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If you asked Bastiat or consumers about China’s currency policy, they would thank the Chinese for their generous foreign aid
View related content: Carpe Diem
One of the most important economic messages of French economist Frederic Bastiat was this one:
Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race.
Let me channel Bastiat and speak for the hundreds of millions of disorganized US consumers (and some US firms), who collectively reap millions of dollars in “foreign aid” and cost savings every year because of China’s very favorable currency policy that strengthens the value of the US dollar and thereby lowers the price of all Chinese imports. On behalf of consumers and in the interest of the human race, I’ve edited a recent news story to represent the viewpoint of the US consumer:
“Brown, Portman back protectionist bill aimed at curbing currency manipulation by China, even though consumers save millions of dollars in the form of lower prices from that ‘manipulation’ in their favor”
Sen. Sherrod Brown joined five other members of the Senate yesterday in backing a bill that could lead to tariffs taxes being imposed on Americans buying goods manufactured by countries accused of manipulating their currencies in our favor to make their exports to the United States less expensive for American consumers and businesses.
At a news conference on Capitol Hill, Brown, D-Ohio, said the bipartisan plan “would mean more products are stamped with ‘Made in the USA’ and fewer products stamped with ‘Made in China.’” However, economists point out that substituting higher-priced US goods for less expensive Chinese goods would raise prices for American consumers and businesses, which would unfortunately make consumers worse off and could lead to job losses.”
Brown said he will work with fellow lawmakers “to attach this bill to any legislation — any legislation going to the president’s desk.”
Under existing law, the U.S. Department of Commerce can investigate claims of currency manipulation by foreign nations and retaliate by imposing tariffs on American consumers and businesses who buy products shipped from those countries to the United States.
But Brown and other critics complain that Commerce has hesitated to investigate currency claims. The bill, if approved by the Senate and House and signed by Obama, would force Commerce to launch an investigation into those claims.
Portman, who did not attend the news conference, said in a statement that he has “long called for the president to crack down on countries like China that manipulate their currency in our favor, aiding foreign exporters and American consumers at the expense of some American workers.” Economists at the American Enterprise Institute have pointed out that many American workers are employed by companies who buy imported goods, inputs and raw materials from China, and currency manipulation benefits those workers and their employers by lowering the costs of production for those companies and thereby making them more competitive.
Critics US firms who don’t use Chinese inputs complain that China artificially keeps its currency low, which makes its products less expensive when they are sold in the United States to their domestic competitors who do use Chinese inputs.
A similar bill co-sponsored by Rep. Tim Ryan, D-Niles, was introduced yesterday in the House.
Rep. Pat Tiberi, R-Genoa Township, who chairs the House Ways and Means subcommittee on trade, said that “currency manipulation is a bipartisan concern and requires a balanced approach since millions of American consumers and thousands of domestic producers benefit from lower prices for Chinese imports, and those lower costs have to be balanced against the concerns of some domestic producers who argue for protectionist trade policies.”
But Tiberi said he is focused on passing a trade-authority bill that would make it easier for Obama to win congressional approval of a new Pacific trade agreement, saying he looks “forward to reviewing this measure and working with the president to find that right balance between American consumers and producers who benefit from lower prices for Chinese imports and the protectionist concerns of some American producers.”
China and the rest of Asia are major trading partners for Ohio companies.
The Ohio Department of Development reported in 2013 that Ohio companies exported $7 billion worth of goods to Asia, up from $5.95 billion in 2011. On the other hand, Ohio consumers and companies imported $12.4 billion worth of goods from China in 2013, up from $11.2 billion in 2011 and up from $9.5 billion in 2010. Thanks to China’s generous currency policy of strengthening the US dollar, Ohio consumers and firms collectively saved millions of dollars from the resulting lower prices for Chinese imports. Various Ohio consumer and industry groups thanked the Chinese government for its generous foreign aid to Ohio citizens and businesses that take place every year through its favorable currency policies.
MP: As Bastiat might point out, China’s currency manipulation is a form of foreign aid, and to the direct advantage of millions of U.S. consumers, especially low-income groups, and to the direct advantage of thousands of American companies buying inputs from China. As I concluded before in The American in 2001 (“Why We Should Thank the Chinese Currency Manipulators“): If you wouldn’t object to China sending products to the United States for free, then on what basis would you object to currency “manipulation” that allows you to purchase undervalued Chinese imports at a huge discount and great bargain?
