
Up to 70% of people in developed countries 'have seen incomes stagnate' - vmateixeira
https://www.theguardian.com/business/2016/jul/14/up-to-70-per-cent-people-developed-countries-seen-income-stagnate
======
davidf18
Economist Branko Milanovic (
[https://twitter.com/BrankoMilan](https://twitter.com/BrankoMilan) ) wrote
about this in a World Bank working paper in 2012. Here is a recent article
which refers to his now famous "Elephant Curve."

[http://www.voxeu.org/article/greatest-reshuffle-
individual-i...](http://www.voxeu.org/article/greatest-reshuffle-individual-
incomes-industrial-revolution#.V4eDRJepTrE.twitter)

His book published in April:
[https://www.amazon.com/dp/067473713X/](https://www.amazon.com/dp/067473713X/)

~~~
woodpanel
Not to diminish the suffering of the western middleclass (as I'm part of it)
but what about the people in emerging markets?

If I understand his thesis correctly our 1% raked in the profits of letting us
compete against emerging market workers. To put it in startup lingo: we are
the cab drivers, they are the uber drivers.

It's not 'perfect' for us. But I have a hard time seeing only immorality at
work here, while emerging markets getting a shot at having a middle class at
all.

~~~
dv_dt
Maybe it's a hint the this model of capitalism is only good for increasing the
wealth of societies within a certain range of development. What happens when
emerging markets become developed middleclass markets - do they too stagnate,
or does the whole economy decline except for the top 0.1% at that point? Is
that an acceptable system?

~~~
vmateixeira
Interesting theory. Even more interesting if we consider the same top 0.1% to
be present in every emerging market.

------
woodpanel
I think if we want to understand the recent surge of populist movements in
western countries, this study gives one good reason for it. Regardless of
wether statements/positions of those groups are correct or outrageous.

 _“In Sweden, for example, where the government intervened to preserve jobs,
market incomes fell or were flat for only 20%, while disposable income
advanced for almost everyone. In the United States, government taxes and
transfers turned a decline in market incomes for 81% of income segments into
an increase in disposable income for nearly all households.”_

So, protectionism works? At least it seems consequential to me, that for
western workers came with globalization an increase in wage-competition from
workers in emerging markets.

That most western workers can afford much more from their flattened or fallen
income than they could 10 years ago is the other part of the story that
neither this data-point tells nor the populist movements.

~~~
ZoF
That they can afford more, I would assume, is because things are cheaper.
_clarified below_

To me it feels like quality of living per dollar has risen tremendously over
the past generation, but income per household hasn't. So while quality of
living overall has improved, it doesn't 'feel' like it with regards to
individual wealth. That is to say, an upper-middle class person 15 years ago
might feel lower-middle class today even with a better QoL overall.

I would definitely agree that this kind of stagnating income in the middle
class is a large part of what is pushing these nationalist/populist movements.

It's definitely not a popular sentiment on HN at the moment(nationalism), but
I can definitely see the allure; especially for the lower-middle class who
have lived through the past ~15 years and aren't seeing the same increase in
wages/authority that the previous generation did.

Personally I have yet to see a real cogent argument for why globalism would
help here at all with regards to the growing income inequality in developing
nations. From my perspective a single centralized government(e.g.: the EU) can
only really benefit the multinational corporation and almost by definition be
of detriment to the individual nation-states.

It's hard to really grok the reality of the situation from unemployment/income
statistics because they don't really tell the whole tale and of course because
I'm neither an economist nor a statistician.

Lastly, I don't think it can really be ignored that this is the fastest
changing world our species has ever had to adapt to.

I love technology, of course, but I don't think it's impact has been _only_
good. Looking at pictures of previous generations you can't help but notice
the upright postures and healthy bodies that are so often missing from today's
populace. Not trying to be a luddite here, and you can of course so,

Edit: to clarify 'because things are cheaper', I'm speaking of disposable
items and food, as was stated by another commenter "stuff you can buy in a
store"

In fact, I think an important aspect of this discontent is the increasing cost
of housing/healthcare relative to income.

~~~
socialist_coder
One thing the EU does is prevent a "race to the bottom" with regards to
foreign trade agreements and tariffs. For example, if Poland wants to trade
with China, they cannot negotiate directly. They must go through the EU. This
prevents China from playing EU countries against each other to get better and
better trade deals.

The EU also has labor and human rights protections built into it, so factories
that move from Germany to Romania see far less benefit than a factory moving
from the US to Mexico.

