Zapping the middle-class--Europe & the US, 1993-2006

by: Paul Rosenberg

Fri Nov 26, 2010 at 09:00

From the Real World Economics Review blog chart of the day 11/25:

Change in share of total hours worked by lowest, middle and highest income occupations between 1993 and 2006

This all happened before the financial crisis that triggered the Great Recession.

We're not alone, and we're not the worst.  It's a pervasive trend among the established Western industrial democracies. But since we have the weakest welfare state to help soften the blow, and the deepest ideological antipathy to doing anything about it....  Well, let's just say that this chart gives an indication of how badly screwed we are right now, since (a) the global oligarchs are in denial about the ongoing Great Recession & what needs to be done about it, and (b) this chart shows--from yet another perspective--that the problems began long before the Great Recession started.

Paul Rosenberg :: Zapping the middle-class--Europe & the US, 1993-2006

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Thanks for this (0.00 / 0)
I wonder what the explanation for low wage work in italy is.

It Is A Sriking Anomaly (0.00 / 0)
Perhaps they're still losing significant low-wage positions to ongoing automation?

Mafia laying off hitmen?

Beats me!

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
this could help (0.00 / 0)

it's imf, so basically probably disregard everyhing they say about product pricing regulation and how it affects employment levels :D

[ Parent ]
And the significance of this is...what? (0.00 / 0)
The middle class works less, ok. Everywhere. But does that say that they EARN less everywhere? Not necessarily. And the starting points are very much different, too. Sry, but I don't think that graph alone can prove anything.

? (0.00 / 0)
Works less, or has a smaller share of the available "work time."

[ Parent ]
Good Lord! (0.00 / 0)
They work fewer hours by a significant amount.  The only way this means they are not earning less is if their wages have gone up significantly.

But how does this happen if the demand for their labor (reflected in hours worked) goes DOWN?

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
Doesn't take changing conditions into account. (0.00 / 0)
For instance, reduction of overtime, by choice or by law. Or more part-time jobs. During that timespan, every employee got the legal right to demand a part time job for personal reasons (family, health)(of course, that WILL reduce income, but may increase quality of life). Then, parenthood leave. Afaik that was changed during that time, too. Nowadays, Dads can take a time out to care for a kid, not only mothers. And there's certainly several other changes that don't instantly come to my mind now.

Point is, there's lots of ressons for the reduced hours. And they are different in different countries! Just looking at the total is misleading. If you want to investigate rising inequality, and the alleged shrinking of the middle class, only coming up with this data set isn't good enough, imho. The devil is in the details!  

[ Parent ]
Ahem! (0.00 / 0)
Doesn't take changing conditions into account.

For instance, reduction of overtime, by choice or by law. Or more part-time jobs.

Both of which reduce income.

Look I don't deny that more data from more angles would provide a more complete picture.  And lord knows, I've produced enough multi-chart diaries with twice as many graphs & charts as comments.

But this time out, I just wanted to rely on a single graph for how much it could reveal.  And as your flailing and failed attempt to obfuscate here reveals, it really does reveal quite a lot.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
IF wages don't rise! (0.00 / 0)
Which you haven't even looked at yet. Also, even with part time jobs, folks may stay in the middle class. As I said, with a single data set, especially one that focusses on a sideissue (hours) instead of the real deal (share of people in the middle class), there's a considerable risk that conclusions may be distorted by differences in the details.

"And as your flailing and failed attempt to obfuscate here reveals, it really does reveal quite a lot."
That's just your usual way of tiptoeing around the fact that a commenter raised a valid point of criticism. Of course, you would never admit that someone else may have found a flaw in one of your stories, no matter how minor!

[ Parent ]
The Question Here Is NOT About People Staying In The Middle Class (0.00 / 0)
so much as it's about the long-term trajectory of the middle class.  Sure folks can nominally stay in the middle class while still working fewer hours. But to the extent that that is involuntary, it represents a real erosion of the security that used to be synonymous with the working class, and the middle class as a whole will suffer as a result.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
Again, that depends on the circumstances. (0.00 / 0)
Afaik, the law that allows employees to demand a part time job also allows them to go back to full time (companies don't like that at all, of course). And then there's the social safety net. Imho it's very difficult to compare the job safety of European citizen with those in the US. Conditions are very different.

[ Parent ]
Are they? (4.00 / 2)
Not really sure what you are after here Gray. Do YOU have any data to back up the series of alternate scenarios you introduce as possibilities? Because none sound more plausible (in the absence of actual data either way) than the fact reduced hours for most in most instances produces reduced incomes or purchasing power, which will for most either push them out of the middle class or make them less secure while remaining in the middle class.

Rosenberg's premise is that reduced hours likely means reduced income and security. That is a sound premise. Your counter is that this is not necessarily so. True enough. But it is usually so and you don't appear by my reading (not through the entire thread) to provide data backing up your facially less-likely though still possible outcomes. Occam's razor and all that.

Did they get you to trade your heroes for ghosts? Hot ashes for trees? Hot air for a cool breeze? And cold comfort for change?

[ Parent ]
Paul is using this single data set for comparisons! (0.00 / 0)
Claiming it shows that the US are in the same league as us Europeans. And that really goes too far! Without looking into the details, he can't plausibly say that. And I'm a commenter pointing out this problem with Paul's too-farfetched approach. I don't have to produce additional data to do that. the logical shortcomings are OBVIOUS!

You simply can't use that one graph for saying anything about a ranking order of the decline of the middle class. That's as if you say something about the lifestyle of the middle class by looking only at the average credit card use (we Germans don't use them as much, but we have a different card system drawing from the bank accounts). Any conclusions necessarily will be totally DISTORTED! Got my point now?