Evidence shows that affluence in the US is much more fluid and widespread than the rigid class structure narrative suggests
View related content: Carpe Diem
Most of the discussions on income inequality, the reviled “top 1%,” and the hand-wringing about the share of income or wealth going to the “top 1%” typically assume that the top 1/5/10% and bottom 99/95/90% percentile groups by income (pick your favorite percentage) operate like private clubs that are closed to new members. That is, many people assume that various income groups are static and fixed, with very little movement or fluidity among those income groups over one’s career or lifetime. Start out life in the bottom 20% or bottom 50%? Too bad, you’re stuck there forever no matter how hard you try or work, and you can forget about ever being part of the top 1/5/10%. Born into the top 1/5/20%? Great, you’ve got a lifetime membership in that static, closed group.
That rather simplistic interpretation of a static economy is really nothing like the very fluid and dynamic world we actually live in, with significant degrees of income and wealth mobility/fluidity over one’s lifetime. That’s the main conclusion of a new study titled “The Life Course Dynamics of Affluence” by Thomas Hirschl and Mark Rank, based on an empirical investigation of individual lifetime income data in the Panel Study of Income Dynamics over a 44-year period.
For example, one of the authors’ key findings is that by age 60, nearly 70% of the US population experienced at least one year in the top 20% by income, more than half (53.1%) were in the top 10% for at least one year, more than one-third (36.4%) spent at least one year in the top 5%, and 11.1% (one out of nine) spent at least one year with income in the top 1% (see top chart above). Those findings of significant income fluidity for one year periods are further supported when the authors look at longer time periods. For example, although 11.1% of Americans made it into the top 1% for at least one year, only 1.1% (1 in 91) of Americans stayed in the top 1% for ten years or more during their lifetimes, and only about half that amount (0.60%, or 1 in 167) were able to stay in the top 1% for ten consecutive years (see bottom chart above). That should shatter the myth that the top 1% is a fixed club closed to new members! Likewise, more than 1 out of 3 Americans (36.4%) spent at least a year in the top 5%, but only about 1 in 15 (6.6%) remained there for ten years or more, and only about 1 in 27 (3.7%) spent 10 consecutive years in the top 5%. Lots of movement and fluidity.
Here is a summary of the main findings of the study (emphasis added):
1. There is substantial fluidity in top-level income over ages 25 to 60. Thus a static image of top-level income tenure is at odds with the empirics of how people live out their life course.
2. The study findings indicate that top-level income categories are heterogeneous with respect to time, comprised of a relatively small set of persistent members, and a larger set of short-term members. For example, although over half of the U.S. population experienced one or more years of top 10th percentile income, only about half of this set attained top 10th percentile income for three consecutive years, and fewer than 7 percent persisted at this level for 10 consecutive years. Thus the lifetime top 10th percentile is mostly transitory, moving in and out of this percentile over the life course.
3. There are two contentious social implications related to the finding that top-level income is fluid across time. One is that there is widespread opportunity for top-level income. The opportunity to attain top-level income is widely accessed, and many reap the benefits of opportunity. It is also the case that attaining top-level income in one year does not necessarily predict it for the following year. Indeed, most who attain top-level income do so for a limited number of years, and to the extent that they have expectations of persistence, have some probability of experiencing insecurity relative to their expectations. Income fluidity is a double-edged sword, creating opportunity for many, along with insecurity that this opportunity may end sooner than hoped for.
4. We interpret the widespread attainment of top-level income as materially consistent with the way the majority of Americans tend to characterize their society. In a recently published study, we report evidence that most Americans hold fast to the belief that hard work will be rewarded economically, and the present study finds evidence that many Americans do, in fact, attain top-level income. This evidence is counter-intuitive vis-à-vis popular interpretations regarding the 1 percent versus the 99 percent, and we believe that our findings serve to qualify these interpretations. When interpreting social and economic relationships and trends, it is important to consider not simply one, or even many, cross-sections in time, but also the extent of social and economic mobility across the life course. Individuals experience their lives not as a disconnected set of years, but rather as a continuous lifetime of experience.
MP: Thanks to Thomas Hirschl and Mark Rank for bringing some much-needed attention to the significant income mobility and fluidity in the American economy, which directly contradicts the narrative we hear all the time of a rigid class structure based on static income groups like the top 1/5/10%, a static bottom 20/50/99%, etc.
