Below a digest of an article in the Economist of June 17th on p28: http://economist.com/displaystory.cfm?story_id=7055911
"Thanks to a jump in productivity growth after 1995, America's economy has outpaced other rich countries' for a decade. Its workers now produce over 30% more each hour they work than ten years ago. In the late 1990s everybody shared in this boom. Though incomes were rising fastest at the top, all workers' wages far outpaced inflation. "But after 2000 something changed. The pace of productivity growth has been rising again, but now it seems to be lifting fewer boats. After you adjust for inflation, the wages of the typical American worker-the one at the very middle of the income distribution-have risen less than 1% since 2000. In the previous five years, they rose over 6%. ".whatever the measure, it seems clear that only the most skilled workers have seen their pay packets swell much in the current economic expansion. The fruits of productivity gains have been skewed towards the highest earners, and towards companies, whose profits have reached record levels as a share of GDP. "According to the latest Gallup survey, fewer than four out of ten think it is in "excellent" or "good" shape, compared with almost seven out of ten when George Bush took office. "Average after-tax income per person, Mr Bush often points out, has risen by more than 8% on his watch, once inflation is taken into account. He is right, but his claim is misleading, since the median worker-the one in the middle of the income range-has done less well than the average, whose gains are pulled up by the big increases of those at the top. "The statistics suggest that the economic boom may fade. Americans still head to the shops with gusto, but it is falling savings rates and rising debts (made possible by high house prices), not real income growth, that keep their wallets open. A bust of some kind could lead to widespread political disaffection. "The richest Americans now earn as big a share of overall income as they did a century ago. "During the 1950s and 1960s, the halcyon days for America's middle class, productivity boomed and its benefits were broadly shared. The gap between the lowest and highest earners narrowed. After the 1973 oil shocks, productivity growth suddenly slowed. A few years later, at the start of the 1980s, the gap between rich and poor began to widen. "Some statistics suggest that the annual income of Americans with a college degree has fallen relative to that of high-school graduates for the first time in decades. So, whereas the 1980s were hardest on the lowest skilled, the 1990s and this decade have squeezed people in the middle. "the share of aggregate income going to the highest-earning 1% of Americans has doubled from 8% in 1980 to over 16% in 2004. That going to the top tenth of 1% has tripled from 2% in 1980 to 7% today. And that going to the top one-hundredth of 1%-the 14,000 taxpayers at the very top of the income ladder-has quadrupled from 0.65% in 1980 to 2.87% in 2004." "no other country has seen such extreme shifts. ".structural changes in America's job market that began in the 1990s are now being reinforced by big changes in the global economy. The integration of China's low-skilled millions and the increased offshoring of services to India and other countries has expanded the global supply of workers. This has reduced the relative price of labour and raised the returns to capital. That reinforces the income concentration at the top, since most stocks and shares are held by richer people. More important, globalisation may further fracture the traditional link between skills and wages. ".the demand for skills depends on whether they must be used in person: X-rays taken in Boston may be read by Indians in Bangalore, but offices cannot be cleaned at long distance. So who will be squeezed and who will not is hard to predict. "America's income distribution is likely to continue the trends of the recent past. While those at the top will go on drawing huge salaries, those in the broad middle of the middle class will see their incomes churned. The political consequences will depend on the pace of change and the economy's general health." [Non-text portions of this message have been removed] ------------------------ Yahoo! Groups Sponsor --------------------~--> Great things are happening at Yahoo! Groups. 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