Istvan Gorog
April 2014, Eureka, CA
Deficit, inequality, technological progress, and unemployment are interrelated. Here I argue that a major rethinking of our economic and social policies is needed to preserve our American capitalistic society.
Contents
- General background thoughts on deficit, inflation, and growth
- Automation and employment
- Where we are coming from and are going to
- Concluding remarks: a Global perspective
- Appendix: Quantification of American income and wealth trends.
General background thoughts on deficit, inflation, and growth
In the USA we have widely discussed concerns regarding the economy, especially the deficit. I share such concerns in general though my primary focus is elsewhere. Yes, the national debt is high, the second highest in US history as % of GDP. The highest (~120%) was reached after recovery from the Great Depression and ending WWII. Now we have about 80% as we are recovering from the Great Recession and ending two of the longest wars in US history. (And hopefully avoiding a new one with Mr. Putin.) While the debt is still increasing, the deficit is now decreasing (now ~3% of GDP vs. ~10% a few years ago) and is expected to do so for several years before it starts to rise again after 2017. Currently and in the near future, the debt is not a problem because interest rates are now very low.
Why are the interest rates so low? I think the answer is twofold, neither one very encouraging. First, mostly cited in the media is that the world economy and politics are so uncertain that people with money consider US Treasuries the preferred safest investment, even if the payback is nil. The second part of the answer must be lack of demand relative to available supply, potential GDP exceeds actual GDP; more is offered than is taken. -- High-interest rates reflect that people want more stuff than what is available for them to buy; this is how rampant inflation developed in some European countries after WWI and WWII. (Even though most people are not well off after a war when both industry and agriculture are destroyed, people are desperate to spend whatever they may have on essentials they desperately need.) Now we have no inflation, and some even fear deflation, considered a nightmare scenario in modern economics. Why is there a lack of demand relative to supply? Because there is unemployment, which also results in stagnant wages.
Why is the deficit expected to grow again after 2017? Because the economic growth is expected to slow, because by then supply and demand are expected to be in balance (potential GDP equals actual GDP). GDP growth will slow partly due to an aging population. So what is going to happen to the national debt? If unlike after WWII, we cannot outgrow it, we will have to pay it back. There is only one way of paying it back: to pay it back, taxes must be increased. There is much talk about reducing entitlements and government waste. Well, our entitlements are small relative to other advanced economies, and we need more infrastructure and green energy investments. Also, to preserve American democracy and social peace, we need to re-balance income distribution and reduce the growing difference between the average and the median household incomes. For several decades now, average inflation-adjusted income grew, while the corresponding median income stagnated or even declined. All the GDP growth since the 1970s went to the upper crust (this includes the lucky well educated), while the largest segments of society saw no improvement in their lives. This situation is unjust, and unsustainable, leading to resentment, class warfare, and political instability. It must be reversed. To accomplish this reversal, we need to return to steeply progressive taxation without loopholes. Yes, Warren Buffet and Mitt Romney should pay not a lower, but a much higher percentage of their incomes in tax than their secretaries do. Then we will be able to maintain a stable democratic society and pay back the debt even in the absence of sufficient GDP growth to repeat the historic precedent.
Why are the interest rates so low? I think the answer is twofold, neither one very encouraging. First, mostly cited in the media is that the world economy and politics are so uncertain that people with money consider US Treasuries the preferred safest investment, even if the payback is nil. The second part of the answer must be lack of demand relative to available supply, potential GDP exceeds actual GDP; more is offered than is taken. -- High-interest rates reflect that people want more stuff than what is available for them to buy; this is how rampant inflation developed in some European countries after WWI and WWII. (Even though most people are not well off after a war when both industry and agriculture are destroyed, people are desperate to spend whatever they may have on essentials they desperately need.) Now we have no inflation, and some even fear deflation, considered a nightmare scenario in modern economics. Why is there a lack of demand relative to supply? Because there is unemployment, which also results in stagnant wages.