As one of the authors (Mark Rank) pointed out last year in the New York Times:
It is clear that the image of a static 1 and 99 percent is largely incorrect. The majority of Americans will experience at least one year of affluence at some point during their working careers. (This is just as true at the bottom of the income distribution scale, where 54 percent of Americans will experience poverty or near poverty at least once between the ages of 25 and 60).
Ultimately, this information casts serious doubt on the notion of a rigid class structure in the United States based upon income. It suggests that the United States is indeed a land of opportunity, that the American dream is still possible — but that it is also a land of widespread poverty. And rather than being a place of static, income-based social tiers, America is a place where a large majority of people will experience either wealth or poverty — or both — during their lifetimes.
Rather than talking about the 1 percent and the 99 percent as if they were forever fixed, it would make much more sense to talk about the fact that Americans are likely to be exposed to both prosperity and poverty during their lives, and to shape our policies accordingly. As such, we have much more in common with one another than we dare to realize.
Chart of the day: Hillary Clinton’s 28% (and $15,700) gender pay gap from 2002-2008 for her Senate staff
View related content: Carpe Diem
An analysis of Senator Hillary Clinton’s official Senate expenditure reports by Washington Free Beacon reporter Brent Scher reveals that from 2002-2008, the New York Senator and champion of women’s rights, paid her female staffers significantly less on average than men working on her staff. In his article “Hillary Clinton’s War on Women,” Brent Scher reported that over the eight years that Sen. Clinton was in the Senate, the median annual salary for female staffers was about $40,800, which was 28% (and almost $16,000) less than the median salary paid to men of $56,500 (see chart above).
Senator Clinton’s 28% gender pay gap while in the Senate was more than double the 13.3% current gender pay gap in Obama’s White House and more than three times the average gender pay gap for the Washington, D.C. labor market of only 9.2%. As I pointed out in a post last week about “White House Equal Pay Day,” the glass ceiling in Obama’s White House means that women on his staff will have to work until this Friday, February 27 to earn the same income as men earned working last year. Women working for Obama should feel lucky only having to work until the end of February to achieve “Equal Pay Day.” The average female staffer working for Sen. Clinton had to work until the middle of May every year (almost 5 additional months) to earn the same income that their male peers earned working the 12 months of the previous year. In some individual years like 2006 and 2008 when Sen. Clinton’s gender pay gaps were even higher at 35% and 37%, Clinton’s female staffers would have had to work until about the end of June, an additional 6 months, to achieve “Equal Pay Day Working for Senator Clinton.”
As I pointed out in my post about Obama’s glass ceiling at the White House, Hillary Clinton can’t have it both ways, either: a) there are gender pay differences throughout the entire economy and in any organization including her Senate staff, which can be explained by factors other than gender discrimination including age, years of continuous work experience, level of education, number of hours worked, marital status, number of children, workplace environment and workplace safety, industry differences, etc., or b) any gender pay gap in aggregate, unadjusted salaries automatically exposes gender discrimination – including Sen. Clinton’s staff – and Clinton then needs to explain why she was “waging a war on her female Senate staffers” by paying them 28% less on average than men (and 3.5 times greater than the 9.2% average gender pay gap for Washington, D.C.).
So either: a) there was a glass ceiling for women working for Sen. Clinton and she herself is guilty of paying her female staffers significantly less than men by $16,000 per year on average, or b) Sen. Clinton is guilty of statistical fraud and deception for continuing to spread misinformation about the alleged discrimination-based gender pay gap at the national level with constant claims of women being paid “77 cents on average for every dollar paid to men” using only aggregate, unadjusted raw data.
Kudos and thanks to Brent Scher for exposing Sen. Hillary Clinton’s hypocrisy about the gender wage gap. If she responds, we can probably expect explanations involving “comparing apples to apples,” but that appropriate statistical standard is never, ever applied when Clinton and Obama engage in their typical statistical deception as they spread their false narratives about how women make “77 cents on the dollar to men” and that is “an embarrassment” (according to Obama) or means there is “more work to do” (see Hillary’s tweet below featured in Brent Scher’s article) or represents ongoing gender discrimination requiring executive orders and additional legislation, etc.
View related content: Carpe Diem
In a recent post, I posed the question: Rather than calling it “an increase in the minimum wage from $7.25 to $10.10 (or $15) per hour,” if we instead called it “imposing a $2.85 (or $7.75) per hour tax on employers who employ or hire unskilled workers,” would it make any difference to those who support “an increase in the minimum wage”? Maybe not for some of the strongest advocates of a higher minimum wage, but perhaps it would make a difference for some weaker advocates who were never challenged to think of it that way?
