Wage inequality: you work and make $20/hr. They work and make $10/hr. Your 1 hour of work lets you induce them to work for 2 hours.
Technology: It takes 100 hours of human time to make a thing you buy. It costs 50 hours of your work ($1,000) because cheap labor makes it. We found a way to make it in 50 human hours (technology), so now it costs 25 hours of your work ($500).
Markets in long term: You're now spending 25 hours of your labor to buy what 50 hours once bought. You have 25 hours's worth of your labor ($500) unspent. You buy some other thing.
In other words: "technology" has been happening since humans sharpened a stick into a spear--or, hell, since humans learned to hunt effectively in groups instead of ineffectively alone. The whole point of technology is to reduce the number of labor-hours to make something so you pay fewer peoples's wages for that thing. That's how food went from 40% of the median income in 1900 to 33% in 1950, to 12% today. (Clothing dropping by trade was largely wage inequality, but China has improved its manufacturing processes sufficient to push the prices even lower while their workers's standard-of-living increases.)
Remember: wages are paid by revenue. You pay people's salary. Businesses only transfer that revenue around to carry out the transactions between you, workers, other businesses, and management chains. Even business itself is an organizational structure composed of management chains whose entire purpose is to make stuff happen with less labor--because self-organized laborers would be inefficient and everything they make would be expensive as all hell (it's called "artisan", "small-batch", or "hand-made" in general; but more importantly, logistics and business process management eliminate a lot of time costs).
The important point is rate. If you unemploy 50% of your labor force in a year, your economy crashes; if you do it over a decade or so, you end up with an extremely wealthy middle-class which somehow still complains that all the wealth is going elsewhere even while their internet becomes 1,500 times faster, cell phones become available, smart phones become available, more and better healthcare becomes available, clothing gets cheaper, food gets cheaper, they start living in much larger houses to store all the crap (read: luxuries) they're buying, more and more money goes to video games and home theaters, and in general every standard-of-living goes up and up without end.
Apparently, economists have fucked up so bad that they adjust median income for inflation to cite "real" median income, which might actually make it mathematically-impossible to demonstrate a large deviation in median income. When you see GDP-per-capita, that tells you what the per-capita income can buy. So when you see $49K median income becomes $52K median income in 15 years, but $31k GDP-per-capita becomes $57k, what actually happened is people who were making $49k were able to buy what $33k buys now, and people today can buy what $52k buys now.
In other words: the numbers don't make any god damned sense at a glance. "Real incomes" aren't buying power. Buying power income is a complex calculation.
it's not "magic" that causes this complete crapshoot of prices...it's the lack of a competitive market.
You mean the competition among insurers for customers, and the competition among health care providers for access to large insurer provider networks? The things that can make or break your business: whether your premium is $425 or $317/month, and whether the 240,000 regional customers in your 30-mile radius are disinclined to even show up at your office because the next guy over is covered by their insurance?
"Competition" means true costs are exposed (not "negotiated rates") and consumers have the freedom and mobility of choice to pick one doctor or hospital over another based on known rates
Actually, competition means that two or more participants stand to gain only at the expense of the others, and so tend toward behaviors which maximize their gains. In markets, that means supplying the best service at the lowest price point. In insurance markets, that means attracting customers by lowering premiums; and to do that, you must lower costs. In healthcare markets, that often means attracting insurers to allow you to participate in their provider networks, which means you must lower your prices closer to your costs if there are other providers adequate to care for the clients of the insurers (you're competing with those providers).
Businesses generally tailor their own insurance through a third party. My current employer uses Carefirst for healthcare and CVS for prescriptions, with unique plans designed by the insurance adjusters and our HR department. My employer has to pay Carefirst large amounts of money for insurance (if you've ever looked at COBRA rates, that's what your employer was paying), and I only take up about $25/month of it (of some $700). My last employer used Aflac, and the employer prior used Guardian, each having negotiated similarly for appropriate plans and bid between insurers to find who could provide something they could use to entice employees while also keeping their premiums low to maximize the business's profitability by minimizing benefits expenses.
It's an enormously-competitive market; the problem is healthcare costs in the US are ridiculous, and there's a lot of gerrymandering to cover this. Healthcare profits are all over the place, and some of them are actually pretty big; although how big is a matter of debate. That question has been asked before, with claims like HCA making 20% profit margin and Pfeizer making an egregious 43%. That compares to a rough 10% average profit margin; but are they really that big?
That's not even the whole story, though.
High profit margins are frequently a sign of risk. Pfeizer's profit margin reached a whopping 45.5% in the past few years; their current quarter margin is 10%; and their minimum profit for one year was -1.22% (a loss in Q4 2015). Their 5-year average margin? 19%. Prescription drugs are volatile, and can face large losses; when you include the cost of risk--the losses faced that eat up previous profits so the business doesn't just file for bankruptcy and make someone else pay for it all--80% of the actual price paid to Pfeizer itself is sucked into costs.
Drugs aren't even a large part of the cost of care--which is the other shoe dropping. Hospitals might average 20%, and medical devices might be 33%--although HCA seems to average 6%, and Medtronic seems to max at 25% and average only 17%--but how much medical care is drugs and hospitals, rather than doctor's office visits and preventative care?
That probably doesn't matter all that much when it comes to actual surgery. Catastrophic care is easy to talk about as a sor
We have the lowest costs of these resources now, we should have the highest growth now according to your theory.
Food BECAME cheap at a point in the past. Our population expanded. That's not the only aspect, though.
Let's say you have fertile land to make food for 1,000,000 people, but you have a population of 500,000 people. Now, you need 20% of your workforce to make food, so 100,000 of your population is farmers or farm support, and food costs roughly 20% of the income. With me so far?
Increase your population by 20%.
Now you have 600,000 people. You have ample fertile land, and can make food by employing 20% of these new people--20,000--to that end. That's 120,000 of 600,000 making food, and food costs 20% of your income.
So get up to a population of 1,000,000 already. Then, increase that by 20%.
With a population of 1,200,000, you're 200,000 past your fertile land capacity. You can still provide food, and growing it on less-fertile land means you need more irrigation and fertilizer. Yields are lower, so you need to tend 1.2 times the land, at 1.5 times the labor. So for this 20% increase, you need 30% more labor per land-area, and 20% more land area per yield... a total 56% more.
In other words: You need 31.2% of your labor to provide food for these new people, or 62,400 workers. That gives you a total 262,400 farm-related workers, and an average food cost of 21.9% of your income. Food is 9.4% more expensive.
That puts downward pressure on population growth. Your population can outright explode to 1,000,000 people; but then food gets more expensive. More labor is invested in making food, and that means less available to make the other luxuries we like; but that's okay, because there's more wages going to farmers, and higher food prices, meaning some people can't afford those luxuries anyway--more poor people, poverty increases.
Now invent GMOs.
You can now grow GMO corn, soy, and wheat. All of these things use half the farm land you used before. Now to feed 1,200,000 people, you only need the same land as you needed for 600,000 people: 40% of your fertile land is unused.
Suddenly, you can explosively grow your population by 67%, up to 2,000,000. Because literally half as much land is used for food, fertilization, irrigation, planting, and clearing actually take about half the labor: you only need 10% of your population to make food. That means food costs half as much; that, however, isn't really important in terms of scarcity. What is important is the cost of food won't increase until you break 2,000,000 people--whereas before it increased when you broke 1,000,000 people.
Does all that follow? If it costs twice as much to support twice the population at the same standard-of-living, then population can grow to double. If it costs ten times as much to support thrice the population at the same standard-of-living, the population isn't going to triple until you've found a way to scale production to support it. When it grows past double, it'll start seeing higher living costs and lower standards of living, unless you manage to bring new technology by then.
In other words: it's not that food is cheaper; it's that food doesn't get more expensive when population increases.
The practical example of this is the first green revolution somewhere around the 1920s, when population jumped from 1.3 billion to 3.2 billion in like 14 months, the year all kinds of new agricultural tech came out. Up to that point, there was a lot of screaming by global economists about us heading to famine as population started to exceed what we were capable of feeding; a lot of people got Nobel Prizes for preventing a global catastrophe.
You're saying that the value of a job isn't as important of the purchasing power created from its wages.
Ah ah no. "The value of a job" isn't a real thing. Things don't have value--even jobs.
You don't need to justify that point any further or defend it with an Economics 101 lesson.
Actually, if I brought this stuff into ECON101, the teacher would probably cry. A lot. I deal a lot in macroeconomics, and I'm using theories that are a lot more advanced than current in some places. One of my favorite economic tricks as of late is to demonstrate that scarcity does not imply that demand has exceeded supply--which has the metaphorical effect of sharpening a lot of the edges around fuzzy economic theories.
While I'm not an economist, I am a mathematician, who, as such, is inclined to tell you that "you and ten people" is eleven people total, though your math indicates a labor pool of ten. Try not to fail mathematics when you argue mathematics.
Hah, good catch; although I'm sure the point got across correctly.
Arguing about purchasing power being up when median income isn't is like a patient telling his doctor that he's not worried about his cholesterol levels because he exercises everyday and feels fit.
