I never enjoyed economics in college and the greedy profit maximization I saw in my business career left me cold. Prof. Wolfers has be engaged in a new classroom and learning new things every day.
Wolfers tells us that In the Republican Reaganomics era political decisions that favored the wealthy (or "owners" described in this piece) were supposed to "trickle DOWN" economic benefit to all from the owners or wealthy patrons. Is that working for you? Instead, Republican policies that favor the rich owners seem to have put all economic benefit on an "elevator UP" to the billionaires. And then he points out that shifts in income of workers and owners results in and relies on POWER.
The "volume" or number of "workers" is greater than the "owners." How do workers use the power of volume to move to a more balanced distribution of wealth and/or income? What - besides wage bargaining - do workers have to shift economic benefits from their work?
Hi Justin, Good posting. Got me thinking about my own journey through life (I’m a boomer). When I entered the labor force, 100% of my income was wages. When middle aged, I left a very good position to start a company so then my income became a mix of profits and wages. Then I retired and now almost all of my income is from investments (retirement plan and 401K rolled over to an IRA plus capital gains, interest, and dividends from investments made with after tax money). So I wonder how much of the statistics are driven by my very large generation taking this path? In addition, when I view these types of statistics or, as in this case, read someone else’s take on them, It gives the impression that people are either laborers, investors, rich, poor, or middle class etc. Hey, maybe you could write a post about trends in upward mobility in the US. What do you think?
Good point. One data point that could touch on upward mobility is that, starting with Gen X, our children can’t expect to achieve the same or a higher level of prosperity than we did. I’m no economist so I don’t have the data at my fingertips, but I spent a few minutes fact-checking and found that this assertion is based on 1) surveys of how parents feel about their children’s chances. Apparently, though, there’s also, 2) research on whether kids actually do better than their parents or not. It seems that both the expectations of parents and the actual experience of their kids suggest they do not. Confusingly, another prediction is that boomers and subsequent generations are expected to leave a lot of wealth to their kids and will produce a “Great Wealth Transfer” in the future.
HI Alan, Yes I've heard about the generations following the boomers not doing as well. Doesn't fit in my case as offspring have been very successful. Too early to tell about the grandchildren. Although, my point in my comment was that economic statistics seem to assume that we are doomed to be stuck into certain groups. So if labor gets a lower percentage of the income pie, that is automatically bad but one who earns income through labor today, does not mean that one cannot move into another group or indeed to both groups in the future, If more and more people earn income from business ownership and investments, I would think that this would be good thing. Cheers!
AI is the wild card. It’s a real test for our economy and political leaders. It’s early in the game and dynamics change drastically when Trumplicans are out, but as it looks now, rough waters ahead before smooth sailing.
1. Labor’s slice of the pie is interesting from an academic viewpoint but what really counts is labor’s inflation adjusted income over the years and your article doesn’t really address that.
2. An increasing portion of what people buy are digital goods, like your income from subscriptions to Platypus, and unlike stuff that requires physical assembly there is almost no labor element in that.
3. The ratio of manufacturing jobs to service jobs is changing with service becoming proportionately larger. And service jobs tend to pay less. So we have to find ways of paying those workers a higher wage.
Funnily enough, I would venture to say that Platypus Economics is the most labor intensive venture of my lifetime.
Also, an aside: Manufacturing jobs used to pay above average wages. That's no longer the case. That's part of the reason I'm not a manufacturing fetishist.
Meaning that it’s a laborious task for you to write this newsletter or that you provide a lot of coverage of Labor in it? I hope not the former because your newsletter is so good that I would miss it if you felt compelled to quit this venture. J AZ in this comments section thinks you do find it demanding, personally. For me and many other readers, Substack is our main source of honest, reliable information on economics. I subscribe to Krugman, Dube and now you. Heather Cox Richardson’s newsletter in Substack is invaluable in many ways including economics at times. The MSM are not helpful. In my experience not many authors on Substack take the time to respond personally to Commenters. You could save some time by stopping that though I would miss it.
David - re: #1 - in the video around 4 minute mark Justin does make an aside to Bessent that his chart isn't adjusted for inflation, "when you do that you'll see that folks are barely keeping up" - that remark doesn't seem to be in the text of this day's post and you're SO right about inflation!