I think it’s an important point because most discussions on the minimum wage focus more on the benefits to some workers who might be better off because of a higher government-mandated wage, while mostly ignoring the employers, retailers, restaurants, and other small business owners who will be made worse off, and will bear the burden of the $2.85 (or $7.75) “employer tax” per hour for each minimum wage worker employed or hired. Compared to the current federal minimum wage of $7.25 per hour, a $15 per hour minimum (or “living”) wage would be equivalent to a 107% “tax” on some employers, and would burden them with additional labor costs (“taxes”) of $15,500 annually per employee (add in another almost $1,300 for employer-paid payroll taxes and the total cost to employers is nearly $16,800). At least some advocates of a $15 per hour living/minimum wage would have to agree that a $15,500 annual “employer tax” on some small businesses and retailers would have negative effects for both the employers and the workers they hire (or can’t afford to hire).
Here’s a thought experiment: Ask people: a) if they would support a “$15,500 annual tax” on small businesses, retailers, restaurants and employers for each full-time, entry-level worker employed, and alternatively b) if they would support a $15 per hour “living wage.” I’m pretty sure that at least some people who say they support a $15 per hour living wage would be slightly less enthusiastic about imposing a $15,5000 per year “employer tax” on small businesses, retailers and restaurants, even though those two proposals are roughly equivalent. The Venn diagram shows graphically that possible inconsistency.
Words matter, and the terms “raising the minimum wage” or “passing a living wage” are easy to embrace because they sound so positive and well-meaning; but only because those terms only emphasize the potential, positive effects for some workers, while largely ignoring the potential, and very real, negative effects on small businesses, retailers and employers who bear the burden of the government mandate, and the inevitable adverse effects on workers who lose their jobs (or have their hours and benefits cut), or are unable to find a job at the “living wage.”
To illustrate this point, I’ve done some editing of a recent news report about Minneapolis mayor Betsy Hodges, who decided not to support a citywide
$15 minimum wage $7.75 per hour tax (and $15,500 annually for every full-time, entry-level worker) on the city’s small businesses, restaurants and retailers who employ and hire entry-level workers. Would any minimum wage supporters “curb their enthusiasm” for government-mandated wage increases if the report was re-written as follows?
Minneapolis Mayor Betsy Hodges said Thursday that she does not support raising the city’s minimum wage hourly tax on small businesses, employers and restaurants who employ unskilled workers as a way to tackle economic disparities, setting herself apart from a growing coalition of advocates trying to boost the city’s base wage hourly tax on employers who employ entry level workers.
While she has spoken publicly in favor of raising
wagestaxes on employers — including at a December rally advocating a $15 minimum wage for $7.75 per hour (and 107%) tax on employers who employ fast-food workers, which works out to an annual increase of $15,500 in labor costs for each full-time, minimum wage worker — the mayor said that she does not believe a citywide wage hike tax on small businesses, restaurants and retailers who employ low- and un-skilled workers is the best strategy for alleviating poverty or erasing inequalities between racial groups.
“When it comes to a municipal minimum wage tax on employers who employ or hire workers with limited skills I’m not convinced it’s a helpful solution for our city’s economy, specifically,” Hodges told the Star Tribune. “I think that this is a fight that can or should be industry-specific, and one that I think should be done at the regional, state and federal level.”
The mayor’s comments come as advocates of a citywide $15 minimum wage $7.75 per hour (and 107%) tax on employers ($15,500 per year for each full-time, minimum wage worker) have been ramping up their efforts locally and around the country. A Feb. 15 rally featuring the Seattle City Council member who led that city’s successful push for a $15 wage $7.75 per hour (and $15,500 annual) tax on employers drew about 250 supporters and raised $10,000. A handful of Minneapolis City Council members have expressed at least general support for higher wages taxes on the city’s employers, retailers, and small businesses, and one, Lisa Bender, pitched in $1,000 toward the effort.
Hodges says her opposition is twofold.
First, she said Minneapolis is “situated different economically” compared to other cities that have recently upped their minimum wage taxes on employers who hire entry-level workers. Seattle’s vote last year was followed by actions in San Francisco, where the minimum wage will reach $15 employer tax will reach $7.75 per hour in 2018, and Chicago, which will raise its base wage to $13 employer tax to $5.75 per hour between now and 2019. New York City’s minimum employer tax is headed to just over $15 $7.75 per hour in 2019, while Oakland, Calif., has raised its minimum wage employer tax to $12.25 $4 per hour with an additional burden on employers and small businesses in the form of a requirement that businesses provide sick leave to workers.