Actually, it's a bit like arguing that people in Japan eat a hell of a lot more salt than people in America, and yet they generally experience lower blood pressure. This happens to be true, and it's been leading us to identify that stable sodium intake does not raise blood pressure, but sudden increases in sodium intake do.
Purchasing power is income. If we doubled all of the money in circulation and doubled all the wages, median income would be up; yet people wouldn't be any richer. They'd still buy the same things they buy today, and they'd live the same lives; their savings accounts would be ransacked, although anyone holding a stock portfolio would recover quickly enough thanks to the run-up of stock prices in sudden inflation.
In other words: I can give you more dollars and change nothing about your financial situation by giving everyone more dollars. Raising the median income on its own is just inflation.
The existence of capital induces demand for products, which induces a demand for labor. Median income measures the strength salaries have to pay for products and services, which induces job creation.
There's your problem.
I told you: if I work an hour for $20/hr, I have 1 hour of labor for which I can induce someone with a $10/hr wage to work 2 hours.
What if we raised all the incomes by double?
Now instead of $20/hr or $40,000/year, I make $40/hr, or $80,000/year. The median income has doubled from $52,000 to $104,000. Salaries are up.
At the same time, that guy making $10/hr is making $20/hr. His salary doubled, too.
Well, to pay for 2 hours of his work, I was buying a $20 product. Now $20 only induces him to work 1 hour. That $20 product is now $40. I spend my 1 hour--the same amount of labor time--and induce him to work 2 hours. The same number of hours goes into products, and is bought by the same number of my working hours.
Where, pray tell, are these new jobs coming from, if a person working for 40 hours per week, for 52 weeks per year, is still only able to purchase the same products and induce the same labor and thus the same jobs as when the median income was half?
So when lower-wage jobs replace higher-pay jobs*, when existing jobs producing the same product pay less to laborers, and when jobs move to overseas markets where labor is cheaper, less demand for labor is induced. Less demand for labor creates less demand for work, restricting access to capital among laborers, which restricts their access to goods and services, decreasing quality of life.
Actually, we could pass a constitutional amendment banning the private printing of United States money if we wanted. That doesn't mean the private printing of US money isn't already illegal or bannable under Federal law.
Frequently, the role of a constitutional amendment is to establish the constitution of a country (surprising, that). For example: nothing in the U.S. Constitution establishes any sort of equal rights treatment for gay marriage--or any recognition of any marriage--and yet we had a short-lived effort to ban gay marriage with a constitutional amendment. At the time, it was understood that the Federal government could not be legally-compelled to accept gay marriages as legitimate; the goal of a Constitutional amendment was to make sure no future Federal government would, unless the states ratified an amendment repealing the one banning gay marriage.
The Federal government has unilateral right to repeal the prohibition of marijuana and other drugs (barring international treaty). This would result in a scrambling of other states to re-implement DEA controls, and to provide duplicated DEA resources to control any substances they believe should be controlled. It also heavily impacts interstate commerce because of Utah being right next to Colorado, thus being flooded with smuggled drugs across the UT-CO border as UT tries to keep MJ illegal. Thus Utah would be interested in a constitutional amendment prohibiting Marijuana, although they'll never get it: they have a great interest in making sure a coalition of states can uphold their ideal moral fiber and prevent other states from snapping it.
The prohibition of alcohol was the same: the states didn't realize what they were getting into when they all decided alcohol was detrimental to the moral fiber of the United States and that it should be constitutionally banned. They knew they wanted to prevent legislative pressure from constituents in multiple states from pushing back after the ban went into effect; they didn't realize the pressure would be so great as to distort the moral fiber of the United States, glorifying illegal drug smuggling operations as heroic efforts against tyranny and undermining their important puritan message. The social and economic impacts were so great that the states actually repealed that amendment; and they will never give up that much flexibility again without good reason.
When FDR did it, he instated a separate payroll tax to fund Social Security and unemployment, thus giving contributors a legal, moral, and political right to collect their pensions and unemployment benefits. This was to prevent future politicians from scrapping the social security system--the same way a constitutional amendment might make it a tiny bit difficult to repeal your new anti-Budweiser law. Defense against hostile successors is a common thread in lawmaking.
Actually, there is sharp growth from 1950 to 1970, after which point it becomes more-flattened. 33% of income spent on food in 1950, 15% in 1980, 13% in 2000. That's cutting it by more than half in 30 years, and then by barely 1/7th in 20 years.
The slower growth occurred when things stopped getting cheaper more-rapidly: growth was rapid in abundance and slow in scarcity.
These are not the hallmarks of a thriving economy. The US economy is in a sickly state, with too many part time jobs with no benefits. We need to stop shooting ourselves in the foot. The fact that the numbers look like an improvement is a bit like a doctor telling a patient wife that he's not sick any more. He's dead. The US needs to get healthy before it dies.
Are you telling me the OP's argument here is, "Oh my! The economy was healthy in October, but it is actually sicker in November! This is a crisis of immense magnitude! One month of severe illness is killing the US!" Was this OP's argument made in isolation of any trend leading up to the month of October, 2016?
Are you arguing that the above quote is about October 2016 to November 2016, with no prior context, rather than about the long-running state of the economy?
Even looking at take-home pay would blow that argument out of the water. The fact that we can buy more and better things than we could years or decades ago is an increase in real income.
Nobody wants to admit income is actually hard to measure, and that wage income doesn't tell you about buying power because the entire point of technical progress is to make the same things with less labor, and thus to employ the same wage-compensated hours to make more things and more-complex things. It sounds easy when I describe it in terms of wooden chairs versus chairs with cushions, but what happens when we get to talking about cars with fluid couplings versus cars with torsen differentials?
One day, we will have the same cars with self-driving modules in them. Look at Tesla: the self-driving hardware is already in the cars; you pay $2,000 for a software update. Building a car with a self-driving module versus building it without isn't flatly the cost of the module; it's also the cost of labor to make two different assemblies, and logistics to determine how many to supply of each. Those labor and logistics costs are so high in some cases that many cars with a heated seat option actually ship all seats heated, and simply don't install a heating port or connector on the seat itself--that way it gets built the same, and they simply skip a step. How do you gauge how much buying power you've gained now that a car with heated seats or a self-driving software program costs trivially-more than one without, when those things come with all cars and you only pay for the permission to use them?
Arguing about long-term economic trends like incomes going up or down requires a long-term context. A context of one-month is like trying to describe climate change in terms of August to September.
GP even argued about inflation. How much inflation do you suppose happened--or was even measured--between October and November? For that matter, with holiday sales, wouldn't inflation over a few weeks be negative, if you picked the right weeks?
It's unreasonable to assume an economics discussion about the general state of the US economy is a short-term discussion. Unemployment rate falling segways into larger discussions quite-readily. If the discussion were meant to be in a one-month total context, then OP and GP are just morons; while I don't doubt they're terrible economists, I tend to doubt people are truly that stupid--usually those kinds of absolute retards have some sort of pathological mental illness and exhibit defense mechanisms that look an awful lot like, but are distinct from, schizophrenia.
Person B: "Actually, looking at these numbers... he made things better."
Person C: "Person B is a moron and wrong. He used incorrect numbers."
Person D: "Oh, Person B is wrong. Obama fucked everything up, like Person A said."
You are Person C. You made the type of calculated argument that I would have intentionally developed if I wanted to mislead the reader into dismissing an argument without directly stating anything factually-incorrect. I responded the same way as any other reader: I interpreted your simple "you're wrong because your numbers are wrong" to incorporate "thus your conclusion is wrong"--the way every English language speaker who hasn't redone the analysis themselves would interpret it, because assuming you're not implying my conclusions are incorrect would be ludicrous.
My post is insightful and informative, because it shows that, in fact, Obama improved the economy--albeit a clerical error demonstrates that improvement to a lesser degree than actual. You argued that "every number is wrong or irrelevant" and that I should be modded down, without implying that the conclusions are correct. You either fully-understand that you're trying to convince others that Obama actually made shit worse, or you have zero ability to communicate clearly with other people and are probably considered some kind of weird-ass social failure--and likely don't even understand how awkward people find you.
you omit the fact that others, including post-secondary education and health care costs, have risen sharply relative to inflation.
You mean the part where people are spending more money to buy more and better healthcare? Yes, when you spend $6 to buy 8 gallons of beer instead of $4 to buy 3 gallons of beer, you generally do end up spending more.
Your summary of my argument was partially incorrect; I never said purchasing power has gone down.
You said that Americans aren't earning more money, and that they're producing more. The problem is the United States $47,000 median income in 2005 has become a $52,000 median income in 2015; and Americans are spending similar money on more-complex, more-advanced, more-useful things, as well as on just plain more. That's roughly-equivalent to the movement of the GDP-per-Capita.
You asked who's pocketing all this extra money, as if suggesting purchasing power has not gone up.
What people are able to do with the money they earn is irrelevant to the discussion, and only distracts from it.
What people are able to do with the money is practically a description of what money is.
Income comes from your labor-hours. Hours of labor go into producing a good--or many goods. If you and ten people making $10/hr all work to produce two toasters per hour, then we must sell each toaster for $50 to generate enough revenue to pay your base wages. Each of you works 2,000 hours each year, equivalent to 400 toasters. (In practice, we have to also pay payroll taxes, benefits, and operational overhead; and you take home less than your full wage earnings thanks to taxes.)
