
The link between middle-wage jobs, wage inequality, and worker welfare - hhs
https://voxeu.org/article/link-between-declining-middle-wage-jobs-rising-wage-inequality-and-worker-welfare
======
rayiner
One of the things I’ve learned as I started digging into wage inequality
statistics is that performing this data analysis is extremely complicated.
Demographics have changed dramatically between then and now. The labor force
participation rate for women has nearly doubled from 1950 to today. The US
keeps income statistics on a per household basis, and marriage rates and
household sizes have declined dramatically. The percentage of the population
that is immigrants has tripled since 1970. The age distribution has changed,
as well as college attendance rates (four years where young people are earning
no income). Racial distributions have changed, which creates complex effects.
(Phenomena that are better explained as racial discrimination show up as
income inequality. Also, the median ages of people of different races varies
quite dramatically, from 28 for African Americans to 43 for white non-Hispanic
Americans. So some of what you might characterize as racial inequality
actually ends up being age inequality.) The shift from hourly factory work to
salaried service jobs, the create of tax income like the EITC, etc., all make
these analyses extremely complicated.

To isolate what you might think of as income inequality due to structural
economic factors, you’d want something like individual lifetime income
adjusted by race, immigration status, and gender. I have yet to see anything
that thoroughly adjusts for all of these confounding factors.

~~~
IkmoIkmo
Ran into this a lot myself. So far I haven't been able to get very far to
consolidate all these variables. Whenever I see threads pointing to economic
growth or decline, I'm left saying there are tons of confounding factors, but
without being able to offer the right answer.

If you have any good reading to point to, please let me know. It's one of the
things I'd love to have a good answer to, and that should be able to be
answered to some extent, but isn't. Moreover I feel even many top economists
routinely invoke extremely simplified single-variable perspectives (e.g.
average wages per worker, or average household income) which indeed leaves out
so many confounding factors that I've almost lost my expectation/hope that
people even consider this kind of stuff... Only in academic papers which look
to study something specific, are these confounders taken into account. But in
general studies of economic growth or changes in or comparisons of economic
wellbeing of various demographic subgroups, it seems the simple-perspective
prevails. I get that many of these discussions are inherently political, thus
susceptible to cherry-picking perspectives, but I'm still surprised there
isn't some standard method so far that is more complex than charting
'household income for xyz'.

Any pointers to good literature is most welcome, and thanks for posting!

~~~
hhs
> leaves out so many confounding factors

Indeed, that’s one of the key problems with retrospective analysis. Fieldwork
studies are promising. I find John List exploring this area and think his work
is interesting:
[http://www.fieldexperiments.com/papers/recent/](http://www.fieldexperiments.com/papers/recent/)

------
sysbin
"The current Western psychiatric wisdom states that suicide is the result of
mental disorder in 98% (1) or even 100% (2) of cases. However, a number of
recent studies (3–5) have reported that, in Asian countries, mental disorder
has been found in less than 50% of those who completed suicide.

In the late 19th century, Emil Durkheim, a sociologist, published (6)
important observations. Durkheim found that suicide was primarily a function
of social circumstances; he stated that people suicide when they are not
supported by or well integrated into the society, and that mental disorder was
relatively less important. The majority of his observations have been
supported: for example, he found that marital breakdown frequently led to
suicide, particularly among males, and this has been repeatedly demonstrated
(7)." Source -
[https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3431736/](https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3431736/)

~~~
mamcx
Interesting. That mean that low/medium mental disorders are not big deal in an
environment of stability/happiness.

"If you are ugly, and everyone love you, it don't matter!" I remember this...

------
solidsnack9000
The conclusion is that computerization and automation are not the root of the
change, which is at least contrary to popular wisdom. In an era of increasing
returns to capital, relying on wages may ultimately be a losing strategy.

~~~
dvduval
Thomas Picketty did great research in this area. The way I understood part of
his theory is that the rate at which the value of wealth increases is faster
then the rate at which wages increase. In other words, those people who own
things like land and factories see the value of those things increase faster
than workers see their wages increase.

~~~
bmurphy1976
And that cycle usually ends when a few people get their heads chopped off and
things reset. It would be nice if we could figure out a better way to spread
the wealth without costly and violent revolutions.

~~~
aantix
Can you not take on risk? Then you can obtain your own wealth.

~~~
Mikeb85
It's nice to think this and there certainly are high-achievers who accomplish
this, but Piketty's research relates to the economy as a whole and the entire
point is that the economy's aggregate return on capital is outpacing economic
growth (r > g). This means even if some do obtain wealth, ultimately there's
more losers than winners. Outliers mean little in statistics and economics.

------
jmpman
I’ve read that politicians pushed the H1B program to drive down wages in the
STEM fields, in order to reduce perceived wage inequality. The top 1/10 of 1%
can remain hidden if the bottom 50% aren’t seeing the much more visible top
10% driving their BMWs around.

~~~
dahdum
Skilled immigration is an economic home run, those opposed to it are similar
to the NIMBY’s in the Bay Area that vote down all new housing so their home
values rise.

IMHO, there is no conspiratorial reason politicians pushed the program, it was
common sense. H1B is a flawed half measure of a program because of upper
middle class voters.

~~~
dexen
_> Skilled immigration is an economic home run_

Your response is tangential to the original point.

OP asserts correctly that increasing supply of labor depresses wages, by
lowering the negotiating leverage. Your response handwaves it away with
"skilled immigration is better for the whole economy".

Sorry to burst your bubble - this is a thread about balancing the wages /
profits split. OP is right; the higher the supply of labor, the lower the
price of labor, thus leaving higher proportion of the surplus as profits. Aka
the dreaded _inequality_.

It's fine to prefer profit over wages, if that's how you make your living. But
let's not pretend we're for increasing wages while in fact for increasing
profit.

~~~
zamfi
But this is _all else being equal_ , which is the “lump of labor” fallacy.

It’s not obvious that skilled immigrants have the net effect of reducing the
wages of non-immigrants with those same skills — tons of new firms are started
by skilled immigrants and/or their kids, and the current SV economic expansion
particularly so.

So, sure. If you already assume that the pie is of fixed size and a skilled
immigrant reduces the work available to others, then you can draw the
conclusions you do. But otherwise it’s a weak argument.

------
pas
Could someone explain the symmetry in figure 2? Why top-bottom is so strongly
linked seemingly completely ignoring the middle two quartiles?

------
md2be
The oldest millennial is now 38. This group - now the largest as a percentage
- will see wage growth year over year for the next 15 years for three reasons
1) their skills improve year after year 2) employers will have a harder time
replacing them - and will pay them not to leave 3) productivity is about to
accelerate after a decade of flat productivity.

------
andrewtbham
US inequality is up but global inequality is down.

[https://ourworldindata.org/extreme-
poverty](https://ourworldindata.org/extreme-poverty)

~~~
danans
> US inequality is up but global inequality is down.

Not sure if you are implying otherwise, but the reduction in global inequality
doesn't necessarily require growth in US inequality, although that's the form
that this has taken.

Growth in US inequality is to an extent a policy choice: US GDP has grown a
huge amount during the same period, but the same period the majority of those
gains have gone to those in the top fractions of 1% of the wealth
distribution.