Opponents of such a move in Minneapolis have expressed concerns about losing businesses to St. Paul or other surrounding cities with lower wages. Hodges said she believes wage increases increases in taxes on employers should occur on a broader level than individual cities. She said she backed Minnesota’s recent move to gradually increase the statewide minimum wage employer tax to $9.50 $2.25 per hour for employees of large businesses and $7.75 $0.50 per hour for small businesses.
“I want to be clear: I support, I believe that the minimum wage an hourly tax on employers who hire workers with limited skills should be higher,” she said. “I believe it should be higher nationally, I believe it should be higher in the state.”
For now, however, advocates say they’re disappointed to learn of the mayor’s opposition and are determined to win over her support of imposing higher taxes on the city’s employers, small businesses and restaurants.
MP: Let’s be very clear – going from the current federal minimum wage of $7.25 per hour to a new $15 per hour minimum/living wage is equivalent to a $15,500 annual “tax” (closer to $16,800 with additional payroll taxes) on employers for each full-time, minimum wage employee. Maybe it doesn’t make any difference to many proponents of the minimum wage, but shouldn’t they at least give some consideration to the impact of higher mandated wages on the employers who are the ones who actually have to bear the burden of their “good intentions” when minimum wage advocates use government force to impose
significantly higher costs/taxes on small businesses, restaurants and retailers who employ entry-level workers?
So I say to minimum wage advocates: would replacing the term “increase the minimum/living wage to $15 per hour” with the equivalent term “raise the cost to businesses who employ or hire entry level workers by $15,500 per year ($16,800 with payroll taxes) for every full-time, entry-level employee” curb your enthusiasm at all about government-mandated wage increases? Maybe not for most, but at least for a few of you? Finally, I would say to minimum wage proponents that it’s easy for you to show your concern and compassion for “the poor” and for entry level, unskilled workers when you bear no cost yourself, but in fact are using somebody else’s (small businesses, restaurants, retailers and other employers) money, with government force, to demonstrate your “compassion”!
Glass ceiling at the White House: Because of a $10,100 gender pay gap, White House Equal Pay Day occurs on February 27
View related content: Carpe Diem
While in office, President Obama has issued at least nine presidential proclamations where he has claimed that women in America “still receive unequal pay” and as evidence points to the fact that based on unadjusted, aggregate salary data “women are paid only 77 cents on average for every dollar paid to men,” see examples here and here in 2009, here and here in 2010, here (in 2011), here in 2012, here and here in 2013, and here in 2014.
For example, President Obama proclaimed August 26, 2013 to be Women’s Equality Day and called upon Americans to promote full gender equality, here’s an excerpt of that presidential proclamation (emphasis added):
From the beginning, my Administration has been committed to advancing the historic march toward gender equality. We have fought for equal pay, prohibited gender discrimination in America’s healthcare system, and established the White House Council on Women and Girls.
Yet we have more work to do. A fair deal for women is essential to a thriving middle class, but while women graduate college at higher rates than men, they still make less money after graduation and often have fewer opportunities to enter well-paid occupations or receive promotions. On average, women are paid 77 cents for every dollar paid to men. That is why the first bill I signed was the Lilly Ledbetter Fair Pay Act. It is also why I established the National Equal Pay Task Force, which is cracking down on equal pay violations at a record rate. And it is why I issued a Presidential Memorandum calling for a Government-wide strategy to close any gender pay gap within the Federal workforce.
Last year, Obama’s presidential proclamation for National Equal Pay Day on April 8 included these statements (emphasis added):
Women make up nearly half of our Nation’s workforce and yet from boardrooms to classrooms to factory floors, their talent and hard work are not reflected on the payroll. Today, women still make only 77 cents to every man’s dollar. Over her lifetime, the average American woman can expect to lose hundreds of thousands of dollars to the earnings gap, a significant blow to both women and their families.
The time has passed for us to recognize that what determines success should not be our gender, but rather our talent, our drive, and the strength of our contributions. So, today, let us breathe new life into our founding ideals. Let us march toward a day when, in the land of liberty and opportunity, there are no limits on our daughters’ dreams and no glass ceilings on the value of their work.