If I make $20/hr, I can essentially work 1 hour and induce you to work 2.
Productivity increases mean you and five other people making $10/hr work to produce two toasters per hour, and we only have to sell them for $25 each to pay your base wages. Each of you still works 2,000 hours each year, but that equates to 800 toasters. When that magnitude of productivity increase occurs sufficient to average across all the goods and services you buy, you find your same $20,000/year purchasing what $40,000 used to (deflation).
Inflation, of course, just raises prices sufficiently that you make $50,000 instead, toasters cost $60, and you get to complain about toasters being more expensive and talk about how they used to only cost $50.
In other words: the median income doesn't matter; what matters is what that income can purchase. That is the only thing that matters. That's what determines your standard of living--do you live like a West african bush tribe or like a European elite? Well, it depends on if your piles and piles of dollars buys a half a loaf of bread or a frigging jumbo yacht.
They're not earning $75,000
They're earning $52,000, as an average. I'm earning $75,000 and putting $18,000 into long-term savings, leaving $56,000--slightly more than the median. That puts me approximately in the same class, in terms of what I've been working with for finances.
They're begging for jobs that would earn them even half that, but those jobs are disappearing
We've been adding more jobs than labor force since 2010.
January, 2010: 129.802 million employed, 236.858 million labor-age population, 153.484 million labor force. 84.6% employed labor force, 54.80% employed labor age population.
January, 2011: 130.882 million employed, 238.727 million labor-age population, 153.263 million labor force. 85.4% employed labor force, 54.82% employed labor age population.
January, 2012: 133.265 million employed, 242.309 million labor-age population, 154.351 million labor force. 86.3% employed labor force, 55.00% employed labor age population.
January, 2013: 135.266 million employed, 244.757 million labor-age population, 155.666 mill
"All of parent's figures reflect the very bad last year of Bush Jr's term." The numbers I erroneously cited from 2008 were 30% better than the 2009 numbers. The 2009 numbers are worse. Unemployment is higher in 2009 at the start of Obama's term than it was in 2008--a lot higher.
You're attacking my analysis and conclusions--which favor Obama--and correcting my analysis and conclusions only favors Obama more-strongly. It would appear every point I made was correct, although the numbers backing those points were off to some degree.
Yeah I got my target year wrong, and some idiot is wargarbling about how the conclusion is inaccurate when correcting it only leans further in the direction I stated and away from the direction he's claiming.
Which is false in practice. The high abundance societies all and I do mean all have negative population growth once you exclude first and second generation immigrants (who have higher fertility).
Societies experiencing famine and economic recessions grow their population more-slowly than their population grows before and after those recessions.
Societies experiencing economic booms grow their population rapidly.
Why does population seem to always surge when food and jobs are plentiful, and then stop growing so damned much when further growth starts to make food and jobs scarce? Why does that happen?
Incorrectly described. If his theory had been correct, we would have seen massive die-offs in the 19th and 20th Century.
Why? What became scarce in the 19th and 20th century such that there was no way to provide for the people we had? Are you telling me that, some time in the 19th century, we had 2 billion people and only enough food to feed 1.5 billion people? If so, how did population not die off?
If population grows until it hits a wall, restricting its growth, then the point at which it stops is the point at which it's stable. Something must become inaccessible for population to constrict--even wars and disease only cut the population back temporarily.
There has been a very real growth in nominal median household income, while people claim that real household income is flat even as far back as pre-1970.
Meanwhile, we see in the long term reductions in the percent of that income spent on food and clothing, as well as a 31% increase in spending on shelter while the median size of shelter increases by 56% and the household size (persons) decreased by 15%. That means spending 84% as much on shelter (and 71% per area per person, but that's irrelevant except to say that we're not cramming lots of people into cramped little spaces).
Even since 2005, the food expenditure was 13% and it's now under 12% (personally, it's 3.9% for me, and I eat out a lot--frequently spending $15 for one meal, but not nearly on every meal). Across the past decades, people have been enabled to put more money into savings, buy more and better healthcare, and spend much of their money on entertainment and other discretionary spending.
That doesn't even get into what accounts for "equivalent goods and services" these days.
Dual-core desktops hit the market in 2005. That's quite a shock compared to 66MHz 486DX or 200MHz Pentium Pro chips that cost $200. Never mind the constantly-falling price of RAM, hard disk, and SSD. PCs, costing thousands of dollars in the early 90s, were $350 commodity items in the mid-2000s.
Cell phones of 1983 cost $4,000 for the phone and $55/month for the service, plus 42 cents per minute voice. Two hours per week would net you $250/month service. That's a $9,000 phone and $550/month service today. Somewhere along the line, we got consumer cell phones with $100/month service; then we had $250 flip phones, $40/month service, and text and video messaging; and now we have heterogeneous hex-core smartphones with 2GB RAM for $350, backed by $60/month service with high-speed data (although I pay $35/month to Ting instead).
An ISDN 128K line in 1998 cost $35/month and required a $250 modem. Today I get 200Mbps Comcast service over an $80 modem--it's $54,687 worth of ISDN lines all tied together for $83. Do you remember DSL talking about their wicked-fast "three megs" in 2005? I have 70 of those.
Even cars only standardized transistor radio and air conditioning in the 1950s. Now we have antilock brakes, traction control, EFI, complex suspension systems, air bags, vehicle dynamics that prevent rolling and skidding, sensors and cameras to assist in lane control and parking, and all other manner of highly-complex systems with many moving parts. Somehow, we don't pay a bigger chunk of our income for these things: cars cost about the same proportion of our income, but come loaded. This will remain true when we all have self-driving vehicles.
Your argument is essentially that somebody else has told you that we're producing more, we're not earning more, and our buying power is not increasing. My argument is that the percentage of the median income being spent on goods like food, clothing, and shelter square-footage has gone down; people have spent more on luxury, leisure, savings, and medical care; and that the common goods and services we consume have rolled in more stuff we couldn't have afforded years and decades ago, essentially taking the same portion of our money and giving us more stuff in exchange.
Reality suggests buying power has increased. A lot. People like me--at $75,000 income--are pocketing all the extra money. I bought a house and paid off the mortgage in 3 years. I'm getting ready to buy a car, but I have a couple debts I want to clear out first (adding payments on top of other payments is stupid). I bought myself a $7,000 piano for the house. I put $18,000 into my 401(k) and $3,385 into my HSA this year
And then I went and redid the numbers, and found that the correct numbers don't show that Obama did not-bad-to-slightly-good; instead, it turns out Obama's first year was much worse than Bush's last year, and so Obama actually dropped U-6 by about 4.1% instead of raising it by 0.1%, and dropped adjusted unemployment by 0.18% instead of by 0.02%.
You seem to be arguing that I used the wrong data point, thus trying to conclude Obama did much worse; except that using the correct data point shows that Obama did actually phenomenally-better. Are you, perhaps, engaging in deception to further a political viewpoint by inducing the reader to incorrect conclusions in opposition of bare facts?
Insurance just tends to hide this by spreading the cost over everyone else.
Insurance shares risk. It's an important function which gives a detailed advantage to those who do not have a high enough income to cover their own risk; and to those whose income is high enough, it frees up that income for other uses. This is a stabilizing effect providing an advantage to all involved.
In a market model, many insurers compete on premium price for many customers. To obtain access to these many customers, medical care providers compete on service price, negotiating lower margins.
For example: my office visit to my PCP for a routine physical cost $130 for 1 hour of time; however, my insurance covered it for me. My insurance paid $32, including $2.18 for blood work--that's $2.18 for two nurses to take blood, package the vials, and ship them to an external lab for analysis, as well as the lab work itself and all involved materials. I actually found the cost breakdown ludicrous, because I can't imagine how anyone--including my doctor--is getting paid above half of minimum wage at those rates.
Generic Modafinil costs $1,079 for 60 pills. My insurer doesn't cover it. For me to buy Modafinil, I have to pay out of pocket. My insurer has negotiated the rate down: for 90 pills, I have to pay $247, or $82.33 per 30-day supply, $164.66 for 60 pills. That's more-reasonable. For newer drugs like Suvorexant or Atomoxetine, the cost to get the drug to market is about $3.1 billion in the United States, so Suvorexant is $300 per 30-day (the manufacturer is giving an out-of-pocket coupon that knocks it down to $90), and Atomoxetine has been $550 per 30-day (but will be generic this year). Jumping through FDA hoops of three years of continuous study on rats, clinical trials, and three years of follow-up study on real patients ostensibly costs $318 million; but only 1 in 10 drugs at best actually makes it to market, and your profits have to cover those costs on top of synthesis costs--and early synthesis methods can be expensive and slow, although we usually find a quick and cheap way to make drugs 5-10 years later.
If I compare the costs of a procedure in India and US the amount to be paid in India at market rates at a private hospital is less than the copay in the US with silver insurance.
SunPharma modafinil costs like $40 for 60 pills in the Indian market, compared to $80 in the U.S. generic market. It's a little pricey in the U.S., but not the 100x pricey people like to talk about.