Why is the deficit expected to grow again after 2017? Because the economic growth is expected to slow, because by then supply and demand are expected to be in balance (potential GDP equals actual GDP). GDP growth will slow partly due to an aging population. So what is going to happen to the national debt? If unlike after WWII, we cannot outgrow it, we will have to pay it back. There is only one way of paying it back: to pay it back, taxes must be increased. There is much talk about reducing entitlements and government waste. Well, our entitlements are small relative to other advanced economies, and we need more infrastructure and green energy investments. Also, to preserve American democracy and social peace, we need to re-balance income distribution and reduce the growing difference between the average and the median household incomes. For several decades now, average inflation-adjusted income grew, while the corresponding median income stagnated or even declined. All the GDP growth since the 1970s went to the upper crust (this includes the lucky well educated), while the largest segments of society saw no improvement in their lives. This situation is unjust, and unsustainable, leading to resentment, class warfare, and political instability. It must be reversed. To accomplish this reversal, we need to return to steeply progressive taxation without loopholes. Yes, Warren Buffet and Mitt Romney should pay not a lower, but a much higher percentage of their incomes in tax than their secretaries do. Then we will be able to maintain a stable democratic society and pay back the debt even in the absence of sufficient GDP growth to repeat the historic precedent.
In the worst-case, nations like the USA, unlike ordinary households and unlike Greece in recent times, have another way to wipe out the national debt. They can print their own currency as necessary and there is not much anyone can do to stop that. Of course, there would be a price to be paid: loss of credit, loss of international trade, loss of general national trust, most likely followed by an extended period of a declining economy, decreasing GDP, and hardship for all. Nevertheless, it is an option available as a last resort to balance the nation's books.
Automation and employment
Now I want to focus on what I consider to be the primary long-term economic issue: employment/unemployment. Let’s start by considering what industries drove economic growth and where were the job creators. Research indicates that in the recent past economic growth came from the tradeable sector, while jobs were created in the untradeable sector. Here tradeable refers to those economic activities that can be performed elsewhere and the results of the activity imported; e.g. most manufacturing, and agriculture. The untradeable (or not-tradeable) economic activities are essentially local, they must be performed where the demand is located; e.g. health and educational services, and construction. While the boundary between tradeables and untradeables is not sharply defined nor fixed forever (e.g. recently part of the rebuilt Eastern span of the San Francisco Bay Bridge was built in China, and online education can be imported), the concept is clear and the conclusion is thought-provoking, one could say shocking: wealth and job creation have diverged. Furthermore, I expect this divergence to grow.
Let’s look at manufacturing, an area with which I have considerable familiarity. – I started my involvement with manufacturing at age 14 as an unskilled laborer in a machine factory in the early 1950s, worked as a technician for a small privately-owned home heaters manufacturer in the late 1950s; later I was Director of Manufacturing Technology Research at a major domestic electronics manufacturer. Following that, I worked for a major international consumer electronics manufacturer where I had full technical responsibility for products and manufacturing processes of a product family producing over a billion-dollar yearly sales. I have intimate familiarity over more than half a century with factory operations, their evolution, and technology. I have built experimental production lines as well as small volume and large volume mass production plants.
Without exception, in high-volume manufacturing, the one never-ending objective is to reduce costs. All successful products deliver a set of consumer benefits at a cost below that available to the consumer from the competition. This is a fundamental truth under all circumstances: a monopoly or a communist state eliminates the competition; in a capitalistic competitive economy, the manufacturers’ emphasis must be to minimize the cost of producing the set of benefits offered to the customer. There are three fundamental cost components: capital, materials, and labor. Once a design is fixed, the materials content is defined and neither capital nor labor can be traded for reduced materials content without changing the design. (Materials costs of course are directly affected by outsourcing versus vertical integration business strategies.) Significant opportunities exist in most manufacturing operations to substitute labor and capital for each other. During experimental and pilot phases capital commitments are likely to be minimized and production is more labor-intensive than during the volume production mature phase. In general, given the state of technology, if automating an operation is feasible, the long-term cost of automation is less than the cost of the substituted labor would be. In advanced economies, if it is technically feasible, the per-unit depreciation cost of the automated equipment, i.e. per unit cost of the capital, tends to be lower than the per-unit labor cost replaced by automation. (In developing economies, for example in China in the recent past, the cost of available capital versus the availability of plenty of low-cost labor may temporarily lead to a lower level of automation than in a contemporary advanced economy; nevertheless, the long term historic trend towards automation is everywhere similar.)