MP: There’s just a little bit of a problem here and some major hypocrisy on the part of Obama because his own White House had a 13.3% gender pay gap last year. According to a detailed analysis of salary data from the “2014 Annual Report to Congress on White House Staff,” the 230 female employees in the Obama White House were paid a median annual salary of $65,650 last year, which is $10,100 per yer (and 13.3%) less than the $75,750 median annual salary for the 225 male White House staffers (see chart above).
So while the president brags in presidential proclamations about fighting for equal pay and gender equality, he might want to investigate and address his own glass ceiling for federal female employees working on his staff at the White house. Paraphrasing the president’s own words from his 2014 State of the Union speech, “You know, today, women make up about half our White House workforce, but they still make only 86.7 cents for every dollar a man earns. That is wrong, and in 2014, it’s an embarrassment.”
That’s better than the overall 23% gender pay gap cited constantly by the president as a national average, but still leaves a 13.3% gender pay gap for women working at the Obama White House and means that his female staffers lose tens of thousands of dollars every year compared to the salaries of male staffers. The 13.3% gender pay gap at the White House is also much greater than the 9.2% average gender pay gap for the Washington, D.C. metro area (BLS data here). That’s a further sign that Obama’s female staffers must be victims of gender discrimination, according to the way that Obama uses unadjusted, aggregate pay numbers (“77 cents per dollar”) to uncover alleged gender discrimination throughout the economy.
Unfortunately, because of the glass ceiling at the White House, women working on Obama’s staff must work much longer than their male colleagues to earn the same amount of pay. The typical female White House staffer who earned $65,650 last year will have to work about two additional months into 2015 to earn the same income that the typical man earned working at the White House last year ($75,750). In the tradition of the National Committee on Pay Equity which identifies and recognizes “Equal Pay Day” every year (and which has been endorsed annually by President Obama with presidential proclamations every year since he was elected) I hereby proclaim that White House Equal Pay Day will take place this year next week on Friday, February 27, 2014. That date symbolizes how far into the 2015 calendar year a typical female White House staffer will have to continue working – slightly more than 38 days — to earn the same income that her male counterpart earned last year. By recognizing White House Equal Pay Day, we can bring attention to the glass ceiling at the White House and highlight the injustice of the gender wage gap at the White House.
Hopefully, creating a public awareness event like White House Equal Pay Day can help to inform the public that the gap between men’s and women’s wages extends all the way to the Obama White House. As President Obama reminds us, “we have more work to do” on the historic march toward full gender equality. Addressing and closing the significant gender wage gap of 13.3% (and $10,100 in income per year) at the White House might be a good place for the President to start some of that unfinished work. And perhaps the National Committee on Pay Equity can supplement its annual Equal Pay Day by recognizing and promoting White House Equal Pay Day until the gender pay gap at the White House is finally addressed and closed.
Bottom Line: President Obama can’t have it both ways, either: a) there are gender pay differences throughout the economy and in any organization including at the White House, which can be explained by factors other than gender discrimination including age, years of continuous work experience, education, hours worked, marital status, number of children, workplace environment and safety, industry, etc., or b) any gender pay gap in aggregate, unadjusted salaries automatically exposes gender discrimination – including the White House – and Obama needs to explain why he is “waging a war on his women staffers” by paying them less on average than men.
So either: a) there is a glass ceiling at the White House and Discriminator-in-Chief Obama is guilty himself of paying his female staffers significantly less than men by $10,100 per year on average, or b) Obama is guilty of statistical fraud and deception for continuing to spread misinformation about the alleged discrimination-based gender pay gap at the national level with constant claims of women being paid “77 cents on average for every dollar paid to men” using only aggregate, unadjusted raw data.