Actual medical service is often cheap elsewhere. This I don't understand. Frequently, people point to over-regulation, bogus malpractice pseudoscience suits, and other extreme costs in the United States; I haven't been able to sort signal from noise enough to get any good data on why it's expensive to provide healthcare in the U.S. All I do know is it generally is expensive, and nobody seems to be profiting shitloads for all our excessive healthcare pricing. The insurance deductions seem to be a political dance, even, with uninsured patients being offered enormous discounts in many cases--such as with doctors's offices charging $300, charging insurers a negotiated $30, and charging uninsured patients $10; but also with million-dollar surgeries turning into an $80,000 bill by some magic.
What is needed is competition.
Competition is precisely what we have.
Sometimes I think we're getting fed the bill for catastrophic care: if a patient shows up having overdosed on heroin or suffering a heart attack from bad diet, the hospital must care for them or else everyone involved faces manslaughter charges, malpractice suits, ethics board inquires, license revocations, and so forth. Someone needs to pay for all that care given to poor people who, in some other countries, would just die on the streets for lack of life-sustaining money. You've alluded to
My brain is inserted backwards; that's an off-by-one error.
2009 was 7.8% at 65.7%. Today is 4.6% at 62.7%, or 4.82% adjusted to the same labor force.
Obama's 14.2% Jan 1 2009 became 9.3% U-6, adjusting to 10.1%. So Ritz is even more wrong I guess: by any measure, Unemployment numbers are much better than when Obama took office in 2009. Economic advantage seems to have increased by only 3%, though.
So how is that $9,000 cell phone, with the $550/month service?
You know, in 1983, cell phones became commercially available. They cost $4,000, with $50/month service plus 42 cents per minute of voice. 2 hours per week means about $250/month service cost--in 2015 dollars, that's $9,000 for a phone with $550/month service. Obviously, you couldn't possibly afford something as exotic and complex as a smart phone, much less service including not only voice but large amounts of high-speed data transfer. Inflation isn't negative; a smart phone with an HD screen, quad processor, and 2GB of RAM would cost over a quarter million dollars today, and the service... Government-grade stuff, billions of dollars per year for a line.
Why I remember in 1998 when we paid $250 for a 128K ISDN data modem, and $35/month for that line. Could you imagine what a high-speed, 200Mbit/s line would cost today? It'd be ludicrous. You'd be looking at $54,687.50/month, and probably a $390,000 modem. No doubt the average American could never afford that.
That's not even getting into cars with things like traction control, power locks, or air bags. That stuff would have to be ludicrously-expensive; nobody can afford that.
Oh, wait, no. It turns out food dropped from 40% of the average family's income in 1900 to 33% in 1950, 15% in 1990, and under 12% in 2015--despite the average family eating out more than twice as frequently, paying others to cook and serve their food (food plus servants!). Clothing dropped from 12% of income to 4% in the past 25 years. Houses got bigger--living space has generally trended downward per thousand square foot of space, but has faced recent minor upward trends thanks to some market disruptions.
We spend more on entertainment, we buy more and better medical care, and we buy higher-quality goods with more complex parts and lots of stuff that we couldn't have dreamed of in 1995. Yes our damned buying power has gone up.
How is it that Americans buy so much more today than they did in 2000 or 1990 if their buying power hasn't increased? Do you imagine that inflation--raising the number of dollars by 2% per year--doesn't oppose technical progress and its deflationary effect? Do you suppose that 1.5% deflation coupled to a 3.5% per-capita increase in the number of dollars would come out to 2% inflation capable of buying 1.52% more stuff? That's an increase in buying power, dude.
Go back to Erols Internet or Juno. Pay $40 for the phone line and $15 for the service. For that $55, I can get 80Mbit/s connection today, because my buying power per fucking US Dollar has nearly doubled in the past 15 years.
This isn't the mud-huts-and-loincloths world of the 1990s.
A high labor force participation rate indicates that people are not only active in the economy which is very good thing, and it also means people are actively taking care of themselves and not relying on others.
Yes, yes, Of course. 59% LFPR is unacceptable because it means like half of all those lazy fucking female bitches are out there mooching off men, instead of going out to work and bring home their own whore-money. I see your point.
I don't even know where to begin with this statement. Labor force participation should include ALL workers...period. Just because you are "discouraged" doesn't mean you shouldn't work.
Labor force participation rate does include discouraged workers. Reading comprehension, go back to third grade for it.
You don't seem to be defining "workers". Are you trying to imply everyone above age 18 should have a job, or else they should go die somewhere because they're not doing their duty to the Party?
Your ability to buy things is contingent on price, or so goes the theory. In practice, the contingent is a matter of averaging: the sum of some number of laborers's time produces a number of things; the laborers use their money to buy things; and the revenue to pay laborers comes from the sale of what they make. You have things like debt, where laborers take additional money now to spend and pay it back later; employment cost, where a laborer's wage is less than what the employer actually spends (and must recover) on him; and savings, where an entity retains but does not eventually spend money.
"Being wealthy" as a society essentially means having a high purchasing power per capita. This can occur by trade and technical progress. Trade can either bring lower-employment-cost workers (e.g. Chinese) or technical advantages (e.g. they live right next to good foresting land, so can sustainably grow wood right by the factory rather than ship it 4,000 miles to start with). Technical progress bluntly reduces the number of labor-hours invested in making a good, meaning fewer wage-hours paid, thus the workers gain the same wages but the products consume less of those wages when bought.
So in theory, desperate employers are self-limiting: if they pay high prices, then the products have higher prices. This isn't important when the product is information: paying $10 million to develop a program that's sold to 10 million customers means you only have to charge $1/customer. That's because design and development cost most of the price, and tangible manufacture costs near-nothing (this is why piracy worries IP-driven businesses: the customers don't need to outlay thousands of dollars and hours of personal effort to get a $10 CD; the total cost to duplicate the CD by copying it over Bittorrent is less than a thousandth of a penny, even though it cost hundreds of thousands to create the CD in the first place). If the employer makes hamburgers or such, however, the price jumps up to cover the per-unit employment costs.
There's another problem, though.
In abundance, a society's population will grow faster. I first expressed this as a corollary to my theory of scarcity; someone eventually pointed me to Malthus, who had correctly described in the 1800s that population grows rapidly in abundance.
That means a society with low unemployment will expand its labor force, in part in the way you say. In large part, it will also draw more immigration--which is advantageous because that preserves our buying power (products that cost $100 don't turn into 1% more jobs and $250 products; instead, we can all keep buying tons of shit and live like kings). It will also encourage people to exit college instead of continuing to grad school. High employment rates also encourage late retirement, higher birth rates, and other expansions of the labor force in the short- and long-term.
Those implications run deep. Part of that is that any mild loss or gain of jobs is temporary: your population adjusts so as to fill those positions. If you rapidly lose jobs, you get an unemployment crisis; if you rapidly gain jobs, you get a labor shortage; and if you do either slowly, the difference is erased before it can start building into either of these things.
Generally, though, a high labor force participation rate is unsustainable unless society is very poor: if you're dealing with single households, you lose those in a generation; and otherwise, you're dealing with multiple-earner households who are trying desperately to get by. There's no economic rule that says your society can't be built on a throbbing pulse of nationalism in which we do our duty to our country by building an economic superpower by all working long hours for low wages, giving us high amounts of productive output and thus making an extremely wealthy nation with ridiculous amounts of GDP-per-capita; it's just not common for a large society to devote itself to being a slave labor state in order to win an international penis-measuring contest.
66.2% labor force participation rate in 2008. 5.0% unemployed.
Today, 62.7% labor force participation rate, 4.7% unemployed.
In direct comparison, that would be 4.96% unemployed today if we had a 66.2% labor force participation rate.
Further, the 62.7% labor force participation rate includes discouraged workers, marginally-attached workers, and part-time workers (the underemployed); it being lower than the old 66.2% means 3.5% of Americans now find their economic situation sustainable such that they don't need to seek work, where before this proportion of workers had believed they required employment (or at least the income from employment) to sustain their lives and livelihoods. Thus the reduction in labor force indicates that working-class American households are altogether better off financially today than they were 8 years ago.
So, just a hair lower direct proportion of unemployment, and significantly-improved economic status, compared to January 2008 when Obama entered office.
Also the U-6 number includes part-time employees as "unemployed", rather than directly-addressing the great and terrible problem of underemployment. Underemployment is encouraged by the ACA's provision to provide health insurance for full-time employees, whereas a provision to provide insurance for all employees would have encouraged businesses to keep fewer employees with longer hours so as to reduce their benefits costs. The ACA increased underemployment and decreased U-3, whereas the alternative strategy would have increased U-3. I believe the increase in U-3 unemployment would have been superior, but it is impolitic: people only care about number of jobs, not robustness of those jobs.
Even so, U-6 is 0.1% higher today than in January of 2008. The impact hasn't been broad and catastrophic, but it has been suboptimal compared to consolidating to fewer jobs with lower underemployment.
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It's a false flag operation to distract everyone from Donald Trump saying he wants to bang his daughter.
You have to be about as intelligent as a retarded redneck who knows everything about cars but nothing about anything else.
That should tell you something about human intelligence.
Money: irrelevant.
Wage inequality: you work and make $20/hr. They work and make $10/hr. Your 1 hour of work lets you induce them to work for 2 hours.
