America’s Vanishing Middle Class

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E.D. Kain, Contributor




Any analysis of wages earned in prior decades and wages earned today needs to take into account the fact that a lot of non-white-males have entered the workforce. Still, these are troubling numbers from John Cassidy of The New Yorker:

Median earnings for full-time, year-round male workers: 2010—$47,715; 1972—$47,550. That not a typo. In thirty-eight years, the annual earnings of the typical male worker, adjusted to 2010 dollars, have risen by $165, or $3.17 a week.

If you do the comparison with 1973 it is even worse. The figure for median earnings of full-time male workers in that year (when O. J. rushed two thousand yards and Tony Orlando had a chart-topper with “Tie a Yellow Ribbon Round the Old Oak Tree”) was $49,065. Between now and then, Archie Bunker and Willie Loman have suffered a pay cut of more than twenty-five dollars a week.

Now check out this chart from Mother Jones:


The gap is only growing wider, and the structural issues at the heart of the gap are becoming more entrenched in this current recession. The problem isn’t with income inequality per se. There will always be income inequality, and that’s not necessarily a bad thing so long as the people at the bottom aren’t living in poverty. The problem is that you reach a certain point where income inequality becomes a destabilizing force both economically and politically.




And while a number of consumer goods have gotten cheaper over the years – like personal computers and all the stuff you can waste time with online – important and essential items like healthcare have gotten much, much more expensive:



Now we can quibble about why costs have risen so much, and really there’s a number of reasons. If you want an in-depth look at those reasons, you should read Aaron Carroll’s series on health costs. One way or another we’re talking about a major expense for middle and working class people, and that’s on top of growing education and housing costs. The big essentials are breaking the bank for many Americans, even if we can afford refrigerators and flat screen televisions.

Does this mean we need more regulation or less? Does it mean we need higher taxes and more redistribution? I would propose a grand bargain along these lines:

• Let’s deregulate the economy as much as possible, eliminating barriers to entry from as many fields as possible, and allowing the DIY economy to flourish. This includes a bunch of supply side stuff in the health sector.
• Let’s do away with the corporate income tax altogether to encourage domestic investment, especially since this tax is just passed along to consumers.
• Let’s reform the progressive tax code to be way more progressive – especially on the top tiers. The top earners in this country can afford to spread the wealth around.
• Let’s get rid of Medicare, Medicaid, and the ACA and replace them with straight-up single payer health insurance for everyone. Simplify and save money in the process. Take the burden off of employers.
• Let’s let markets do their thing and public options do theirs. We don’t need Romney’s “unemployment accounts” – unemployment insurance works just fine. I’d be more sanguine about private savings accounts if markets weren’t so prone to crashing, but as it stands Social Security just needs some tinkering to be perfectly sustainable.
• We should invest more in our public institutions, from schools to universities to public libraries. We should also invest a lot in our public infrastructure, and we should use higher fossil fuel taxes to make those investments.

That’s a broad sketch – and I do mean sketch – of my basic blueprint for market-social-democracy (or something like it). Less government in how we actually interact with people, whether that’s running a business out of our home or smoking marijuana, coupled with a more focused public sector geared toward providing basic services (transit, healthcare, education, etc.).

Oh, and quit spending nearly a trillion dollars a year on war. Keep those dollars here in America and put them to better use. We can defend our country just fine without getting our nose in everybody else’s business.

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Asian wealth to triple by 2015

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By JOHN LOH  johnloh@thestar.com.my

Boom seen coming from property, manufacturing, commodity sectors

KUALA LUMPUR: The wealth in Asia will triple by 2015 to US$15.8 trillion, according to the findings of the recently-published Asia Wealth Report by private Swiss bank Julius Baer.

The report, done in collaboration with brokerage and investment group CLSA, also estimates that the current 1.15 million high net worth individuals (HNWI) across Asia will double to 2.82 million by 2015.

China alone is estimated to hold 55.4% of this wealth in 2015 and will have 49.6% of the total HNWI.
In 2011 and 2012, China and India are forecast to contribute to over 40% of global gross domestic product (GDP).

The report was commissioned with the aim of investigating the key drivers of wealth creation in the Asia Pacific region and the future size of the HNWI market by country.

Speaking to StarBizWeek at the sidelines of the Forbes Global CEO Conference, Julius Baer Asia CEO Dr Thomas Meier said the wealth would come from a diverse spectrum of industries, primarily property, manufacturing (for fast-moving consumer goods and information technology) and commodities (palm oil and coal).



In terms of the investment portfolios of the HNWI in the study, Meier said they noticed a trend of high allocation of equity holdings, which would appear to run counter to the current pessimism in global stock markets.

He said equity investments were recommended, adding that the bank's optionality products capitalised on the volatility of the stock market and allowed investors to enter at attractive prices.

On whether Asia's growth was sustainable, Meier said: “We believe the economic fundamentals of Asia are strong and robust, and this will eventually translate to wealth creation. We are not in a bubble the growth of Asia was a normal evolution process.”

When asked if Asia's boom would eventually sputter out, Meier said the economy was indeed cyclical, but noted that “this is the decade for Asia, and in this current global scenario, we believe Asia has the potential to absorb any shocks to the world economy.”