Throughout the history of manufacturing, from the beginning of the industrial revolution through the invention of assembly lines, and into the era of modern chip manufacturing that enables the information age, the relentless drive has been to reduce per unit labor costs. This is true whether the unit is a car (sold by the millions for tens of thousands of dollars each) or an electronic switch (of which there may be billions on chips sold by the billions each for a few dollars or less). Since a unit switch costs less than about a billionth of a dollar, the range of the values of the expected and continuous unit labor cost reductions is astronomical. It has been successfully addressed nonstop for over two hundred years by some of the best brains using every conceivable tool in all known manufacturing industries.
Much of manufacturing technology involves shaping and joining parts from incoming materials, i.e. parts manufacturing and assembly. The incoming materials themselves are likely to have been prepared by shaping and joining at a supplier’s manufacturing plant, and so forth. This supply chain goes back all the way to the extraction and preparation of raw materials that are mostly chemical in nature. Chemical plants have been highly automated already long before the technologies became available for significant automation of the shaping and joining activities. Automation of parts manufacturing also predates large-scale automation of assembly operations.
Automation of assembly operations in its earlier phase employed “hard automation”, where unique machinery needed to be designed for the joining of subassembly elements. This was expensive and slow to develop and at times required a redesign of the incoming elements to facilitate their automated handling. More recently with the availability of robots with more and more articulated motion and grasping capabilities, assembly line designs incorporated more and more robots. In general robotic assembly lines are more flexible than those using hard automation, they can easily be programmed to accommodate the handling of a variety of parts and finished assemblies. By around the year 2000 in mass production lines, human labor was retained principally only in those operations that required eye-hand cooperation. By the second decade of the 21st-century machine vision has become sufficiently well developed to eliminate much of the earlier hand-eye coordination requirement constraint on automation. In fact, machine vision-aided intelligent robots mostly surpass human capability in joining parts: they see better, do not tire, and are more precise. An interesting comparison of human and robotic manufacturing was made in a front-page article in the New York Times on August 19, 2012. According to that article, at a factory in China, hundreds of manual laborers assemble high-end electric shavers; a sister factory in the Netherlands uses 128 robots to complete the same task, without coffee breaks working 24/7 365 days a year. If necessary, in addition to vision, robots in various applications may utilize other available sensors and measuring devices (e.g. tactile, weight, distance) thus making those easily programmable human-like task-oriented performers. There is a considerable public discussion regarding the repatriation of manufacturing that went off-shore; while this is a worthwhile objective to strengthen the national economy, such repatriation is not likely to have a significant impact on recreating the jobs that went overseas. In fact, those jobs are gone forever and the repatriation of some (or even much) manufacturing may occur as part of the natural economic evolution: in the world of robotic manufacturing the cost advantage offered by low-cost overseas labor is gone and the lowest cost may be achievable by locating factories closer to the markets.
The labor content reduction is not confined to manufacturing. In agriculture, we have gone in the course of about 250 years from virtually everyone working the land to a small fraction now so employed. Much of this reduction is the result of large-scale farming with large cultivating machines. In the next phase, farming machinery is moving towards GPS-controlled autonomous equipment. A large scale dairy farm (thousands of heads herd) I visited in Arizona has used milking machines for many years: as the cows arrived at the machine their tags were read by scanners, humans connected and disconnected the machine to the udders, and the volume and quality of the milk were computer analyzed and stored. More recently, in New York family farms (hundred heads herd) started using fully robotic milking and feeding (no farmhands involved at all), obtaining apparently superior results by being able to allow the cows to elect how many times and when they are to be milked by the robots. (N Y Times, Apr. 23, 2014)
According to the U. S. Bureau of Labor Statistics the combined goods-producing industries (mining plus construction plus manufacturing plus agriculture) in 2000, 2010, and 2020 respectively employed, or are forecast to employ, 18.4, 13.9, and 13.1 percent of the working population of the USA.
