THE SEVERE USA STAGNATION. Here point
1: wages
Mainstream economists are
mystified why wages/salaries are still stagnant after 7+ years of growth /
“recovery.” The conventional view is
that wages should be rising as the labor market tightens (i.e. the unemployment
rate is low) and demand for workers increases in an expanding economy.
But wages are only rising significantly for the top 5%,
while workers between the bottom 81% who have seen their household incomes
decline and the top 5% are experiencing stagnant earnings.
We can see how the top 5% have
pulled away from the bottom 95% by examining household budgets:
spending by the top 5% has soared compared to the stagnant spending of the
bottom 95%.
In effect, productivity gains
have accrued to the top 5%. This
chart shows that while productivity has advanced, household income has remained
flat.
Mainstream economists are also
puzzled about the decline in labor participation
The percentage of
the labor force that is employed or seeking work has plummeted despite 16 years
of economic expansion:
Conventional economists look to
labor market supply and demand for answers–and have come up empty.
They can’t explain why labor supply–people of working age that are
actively in the labor force–keeps declining in a growing economy.
They are equally flummoxed by stagnant demand for goods
and services: in an expanding economy, rising demand should spur higher demand
for workers that should eventually push wages higher.
These higher wages should attract non-participants to rejoin
the labor force and fuel higher demand for goods and services.
Instead, people are dropping out
of the labor force, wages are stagnant for all but the top layer and demand is
weak as well. This creates multiple serious long-term problems for
the U.S. economy: if fewer people are working, wages will continue to decline
as a percentage of the economy, which is precisely what has been happening for
decades (see chart below).
If earnings and household incomes for the bottom 95%
stagnate, these households cannot afford to borrow and spend more money–and
that’s why demand is tepid except when the purchases are financed at 0%.
If the top 5% garner most of the productivity gains, their
spending must support consumption. That’s a much shakier foundation for demand
than 80% of the households participating in wage gains.
The reason why mainstream
economists don’t understand these developments is they don’t:
1. Consider the systemic impact of energy and EROEI
(energy returned on energy invested).
2. Consider the systemic impact of fast-rising private
and public debt.
3. Consider the systemic impact of rising inflation
resulting from state-cartel capitalism; the only possible output of
state-cartel capitalism is a higher cost structure for’ the entire economy.
4. Consider that consumption is exhausted because
everyone already has everything–the utility of more consumption is increasingly
marginal.
5. Understand the perspective of employers and
marginalized workers. Most economists are safely inside the well-paid
protected castles of academia or government, and so they have no real
experience of being an entrepreneur or employer. They have no real grasp of how
difficult it is to start a business or operate a business at a profit.
Let’s review these one at a time.
To continue reading OPEN:
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