Technology: It takes 100 hours of human time to make a thing you buy. It costs 50 hours of your work ($1,000) because cheap labor makes it. We found a way to make it in 50 human hours (technology), so now it costs 25 hours of your work ($500).
Markets in long term: You're now spending 25 hours of your labor to buy what 50 hours once bought. You have 25 hours's worth of your labor ($500) unspent. You buy some other thing.
In other words: "technology" has been happening since humans sharpened a stick into a spear--or, hell, since humans learned to hunt effectively in groups instead of ineffectively alone. The whole point of technology is to reduce the number of labor-hours to make something so you pay fewer peoples's wages for that thing. That's how food went from 40% of the median income in 1900 to 33% in 1950, to 12% today. (Clothing dropping by trade was largely wage inequality, but China has improved its manufacturing processes sufficient to push the prices even lower while their workers's standard-of-living increases.)
Remember: wages are paid by revenue. You pay people's salary. Businesses only transfer that revenue around to carry out the transactions between you, workers, other businesses, and management chains. Even business itself is an organizational structure composed of management chains whose entire purpose is to make stuff happen with less labor--because self-organized laborers would be inefficient and everything they make would be expensive as all hell (it's called "artisan", "small-batch", or "hand-made" in general; but more importantly, logistics and business process management eliminate a lot of time costs).
The important point is rate. If you unemploy 50% of your labor force in a year, your economy crashes; if you do it over a decade or so, you end up with an extremely wealthy middle-class which somehow still complains that all the wealth is going elsewhere even while their internet becomes 1,500 times faster, cell phones become available, smart phones become available, more and better healthcare becomes available, clothing gets cheaper, food gets cheaper, they start living in much larger houses to store all the crap (read: luxuries) they're buying, more and more money goes to video games and home theaters, and in general every standard-of-living goes up and up without end.
Apparently, economists have fucked up so bad that they adjust median income for inflation to cite "real" median income, which might actually make it mathematically-impossible to demonstrate a large deviation in median income. When you see GDP-per-capita, that tells you what the per-capita income can buy. So when you see $49K median income becomes $52K median income in 15 years, but $31k GDP-per-capita becomes $57k, what actually happened is people who were making $49k were able to buy what $33k buys now, and people today can buy what $52k buys now.
In other words: the numbers don't make any god damned sense at a glance. "Real incomes" aren't buying power. Buying power income is a complex calculation.
it's not "magic" that causes this complete crapshoot of prices...it's the lack of a competitive market.
You mean the competition among insurers for customers, and the competition among health care providers for access to large insurer provider networks? The things that can make or break your business: whether your premium is $425 or $317/month, and whether the 240,000 regional customers in your 30-mile radius are disinclined to even show up at your office because the next guy over is covered by their insurance?
"Competition" means true costs are exposed (not "negotiated rates") and consumers have the freedom and mobility of choice to pick one doctor or hospital over another based on known rates
Actually, competition means that two or more participants stand to gain only at the expense of the others, and so tend toward behaviors which maximize their gains. In markets, that means supplying the best service at the lowest price point. In insurance markets, that means attracting customers by lowering premiums; and to do that, you must lower costs. In healthcare markets, that often means attracting insurers to allow you to participate in their provider networks, which means you must lower your prices closer to your costs if there are other providers adequate to care for the clients of the insurers (you're competing with those providers).
Businesses generally tailor their own insurance through a third party. My current employer uses Carefirst for healthcare and CVS for prescriptions, with unique plans designed by the insurance adjusters and our HR department. My employer has to pay Carefirst large amounts of money for insurance (if you've ever looked at COBRA rates, that's what your employer was paying), and I only take up about $25/month of it (of some $700). My last employer used Aflac, and the employer prior used Guardian, each having negotiated similarly for appropriate plans and bid between insurers to find who could provide something they could use to entice employees while also keeping their premiums low to maximize the business's profitability by minimizing benefits expenses.
It's an enormously-competitive market; the problem is healthcare costs in the US are ridiculous, and there's a lot of gerrymandering to cover this. Healthcare profits are all over the place, and some of them are actually pretty big; although how big is a matter of debate. That question has been asked before, with claims like HCA making 20% profit margin and Pfeizer making an egregious 43%. That compares to a rough 10% average profit margin; but are they really that big?
That's not even the whole story, though.
High profit margins are frequently a sign of risk. Pfeizer's profit margin reached a whopping 45.5% in the past few years; their current quarter margin is 10%; and their minimum profit for one year was -1.22% (a loss in Q4 2015). Their 5-year average margin? 19%. Prescription drugs are volatile, and can face large losses; when you include the cost of risk--the losses faced that eat up previous profits so the business doesn't just file for bankruptcy and make someone else pay for it all--80% of the actual price paid to Pfeizer itself is sucked into costs.
Drugs aren't even a large part of the cost of care--which is the other shoe dropping. Hospitals might average 20%, and medical devices might be 33%--although HCA seems to average 6%, and Medtronic seems to max at 25% and average only 17%--but how much medical care is drugs and hospitals, rather than doctor's office visits and preventative care?
That probably doesn't matter all that much when it comes to actual surgery. Catastrophic care is easy to talk about as a sor
We have the lowest costs of these resources now, we should have the highest growth now according to your theory.
Food BECAME cheap at a point in the past. Our population expanded. That's not the only aspect, though.
Let's say you have fertile land to make food for 1,000,000 people, but you have a population of 500,000 people. Now, you need 20% of your workforce to make food, so 100,000 of your population is farmers or farm support, and food costs roughly 20% of the income. With me so far?
Increase your population by 20%.
Now you have 600,000 people. You have ample fertile land, and can make food by employing 20% of these new people--20,000--to that end. That's 120,000 of 600,000 making food, and food costs 20% of your income.
So get up to a population of 1,000,000 already. Then, increase that by 20%.
With a population of 1,200,000, you're 200,000 past your fertile land capacity. You can still provide food, and growing it on less-fertile land means you need more irrigation and fertilizer. Yields are lower, so you need to tend 1.2 times the land, at 1.5 times the labor. So for this 20% increase, you need 30% more labor per land-area, and 20% more land area per yield... a total 56% more.
In other words: You need 31.2% of your labor to provide food for these new people, or 62,400 workers. That gives you a total 262,400 farm-related workers, and an average food cost of 21.9% of your income. Food is 9.4% more expensive.
That puts downward pressure on population growth. Your population can outright explode to 1,000,000 people; but then food gets more expensive. More labor is invested in making food, and that means less available to make the other luxuries we like; but that's okay, because there's more wages going to farmers, and higher food prices, meaning some people can't afford those luxuries anyway--more poor people, poverty increases.
Now invent GMOs.
You can now grow GMO corn, soy, and wheat. All of these things use half the farm land you used before. Now to feed 1,200,000 people, you only need the same land as you needed for 600,000 people: 40% of your fertile land is unused.
Suddenly, you can explosively grow your population by 67%, up to 2,000,000. Because literally half as much land is used for food, fertilization, irrigation, planting, and clearing actually take about half the labor: you only need 10% of your population to make food. That means food costs half as much; that, however, isn't really important in terms of scarcity. What is important is the cost of food won't increase until you break 2,000,000 people--whereas before it increased when you broke 1,000,000 people.
Does all that follow? If it costs twice as much to support twice the population at the same standard-of-living, then population can grow to double. If it costs ten times as much to support thrice the population at the same standard-of-living, the population isn't going to triple until you've found a way to scale production to support it. When it grows past double, it'll start seeing higher living costs and lower standards of living, unless you manage to bring new technology by then.
In other words: it's not that food is cheaper; it's that food doesn't get more expensive when population increases.
The practical example of this is the first green revolution somewhere around the 1920s, when population jumped from 1.3 billion to 3.2 billion in like 14 months, the year all kinds of new agricultural tech came out. Up to that point, there was a lot of screaming by global economists about us heading to famine as population started to exceed what we were capable of feeding; a lot of people got Nobel Prizes for preventing a global catastrophe.
You're saying that the value of a job isn't as important of the purchasing power created from its wages.
Ah ah no. "The value of a job" isn't a real thing. Things don't have value--even jobs.
You don't need to justify that point any further or defend it with an Economics 101 lesson.
Actually, if I brought this stuff into ECON101, the teacher would probably cry. A lot. I deal a lot in macroeconomics, and I'm using theories that are a lot more advanced than current in some places. One of my favorite economic tricks as of late is to demonstrate that scarcity does not imply that demand has exceeded supply--which has the metaphorical effect of sharpening a lot of the edges around fuzzy economic theories.
While I'm not an economist, I am a mathematician, who, as such, is inclined to tell you that "you and ten people" is eleven people total, though your math indicates a labor pool of ten. Try not to fail mathematics when you argue mathematics.
Hah, good catch; although I'm sure the point got across correctly.
Arguing about purchasing power being up when median income isn't is like a patient telling his doctor that he's not worried about his cholesterol levels because he exercises everyday and feels fit.
Actually, it's a bit like arguing that people in Japan eat a hell of a lot more salt than people in America, and yet they generally experience lower blood pressure. This happens to be true, and it's been leading us to identify that stable sodium intake does not raise blood pressure, but sudden increases in sodium intake do.