Activities to save labor through automation are not confined to the goods-producing industries. Such activities can be found in the service industries too and virtually no industry sector is immune to their expected impact. Surgeons now can avail themselves of robotic tools that allow remote operations that save scrubbing and dressing time. No doubt high precision invasive procedures will be more accurately (and thus more safely) performed by robotic devices than by knives held by human hands. Self-driving cars and robots that climb ladders are already operational. Automated warehouse operations are well established. Thus the delivery of online ordered goods from automated warehouse to home via fully autonomous means can be expected soon.
Robotic delivery in hospitals and in homes of personal services for the sick and the aged are being considered. More generally I can envision a world where most of us will have one or more personal assistant robots. Recently a friend visiting Carnegie Mellon University was guided by a Co-Bot; this device is a post on wheels with a screen on top to communicate; it knows its way around, and asks people to push the elevator buttons to get where it needs to go; in addition to guiding people around it picks up the mail and delivers small packages as requested; if stuck somewhere without help, it contacts its headquarters. Walking, seeing, listening, tactile-and force-sensing robots with two legs and two arms already have been demonstrated, they can be programmed to execute various tasks by initially guiding their movements through task-required paths and their actions directed by voice command using well-established speech recognition tools. The natural extension of these processes takes us out of science fiction into the new real-world of the not too distant future.
Already today certain easily programmed two-armed stationary robots can be purchased for $25,000. The inherent cost of an autonomous walking robot is not higher than that of an automobile, in fact, it is probably much lower. Weight is an important cost scaler and a personal assistant robot would certainly weigh much less than a low-cost car. Thus, once the technology is fully developed and demand established, highly automated mass production techniques are applied to the fabrication of robots themselves, a mass market will open up where personal assistant robots will be desired and affordable by all.
Thus robots eliminate jobs. They also may enhance the average person’s quality of life. But with no job, how will a person who earned a modest income and accumulated no wealth pay for his/her necessities that possibly (even may need to) include an intelligent machine personal assistant?
Where we are coming from and are going to
As by now it is well known, and also discussed in some quantitative detail in the Appendix, labor’s share of the slowly growing economy is continuously decreasing. While some economists may argue whether capital and labor are complementary or substitutional, in the practice of manufacturing automation definitely is substituted for labor. Automation is a capital investment, thus capital is substituted for labor. One may argue that with automation the unit costs are reduced, thus prices can be reduced and maybe more units can be sold. This then can lead to the opening of more manufacturing lines to satisfy the growing demand and thus labor is not necessarily displaced; however, when supply already exceeds demand, automation directly displaces labor.
During the 19th and much of the 20th centuries, as one industry matured another new industry was born. For example, the textiles, automobile, and consumer electronics industries evolved consecutively, each creating reasonably well-paying new employment opportunities. In the last quarter of the 20th century, two new industries emerged: microelectronics and information technology (IT). Neither has been a major job creator for the average person. Microelectronics by its very nature needed to be highly automated from the beginning and ultimately displaced earlier consumer electronics products. For example, cheaper and less labor-intensive heavily microelectronics-based HDTV Flat Panels completely replaced the earlier CRT TVs. Both microelectronics and IT provided many new jobs to a new generation of highly trained professionals, but in general, only reduced the employment opportunities of persons without a college education. (See the Appendix for data on the correlation of education with unemployment and income.)
We face a major crisis. We need to rethink some of our basic economic beliefs; otherwise our relative social peace and our capitalistic society are likely to break down.
Till the 1970s we had a social contract that maintained a balance between capital and labor, whereby capital and labor shared the benefits of productivity gains. Later on, increasing automation, deregulation, and the replacement of the old rule of “one citizen one vote” with the new rule of “one dollar one vote”, ended the social contract. We now have “inequality” that has been growing continuously for well over a quarter of a century and it appears to continue to grow unstoppably in the foreseeable future. Who are the expected winners in our brave new world? They belong to three groups: owners of capital, the top managers of major industrial and financial organizations, and innovators. Some innovators who recently became super-rich have come up with new ideas that appeal to many people and out of this appeal created billion-dollar companies that employ virtually no one.
