Economy robust, middle class income dropping?

[Mosca]

Comments? I've noticed this in my daily work, which consists partly of analyzing creditworthiness. I have no immediate opinion on the study's validity, but I thought some would find it interesting, seeing as how there has been a lot of talk in the media about "the war on the middle class".



NEW YORK (CNNMoney.com) -- American men in their 30s are earning less than their father's generation did, challenging a long-held belief that each generation will be better off than the one that preceded it, according to a new study published Friday.

The report, the first in an ongoing 18-month study on economic mobility in the United States, also revealed that the income growth of the median American household is declining.

The study was produced by a handful of politically diverse think tanks including the Pew Charitable Trusts, the American Enterprise Institute, the Brookings Institute, the Heritage Foundation and the Urban Institute. It looked at income levels of American men in their 30s, which can be a good indicator of lifetime income.

Relying on Census Bureau figures, the study's authors found that after adjusting for inflation, men in their 30s in 2004 had a median income of about $35,000 per year, for a 12 percent drop compared with $40,000 per year for men in the same age group in 1974.

That stood in stark contrast to men in their 30s in 1994, who earned 5 percent more than their fathers did.

Similarly, American families, which experienced a 32 percent increase in income levels between 1964 and 1994, saw household income growth slow to 9 percent between 1974 and 2004, according to the report.

"There is clearly some story here that [U.S.] productivity gains are not trickling down to the median family," said John Morton, a co-author of the study and the managing director of economic policy initiatives at the Pew Charitable Trusts.

Even as male incomes have declined and household income growth has slowed, the nation's productivity has remained robust. While the two once kept pace with each other, U.S. productivity has quickly outpaced income growth since the mid-1970s, according to the report.

The study's authors, who plan to examine relative mobility, or the ability of Americans to move up or or down in social strata, said their report shows the canonical belief in an American meritocracy may be unraveling.

"The expectation that each generation will do better than their parents has become a fundamental part of what we call 'The American Dream,'" said Morton. "But this new analysis suggests this bedrock belief may be shifting under our feet."

[fansince'76]

I believe it. It's also instructive to note that in 1980, CEO compensation vs. rank-and-file worker wages was about a 40/1 ratio. Today, it's almost a 300/1 ratio. Productivity has gone way up during the same period, but it's executive management reaping the benefits, not the average worker.

Ratio of CEO to average worker pay 1965-2005

[Jeremy]

What do you really expect when you've had a Republican President and a Republican Congress in place for as long as we've had? It's not just BushCo either.

Go back and look at Reaganomics and you won't need to wonder about how we've gotten to this point.

[Godfather]

It's even worse when you take housing prices, student loans, and insurance into account--the cost of living has gone up by more than what the CPI says.

[GBMelBlount]

Originally Posted by fansince'76

I believe it. It's also instructive to note that in 1980, CEO compensation vs. rank-and-file worker wages was about a 40/1 ratio. Today, it's almost a 300/1 ratio. Productivity has gone way up during the same period, but it's executive management reaping the benefits, not the average worker.

Ratio of CEO to average worker pay 1965-2005

'76, I am pretty much rank and file. One of my fraternity brothers works for a local bank and makes $10,000,000 plus per year. Do I think he earns it, yes, he is brilliant!!! Could I ever do his job, no. Point being, anyone (like me) can do appropriate data entry out of 40 applicants. The CEO's, CFO's, Presidents, are like the rudder on a huge corporate ship, directing them to failure or success. Even at apparent "high" rates, brilliant people, like my frat bro, are often worth their pay. That is why they are paid the bucks. Capitalism. God Bless America!!!!

[Atlanta Dan]

Originally Posted by GBMelBlount

'76, I am pretty much rank and file. One of my fraternity brothers works for a local bank and makes $10,000,000 plus per year. Do I think he earns it, yes, he is brilliant!!! Could I ever do his job, no. Point being, anyone (like me) can do appropriate data entry out of 40 applicants. The CEO's, CFO's, Presidents, are like the rudder on a huge corporate ship, directing them to failure or success. Even at apparent "high" rates, brilliant people, like my frat bro, are often worth their pay. That is why they are paid the bucks. Capitalism. God Bless America!!!!

Of course under the heads I win, tails you lose model of executive compensation in modern American capitalism, top execs make out whether or not the stock price tanks (stock option backdating) and win Powerball even if they steer the ship onto the rocks (Bob Nardelli at Home Depot). Hard to see how the capitalistic creed of rewarding success and punishing failure supports those outcomes.

[GBMelBlount]

Originally Posted by Atlanta Dan

Of course under the heads I win, tails you lose model of executive compensation in modern American capitalism, top execs make out whether or not the stock price tanks (stock option backdating) and win Powerball even if they steer the ship onto the rocks (Bob Nardelli at Home Depot). Hard to see how the capitalistic creed of rewarding success and punishing failure supports those outcomes.

Most of the President, CEO, CFO income is OUTCOMES / performance based.

[Atlanta Dan]

Originally Posted by GBMelBlount

Most of the President, CEO, CFO income is OUTCOMES / performance based.

Well, it is supposed to be, but the Wall Street Journal (not exactly a pillar of socialism) reported on this disgusting practice following 9-11.

"On Sept. 21, 2001, rescuers dug through the smoldering remains of the World Trade Center. Across town, families buried two firefighters found a week earlier. At Fort Drum, on the edge of New York's Adirondacks, soldiers readied for deployment halfway across the world.

Boards of directors of scores of American companies were also busy that day. They handed out millions of bargain-priced stock options to their top executives.

The terrorist attack shut the U.S. stock market for days. When it reopened Sept. 17, stocks skidded more than 14% over five days, in the worst full week for the Dow Jones Industrial Average since Germany invaded France in May 1940. But for recipients of options, the lower their company's stock price when options are awarded the better, since the options grant a right to buy shares at that price for years to come. The grants set recipients up for millions of dollars in profit if the shares recovered.

A Wall Street Journal analysis shows how some companies rushed, amid the post-9/11 stock-market decline, to give executives especially valuable options. A review of Standard & Poor's ExecuComp data for 1,800 leading companies indicates that from Sept. 17, 2001, through the end of the month, 511 top executives at 186 of these companies got stock-option grants. The number who received grants was 2.6 times as many as in the same stretch of September in 2000, and more than twice as many as in the like period in any other year between 1999 and 2003.

Ninety-one companies that didn't regularly grant stock options in September did so in the first two weeks of trading after the terror attack. Their grants were concentrated around Sept. 21, when the market reached its post-attack low. They were worth about $325 million when granted, based on a standard method of valuing stock options."

http://online.wsj.com/public/resourc...ntVersion=true


Stock options are a defensible means of rewarding performance when properly accounted for, but the practice of backdating options, the post 9-11 incidents described above, and the failure to account for the cost of these options when exercised are indicative of executive compensation practices that loot the company and often have little to do with a reward for a job well done.

[steelerbackr4life]

Without trying to go off topic. I think the rate of decreased income and increased productivity can be traced to the decline of good paying union jobs.

[SteelCityMan786]

Originally Posted by Jeremy

What do you really expect when you've had a Republican President and a Republican Congress in place for as long as we've had? It's not just BushCo either.

Go back and look at Reaganomics and you won't need to wonder about how we've gotten to this point.

Don't forget that republican congress was around during the Clinton Administration as well. I'm also sick and tired of Democrats blaming us(The Republican Party) for the shape the country is in when all parties are responsible. A lot of Democrat like to act like Republicans are the only party in Congress when Republicans like myself know that it's not just Republicans in Congress, it's Republicans AND Democrats.