On secular relative impoverishment of young people

The problem with young people's income deficiency attracts more and more attention from media and politicians. Almost every day one can find a publication in non-negligible (e.g. FT) media resources comparing the current young people generation with historical records. We have explained in this blog and many academic papers that this problem cannot be resolved in the situation with growing real GDP per capita. 

Figure 1 describes the growth in average income in the USA for work experience between 4 and 10 years, i.e. for 19 to 25 years of age according to the CPS ASEC conducted by the Census Bureau every March for the BLS. (All data were retrieved from  IPUMS USA, University of Minnesota, www.ipums.org.) Because of the growing nominal and real GDP, the curves in Figure 1 are normalized to the peak value for a given year and we observed how fast people can reach the peak income on average.  In 1950, the mean income grew from 0.26 for 4 years of work experience to 0.70 for 10 years. The linear regression shows that extremely good fit (Rsq=0.991) and a linear growth rate of 0.073 relative units per year. In 2019, the rate was only 0.054 per year, and the change from 0.082 for 4 years of work experience to 0.40 for 10 years (Rsq.= 0.995). This observation indicates the progressive decay in the relative mean income for a given work experience. Figure 2 presents an example of such decay for 10 years of work experience from 1950 to 2019, i.e. during the last 70 years. The linear decay over decades implies that extremely strong natural economic forces drive this process.  These forces are fully related to real GDP per capita linear growth.  

We have developed an income distribution and evolution model describing also these effects of the relative decrease in the young people incomes - the mean income obviously means that all young people of a given age have lower relative incomes. We also well documented the process of full similarity of the personal income distribution in various countries when compared according to real GDP per capita. The linear fall in the mean income relative with time is explained by the effect of the increasing age of the peak income, as Figure 3 shows. The peak age has been increasing as a square root of the real GDP per capita since the beginning of the 20^th century, where we have income measurements. According to our model, the initial mean income growth is approximately a linear function of time.

Real income measurements reveal the process which underlies the relative impoverishment of the youngest cohorts. This is not an economic problem in sense of natural forces driving this effect. One cannot make younger people richer by economic measures. This is a social problem, however. This social problem will deepen and expand with time if to ignore the real economic forces behind it. These forces are fully related to real economic growth.  

Figure 1. Relative growth of the mean income depending on work experience between 4 and 10 years in 1950, 1980, and 2019.   

Figure 2. The fall of the relative mean income of people with 10 years of work experience between 1950 and 2019.

 

Figure 3. Relative growth of the mean income depending on work experience in 1950, 1980, and 2019.  

 

Will Green ruin Berlin?

I am waiting for the Greens victory and green Chancellor in Germany this fall. This would be a great social experiment when amateurs will run the biggest economy in Europe. The secret of German success was always in excellent engineering (industry)  and order (social agreement). Both cornerstones will be deposed and the decay of the German economy will be dramatic with negative social consequences. I hope that Germany will compete in this race with the US - recognized leader of self-destruction.  

МОК запретил вставать на колено во время Олимпийских Игр

Надеюсь чернокожие американцы откажутся от участия в этих ксенофобских и расистских соревнованиях, а остальные развитые страны их поддержат. Недопустимо ограничивать права угнетенных.

Why liberals do not join the police

The current police discussion in the USA reminds me of the excellent book by J.Haidt "The righteous mind" discussing the inherent difference between liberal and conservative moral foundations. This difference is well experimentally described in the book but what strikes my (conservative) mind is how liberal mids can serve the army and police. The liberal mind does not like authority and loyalty - the basis of hierarchy, order, honor, and duty. The police reformation (defund) discussion does not have a significant point - liberals have to reform the police from the inside, i.e. join the police and replace the rude policemen. However, they want the dirty part of the justice work to be done by somebody else and thus denying their own conviction that nobody has to be forced to do such a job. I do understand why liberals do not have overwhelming representation in the police force, but I do not understand how they are going to resolve actual social and criminal conflicts.

Why the whites pretend they do not understand the meaning of George Floyd's death

The (western European) whites and their descendants have many excuses for their cruel global expansion accompanied by extermination - genocide is a new term - of the native population (literally everywhere) and slavery. There are many considerations why they pretend that they do not understand their crimes and the feelings related to Floyd's death. 

1. they say that slavery was prohibited more than 150 years ago and none of the living humans participated in that. To understand the feelings the whites have to get through 300 years of slavery themselves and then judge what does it mean.

2. many white (and not only white) say that they are not guilty because joined later. Since the whites is a gang humiliating everyone who is not in the gang and protecting their own bandits one can say that the members joining the gang at the later stage are also guilty in all criminal actions, including the genocide of the native population. They knew whom they joined and were ready to use all preferences obtained from all the crimes. 

The mean income gap between white males and black females grows during the democratic presidencies

Two days ago, we compared the mean income evolution of the white and black population and demonstrated that the difference did not change much since the 1980s. Finer details might be more graphic and Figure 1 shows that the mean income of white males is now 1.72 times larger than the man income of black females. In 2019, the black males earned 1.21 times more than black females.  The relative values are important and demonstrate some convergence between various population groups but they are partially misleading since the absolute difference in mean income might be more painful. Moreover, the absolute difference may reveal important details which are ironed out in the relative representation.

In Figure 2, the difference between the real mean incomes of the white males and black females is shown. One can see that the difference was growing between the 1950s and 1070s and reached its peak in ($30,599) in 1973. It has been oscillating between $28,000 and $25,000 ever since. It is interesting that since the 1980s the difference grows during the democratic presidency and falls during the republican one. Having President Biden representing Democratic Party, one can guess that the absolute gap between white males and black women will be growing in the years to come. During the Trump period, the difference did not move much. 

Figure 3 shows that the difference between the white and black population mean income was stable between the late 1980s and the mid-2010s. During the Trump period, the mean income of white females surged, and the overall difference increased from $11,312 in 2016 to $13,244 in 2018. 

 Figure 1. The ratio of white male/ black female and black male/black female mean incomes

 

Figure 2. The difference between white male and black female mean income

Figure 3. The difference between the white and black  population mean income

The US lost face - Biden called Putin

On April 9, I wrote that the US is losing face in the Russia-Ukraine escalation. It really happened and Biden called Putin putting forward the Global stability issue. Essentially it means that the US blinked first and the agenda and terms of the proposed Summit (which is extremely important for global stability) will be formulated by Putin. Otherwise, the Summit will not happen. The lesson learned is that the aggressive counteraction on the brink of global extinction is not acceptable for the US establishment. This is a powerful tool to push own interests through. The next time, the readiness of Russia to defend existential interest will not be tested by the West.