We have growing inequality and at the same time our machines can produce enough to satisfy all of our physical needs, provided we can pay. Of course, if we cannot pay, because there are no jobs, the machines too will stop and no one’s needs can be satisfied. The key point is that we have more capacity than demand now. In the future, we are likely to continue to employ increasingly robotics and IT technologies in virtually all industries and not only in manufacturing. Then, if we continue on the present course, we will have fewer jobs, and fewer people able to pay for what they need (and what we can easily produce/supply to fulfill their needs). This situation will lead to human suffering, ever-increasing inequality, political unrest, and economic disaster.
What needs to be done? First, we need to recognize and accept that a significant fraction of society is unemployable. Simply put, we have more people than are needed to produce all the goods and services consumed by our society. We must take care of all. We also need to recognize that no profession is immune to the effects of advances in robotics and IT. Many aspects of law, medicine, education, engineering, human services, etc… are all likely to require reduced human contribution for the completion of given tasks. In education, for example, ongoing experiments in computer-based language teaching methods may initially only match, but then are expected to surpass the effectiveness of classroom teachers.
Once we recognize the above reality, the next step is a new social contract whereby all will share in the productivity gains brought by intelligent machines. We need to reduce the number of working hours; a reduction long overdue. During the Dickensian period of industrial evolution workweeks of 60 hours or even more were not uncommon. By the late 19th century the 48-hour workweek was established. In 1926 Ford introduced the 5-days 40-hours work week. (It is interesting to note that in the Soviet satellite Communist countries the 6-days 48-hours workweek was continued till the late 1960s.) The 5-days 40-hours work week (with 0.5 hours paid lunch break typically bringing the weekly hours worked to 37.5 hours), with minor variations, is still the basic American standard today. Now is the long-overdue time to begin progressive further reductions.
As a social policy, it is better to employ more and have fewer people on welfare. Without a workweek reduction, we will have more people on welfare and fewer employed. As a matter of politics, to accomplish this in the current environment is very difficult. But sooner or later it must be done, and the sooner it is done, the better it is for all. Clearly, to support all of us working fewer hours, will require some form of taxation and transfer payments. Clearly, we need a redistribution of income and possibly wealth also. Clearly, some may think of this as socialistic. So be it! To save our free enterprise capitalistic system, we must update it; better to adjust and fine-tune it than to lose it altogether.
Concluding remarks: a Global perspective
Thus far I have only discussed the specific issues from a US perspective; inequality and unemployment are global issues. In the developing world “rent-seeking” crony capitalism rules, where political connections created a super-rich class, typically closely entwined with the political elite. Russia and Ukraine are prime examples of this situation, as well as is China. Inequality in these countries far exceeds that in the USA. In general, in the course of the last decades, inequality has grown around the world. Nevertheless, now inequality in the USA exceeds that in all other countries of the developed world. According to the CIA World Factbook, the least inequality, as measured by the Gini index, exists in Sweden with rank order 139 out of 139 countries examined while the USA is assigned position 41 in the Global rank order. USA inequality is worse than that in many African countries; it is also worse than in Russia and in Ukraine, but better than in China. In several countries of the developed world, some progress has been made in addressing the fundamental unemployment issue. In France, the workweek has been reduced to 35 hours. In Germany to ease unemployment “Kurzarbeit” (short-work) is widely practiced, whereby instead of lay-offs reduced working hours have been deployed with government subsidies providing partial compensation for the lost wages. A typical 40 hours/week American worker with a 0.5-hour lunch break, 10 days of paid vacation, and 10 paid holidays would work a total of 1,800 hours per year; on a 52-week basis thus Americans work on the average about 34.5 hours per week. As a result of “Kurzarbeit” and also of more generous vacation plans, in 2011 Germans worked 1,330 hours in the year, or on the average 25.6 hours per week. In 2011 the US unemployment rate was about 9% and the German was about 6%. In 2014 at the time of this writing, the US unemployment rate is about 6.7%, and that in Germany was 5.1%. Several countries in the EU are ahead of the USA in addressing both inequality and unemployment.