Purchasing power is income. If we doubled all of the money in circulation and doubled all the wages, median income would be up; yet people wouldn't be any richer. They'd still buy the same things they buy today, and they'd live the same lives; their savings accounts would be ransacked, although anyone holding a stock portfolio would recover quickly enough thanks to the run-up of stock prices in sudden inflation.
In other words: I can give you more dollars and change nothing about your financial situation by giving everyone more dollars. Raising the median income on its own is just inflation.
The existence of capital induces demand for products, which induces a demand for labor. Median income measures the strength salaries have to pay for products and services, which induces job creation.
There's your problem.
I told you: if I work an hour for $20/hr, I have 1 hour of labor for which I can induce someone with a $10/hr wage to work 2 hours.
What if we raised all the incomes by double?
Now instead of $20/hr or $40,000/year, I make $40/hr, or $80,000/year. The median income has doubled from $52,000 to $104,000. Salaries are up.
At the same time, that guy making $10/hr is making $20/hr. His salary doubled, too.
Well, to pay for 2 hours of his work, I was buying a $20 product. Now $20 only induces him to work 1 hour. That $20 product is now $40. I spend my 1 hour--the same amount of labor time--and induce him to work 2 hours. The same number of hours goes into products, and is bought by the same number of my working hours.
Where, pray tell, are these new jobs coming from, if a person working for 40 hours per week, for 52 weeks per year, is still only able to purchase the same products and induce the same labor and thus the same jobs as when the median income was half?
So when lower-wage jobs replace higher-pay jobs*, when existing jobs producing the same product pay less to laborers, and when jobs move to overseas markets where labor is cheaper, less demand for labor is induced. Less demand for labor creates less demand for work, restricting access to capital among laborers, which restricts their access to goods and services, decreasing quality of life.
Actually, when some bu
Actually, we could pass a constitutional amendment banning the private printing of United States money if we wanted. That doesn't mean the private printing of US money isn't already illegal or bannable under Federal law.
Frequently, the role of a constitutional amendment is to establish the constitution of a country (surprising, that). For example: nothing in the U.S. Constitution establishes any sort of equal rights treatment for gay marriage--or any recognition of any marriage--and yet we had a short-lived effort to ban gay marriage with a constitutional amendment. At the time, it was understood that the Federal government could not be legally-compelled to accept gay marriages as legitimate; the goal of a Constitutional amendment was to make sure no future Federal government would, unless the states ratified an amendment repealing the one banning gay marriage.
The Federal government has unilateral right to repeal the prohibition of marijuana and other drugs (barring international treaty). This would result in a scrambling of other states to re-implement DEA controls, and to provide duplicated DEA resources to control any substances they believe should be controlled. It also heavily impacts interstate commerce because of Utah being right next to Colorado, thus being flooded with smuggled drugs across the UT-CO border as UT tries to keep MJ illegal. Thus Utah would be interested in a constitutional amendment prohibiting Marijuana, although they'll never get it: they have a great interest in making sure a coalition of states can uphold their ideal moral fiber and prevent other states from snapping it.
The prohibition of alcohol was the same: the states didn't realize what they were getting into when they all decided alcohol was detrimental to the moral fiber of the United States and that it should be constitutionally banned. They knew they wanted to prevent legislative pressure from constituents in multiple states from pushing back after the ban went into effect; they didn't realize the pressure would be so great as to distort the moral fiber of the United States, glorifying illegal drug smuggling operations as heroic efforts against tyranny and undermining their important puritan message. The social and economic impacts were so great that the states actually repealed that amendment; and they will never give up that much flexibility again without good reason.
When FDR did it, he instated a separate payroll tax to fund Social Security and unemployment, thus giving contributors a legal, moral, and political right to collect their pensions and unemployment benefits. This was to prevent future politicians from scrapping the social security system--the same way a constitutional amendment might make it a tiny bit difficult to repeal your new anti-Budweiser law. Defense against hostile successors is a common thread in lawmaking.
Actually, there is sharp growth from 1950 to 1970, after which point it becomes more-flattened. 33% of income spent on food in 1950, 15% in 1980, 13% in 2000. That's cutting it by more than half in 30 years, and then by barely 1/7th in 20 years.
The slower growth occurred when things stopped getting cheaper more-rapidly: growth was rapid in abundance and slow in scarcity.
TFA is talking about a month-to-month report.
And the OP said:
These are not the hallmarks of a thriving economy. The US economy is in a sickly state, with too many part time jobs with no benefits. We need to stop shooting ourselves in the foot. The fact that the numbers look like an improvement is a bit like a doctor telling a patient wife that he's not sick any more. He's dead. The US needs to get healthy before it dies.
Are you telling me the OP's argument here is, "Oh my! The economy was healthy in October, but it is actually sicker in November! This is a crisis of immense magnitude! One month of severe illness is killing the US!" Was this OP's argument made in isolation of any trend leading up to the month of October, 2016?
Are you arguing that the above quote is about October 2016 to November 2016, with no prior context, rather than about the long-running state of the economy?
Even looking at take-home pay would blow that argument out of the water. The fact that we can buy more and better things than we could years or decades ago is an increase in real income.
Nobody wants to admit income is actually hard to measure, and that wage income doesn't tell you about buying power because the entire point of technical progress is to make the same things with less labor, and thus to employ the same wage-compensated hours to make more things and more-complex things. It sounds easy when I describe it in terms of wooden chairs versus chairs with cushions, but what happens when we get to talking about cars with fluid couplings versus cars with torsen differentials?
One day, we will have the same cars with self-driving modules in them. Look at Tesla: the self-driving hardware is already in the cars; you pay $2,000 for a software update. Building a car with a self-driving module versus building it without isn't flatly the cost of the module; it's also the cost of labor to make two different assemblies, and logistics to determine how many to supply of each. Those labor and logistics costs are so high in some cases that many cars with a heated seat option actually ship all seats heated, and simply don't install a heating port or connector on the seat itself--that way it gets built the same, and they simply skip a step. How do you gauge how much buying power you've gained now that a car with heated seats or a self-driving software program costs trivially-more than one without, when those things come with all cars and you only pay for the permission to use them?
Arguing about long-term economic trends like incomes going up or down requires a long-term context. A context of one-month is like trying to describe climate change in terms of August to September.
GP even argued about inflation. How much inflation do you suppose happened--or was even measured--between October and November? For that matter, with holiday sales, wouldn't inflation over a few weeks be negative, if you picked the right weeks?
It's unreasonable to assume an economics discussion about the general state of the US economy is a short-term discussion. Unemployment rate falling segways into larger discussions quite-readily. If the discussion were meant to be in a one-month total context, then OP and GP are just morons; while I don't doubt they're terrible economists, I tend to doubt people are truly that stupid--usually those kinds of absolute retards have some sort of pathological mental illness and exhibit defense mechanisms that look an awful lot like, but are distinct from, schizophrenia.
Person A: "Obama fucked everything up."
Person B: "Actually, looking at these numbers... he made things better."
Person C: "Person B is a moron and wrong. He used incorrect numbers."
Person D: "Oh, Person B is wrong. Obama fucked everything up, like Person A said."
You are Person C. You made the type of calculated argument that I would have intentionally developed if I wanted to mislead the reader into dismissing an argument without directly stating anything factually-incorrect. I responded the same way as any other reader: I interpreted your simple "you're wrong because your numbers are wrong" to incorporate "thus your conclusion is wrong"--the way every English language speaker who hasn't redone the analysis themselves would interpret it, because assuming you're not implying my conclusions are incorrect would be ludicrous.
My post is insightful and informative, because it shows that, in fact, Obama improved the economy--albeit a clerical error demonstrates that improvement to a lesser degree than actual. You argued that "every number is wrong or irrelevant" and that I should be modded down, without implying that the conclusions are correct. You either fully-understand that you're trying to convince others that Obama actually made shit worse, or you have zero ability to communicate clearly with other people and are probably considered some kind of weird-ass social failure--and likely don't even understand how awkward people find you.
you omit the fact that others, including post-secondary education and health care costs, have risen sharply relative to inflation.
You mean the part where people are spending more money to buy more and better healthcare? Yes, when you spend $6 to buy 8 gallons of beer instead of $4 to buy 3 gallons of beer, you generally do end up spending more.
Your summary of my argument was partially incorrect; I never said purchasing power has gone down.
You said that Americans aren't earning more money, and that they're producing more. The problem is the United States $47,000 median income in 2005 has become a $52,000 median income in 2015; and Americans are spending similar money on more-complex, more-advanced, more-useful things, as well as on just plain more. That's roughly-equivalent to the movement of the GDP-per-Capita.
You asked who's pocketing all this extra money, as if suggesting purchasing power has not gone up.
What people are able to do with the money they earn is irrelevant to the discussion, and only distracts from it.
What people are able to do with the money is practically a description of what money is.
Income comes from your labor-hours. Hours of labor go into producing a good--or many goods. If you and ten people making $10/hr all work to produce two toasters per hour, then we must sell each toaster for $50 to generate enough revenue to pay your base wages. Each of you works 2,000 hours each year, equivalent to 400 toasters. (In practice, we have to also pay payroll taxes, benefits, and operational overhead; and you take home less than your full wage earnings thanks to taxes.)
