24 July 2004

If cars are the measure, the standard of living of a typical American worker – 80% of the population – fell by 50%

Some insightful numbers at the Concentration of Wealth Gallery. While I don't agree the article title's premise — that "concentration of wealth" alone is responsible for a falling standard of living — the numbers indeed indicate a structural economic problem that is not being attended to. The blog author penned this piece in response to a recent NY Times article on falling hourly pay and Alan Greenspan's testimony to Congress on monetary policy.
By looking at this report from the census bureau (page 720) and this report, you can see that the median sales price of a home in 1971 was $24,800. The average annual wage in 1971 was $6,620 (see previous section). So it took 3.74 years of labor for the average worker in 1971 to buy the average home.

The median sales price of a house in 1999 was $133,300. The average annual wage in 1999 was $23,750. So it took 5.61 years of labor for the average worker in 1999 to buy the average home.

The author debunks the notion of increasing standard of living for the preponderance of Americans by looking at average wages versus cost of a home, cost of a car, and minimum wage values in years 1971 and 2000. The evidence is obvious and shatters the pollyanna naysayer counterclaims to the contrary.

However, I don't believe that an overly heavy distribution of wealth at the top is necessarily bad in itself. That's a flaw that presupposes that the amount of total wealth in the world is a constant static quanity. This is simply not true. Aggregate wealth can expand and contract, depending on environmental factors brought on by man or mother nature. Simply, there can be more cake and more pie, and efforts that attack wealth generation are not prudent measures.

Still, there is a major structural problem and it's not even being acknowledged, let alone addressed. The nature of work is changing — it takes less workers to provide the same level of productivity as in past times. Computing and robotics technology advances stifle the need for manpower. And in those enterprises where manpower is still paramount, a global economic model now moves those numbers offshore or imports workers from developing nations who lack the negotiating power and rights that citizens are entitled to. The net effect is to suppress wages and salaries for the bulk of the citizenry. A shift in our paradigm of work and compensation is most needed, yet few even are aware of this social wave and its negative ramifications.

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