~~~
johnnyhillbilly
Really? What about Ireland? They call it the Celtic tiger, but it is really
the Celtic leech upon the rest of Europe.

~~~
nazgob
It works with trade deals, taxes are not harmonized.

------
drawkbox
Since there is a smaller consumer spending pool to pull from, prices have
risen faster on key products to make up for the lack of growth in wages.

Housing/rent, healthcare, tuition, food and many other things have risen
dramatically. Some products have come down in price but that is typical with
technology/entertainment products over time.

If you make products to sell to everyone, not just the wealthy, you have also
probably noticed consumers having less money to spend. This is not good for
the engine of the US that creates jobs, small to medium business. This is bad
for both classes in the US: wealthy upper and lower plebs, the middle is just
about gone.

If we want growth across the board, wages also have to grow, else stagnation
for all from lower to upper, when did we forget this?

~~~
abakker
Has individual productivity gone up? Income needs to be justified by
productivity, doesn't it?

~~~
drawkbox
What comes first, the productivity gains or a raise? If there is never a
raise, or wages essentially do not grow, why would productivity rise?

However, productivity has gone up and been helped by technology, wages have
not followed.

~~~
abakker
assuming a Technology/Capital/Labor split (simplistic), if productivity has
gone up due to technology, and the technology is primarily a function of
capital (i.e. technology doesn't make me smarter, it makes my computer faster)
then doesn't it follow that my wage doesn't go up, but the money spent on my
computer does?

~~~
douche
You know, that would make a lot of sense, but it seems to be awfully hard to
get management to sign off on time-saving tools, equipment, and software
sometimes.

It seems like it's pretty simple math: You're paying me X/day, tool which
costs Y would save me Z days of time, over the course of the year. Is Y/Z >=
X? Then get out the company Amex already.

~~~
naveen99
Unless the worker writes their own software with their own computer, in which
case they can pocket the productivity gain. This is basically what has allowed
programmer salaries to go up. IT frequently gives long estimates and then does
the work in a tenth of the time, pocketing the surplus. Happens all the time
at multiple levels. Until the end users learn to solve their own problems,
they will keep losing to people who learn to automate themselves.

So if the simple math checks out, don't ask the company, break out your own
Amex, and pocket the difference.

~~~
hiram112
Where do you work? I've never worked at a company where I pocketed the extra
money by coming in under schedule. On the other hand, I often pay out of my
own pocket for licenses, books, etc that benefit the company. In return, I get
more work and less time to do it.

~~~
naveen99
i meant pocket the difference in time saved. Nice added benefit is irs doesn't
tax time off, energy saved, or happiness.

you can use that time and energy to make money elsewhere or invest in
learning, networking, understanding your bureucracy.

but i am sure there are companies where your bonus depends on your performance
vs. your proposed budget. If you are not being rewarded for improved
productivity and being treated as a commodity, why should you pass on your
internal productivity gains.

sometimes you want more work (responsibility). that's how you get experience
and a bigger budget. Even if you can only spend the budget for work things,
you still gain autonomy and power.

------
socialist_coder
This is neoliberalism at work. Bernie Sanders challenges this, while Obama and
Hillary seek to preserve it.

Any chance at changing this in the 2016 election is dead. 4 or 8 more years of
this and it's only going to get worse.

My only hope is that a strong progressive movement can take off before the
right wing Nationalists make it into power.

~~~
_rpd
The past few decades of globalization have resulted in the greatest
destruction of poverty in history. For every person experiencing stagnation in
the developed world, ten people in the developing world have experienced
double digit growth. Poverty destruction has massive benefits, and not only
for those in poverty. Even from a purely self-interested point of view,
developing nations are already seeing exports to developing markets rise, and
that will only continue.

~~~
whenwillitstop
Rising a country out of poverty is close to zero sum. When they rise out,
those incomes are coming from people in developed countries.

~~~
mistermann
When many millions of people go from being subsistence farmers to producing a
massive amount of manufactured goods on the planet, how could you possibly
come to the conclusion that it is a zero sum game?

~~~
st3v3r
Because many of the people in the developed world who used to be doing that
manufacturing are now out of work. Unfortunately, at least here in the US,
we've been pretty bad at retraining and helping those who get laid off because
factories moved overseas.

------
spikels
This is the cost of lifting more than a billion people out of abject poverty
and is an exaggeration of the negative impact (for example, ignores transfer
payments & quality of life improvements). It is part of what is overall a very
good thing.

~~~
danharaj
Do you have numbers to back that up?

~~~
spikels
Here are some but you should try to find numbers you trust.

