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The 21st Century Misery Index: Labor’s Share of the Economy and Real-World Inflation

August 1st, 2018 | by Richard Paul
The 21st Century Misery Index: Labor’s Share of the Economy and Real-World Inflation
Business and Finance
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WEDNESDAY, AUGUST 01, 2018

The 21st Century Misery Index: Labor’s Share of the Economy and Real-World Inflation

Isn’t it obvious that those at the top of the wealth-power pyramid don’t want us to know how much ground we’ve lost while they’ve gorged on immense gains?
In the late 1970s and early 1980s, an era of stagflation, the Misery Index was the unemployment rate plus inflation, both of which were running hot.
Now those numbers are at 50-year lows: both the unemployment rate and inflation are about as low as they can go, reaching levels not seen since the mid-1960s. (See chart below)
By these measures, the U.S. economy’s Misery Index has never been lower and hence prosperity has never been higher or more widespread.
But this simply isn’t true: the top 5% are indeed doing better than ever but the bottom 80% are losing ground and the middle 15% are only appearing to do well because asset bubbles have temporarily created illusory wealth.
I propose a 21st century Misery Index: Labor’s Share of the Economy and Real-World Inflation. Headlines about labor shortages and rising wages are popping up, suggesting the long-awaited boost in labor’s share of the economy’s growth is finally starting.
But these measures of increases are flawed. Median wage increases mask the fact that most of the gains are flowing to the top wage earners; gains are not equally distributed.
Analysts touting increases in compensation costs paid by employers don’t realize much of these increases aren’t going into paychecks–they’re rising because employee healthcare costs are soaring.
The one metric that counts is how much of the Gross Domestic Product is going to labor compensation. As the chart below illustrates, labor’s share of the economy has hit historic lows, and the recent bump up has been modest.
If we look at weekly wages for full-time employees, we find exceedingly modest gains on the order of $6 per week since the Great Recession of 2009–$300 a year.
But this inflation-adjusted number is bogus: if wages were adjusted for real-world inflation, which is on the order of 7% to 8% for those exposed to real-world prices, i.e. those whose expenses aren’t subsidized, then wages have lost purchasing power since 2009.
Here’s how your government figures inflation: your tuition rose by $25,000, your healthcare costs are $25,000 higher, your childcare went up by $10,000, but your last TV was $200 cheaper–mix it all up and inflation is 2%. This is of course beyond absurd, as this chart reveals:
How can 50%, 100% and 200% increases in big-ticket items that cost tens of thousands of dollars when added up be negated by tiny declines in the costs of occasional purchases of TVs and clothing?
As I’ve explained before, it all depends on how much of one’s exposure to real-world costs are being subsidized by the government or an institution. Those without subsidies are experiencing runaway inflation in big-ticket expenses such as rent, junk fees, childcare, college tuition/fees and healthcare.
The point is: if costs are soaring, the institutions subsidizing the costs are absorbing the higher inflation; the cost of healthcare isn’t low because the subsidized patient pays $10 of a $1,000 bill.
Here’s official inflation, which is used to create an illusion of near-zero cost increases and phantom increases in wages:
Here’s labor compensation’s share of GDP: rising modestly off historic lows:
Wages are rising, but only at the top:
So wages have risen $300 a year, while real-world costs have risen $3,000:this is why people don’t feel more prosperity in their paychecks: they’ve been losing ground for a decade or even longer.
Can we be honest for moment? Isn’t it obvious that those at the top of the wealth-power pyramid don’t want us to know how much ground we’ve lost while they’ve gorged on immense gains? The 21st Misery Index isn’t as pretty as the the official propaganda, but choose wisely when choosing what to believe is an accurate measure of the real world.

Summer Book Sale: 30% off Kindle editions, 25% off print editions. If you’re interested in real solutions, check these out:

Resistance, Revolution, Liberation ($6.95 Kindle, $15 print)
Read the first chapter for free.

My new book Money and Work Unchained is now $6.95 for the Kindle ebook and $15 for the print edition.

Read the first section for free in PDF format.

