June 2005 -- NOT YET REWRITTEN FOR THIS BLOG
Who can fault with the education or self-discipline of third and fourth-quintile income American families....
Who can fault with the education or self-discipline of third and fourth-quintile income American families....
....whose annual earnings grew only 30%, from 1973 to 2001, as average income swelled 60%. (First-quintile 8%; second 15%.) To whom did the lost growth go -- and why?
Filling in the lower quintile growth gaps would bleed $45,000 off top quintile mean income (reported above $160,000 for 2001).
Another $40,000 of fifth-quintile earnings may* be hidden from the Census report by the practice of "top coding" family income above one million dollars (fully reported fifth-quintile income might read $200,000) -- so right away we have a hint about where to look for the missed-out growth; we can slice thinner.
If one-percentile income families had evenly split the missed-out money, they would have had to add $900,000 (20 X $45,000) to their (million plus?) annual incomes. If top 1/10th of one-percentile families had soaked the gap, they would have added $9,000,000 (200 X $45,000). And if top 1/100th of one-percentile families had racked up the gap: $90,000,000.
The latter two computations more realistically tally with the day-to-day sight of American CEOs taking home 25 times what their counterpart CEO's in Europe earn, not to mention 25 times more than their predecessor CEOs of 25 years ago made -- and with the ever ballooning incomes of the winners of America's newly emerged economic star system: from network news anchors to pro ball players.
American corporations go out of their way to reward -- and retain -- the uniquely talented. The only way the interchangeable can make themselves indispensable is by holding out all together.
The best "all together" arrangements in the world have to be Germany's, sector-wide labor contracts -- where everyone performing the same job in the same geographic area, by law, must work under a single collectively bargained agreement. This stalls the race to the bottom before it starts and makes (contractless) scabs a thing of the past.
Note: super strong German unions never wrought the kind of stagnating interference with management that old-time British unions fomented -- it's mostly in the culture (not that Germans don't share European welfare wishes).
Education can even become less in demand as machines get better at what we do -- depending on the industry. But, who can doubt, after decades of observing economic growth trickle into an upper income torrent, that a quantum resurgence of union made bargaining power has become the necessary and sufficient condition for American labor to get it's pay groove back.
[ * To calculate the 2001, top code effect: sum all 1973 mean quintile incomes -- add 10% to the fifth quintile report to approximate 1973 top coding -- boost that sum 60% to match per capita growth. Sum all 2001 mean quintile incomes -- the shortfall from the 60%-added sum should approximate uncounted income.]
Denis Drew
Chicago
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