On #2 & 3: I guess my family are all service workers - none of us make physical things but we all have/had well-paying professional careers - law, teaching, healthcare, sales, IT... and we're each grateful for those jobs & income! In some of the discussion & charts it may be that the word "labor" is being used to refer not to physical labor but to "wage income" as opposed to "investment income or growth of capital." I can attest that deliverers of services in e.g. education & healthcare engage in quite a bit of physical labor, as well as mental labor; the output isn't a physical product though and we'd be classified as service rather than labor in that sense. We got wage income or employee earnings (again, very thankful!) I think Justin's comment about this substack project being labor intensive is along these same lines. Service jobs like in hospitality industry generally pay lower than services like healthcare, and even in that one broad field we have both nursing home aides and specialist MDs - so it's challenging to generalize about service occupations as a single category
I think your last sentence in #3 is correct and, lucky for us, the economist Arindrajit Dube just published his book “The Wage Standard; What’s Wrong in the Labor Market and How to Fix It" — from the author: "my new book on why wages stalled for most workers, why that wasn’t inevitable, and what we can do about it."
Echoing what Linda has said, I got Cs in economics, but after studying policy it came into focus. The country has been heading in this direction for decades, and the public is oblivious to the systemic changes that have occurred. We are fortunate to have Justin Wolfer, Paul Krugman, Thom Hartmann, and Michael Lewis to weave narratives accessible to the average reader. Please address the Friedman Doctrine.
Steven - econ is like many a thing that involves math: most of us recoil in fear or horror, LOL! Either "I can't do maths" or "I hate that stuff/what do I need it for?" One of the cool things here is Justin's belief that "everyone, not just the privileged few, deserves the tools to see the world clearly" (per his Substack 'About' tab). He illuminates the big picture for us without speaking too much in the arcane symbols of numerical formulae, but with a sense of ordinary life, a smile, and a bit of clever banter. Proving we don't need to be in a classroom to expand our learning 🤔💡
You have the edge on me in both math and the lingo then. I'm glad to have this Substack, along with some of the others you mentioned, to explain in (or sometimes translate into) language I can follow. Will look into Hartmann & Lewis that you mentioned. Gracias!
One topic I'd like you to comment on is the population reductions caused by dropping birth rates in the US and other developed countries and the demographic imbalances it creates. The standard answer is immigration, but that usually involves huge numbers low skilled workers who probably are not trained for the more critically important jobs and that also lowers the pay rates for our existing low wage population. How do we work around this and how do we make sure there are adequate supplies of labor to cover critical skills?
This is the first post I've read since subscribing to Justin Wolfer's newsletter. He's great when I've chanced to see him on TV and he certainly is in this post. But, I would quibble with, "Then, around 2000, something changed." I don't doubt that statement is true, but the Republican campaign against Labor started earlier. David W Escue wrote in this same Comments section about the Rand study, the Powell Memo, and the Republican's successful war against unions, all of which antedated 2000 and drove down Labor's share of the incredible income produced by our economy. Maybe all of their earlier efforts just started to take effect in 2000?
A friend posed a question to me: When a company buys back its own stock, does it get the dividends? If so, where does that money go? If not, is it a profit, or less loss?
Justin can you talk about how the AI industry is not real. I mean some of it will be beneficial but because of the amount of money it's getting from government contracts it feels to me like a bubble that's going to burst and once again the people are going to have to pay to bail them out. Too big to fail, comes to mind. There will be jobs building the data centres but once it's built those jobs are gone and also they haven't really proved the efficacy of a lot of it's claims. Companies will be investing huge sums into it and may find that they will be paying for something that isn't going to be a a sizeable return on their investment like the tech guys are selling them. Everybody is basically copying Google and there's nothing new that's being invented. Is there?
Dear Dr. Wolfers. It would be my suggestion that any rational thinking being understands that fact that basic living expenses have risen, impacting wage earners while leaving wealth accumulators basically unscathed. I understand the Rand study describing the wealth transfer to the top 10% of wealth holders has been adjusted from $50 T to $70 T between 1970 to today. What I found enlightening about your posting is that you have gone into detail of how the shift took place. I grew up during the 60s and 70s. The propaganda machine debasing union workers compare to the discriminatory slanders against today's minorities and immigrants. The rise of the Christian nationalists increased a self-defined basis of good versus evil. And let's not forget the Powell memo, which warned of the radicals overcoming the decency which the US is based. Fear of a conjured known supersedes someone picking your pocket one dollar at a time. Keep the education flow coming.
I never enjoyed economics in college and the greedy profit maximization I saw in my business career left me cold. Prof. Wolfers has be engaged in a new classroom and learning new things every day.