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

SUNDAY, JULY 29, 2018

Here’s What We’ve Lost in the Past Decade

The confidence and hubris of those directing the rest of us to race off the cliff while they watch from a safe distance is off the charts.
The past decade of “recovery” and “growth” has actually been a decade of catastrophic losses for our society and nation. Here’s a short list of what we’ve lost:
1. Functioning markets. Free markets discover price and assess risk. What passes for markets now are little more than signaling devices to convince us the economy is doing spectacularly well. It is doing spectacularly well, but only for the top .1% of 1% and the class of managerial/technocrat flunkies and apologists who serve the interests of the top .1%.
2. Genuine Virtue. Parading around a slogan or online accusation, “liking” others in whatever echo-chamber tribe the virtue-signaler is seeking validation in, and other cost-free gestures–now signals virtue. Genuine virtue–sacrificing the support of one’s tribe for principles that require skin in the game–has disappeared from the public sphere and the culture.
3. Civility. As Scientific American reported in its February issue (The Tribalism of Truth), the incentive structure of largely digital “tribes” rewards the most virulent, the most outrageous, the least reasonable and the most vindictive of the tribe with “likes” while offering little to no encouragement of restraint, caution, learning rather than shouting, etc.
The cost of gaining tribal encouragement is essentially zero, while the risk of ostracism from the tribe is high. In a society with so few positive social structures, the self-referentially toxic digital tribe may be the primary social structure for atomized “consumers” in a dysfunctional system dominated by a rigged “market” and a central state that no longer needs the consent of the governed.
Common ground, civility, the willingness to listen and learn–all lost.
4. Trust. Few find reason to trust corporations, the corporate media, the tech monopolies or the government. This distrust is reasonable, given these institutions have squandered the public trust to protect the swag being skimmed by insiders and elites.
Rather than earn our trust with true transparency and accurate reporting of data, these institutions spew a false form of transparency that’s doubly opaque, as it’s rigged to mask the skims of the insiders. Transparency: lost. Accountability: lost.
Do you really trust Facebook, Google, and the agencies that are supposed to provide oversight of these monopolies? If you said, “yes,” you’re joking, right?
5. Social mobility for the masses. You’ve undoubtedly read reports about the stagnation of wages for the bottom 90% and the soaring wealth and income of the top 5%, which is concentrated in the top .1%. The old adage–go to college, you’ll be guaranteed a secure, well-paying job– no longer works, as we’ve over-produced elites (college graduates) for decades.
Starting your own business was once a ladder of social mobility, but the layers of bureaucratic costs and compliance are now so heavy that few have the resources or appetite for risk to start a business.
The only business model that’s worth trying now is to start a digital company that can be sold for a couple of million dollars to a tech monopoly (Microsoft, Google, Facebook, etc.) within a matter of months, two years max. By that time, some corporate behemoth will have purchased a competitor and eaten your lunch.
6. Federal law enforcement and national security agencies that were above partisan politics. Now these agencies and their leadership are nothing but political agendas hiding behind a long-extinct reputation for apolitical professionalism. The political impact now guides what’s made public, and how that “information” is gamed, spun or fabricated to drive a political agenda.
7. A democratizing Internet. A handful of corporate cartels and quasi-monopolies now control what we see in web searches, news feeds, our “friends” postings, and what’s available on user-generated content networks such as YouTube. Under the banner of “fake news” and “hate speech,” mass surveillance and censorship are now the status quo.
8. National purpose. Arguably lost long ago, but the loss has become painfully apparent in the past decade. Does anyone still think the Empire is spreading freedom and liberty? Everyone can see that what we’re spreading is destruction and disorder.
The society and culture have degraded to an abject worship of greed and private gain. The “national purpose” is to maximize one’s personal gain by whatever means are available, including fraud, racketeering, embezzlement, lying, cover-ups, punishing whistleblowers, gaming the system to maximize overtime, etc.
The rationalization is always the same: everyone else is doing it.
Here’s a shorthand way to summarize America’s “purpose” now: a medication that costs $8 per vial in Europe costs $38,892 in the U.S.
9. Perspectives on entitlement. Everyone’s entitled to everything now–to sex, a secure income, the “right” to abuse/accuse online without restraint or blowback, the “right” to demand everyone treat you in whatever way you reckon is your “right,” and so on in an infinite expansion of entitlements that require no sacrifice, virtue or even civility of the entitled.
10. Humility. How often do you find someone who publicly expresses caution about their own righteousness, or presents a healthy hesitation about the rightness of their positions, i.e. that they might be wrong? How many are publicly skeptical of their own views and not just of everyone else’s views? How many admit to having a poor understanding of complex issues?
The confidence and hubris of those directing the rest of us to race off the cliff while they watch from a safe distance is off the charts.