[http://www.worldbank.org/en/topic/poverty/overview](http://www.worldbank.org/en/topic/poverty/overview)

~~~
danharaj
Those are only half of the numbers. Yes, poverty has been reduced, but the
global wealthy have seen their ownership over the collective wealth of
humanity increase much more drastically. Where are the numbers that
demonstrate that the only way to raise people out of poverty was to sell their
countries' resources to the highest bidder and turn them into markets for
international capital?

This question investigates a counterfactual claim. Could poverty be eliminated
in a world without neoliberal politics determining the structure of the global
economy?

------
awinter-py
These 'zero growth for bottom X%' headlines, even when mathematically valid,
are deceiving because growth isn't randomly distributed across the income
space, it's concentrated at the top.

'Zero for bottom 50' is usually code for 'positive for 40-50', 'neutral for
20-40', 'negative for 0-20'.

~~~
jseliger
This is a great point. I also think that some people, especially in the media,
feel more pinched than they did decades ago because we've systematically made
housing dramatically more expensive through parochial zoning:
[http://jakeseliger.com/2015/09/24/do-millennials-have-a-
futu...](http://jakeseliger.com/2015/09/24/do-millennials-have-a-future-in-
seattle-do-millennials-have-a-future-in-any-superstar-cities/) or
[http://object.cato.org/sites/cato.org/files/serials/files/re...](http://object.cato.org/sites/cato.org/files/serials/files/regulation/2002/10/v25n3-7.pdf).

Household consumption costs are dominated by housing, first of all, and
transport, secondarily; in many coastal cities, strangling supply has led to
higher prices that consume way more income, making people feel artificially
poorer than they would in a freer market.

~~~
internaut
> we've systematically made housing dramatically more expensive through
> parochial zoning

Surely this is a side effect of something else.

This effect cannot be caused by population increases because most of the 20th
century had large increases without this zoning pattern emerging.

Additionally many European countries have declining populations and high
rent/house prices.

So what is it? Low interest rates?

But then low interest rates are supposed to spur business development and new
enterprise. More people should have more savings to spend on things, like
houses.

Why isn't this happening?

And finally we're back to Peter Thiel's position = ex-computation
technological progress has stalled and many people in the intelligentsia
haven't noticed it due to their cocoon.

Do you agree with this train of thought?

~~~
bufordsharkley
> Surely this is a side effect of something else.

I recommend the writings of Prof. William Fischel (author of Zoning Rules![0])
to answer this question-- he uses a Coasian approach to identify that
restrictive/exclusionary zoning policy is a rational response by homeowners
when they are given undue entitlements.

One entitlement that's especially relevant is low property taxes (Prop 13 in
California/Measure 5 in Oregon)-- this drives up housing prices and
incentivizes homeowners to hold on to housing stock and resist the increase of
housing stock elsewhere in their community.

[0] [https://www.amazon.com/Zoning-Rules-Economics-Land-
Regulatio...](https://www.amazon.com/Zoning-Rules-Economics-Land-
Regulation/dp/155844288X)

~~~
internaut
> I recommend the writings of Prof. William Fischel (author of Zoning
> Rules![0]) to answer this question-- he uses a Coasian approach to identify
> that restrictive/exclusionary zoning policy is a rational response by
> homeowners when they are given undue entitlements.

Very interesting, thank you.

> It's important to remember that the rise of the automobile happened over
> this same period, which raised the level of marginal land (and delayed
> conflict over overpopulation, for at least a few generations).

A good point. I expect self driving to extend such an effect.

------
HillaryBriss
The article says that the causes of this stagnation were:

1\. the deep slump and the weak recovery after the 2008 financial crisis

2\. a decline in the number of people available for work

3\. more part-time and temporary working

4\. a decline in the influence of trade unions

------
josu
"Our research finds that carefully targeted policy measures to boost
productivity, GDP growth, and employment can make a significant difference."

I don't buy. What their research found is that one country has fared better
than the other 5. Everything else are assumptions of causality.

------
api
It wouldn't be so bad if education, housing, health care, and energy hadn't
inflated so much over the same time period.

------
andrewfong
Original report available at: [http://www.mckinsey.com/global-
themes/employment-and-growth/...](http://www.mckinsey.com/global-
themes/employment-and-growth/poorer-than-their-parents-a-new-perspective-on-
income-inequality)

------
Asooka
That's not surprising. Infinite growth is physically impossible and we are
just seeing the end of it. We have to shift our economy and planning from a
growth driven mindset to a sustainability driven one.

~~~
theseatoms
How is infinite growth physically impossible? Human demand for goods,
services, experiences, etc is insatiable. And production will meet demand.

~~~
bluthru
Even if your every desire was fulfilled for 24 hours a day, you can't create a
25th hour.

~~~
efaref
I desire a time machine.

Checkmate.