New Census Bureau data on young adults provide insights into demographic changes and forces of creative destruction
View related content: Carpe Diem
Table 1. Characteristics of Young Adults Ages 18-34, 1980 vs. 2009-2013
|Percent of total population||29.6%||23.3%|
|Speak language other than English at home||10.9%||24.6%|
|Bachelor’s degree or more||15.7%||22.3%|
|Live with a Parent||22.9%||30.3%|
|Income Below Poverty Line||14.1%||19.7%|
|Median Income (2013 dollars)||$35,845||$33,883|
Table 2. Top 20 US Metro Areas (pop. > 400,000) Ranked by Highest Median Income (2013 dollars) for Young Adults Ages 18-34, 1980 vs. 2009-2013
|Rank||Metro Area||Median income, full time workers, 1980||Metro Area||Median income, full time workers, 2009-2013|
|1||Flint, MI||$50,208||San Jose, CA||$51,149|
|2||Detroit, MI||$47,460||San Francisco, CA||$47,426|
|3||Chicago, IL||$43,480||Washington, DC||$47,380|
|4||San Jose, CA||$43,229||Boston, MA||$44,548|
|5||Houston, TX||$43,028||Bridgeport-Stamford-Norwlk CT||$42,757|
|6||San Francisco, CA||$42,047||Hartford, CT||$42,322|
|7||Milwaukee, WI||$41,987||New York-Newark, NY-NJ||$42,108|
|8||Seattle, WA||$41,712||Baltimore, MD||$41,807|
|9||Portland, OR||$40,941||Seattle, WA||$41,167|
|10||Rochester, NY||$40,869||Minneapolis-St. Paul MN||$39,963|
|11||Washington, DC||$40,746||New Haven, CT||$39,794|
|12||Youngstown, OH||$40,738||Philadelphia, PA||$39,413|
|13||Cleveland, OH||$40,732||Worcester, MA||$39,115|
|14||Minneapolis-St. Paul, MN||$40,528||Chicago, IL||$38,415|
|15||Pittsburgh, PA||$40,253||Denver, CO||$37,958|
|16||Bridgeport-Stamford-Norwalk CT||$39,900||Des Moines, IA||$37,456|
|17||Toledo, OH||$39,766||Sacramento, CA||$37,397|
|18||Denver, CO||$39,664||Albany-Schenectady-Troy NY||$37,249|
|19||Grand Rapids, MI||$39,413||Raleigh, NC||$36,811|
|20||Cincinnati, OH||$38,997||Springfield, MA||$36,464|
Derek Thompson provided some fascinating income data for young Americans by metro areas in his recent article in The Atlantic titled “The Richest Cities for Young People: 1980 vs. Today.” The income data are from a new Census Bureau study released in December that show how “young adults today compare with previous generations in neighborhoods nationwide.” The study “Young Adults: Then and Now” is based on 1980, 1990 and 2000 Censuses and the 2009-2013 American Community Survey, and includes an interactive data tool with estimates of 40 demographic variables at the national, state, metropolitan, county and neighborhood levels.
A comparison of some demographic characteristics of today’s millennial generation to young Americans ages 18-34 in 1980 is displayed above in Table 1. Specifically, the Census Bureau study finds that compared to 1980: a) young adults today represent a smaller share of the total population (23.3% today vs. 29.6%), b) the share of young adults who are foreign born has more than doubled (15% vs. 6%), as has the share who speak a language other than English at home (24.6% vs. less than 11%), c) young adults today are more likely to have a bachelor’s degree or higher (22.3% vs. 15.7%), twice as likely to be a minority (42.8% vs. 21.6%), more likely to have never married (66% vs. 41.5%), more likely to live with a parent (30.3% vs. 23%), and more likely to have income below the poverty line (19.7% vs. 14.1%), d) young adults today are less likely to live alone (7.1% vs. 7.5%), less likely to be a military veteran (2.4% vs. 9.4%), and less likely to be employed (65% vs. 69.3%). Young adults today have a lower median income of $33,883 compared to the median income of $35,845 for that group in 1980 (in constant 2013 dollars).
The bottom chart above (Table 2) displays an interesting comparison of the top 20 metro areas (wotj populations above 400,000) ranked by median annual earnings (in 2013 dollars) for full-time workers ages 18-34 in 1980 and 2009-2013. Some observations:
1. In 1980, three Michigan cities (Flint, Detroit and Grand Rapids) ranked among the top 20 US metro areas for the highest median incomes for young adults, and Flint and Detroit were ranked No. 1 and No. 2. In 1980, young people working full-time in Flint and Detroit, thanks to an 80% market share for the Big 3 and the above-market wages of the UAW, had higher median annual incomes than their counterparts in all other major US cities including Chicago, San Francisco, Washington DC, Los Angeles (No. 36) , Boston (No. 35), Dallas (No. 45), and New York City (No. 23). When cities smaller than 400,000 in population are considered, many more Michigan cities made it into the top, highest-income cities for young Americans in 1980: Midland ($49,000), Saginaw ($47,000), Monroe ($46,500), Ann Arbor ($44,500) and Bay City ($44,000), all with median incomes for young Americans higher than No. 3 ranked Chicago ($43,480) for large cities.