[ Parent ]
Why not coming up with data about income distribution, too? (0.00 / 0)
If the middle class is shrinking, this should be obvious in graphs showing the share of certain income classes in, say, 2006 and 1996. The difference should be obvious. Of course, the income has to be adjusted to inflation. But wouldn't that be the more traditional, and maybe significant way to prove your point?

[ Parent ]
"if their wages have gone up significantly" (0.00 / 0)
That's possible. A lot of European countries caught up with the Germans during that timespan. Now, where do you show the cosequences of this? Remember, Paul, I said this graph ALONE can't prove anything. You should come up with more data! Honestly, imho this isn't on the same quality level as your other studies yet.  

[ Parent ]
not true (0.00 / 0)
what this shows is that the proportion of hours worked in middle class jobs has gone down.  the overall number of hours worked in middle class jobs could have gone up, down, or in between.  e.g. if no middle class jobs had been lost but enormous numbers of low wage and high wage jobs had been created, that would still yield these results.

in practice, from OTHER evidence, we know that's not the case and that middle class jobs were lost in these economies - or at least, i do for the u.s.  but that's not what the graph shows, by itself, as far as i can tell.

[ Parent ]
you're reading the graph wrong (0.00 / 0)
you're right that it doesn't prove anything (especially country by country comparisons or looking at a wider timescale) and if you're curious it would be worth going to the source to see whether it makes sense (and then to other literature).

but if you, like me, don't have time for that now, and  accept the assumptions behind the graph, whatever they might be, as far as i can tell, it shows:

of the total number of hours worked in the economy, there are more hours being worked in low wage or high wage jobs than in middle wage jobs in 2006 than in 1993 in every country except italy and france.    one possible interpretation is that there are less middle class occupations in 2006 than in 1993 in all of those countries (meaning all shown except italy and france*).   another way to say this is that the economies in those places have begun becoming more polarized to high income and low income.  

that's how i read it, anyway.  i'm sure someone can correct me if i'm wrong.


*in italy and to a lesser extent france, you have a larger increase in high wage jobs and a decrease in both low wage and middle wage jobs, if the implications of the chart are to be believed.

[ Parent ]
Doc, as my commnt below shows, I looked for other data. (0.00 / 0)
That's how I found the Brookings study. But, I concede, I don't want to put too much time into this now. Yeah, I know, I'm lazy...

[ Parent ]
i don't understand why it's so hard to believe though (0.00 / 0)
do you not agree that income inequality has increased in most western economies over the last twenty years or so?  That's the narrative that paul's dropping this graph into.

[ Parent ]
That's not so hard to belief. But that's not my point. (0.00 / 0)
No, I seriously doubt Paul's data shows a realistic picture of the real differences in income inequality (and the development of the middle class) between the countries! I guess the US are really faring WORSE than the Europeans. Not a single one of the improvements for the European middle class in the last decades, and no compatrable social safety net to get through temporary problems. I'm quite sure that we Yurpeans didn't fell as much back as the Americans! But that view may be tainted by my German European patriotism, ok...

[ Parent ]
i would tend to agree with you (0.00 / 0)
without knowing much more, i would guess that it has to do with the time period chosen and that, as you pointed out, it's just one specific piece of information.

but that's a general rule - never draw vast conclusions from one specific piece of information.  including here a comparison of the u.s. and western european countires.  consider it more a starting point for exploration of interesting ideas / possibilities.

[ Parent ]
As a starting point, it's ok. (0.00 / 0)
However, I expect more from Paul than this. Ok, I guess he has spoiled me...

[ Parent ]
the middle class - (4.00 / 1)
is 'screwed' - no question - but I wouldn't use that graph to prove it  -
You know the French introduced the 35 hours working week around 2000 - so some people got the same salery for less hours worked -(as in some other Eurpean countries)  

This Brookings study shows a bit different picture. (0.00 / 0)

However, it's about the future trend, not the past performance. But the Brookings folks see the middle class in Europe growing until 2020, and then declining. The US, on the other hand, slowly but steadily declines. And Germany stagnates.

Imho this shows that the picture changes if you look at different set of data. Not easy to get close to the truth.

meh (4.00 / 1)
p.4 is where the magic happens ;)  they make assumptions like: u.s. tfp growth* will be around where it was over the last century or so rather than lower. which means that they (imo) are overestimate u.s. gdp growth over the next 25 years and by implication global gdp growth (i think).  

This kind of choice makes me think that the authors have an idea of what the world is like and have to a greater extent than necessary fitted their equations to yield that vision.  

the problem with predictions :)  i do the same all the time in my own! :D


*This is a complicated way of saying that gdp will grow at a higher rate than either labor or capital increase, and the reason for that is called 'total factor productivity'.  For example, if you reorganized the way that five people on a farm were working so that they produced twice as much with the same equipment and the same amount of hours worked, that would be important and an example of total factor productivity growth.

In practice, as far as I can tell (not an expert!) it's a remainder that people try to explain.  Fairly arbitrarily choosing a level for it for a future projection is kind of absurd for an argument like this, particularly given that the u.s. is NOT occupying the same role it did sixty years ago in the global economy.  

It's not wrong to include it - in fact it's very important because it helps to explain why growth rates increase, decrease, etc. beyond simply how much people are working / forced to work and how much capital is being employed.    

But it needs to be dealt with more reasonably, i think.  Especially when you're doing something as complex as imagining the trajectory of the global economy over the next 20 years.

[ Parent ]
There's an even more dicey APEC study! (0.00 / 0)
Published by the Australian government. As I said, too lazy now, but you should easily be able to find it with google. I can only shudder imagining how you professionally take their outrageously optimistic predictions for Asia 2030 apart!

[ Parent ]
lol (4.00 / 1)
i'm a professional trade union employee.  i don't do this professionally :)  i'm an amateur :)

[ Parent ]

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