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Monday, July 19, 2004

Following on from the posting reference Thomas Frank, here are two items on the same subject from Kevin Drum (blogger at Washington Monthly)

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WORKING CLASS WOES — PART 1....The New York Times reports that the working class isn't doing too well these days:

On Friday, the Bureau of Labor Statistics reported that hourly earnings of production workers - nonmanagement workers ranging from nurses and teachers to hamburger flippers and assembly-line workers - fell 1.1 percent in June, after accounting for inflation....In June, production workers took home $525.84 a week, on average. After accounting for inflation, this is about $8 less than they were pocketing last January, and is the lowest level of weekly pay since October 2001.

...."There's a bit of a dichotomy," said Ethan S. Harris, chief economist at Lehman Brothers. "Joe Six-Pack is under a lot of pressure. He got a lousy raise; he's paying more for gasoline and milk. He's not doing that great. But proprietors' income is up. Profits are up. Home values are up. Middle-income and upper-income people are looking pretty good."

....Their woes are a product of supply and demand for labor. From 1996 through 2000 when employers were hiring hand over fist, real hourly wages of ordinary workers rose by 7.5 percent.

Supply and demand. Yes indeed. The labor market is a slave to supply and demand just like any other market, right?

Odd, then, that CEO pay rose 27% in 2003, isn't it? Did the supply of CEOs shrink last year? Did demand skyrocket?

What's more, compared to average workers, who remain stuck in the invisible grip of Adam Smith, CEO pay has increased about 3x since 1990 and about 7x since 1980.

Is this the free market at work? That's what I'm told. So I have a contest in mind: a prize for the least laughable explanation for why CEO pay has gone up 7x since 1980 based on supply and demand. At a minimum, winning entries should explain the following:

Please keep your entries under 100,000 words, and restrict your econometrics to fields no more complex than differential topology.

Grand prize to be announced at a future date."

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WORKING CLASS WOES — PART 2....Thomas Frank, author of What's the Matter With Kansas?, writes in the LA Times today that one of the reasons the working class is doing so poorly these days is that no one stands up for them anymore:

[Moderate DLC] Democrats explicitly rule out what they deride as "class warfare" and take great pains to emphasize their friendliness to business interests....The Republicans, meanwhile, were industriously fabricating their own class-based language of the right, and while they made their populist appeal to blue-collar voters, Democrats were giving those same voters — their traditional base — the big brushoff, ousting their representatives from positions within the party and consigning their issues, with a laugh and a sneer, to the dustbin of history. A more ruinous strategy for Democrats would be difficult to invent. And the ruination just keeps on coming.

Frank's thesis is that Republicans have successfully wooed blue collar workers via social wedge issues, while at the same time Democrats have decided to move upscale. The result is that neither party cares much about the economic issues of the working class:

Behold the political alignment that Kansas is pioneering for us all....when two female pop stars exchange a lascivious kiss on national TV, Kansas goes haywire. Kansas screams for the heads of the liberal elite. Kansas runs to the polling place. And Kansas cuts those pop stars' taxes.

As a social system, the backlash works. The two adversaries feed off each other in a kind of inverted symbiosis: One mocks the other, and the other heaps even more power on the mocker. This arrangement should be the envy of every ruling class in the world. Not only can it be pushed much, much further, but it is fairly certain that it will be so pushed. All the incentives point that way, as do the never-examined cultural requirements of modern capitalism.

Why shouldn't our culture just get worse and worse, if making it worse will only cause the people who worsen it to grow wealthier and wealthier?

I'm not quite as pessimistic as Frank that this vicious cycle is inevitable — in fact, I'm one of those DLC Dems who think that the Republican embrace of neanderthal social issues will eventually ruin them. At the same time, though, he's right about the working class: their wages have stagnated over the past 30 years even though the economy has grown tremendously, and the Democratic party hasn't done nearly enough to address this. It's no wonder the Republicans have been so successful at picking off blue collar workers via social issues.

I only wish Frank had a bit more room in his op-ed to tell us what he thinks the Democrats ought to be doing about this. I guess you have to buy the book if you want to know that".


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