2. Interestingly, the high income levels for young Americans in most Michigan cities in 1980 didn’t reflect a wage premium for education, since the shares of the young adult population ages 18 to 34 with college degrees in most Michigan cities were significantly below the 16% national average, e.g. 9.7% in Flint, 10.2% in Saginaw, 13.4% in Detroit, 8.6% in Bay City, and 8.1% in Monroe. Given its relatively low cost of living compared to other areas of the country, along with income levels that were about one-third above the national median of $35,845 in 1980, Michigan was probably one of the best states in the country for young people back then. You didn’t even need a college degree in those days, you could graduate from high school in the Flint-Detroit-Saginaw areas and go to work in the auto industry, and earn almost $15,000 above the median annual income for young adults back then. Not a bad deal, except that it was unsustainable because the UAW wages had gotten negotiated over the years levels far above realistic, market levels. Once the Big Three and the UAW faced competition from foreign automakers like Toyota and Honda, the market share of GM, Ford and Chrysler fell by almost half to below 44% in 2009 before recovering slightly in more recent years.
3. From its No. 1 rank in 1980, Flint’s median income for young adults fell to the rank of No. 428 in 2009-2013, out of 929 US metro areas of all sizes, with median annual income of $30,732 – a drop of almost 39% in real dollars in just a generation. Likewise, for large metro areas, Detroit slipped to No. 40 in 2009-2013 with median income of only $34,756, a decrease of almost 27% from its 1980 median income of $47,460.
4. Not surprisingly, more than half (11) of the top 20 metro areas with the highest median incomes for Americans ages 18-34 in 1980 were in Midwest or Rust Belt states (Flint, Detroit, Chicago, Milwaukee, Youngstown, Cleveland, Minneapolis-St. Paul, Pittsburgh, Toledo, Grand Rapids and Cincinnati). By 2009-2013, only three of the top 20 metro areas by income for young Americans were in Midwest or Rust Belt states: Minneapolis-St. Paul, Chicago and Des Moines (and none of those cities have a strong manufacturing base), and almost all of the top 20 metros by income for young Americans were in East Coast or West Coast states (San Jose, San Francisco, Washington, DC, Boston, New York, Philadelphia, Baltimore, Seattle, etc.).
5. In 1980, 1990 and 2000, Williston, North Dakota wasn’t even included in the Census Bureau list of US metro areas. But by 2009-2013 Williston ranked as the sixth highest-income city in the US (for cities of all sizes) for young adults with median income of $46,081, just slightly behind Washington, DC at $47,380, San Francisco ($47,426) and San Jose ($51,149). The median income for the millennial generation working in Williston is higher than the median incomes in Boston ($44,548), New York City ($42,108)and Seattle ($41,167). It’s another amazing sign of shale prosperity that young Americans today are earning incomes in Williston, North Dakota, in the epicenter of the Bakken Oil fields, that are comparable to the median incomes of their counterparts in Washington, DC and San Francisco.
Bottom Line: The new Census data provide a striking look at how today’s young adults are different on many important demographic characteristics compared to their counterparts in 1980. We can also see from the Census study how the geographic center of gravity in the US for the highest-paying jobs for young Americans has dramatically shifted over the last several generations, from cities in the Midwest and Rust Belt states to the West Coast (Silicon Valley and Seattle) and East Coast (Boston, Washington, New York, Baltimore). That shift reflects the never-ending gales of Schumpeterian creative destruction that characterize a market economy and result in some industries and geographical regions emerging as economic centers of entrepreneurship, innovation, growth, investment, employment opportunities for young people, and rising income levels, only to eventually have those forces of economic change shift and move away to other industries and other geographical regions, leaving reduced opportunities and lower levels of incomes in the once-prosperous cities.
While Flint and Detroit and other cities in Michigan once provided incomes for young working adults that were the highest in the country in 1980, those high-paying jobs have gradually faded and income levels are now below-average for most young people in Michigan. For the millennial generation, the high income jobs have shifted away from Michigan to the coasts and cities like San Jose, San Francisco, Boston and New York; and to unlikely places like Williston, North Dakota in the heart of the shale-rich Bakken Oil fields. What geographical areas and industries will provide the highest-income opportunities for the future generations of young Americans, and how will those young Americans be different from today’s millennial generation? It’s hard to tell, but it’s likely we’ll see a demographic and economic/geographic shift over the next 30 years that will be as dramatic as the shift and changes that took place between 1980 and 2010.