Wolfers tells us that In the Republican Reaganomics era political decisions that favored the wealthy (or "owners" described in this piece) were supposed to "trickle DOWN" economic benefit to all from the owners or wealthy patrons. Is that working for you? Instead, Republican policies that favor the rich owners seem to have put all economic benefit on an "elevator UP" to the billionaires. And then he points out that shifts in income of workers and owners results in and relies on POWER.
The "volume" or number of "workers" is greater than the "owners." How do workers use the power of volume to move to a more balanced distribution of wealth and/or income? What - besides wage bargaining - do workers have to shift economic benefits from their work?
I love the fact that you're finding some interest and joy in economics.
It's not the "dismal science" any more!
Trickle down used to be derisively referred to as Horse and Sparrow Theory, for good reason.
Hi Justin, Good posting. Got me thinking about my own journey through life (I’m a boomer). When I entered the labor force, 100% of my income was wages. When middle aged, I left a very good position to start a company so then my income became a mix of profits and wages. Then I retired and now almost all of my income is from investments (retirement plan and 401K rolled over to an IRA plus capital gains, interest, and dividends from investments made with after tax money). So I wonder how much of the statistics are driven by my very large generation taking this path? In addition, when I view these types of statistics or, as in this case, read someone else’s take on them, It gives the impression that people are either laborers, investors, rich, poor, or middle class etc. Hey, maybe you could write a post about trends in upward mobility in the US. What do you think?
Good point. One data point that could touch on upward mobility is that, starting with Gen X, our children can’t expect to achieve the same or a higher level of prosperity than we did. I’m no economist so I don’t have the data at my fingertips, but I spent a few minutes fact-checking and found that this assertion is based on 1) surveys of how parents feel about their children’s chances. Apparently, though, there’s also, 2) research on whether kids actually do better than their parents or not. It seems that both the expectations of parents and the actual experience of their kids suggest they do not. Confusingly, another prediction is that boomers and subsequent generations are expected to leave a lot of wealth to their kids and will produce a “Great Wealth Transfer” in the future.
HI Alan, Yes I've heard about the generations following the boomers not doing as well. Doesn't fit in my case as offspring have been very successful. Too early to tell about the grandchildren. Although, my point in my comment was that economic statistics seem to assume that we are doomed to be stuck into certain groups. So if labor gets a lower percentage of the income pie, that is automatically bad but one who earns income through labor today, does not mean that one cannot move into another group or indeed to both groups in the future, If more and more people earn income from business ownership and investments, I would think that this would be good thing. Cheers!
Agreed. Certainly gives those people a better shot at building greater wealth.
AI is the wild card. It’s a real test for our economy and political leaders. It’s early in the game and dynamics change drastically when Trumplicans are out, but as it looks now, rough waters ahead before smooth sailing.
You make the subject of Economics interesting!! Are your tests essay or multiple choice?
Three things
1. Labor’s slice of the pie is interesting from an academic viewpoint but what really counts is labor’s inflation adjusted income over the years and your article doesn’t really address that.
2. An increasing portion of what people buy are digital goods, like your income from subscriptions to Platypus, and unlike stuff that requires physical assembly there is almost no labor element in that.
3. The ratio of manufacturing jobs to service jobs is changing with service becoming proportionately larger. And service jobs tend to pay less. So we have to find ways of paying those workers a higher wage.
Funnily enough, I would venture to say that Platypus Economics is the most labor intensive venture of my lifetime.
Also, an aside: Manufacturing jobs used to pay above average wages. That's no longer the case. That's part of the reason I'm not a manufacturing fetishist.
Meaning that it’s a laborious task for you to write this newsletter or that you provide a lot of coverage of Labor in it? I hope not the former because your newsletter is so good that I would miss it if you felt compelled to quit this venture. J AZ in this comments section thinks you do find it demanding, personally. For me and many other readers, Substack is our main source of honest, reliable information on economics. I subscribe to Krugman, Dube and now you. Heather Cox Richardson’s newsletter in Substack is invaluable in many ways including economics at times. The MSM are not helpful. In my experience not many authors on Substack take the time to respond personally to Commenters. You could save some time by stopping that though I would miss it.
David - re: #1 - in the video around 4 minute mark Justin does make an aside to Bessent that his chart isn't adjusted for inflation, "when you do that you'll see that folks are barely keeping up" - that remark doesn't seem to be in the text of this day's post and you're SO right about inflation!