If I make $20/hr, I can essentially work 1 hour and induce you to work 2.
Productivity increases mean you and five other people making $10/hr work to produce two toasters per hour, and we only have to sell them for $25 each to pay your base wages. Each of you still works 2,000 hours each year, but that equates to 800 toasters. When that magnitude of productivity increase occurs sufficient to average across all the goods and services you buy, you find your same $20,000/year purchasing what $40,000 used to (deflation).
Inflation, of course, just raises prices sufficiently that you make $50,000 instead, toasters cost $60, and you get to complain about toasters being more expensive and talk about how they used to only cost $50.
In other words: the median income doesn't matter; what matters is what that income can purchase. That is the only thing that matters. That's what determines your standard of living--do you live like a West african bush tribe or like a European elite? Well, it depends on if your piles and piles of dollars buys a half a loaf of bread or a frigging jumbo yacht.
They're not earning $75,000
They're earning $52,000, as an average. I'm earning $75,000 and putting $18,000 into long-term savings, leaving $56,000--slightly more than the median. That puts me approximately in the same class, in terms of what I've been working with for finances.
They're begging for jobs that would earn them even half that, but those jobs are disappearing
We've been adding more jobs than labor force since 2010.
January, 2010: 129.802 million employed, 236.858 million labor-age population, 153.484 million labor force. 84.6% employed labor force, 54.80% employed labor age population.
January, 2011: 130.882 million employed, 238.727 million labor-age population, 153.263 million labor force. 85.4% employed labor force, 54.82% employed labor age population.
January, 2012: 133.265 million employed, 242.309 million labor-age population, 154.351 million labor force. 86.3% employed labor force, 55.00% employed labor age population.
January, 2013: 135.266 million employed, 244.757 million labor-age population, 155.666 mill
"All of parent's figures reflect the very bad last year of Bush Jr's term." The numbers I erroneously cited from 2008 were 30% better than the 2009 numbers. The 2009 numbers are worse. Unemployment is higher in 2009 at the start of Obama's term than it was in 2008--a lot higher.
You're attacking my analysis and conclusions--which favor Obama--and correcting my analysis and conclusions only favors Obama more-strongly. It would appear every point I made was correct, although the numbers backing those points were off to some degree.
Yeah I got my target year wrong, and some idiot is wargarbling about how the conclusion is inaccurate when correcting it only leans further in the direction I stated and away from the direction he's claiming.
Which is false in practice. The high abundance societies all and I do mean all have negative population growth once you exclude first and second generation immigrants (who have higher fertility).
Societies experiencing famine and economic recessions grow their population more-slowly than their population grows before and after those recessions.
Societies experiencing economic booms grow their population rapidly.
Take a look at the era surrounding the great depression here. Now take a look at 1950-1980. What happened after 1970? What happened between 1950 and 1980?
Why does population seem to always surge when food and jobs are plentiful, and then stop growing so damned much when further growth starts to make food and jobs scarce? Why does that happen?
Incorrectly described. If his theory had been correct, we would have seen massive die-offs in the 19th and 20th Century.
Why? What became scarce in the 19th and 20th century such that there was no way to provide for the people we had? Are you telling me that, some time in the 19th century, we had 2 billion people and only enough food to feed 1.5 billion people? If so, how did population not die off?
If population grows until it hits a wall, restricting its growth, then the point at which it stops is the point at which it's stable. Something must become inaccessible for population to constrict--even wars and disease only cut the population back temporarily.
I dispute those numbers.
There has been a very real growth in nominal median household income, while people claim that real household income is flat even as far back as pre-1970.
Meanwhile, we see in the long term reductions in the percent of that income spent on food and clothing, as well as a 31% increase in spending on shelter while the median size of shelter increases by 56% and the household size (persons) decreased by 15%. That means spending 84% as much on shelter (and 71% per area per person, but that's irrelevant except to say that we're not cramming lots of people into cramped little spaces).
Even since 2005, the food expenditure was 13% and it's now under 12% (personally, it's 3.9% for me, and I eat out a lot--frequently spending $15 for one meal, but not nearly on every meal). Across the past decades, people have been enabled to put more money into savings, buy more and better healthcare, and spend much of their money on entertainment and other discretionary spending.
That doesn't even get into what accounts for "equivalent goods and services" these days.
Dual-core desktops hit the market in 2005. That's quite a shock compared to 66MHz 486DX or 200MHz Pentium Pro chips that cost $200. Never mind the constantly-falling price of RAM, hard disk, and SSD. PCs, costing thousands of dollars in the early 90s, were $350 commodity items in the mid-2000s.
Cell phones of 1983 cost $4,000 for the phone and $55/month for the service, plus 42 cents per minute voice. Two hours per week would net you $250/month service. That's a $9,000 phone and $550/month service today. Somewhere along the line, we got consumer cell phones with $100/month service; then we had $250 flip phones, $40/month service, and text and video messaging; and now we have heterogeneous hex-core smartphones with 2GB RAM for $350, backed by $60/month service with high-speed data (although I pay $35/month to Ting instead).
An ISDN 128K line in 1998 cost $35/month and required a $250 modem. Today I get 200Mbps Comcast service over an $80 modem--it's $54,687 worth of ISDN lines all tied together for $83. Do you remember DSL talking about their wicked-fast "three megs" in 2005? I have 70 of those.
Even cars only standardized transistor radio and air conditioning in the 1950s. Now we have antilock brakes, traction control, EFI, complex suspension systems, air bags, vehicle dynamics that prevent rolling and skidding, sensors and cameras to assist in lane control and parking, and all other manner of highly-complex systems with many moving parts. Somehow, we don't pay a bigger chunk of our income for these things: cars cost about the same proportion of our income, but come loaded. This will remain true when we all have self-driving vehicles.
Your argument is essentially that somebody else has told you that we're producing more, we're not earning more, and our buying power is not increasing. My argument is that the percentage of the median income being spent on goods like food, clothing, and shelter square-footage has gone down; people have spent more on luxury, leisure, savings, and medical care; and that the common goods and services we consume have rolled in more stuff we couldn't have afforded years and decades ago, essentially taking the same portion of our money and giving us more stuff in exchange.
Reality suggests buying power has increased. A lot. People like me--at $75,000 income--are pocketing all the extra money. I bought a house and paid off the mortgage in 3 years. I'm getting ready to buy a car, but I have a couple debts I want to clear out first (adding payments on top of other payments is stupid). I bought myself a $7,000 piano for the house. I put $18,000 into my 401(k) and $3,385 into my HSA this year
And then I went and redid the numbers, and found that the correct numbers don't show that Obama did not-bad-to-slightly-good; instead, it turns out Obama's first year was much worse than Bush's last year, and so Obama actually dropped U-6 by about 4.1% instead of raising it by 0.1%, and dropped adjusted unemployment by 0.18% instead of by 0.02%.
You seem to be arguing that I used the wrong data point, thus trying to conclude Obama did much worse; except that using the correct data point shows that Obama did actually phenomenally-better. Are you, perhaps, engaging in deception to further a political viewpoint by inducing the reader to incorrect conclusions in opposition of bare facts?
Uh, I covered that. What do you think adjusting for labor force participation rate is? What do you think labor force is?
The entire point of my post was to account for the 20M people added to the job force.
Insurance just tends to hide this by spreading the cost over everyone else.
Insurance shares risk. It's an important function which gives a detailed advantage to those who do not have a high enough income to cover their own risk; and to those whose income is high enough, it frees up that income for other uses. This is a stabilizing effect providing an advantage to all involved.
In a market model, many insurers compete on premium price for many customers. To obtain access to these many customers, medical care providers compete on service price, negotiating lower margins.
For example: my office visit to my PCP for a routine physical cost $130 for 1 hour of time; however, my insurance covered it for me. My insurance paid $32, including $2.18 for blood work--that's $2.18 for two nurses to take blood, package the vials, and ship them to an external lab for analysis, as well as the lab work itself and all involved materials. I actually found the cost breakdown ludicrous, because I can't imagine how anyone--including my doctor--is getting paid above half of minimum wage at those rates.
Generic Modafinil costs $1,079 for 60 pills. My insurer doesn't cover it. For me to buy Modafinil, I have to pay out of pocket. My insurer has negotiated the rate down: for 90 pills, I have to pay $247, or $82.33 per 30-day supply, $164.66 for 60 pills. That's more-reasonable. For newer drugs like Suvorexant or Atomoxetine, the cost to get the drug to market is about $3.1 billion in the United States, so Suvorexant is $300 per 30-day (the manufacturer is giving an out-of-pocket coupon that knocks it down to $90), and Atomoxetine has been $550 per 30-day (but will be generic this year). Jumping through FDA hoops of three years of continuous study on rats, clinical trials, and three years of follow-up study on real patients ostensibly costs $318 million; but only 1 in 10 drugs at best actually makes it to market, and your profits have to cover those costs on top of synthesis costs--and early synthesis methods can be expensive and slow, although we usually find a quick and cheap way to make drugs 5-10 years later.
If I compare the costs of a procedure in India and US the amount to be paid in India at market rates at a private hospital is less than the copay in the US with silver insurance.