Summer Book Sale: 30% off Kindle editions, 25% off print editions. If you’re interested in real solutions, check these out:

Resistance, Revolution, Liberation ($6.95 Kindle, $15 print)
Read the first chapter for free.

My new book Money and Work Unchained is now $6.95 for the Kindle ebook and $15 for the print edition.


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THURSDAY, JULY 26, 2018

Here’s How Systems (and Nations) Fail

These embedded processes strip away autonomy, equating compliance with effectiveness even as the processes become increasingly counter-productive and wasteful.
Would any sane person choose America’s broken healthcare system over a cheaper, more effective alternative? Let’s see: the current system costs twice as much per person as the healthcare systems of our developed-world competitors, a medication to treat infantile spasms costs $8 per vial in Europe and $38,892 in the U.S., and by any broad measure, the health of the U.S. populace is declining.
This is how systems and nations fail: nobody chose the current broken system, but now it can’t be changed because the incentive structure locks in embedded processes that enrich self-serving insiders at the expense of the system, nation and its populace.
Nobody chose America’s insane healthcare system–it arose from a set of initial conditions that generated perverse incentives to do more of what’s failing and protect the processes that benefit insiders at the expense of everyone else.
In other words, the system that was intended to benefit all ends up benefitting the few at the expense of the many.
The same question can be asked of America’s broken higher education system:would any sane person choose a system that enriches insiders by indenturing students via massive student loans (i.e. forcing them to become debt serfs)?
Students and their parents certainly wouldn’t choose the current broken system, but the lenders reaping billions of dollars in profits would choose to keep it, and so would the under-assistant deans earning a cool $200K+ for “administering” some embedded process that has effectively nothing to do with actual learning.
The academic ronin a.k.a. adjuncts earning $35,000 a year (with little in the way of benefits or security) for doing much of the actual teaching wouldn’t choose the current broken system, either.
Now that the embedded processes are generating profits and wages, everyone benefitting from these processes will fight to the death to retain and expand them, even if they threaten the system with financial collapse and harm the people who the system was intended to serve.
How many student loan lenders and assistant deans resign in disgust at the parasitic system that higher education has become? The number of insiders who refuse to participate any longer is signal noise, while the number who plod along, either denying their complicity in a parasitic system of debt servitude and largely worthless diplomas (i.e. the system is failing the students it is supposedly educating at enormous expense) or rationalizing it is legion.
If I was raking in $200,000 annually from a system I knew was parasitic and counter-productive, I would find reasons to keep my head down and just “do my job,” too.
At some point, the embedded processes become so odious and burdensome that those actually providing the services start bailing out of the broken system. We’re seeing this in the number of doctors and nurses who retire early or simply quit to do something less stressful and more rewarding.
These embedded processes strip away autonomy, equating compliance with effectiveness even as the processes become increasingly counter-productive and wasteful. The typical mortgage documents package is now a half-inch thick, a stack of legal disclaimers and stipulations that no home buyer actually understands (unless they happen to be a real estate attorney).
How much value is actually added by these ever-expanding embedded processes?
By the time the teacher, professor or doctor complies with the curriculum / “standards of care”, there’s little room left for actually doing their job. But behind the scenes, armies of well-paid administrators will fight to the death to keep the processes as they are, no matter how destructive to the system as a whole.
This is how systems and the nations that depend on them fail. Meds skyrocket in price, student loans top $1 trillion, F-35 fighter aircraft are double the initial cost estimates and so on, and the insider solutions are always the same: just borrow another trillion to keep the broken system afloat for another year.

Summer Book Sale: 30% off Kindle editions, 25% off print editions. If you’re interested in real solutions, check these out:

Resistance, Revolution, Liberation ($6.95 Kindle, $15 print)
Read the first chapter for free.

My new book Money and Work Unchained is now $6.95 for the Kindle ebook and $15 for the print edition.

Read the first section for free in PDF format.

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

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