On #2 & 3: I guess my family are all service workers - none of us make physical things but we all have/had well-paying professional careers - law, teaching, healthcare, sales, IT... and we're each grateful for those jobs & income! In some of the discussion & charts it may be that the word "labor" is being used to refer not to physical labor but to "wage income" as opposed to "investment income or growth of capital." I can attest that deliverers of services in e.g. education & healthcare engage in quite a bit of physical labor, as well as mental labor; the output isn't a physical product though and we'd be classified as service rather than labor in that sense. We got wage income or employee earnings (again, very thankful!) I think Justin's comment about this substack project being labor intensive is along these same lines. Service jobs like in hospitality industry generally pay lower than services like healthcare, and even in that one broad field we have both nursing home aides and specialist MDs - so it's challenging to generalize about service occupations as a single category
I think your last sentence in #3 is correct and, lucky for us, the economist Arindrajit Dube just published his book “The Wage Standard; What’s Wrong in the Labor Market and How to Fix It" — from the author: "my new book on why wages stalled for most workers, why that wasn’t inevitable, and what we can do about it."
Echoing what Linda has said, I got Cs in economics, but after studying policy it came into focus. The country has been heading in this direction for decades, and the public is oblivious to the systemic changes that have occurred. We are fortunate to have Justin Wolfer, Paul Krugman, Thom Hartmann, and Michael Lewis to weave narratives accessible to the average reader. Please address the Friedman Doctrine.
Don't let your undergrad grade define you! We can all learn a ton of economics.
I misspelled your name, Dr. Wolfers. Shout out to Robert Reich and Elizabeth Warren who also enhance the narrative.
Steven - econ is like many a thing that involves math: most of us recoil in fear or horror, LOL! Either "I can't do maths" or "I hate that stuff/what do I need it for?" One of the cool things here is Justin's belief that "everyone, not just the privileged few, deserves the tools to see the world clearly" (per his Substack 'About' tab). He illuminates the big picture for us without speaking too much in the arcane symbols of numerical formulae, but with a sense of ordinary life, a smile, and a bit of clever banter. Proving we don't need to be in a classroom to expand our learning 🤔💡
I'm a retired researcher specialist: applied statistics. Economics and finance have their own unique language.
You have the edge on me in both math and the lingo then. I'm glad to have this Substack, along with some of the others you mentioned, to explain in (or sometimes translate into) language I can follow. Will look into Hartmann & Lewis that you mentioned. Gracias!
Justin
One topic I'd like you to comment on is the population reductions caused by dropping birth rates in the US and other developed countries and the demographic imbalances it creates. The standard answer is immigration, but that usually involves huge numbers low skilled workers who probably are not trained for the more critically important jobs and that also lowers the pay rates for our existing low wage population. How do we work around this and how do we make sure there are adequate supplies of labor to cover critical skills?
This is the first post I've read since subscribing to Justin Wolfer's newsletter. He's great when I've chanced to see him on TV and he certainly is in this post. But, I would quibble with, "Then, around 2000, something changed." I don't doubt that statement is true, but the Republican campaign against Labor started earlier. David W Escue wrote in this same Comments section about the Rand study, the Powell Memo, and the Republican's successful war against unions, all of which antedated 2000 and drove down Labor's share of the incredible income produced by our economy. Maybe all of their earlier efforts just started to take effect in 2000?
A friend posed a question to me: When a company buys back its own stock, does it get the dividends? If so, where does that money go? If not, is it a profit, or less loss?
Justin can you talk about how the AI industry is not real. I mean some of it will be beneficial but because of the amount of money it's getting from government contracts it feels to me like a bubble that's going to burst and once again the people are going to have to pay to bail them out. Too big to fail, comes to mind. There will be jobs building the data centres but once it's built those jobs are gone and also they haven't really proved the efficacy of a lot of it's claims. Companies will be investing huge sums into it and may find that they will be paying for something that isn't going to be a a sizeable return on their investment like the tech guys are selling them. Everybody is basically copying Google and there's nothing new that's being invented. Is there?
Dear Dr. Wolfers. It would be my suggestion that any rational thinking being understands that fact that basic living expenses have risen, impacting wage earners while leaving wealth accumulators basically unscathed. I understand the Rand study describing the wealth transfer to the top 10% of wealth holders has been adjusted from $50 T to $70 T between 1970 to today. What I found enlightening about your posting is that you have gone into detail of how the shift took place. I grew up during the 60s and 70s. The propaganda machine debasing union workers compare to the discriminatory slanders against today's minorities and immigrants. The rise of the Christian nationalists increased a self-defined basis of good versus evil. And let's not forget the Powell memo, which warned of the radicals overcoming the decency which the US is based. Fear of a conjured known supersedes someone picking your pocket one dollar at a time. Keep the education flow coming.
I love this story. Your teacher was wrong, of course. And I love the fact that you're discovering your inner economist.