Appendix: Quantification of American income and wealth trends.
The average person’s income and wealth are represented by the median income and wealth. The relative value of the median versus the mean provides information about the distribution across the population. While banks and the governments compile huge amounts of data, in no single source could I find data for the four numbers: mean and median income and wealth on a given recent date (or tax year). From The US Census Bureau, “Income, Poverty, and Health Insurance Coverage in the United States: 2012”, p.6, Table 1 for 2011 2011 and 2012 gives the median household income as $51k (number of households in 2011 121 million and in 2012 122 million). From the US Census Bureau, “Historical Income Tables: Households, Table H-3. Mean Household Income Received by Each Fifth and Top 5 Percent” I compute the mean household incomes for 2012 as $71k and for 2011 as $70k. From The US Census Bureau, “Household Wealth in the U.S.: 2000 to 2011”, the median net worth of US households was $69k; the same source gives the aggregate net worth of all US households in 2011 as $40.2 Trillion from which for 121 million households I compute a mean household net worth as $330k. [There are surprisingly large differences in the data available from different sources. For example, from a Congressional Research Service publication (fas.org/sgp/crs/misc/RL33433.pdf) I found that based on data from a Federal Reserve Survey of Consumer Finances (SCF), “mean household net worth was $498,800 and median household net worth was $77,300 in 2010.” In any case, the general message is clear; the mean net worth is much larger than the median, indicating that an affluent minority owns most of the wealth in the USA.]
Thus the Census data for 2011 shows that the median family income and net worth are substantially lower than the corresponding means ($51k vs. $70k and $69k vs. $330k, respectively). Furthermore, the data also shows that between 2011 and 2012 the median family stayed the same while the mean increased. Through the years examined, we can see the much-discussed fact that the average American household is not sharing the benefits of the growing US economy.
From The US Census Bureau, “Historical Income Tables: Households, Table H-6. Regions-by Median and Mean Income”, in the course of 25 years from 1986 and 2011 the inflation-adjusted median household income increased by 2.5%, while the corresponding mean by 15.9%. During the same period, the inflation-adjusted GDP per capita increased by close to 50% (45.2% according to indexmundi.com/facts/united-states/gdp-per-capita, 48.1% according to multpl.com/us-real-gdp-per-capita/table/by-year, and 47.9% according to ers.usda.gov/datafiles/International_Macroeconomic_Data/Historical_Data_Files/HistoricalRealGDPValues.xls). During the same period total government expenditures as a percent of the GDP changed little (was about 35% according to usgovernmentspending.com). Also in 2011 the GDP per capita was $50k and I compute $129k GDP per household (311.6 million people, 121 million households, 2.58 people per household); if I adjust this to split 65/35 between households and the government, I calculate $84k as the mean value of the households’ share of the GDP. Since the mean household income was $70k (see above), I conclude that about 17% is accrued somewhere, not contributing to family incomes. Also, we conclude that the GDP increase is not reflected in the increase in incomes, or in increased government expenditures. Where does it go? -- Both in the short term and in the long term the income of the affluent increased faster than that of the household of the average American.
The evolution of Family Net Worth distribution in the USA over a quarter of a century is shown in the table below (reproduced from 2.ucsc.edu/whorulesamerica/power/wealth.html) for three income percentile groups.
Top 1% Next 19% Bottom 80%
1983 33.8% 47.5% 18.7%
1989 37.4% 46.2% 16.5%
1992 37.2% 46.6% 16.2%
1995 38.5% 45.4% 16.1%
1998 38.1% 45.3% 16.6%
2001 33.4% 51.0% 15.6%
2004 34.3% 50.3% 15.3%
2007 34.6% 50.5% 15.0%
2010 35.4% 53.5% 11.1%
We conclude that during the 27-year period shown above, the lower 80% saw close to a factor two reduction in its share of the Nation’s wealth. Furthermore, according to the Congressional Research Service (CRS) (see fas.org/sgp/crs/misc/RL33433.pdf, Table 2), from 1989 through 2010, the upper 10% of wealth owners (here not income percentile but wealth percentile) increased its share of the total net worth from 67.2 % to 74.5 %.