SunPharma modafinil costs like $40 for 60 pills in the Indian market, compared to $80 in the U.S. generic market. It's a little pricey in the U.S., but not the 100x pricey people like to talk about.
Actual medical service is often cheap elsewhere. This I don't understand. Frequently, people point to over-regulation, bogus malpractice pseudoscience suits, and other extreme costs in the United States; I haven't been able to sort signal from noise enough to get any good data on why it's expensive to provide healthcare in the U.S. All I do know is it generally is expensive, and nobody seems to be profiting shitloads for all our excessive healthcare pricing. The insurance deductions seem to be a political dance, even, with uninsured patients being offered enormous discounts in many cases--such as with doctors's offices charging $300, charging insurers a negotiated $30, and charging uninsured patients $10; but also with million-dollar surgeries turning into an $80,000 bill by some magic.
What is needed is competition.
Competition is precisely what we have.
Sometimes I think we're getting fed the bill for catastrophic care: if a patient shows up having overdosed on heroin or suffering a heart attack from bad diet, the hospital must care for them or else everyone involved faces manslaughter charges, malpractice suits, ethics board inquires, license revocations, and so forth. Someone needs to pay for all that care given to poor people who, in some other countries, would just die on the streets for lack of life-sustaining money. You've alluded to
My brain is inserted backwards; that's an off-by-one error.
2009 was 7.8% at 65.7%. Today is 4.6% at 62.7%, or 4.82% adjusted to the same labor force.
Obama's 14.2% Jan 1 2009 became 9.3% U-6, adjusting to 10.1%. So Ritz is even more wrong I guess: by any measure, Unemployment numbers are much better than when Obama took office in 2009. Economic advantage seems to have increased by only 3%, though.
So how is that $9,000 cell phone, with the $550/month service?
You know, in 1983, cell phones became commercially available. They cost $4,000, with $50/month service plus 42 cents per minute of voice. 2 hours per week means about $250/month service cost--in 2015 dollars, that's $9,000 for a phone with $550/month service. Obviously, you couldn't possibly afford something as exotic and complex as a smart phone, much less service including not only voice but large amounts of high-speed data transfer. Inflation isn't negative; a smart phone with an HD screen, quad processor, and 2GB of RAM would cost over a quarter million dollars today, and the service... Government-grade stuff, billions of dollars per year for a line.
Why I remember in 1998 when we paid $250 for a 128K ISDN data modem, and $35/month for that line. Could you imagine what a high-speed, 200Mbit/s line would cost today? It'd be ludicrous. You'd be looking at $54,687.50/month, and probably a $390,000 modem. No doubt the average American could never afford that.
That's not even getting into cars with things like traction control, power locks, or air bags. That stuff would have to be ludicrously-expensive; nobody can afford that.
Oh, wait, no. It turns out food dropped from 40% of the average family's income in 1900 to 33% in 1950, 15% in 1990, and under 12% in 2015--despite the average family eating out more than twice as frequently, paying others to cook and serve their food (food plus servants!). Clothing dropped from 12% of income to 4% in the past 25 years. Houses got bigger--living space has generally trended downward per thousand square foot of space, but has faced recent minor upward trends thanks to some market disruptions.
We spend more on entertainment, we buy more and better medical care, and we buy higher-quality goods with more complex parts and lots of stuff that we couldn't have dreamed of in 1995. Yes our damned buying power has gone up.
How is it that Americans buy so much more today than they did in 2000 or 1990 if their buying power hasn't increased? Do you imagine that inflation--raising the number of dollars by 2% per year--doesn't oppose technical progress and its deflationary effect? Do you suppose that 1.5% deflation coupled to a 3.5% per-capita increase in the number of dollars would come out to 2% inflation capable of buying 1.52% more stuff? That's an increase in buying power, dude.
Go back to Erols Internet or Juno. Pay $40 for the phone line and $15 for the service. For that $55, I can get 80Mbit/s connection today, because my buying power per fucking US Dollar has nearly doubled in the past 15 years.
This isn't the mud-huts-and-loincloths world of the 1990s.
A high labor force participation rate indicates that people are not only active in the economy which is very good thing, and it also means people are actively taking care of themselves and not relying on others.
Yes, yes, Of course. 59% LFPR is unacceptable because it means like half of all those lazy fucking female bitches are out there mooching off men, instead of going out to work and bring home their own whore-money. I see your point.
I don't even know where to begin with this statement. Labor force participation should include ALL workers...period. Just because you are "discouraged" doesn't mean you shouldn't work.
Labor force participation rate does include discouraged workers. Reading comprehension, go back to third grade for it.
You don't seem to be defining "workers". Are you trying to imply everyone above age 18 should have a job, or else they should go die somewhere because they're not doing their duty to the Party?
Tricky.
Your ability to buy things is contingent on price, or so goes the theory. In practice, the contingent is a matter of averaging: the sum of some number of laborers's time produces a number of things; the laborers use their money to buy things; and the revenue to pay laborers comes from the sale of what they make. You have things like debt, where laborers take additional money now to spend and pay it back later; employment cost, where a laborer's wage is less than what the employer actually spends (and must recover) on him; and savings, where an entity retains but does not eventually spend money.
"Being wealthy" as a society essentially means having a high purchasing power per capita. This can occur by trade and technical progress. Trade can either bring lower-employment-cost workers (e.g. Chinese) or technical advantages (e.g. they live right next to good foresting land, so can sustainably grow wood right by the factory rather than ship it 4,000 miles to start with). Technical progress bluntly reduces the number of labor-hours invested in making a good, meaning fewer wage-hours paid, thus the workers gain the same wages but the products consume less of those wages when bought.
So in theory, desperate employers are self-limiting: if they pay high prices, then the products have higher prices. This isn't important when the product is information: paying $10 million to develop a program that's sold to 10 million customers means you only have to charge $1/customer. That's because design and development cost most of the price, and tangible manufacture costs near-nothing (this is why piracy worries IP-driven businesses: the customers don't need to outlay thousands of dollars and hours of personal effort to get a $10 CD; the total cost to duplicate the CD by copying it over Bittorrent is less than a thousandth of a penny, even though it cost hundreds of thousands to create the CD in the first place). If the employer makes hamburgers or such, however, the price jumps up to cover the per-unit employment costs.
There's another problem, though.
In abundance, a society's population will grow faster. I first expressed this as a corollary to my theory of scarcity; someone eventually pointed me to Malthus, who had correctly described in the 1800s that population grows rapidly in abundance.
That means a society with low unemployment will expand its labor force, in part in the way you say. In large part, it will also draw more immigration--which is advantageous because that preserves our buying power (products that cost $100 don't turn into 1% more jobs and $250 products; instead, we can all keep buying tons of shit and live like kings). It will also encourage people to exit college instead of continuing to grad school. High employment rates also encourage late retirement, higher birth rates, and other expansions of the labor force in the short- and long-term.
Those implications run deep. Part of that is that any mild loss or gain of jobs is temporary: your population adjusts so as to fill those positions. If you rapidly lose jobs, you get an unemployment crisis; if you rapidly gain jobs, you get a labor shortage; and if you do either slowly, the difference is erased before it can start building into either of these things.
Generally, though, a high labor force participation rate is unsustainable unless society is very poor: if you're dealing with single households, you lose those in a generation; and otherwise, you're dealing with multiple-earner households who are trying desperately to get by. There's no economic rule that says your society can't be built on a throbbing pulse of nationalism in which we do our duty to our country by building an economic superpower by all working long hours for low wages, giving us high amounts of productive output and thus making an extremely wealthy nation with ridiculous amounts of GDP-per-capita; it's just not common for a large society to devote itself to being a slave labor state in order to win an international penis-measuring contest.
I don't know. Let's do a full comparison.
66.2% labor force participation rate in 2008. 5.0% unemployed.
Today, 62.7% labor force participation rate, 4.7% unemployed.
In direct comparison, that would be 4.96% unemployed today if we had a 66.2% labor force participation rate.
Further, the 62.7% labor force participation rate includes discouraged workers, marginally-attached workers, and part-time workers (the underemployed); it being lower than the old 66.2% means 3.5% of Americans now find their economic situation sustainable such that they don't need to seek work, where before this proportion of workers had believed they required employment (or at least the income from employment) to sustain their lives and livelihoods. Thus the reduction in labor force indicates that working-class American households are altogether better off financially today than they were 8 years ago.
So, just a hair lower direct proportion of unemployment, and significantly-improved economic status, compared to January 2008 when Obama entered office.
Also the U-6 number includes part-time employees as "unemployed", rather than directly-addressing the great and terrible problem of underemployment. Underemployment is encouraged by the ACA's provision to provide health insurance for full-time employees, whereas a provision to provide insurance for all employees would have encouraged businesses to keep fewer employees with longer hours so as to reduce their benefits costs. The ACA increased underemployment and decreased U-3, whereas the alternative strategy would have increased U-3. I believe the increase in U-3 unemployment would have been superior, but it is impolitic: people only care about number of jobs, not robustness of those jobs.
Even so, U-6 is 0.1% higher today than in January of 2008. The impact hasn't been broad and catastrophic, but it has been suboptimal compared to consolidating to fewer jobs with lower underemployment.