Julius Baer Singapore CEO David Lim, who was present at the interview, added: “Asia's fundamentals were not developed overnight, and it will not change overnight. It has been an accretive process over the years, and that is why we claim it to be sustainable.”

Malaysia was part of the study as well, and the report found that by 2015, the country's HNWI should increase to 68,000 from 32,000 currently, while the stock of wealth would grow to US$330bil from US$142bil.

Lim said Malaysia could maintain positive GDP growth through to 2015, external factors notwithstanding.
Key for Malaysia's continued growth, he said, was to ensure sustainable GDP growth, keep its focus on the new economic areas set by the Government, and maintain a stable currency.

Competitiveness should be increased by improving productivity, and not by devaluing the currency, he added.

Of note also is the forecast that Indonesia will have the highest growth rate, vis-a-vis its Asian neighbours, in terms of the number of HNWI over the five-year period with 25%, rising to 99,000 with a total wealth of US$487mil.

Switzerland-listed Julius Baer, whose origins dating back to 1890, is a private banking group which focuses on servicing and advising private clients.

The Millenium generation and the challenge for social stability

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THINK ASIAN By ANDREW SHENG

AS we enter into autumn, 2011 is turning out to be quite a year. Who would have thought that the immolation of a jobless Tunisian graduate in December 2010 would have sparked off the Arab Spring, with uprisings in North Africa and Middle East and now a variant has appeared in Britain?

Other than the social unrest fermented by unemployed youth upset with government corruption and inability to create jobs, the common element was the use of the social media. Even the Chinese high speed train crash in Wenzhou sparked off microblogging that spread the news faster than before. Twitter, Facebook, Google and mobile phone texting have changed the nature of news transmission and the whole governance structure globally.
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Human behaviour reacts to new information, hence our obsession with breaking news. We need information to plan, respond and act.

Traditionally, the control of news and information was confined to a relatively small number of powerful newspaper groups around the world or government media. Radio and television changed the game, but the information was essentially one way. News feed meant news was fed to the consumer. Advertising was about promoting products and services and conveying information to the user.

Society became concerned about the use and misuse of information, hence the intense debate about control of media and freedom of information.



With the arrival of the Internet and social media technology, information became two-way. Two simultaneous events happened with the arrival of social media, both of which are totally new and not fully understood.

First, information became available, faster and more comprehensive to more people than ever thought possible. Papers like the News of the World were considered successful if they sold more than one million copies daily. A successful book would sell 100,000.

However, today, there are five billion mobile phones in use, compared with just over six billion people. More and more people everywhere are connected to the Internet. Every month more than 30 billion pieces of content are shared on Facebook. Twitter can reach millions instantaneously.

Second, because millions of people can receive news simultaneously, they can react synchronously. This is the rise of flash news and flash mobs. The news feedback mechanism has moved from months to nano-seconds.

Governments which had time to react to news, now have no time at all to understand and respond to instant public opinion or even sudden appearance of thousands on social protest.

When someone rich and famous like Dominique Strauss-Kahn was arrested, there was almost instant decision on the Web whether he was guilty or not.

In the past, legal justice could have the pretense that the jury should not be biased by newspaper comment. Today, there are no “clean” decisions everyone is affected by the public opinion.

There are several serious implications for the media industry and social governance.

In economic terms, the traditional print media is suffering in the advanced countries. The good news is that print media is still growing in the emerging markets, as less access to Internet and a rising young population look voraciously for news.

More and more people are turning to instant news on their mobile phone and the Web. The bad news is that with instant news are instant judgements Like or Do Not Like. The fates of major social events are no longer judged by Royal Commissions of Inquiry, but by 140 character limit of news transfer by Twitter or other micro-blogs.

The events and responses of daily life are now black and white, demanding instant solution, not complex matters of grey requiring careful analysis and cautious response.

Thus, in many ways, the world has moved into a multi-dimensional complex transformation, facing simultaneously forces of demographics (more and more younger people and at the same time ageing people), urbanisation, industrial transformation, dramatic technology advances and the visible effects of climate warming and natural disasters.

Hence, mankind is facing changes in the natural environment even as we are confronting massive social change. But the most profound change is the great divide in the inter-generational understanding of each other.

The baby boomers of my generation marched in the streets in 1968 to demand greater social equality, including gender and racial equality. We were less than 5% of our age group who went to university. We were an elite.

Today, the baby boomers (those born after World War II) are beginning to retire. They have become the establishment.

University or tertiary education has become much more broad-based. More than half the population of the world is under the age of 21. The protesters in the Arab Spring or the rioters in Britain represent a generation different from their political leaders.

The new generation has largely grown up not in an age of war, but in an age of global peace. But the biggest challenge for social stability is the challenge of jobs for Gen Y or the Millenium generation, people born around the turn of the century.

In China, there is general acceptance of the fact the post 1980 generation (after the implementation of the one-child policy) has social behaviour different from those when families were multi-children.

In the next 15 years, more than 700 million young people will enter the labour force, of whom 300 million will come from Asia.

Already, the International Labour Organisation estimates that there are roughly 100 million unemployed people in Asia, before the global financial crisis.

If we cannot create enough jobs despite massive fiscal deficits and industrial restructuring, expect more social disruption from the new generation.

Andrew Sheng is president of the Fung Global Institute.