only 5 percent of those in the bottom 20 percent category of income earners in 1975 were still there in 1991. What happened to them? A majority made it to the top 60 percent of the income distribution -- middle class or better -- over that 16-year span. Almost 29 percent of them rose to the top 20 percent.
The evidence suggests that low income is largely a transitory experience for those willing to work. There's no mystery to it: As a function of age, people get wiser and gain more experience. That means it's not very intelligent to think one can make meaningful statements about poverty simply by measuring income at a particular point in time. By the way, people are also mobile downward, as suggested by the joke that the easiest way to become a Texas millionaire is to start out as a Texas billionaire.
Here's Williams' roadmap out of poverty: Complete high school; get a job, any kind of a job; get married before having children; and be a law-abiding citizen. Among both black and white Americans so described, the poverty rate is in the single digits.
Leaving this thread and Walter Williams' column alone, for the nonce, I've read untold threads, wherein you have posted junk economic pronouncements.All you've done now, is to heap calumny on the author of this article, with no solid refutation. Par for the course for you.
Like I said, Walter's position is indefensible.
Usually, on this board, that is criticized.
Prior to buying the co-op, when my husband and I were in our 20s, we rented.
The money we made, when we sold that co-op ( which we redid the kitchen in, without a loan or mortgage )was a pittance, in what we subsiquently paid for the condo, that we bought, after renting an apartment for a year. We sold the condo and rented for the next 11 years, until we built this house. what we made on the sale of the condo, probably covered the cost of my kitchen...if that.
It may be rare, but it isn't nearly as unuaual,as one might imagine, for people to buy their homes outright.
" According to the 1995 Annual Report of the Federal Reserve Bank of Dallas, only 5 percent of those in the bottom 20 percent category of income earners in 1975 were still there in 1991. What happened to them? A majority made it to the top 60 percent of the income distribution -- middle class or better -- over that 16-year span. Almost 29 percent of them rose to the top 20 percent.
It sure looks to me like people (who are willing to work) are doing better.
The reason that the dollars are translated into another years to express them is for the ease of comparison. By picking one of the two years being compared, or better yet picking a separate base-line year that can then be used as other years are added to a study, the numbers can then be compared mathematically and by percentages and the like, with inflationary changes to the currency being taken into account.
For example, if a daily income of the average union carpenter foreman was 200.00 and bought a weeks groceries for four, 20 gallons of gas, and an average months utilities in 1990, while he earned 217.45 in '93 and 257.60 in '02, then it is best to look at the inflation rate for the standard package of consumer costs and then express all those dollars in terms of one base year. If the inflation rate was not compounding, but only 1% per year, then the package of goods, theoretically, cost 206.00 in '93 and 224.00 in '02. If we then express the earnings in '90 dollars, they are lower in the subsequent years as adjusted for comparison, but it gives a more true picture as to the value of the income being discussed.
Does that help?
If we were simply talking of percentage changes we would be saying the income has gone up 27% while prices have gone up 22% and that gives the impression that the changes were straight lines rather than fluctuating curves and would still not be too clear if we are 5% ahead.
I was listening to the radio this evening and someone was discussing the personal debt level of 2 trillion having doubled in the last 13 years. That's about 6% per annum compounded, or thereabouts. What wasn't mentioned is that the savings in general savings and retirement is also at an all time high, as I understand it. If that is the case, it somewhat tempers my concern about the personal debt level.
In 1980 income per capaita in 2000 dollars was $16,940, in 1990 it was $21,281, and in 2002 it was $26,320. During that time expenditures on housing and cars as a percentage of income remained at about the same level (within a percentage point) while expenditures on services as a percentage of income rose significantly (mostly due to expenditures on medical care). This was offset by a reduction in expenditures on nondurables (mostly clothing) I would suspect that this is the result of rising medical costs and decreasing prices on clothing. I point this out only to show that expenditures on the two biggest items (which are generally finced with debt) have not increased relative to income over the period in question.
Looking at debt - the actual debt level as a number by itself is pretty meaningless. What is important to look at is are people able to make the payments. Interest payments (less housing) as a percent of income was at 1.9% in 1980, 2.4% in 1990, and 2.2% in 2002.
The Federal Reserve tracks the debt/service ratios which are more meaningful. For all households the ratio was 15.7% in 1980, 17.2% in 1990, and 18.1% in 2002. That is less than a one percentage point rise over the twelve year period from 1980 to 2002.
The household debt service ratio (DSR) is an estimate of the ratio of debt payments to disposable personal income. Debt payments consist of the estimated required payments on outstanding mortgage and consumer debt. The financial obligations ratio (FOR) is a broader measure than the debt service ratio. The FOR includes automobile lease payments, rental payments on tenant-occupied property, homeowners' insurance, and property tax payments.
The ratio I cited for debt/service was actually the financial obligations ratio but because it is broader it is probably more meaningful. If one only wants to look at debt obligations, the debt to service ratio was 10.9% in 1980, 12.0% in 1990, and 13.3% in 2002. Again, not huge increases.
In summary, this tends to show that income rose significantly in real terms from 1980 to 2002, but at the same time debt rose at a slightly higher rate. It is important to put things into perspective.
Sources: BEA NIPA tables 2.1 and 2.5.3 and Federal Reserve Board of Governors "Household Debt Service and Financial Obligations Ratios"
Thanks for posting this!
Also, don't confuse per capita GDP with purchasing power. The two are related, but not identical. Lawsuits, for example, produce no growth for the economy, but they help GDP growth, and the same goes for medical treatment.
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