From the above referenced CRS report Table 3, reproduced here below, additional income and net worth data are available. It is interesting to note that up to the 90th percentile, in the ranges shown the income distribution is flat, medians and means are essentially the same as one would expect for the narrow percentile ranges selected. However, in the range of 90% to 100%, the mean is substantially larger than the median. Here the small elite group of extremely high earners skews even the narrow high-income percentile group’s income average strongly upwards. It is also noteworthy that the lower the income group, the higher is the mean to the median ratio for net worth; this suggests that in the lower-income brackets some households manage to accrue significantly more wealth, obviously not by earning more, but presumably by saving and/or inheriting more.
Household Income and Net Worth by Income Class (2010 dollars) – Source: CRS Report for Congress www.crs.gov RL33433
| ||||||||
Income
|
Income ($k)
|
Net worth ($k)
|
% Households
| |||||
Percentile
|
Median
|
Mean
|
Median
|
Mean
|
Who Saved
| |||
All
|
45.80
|
78.50
|
77.38
|
498.80
|
52.00
| |||
< 20%
|
13.40
|
12.90
|
6.20
|
116.80
|
32.30
| |||
20% to 40%
|
28.10
|
27.90
|
25.60
|
127.90
|
43.40
| |||
40% to 60%
|
45.80
|
46.30
|
65.90
|
199.00
|
49.80
| |||
60% to 80%
|
71.70
|
73.60
|
128.60
|
293.90
|
60.10
| |||
80% to 90%
|
112.80
|
114.60
|
286.60
|
567.20
|
67.70
| |||
90% to 100%
|
205.30
|
349.00
|
1,194.30
|
2,944.10
|
80.90
| |||
Note: Income data are for 2009, the year before the 2010 SCF was conducted survey. Asset and liability data are for 2010, as of the time interviews were conducted.
The foregoing quantitative details clearly indicate that in our era the rich get richer and a few may get rich, but the majority is left behind economically and likely heading towards marginalization. – Nevertheless, education pays. The table below is reproduced from the website of the U.S. Department of Labor, U.S. Bureau of Labor Statistics.
Education attained
|
Unemployment rate in 2013 (Percent)
|
Median weekly earnings ($)
|
Doctoral degree
|
2.2
|
1,623
|
Professional degree
|
2.3
|
1,714
|
Master's degree
|
3.4
|
1,329
|
Bachelor's degree
|
4.0
|
1,108
|
Associate's degree
|
5.4
|
777
|
Some college, no degree
|
7.0
|
727
|
High school diploma
|
7.5
|
651
|
Less than a high school diploma
|
11.0
|
472
|
Note: Data are for persons age 25 and over. Earnings are for full-time wage and salary workers.
| ||
Source: Current Population Survey, U.S. Department of Labor, U.S. Bureau of Labor Statistics
| ||
In fact, the benefit of education in terms of a low unemployment rate is even greater than the above table suggests. In lower educated segments of the population, the participation rate (fraction seeking employment) is lower than in the better-educated segments. Presumably, because a higher fraction of less-educated people has given up looking for jobs than did the more-educated, rather than low earners not needing the income. The table below also reproduced here from the website of the U.S. Department of Labor, U.S. Bureau of Labor Statistics (it again covers persons 25 years and over) shows that in the lowest educational category fewer than half participate (want jobs) while at the high education levels more than three-quarters do so. It is interesting and for me surprising to note that in all education categories the participation rate decreased from the year 2012 to 2013. The reason for this is not clear to me. Could it be a statistical effect of an aging population?
According to the Census Bureau (Educational Attainment in the United States: 2013 - Detailed Tables) out of a total population over 25 years of age, 12% hold graduate and/or professional degrees. Many, if not most of these advanced degree holders may not be super-rich but are in the upper 20% of US earners and wealth holders.
