October 02, 2014

The broken link

I mentioned in  yesterday's post that I worked with friends from the WV Center on Budget and Policy on a report about The State of Working West Virginia, something we've done every year for the last seven or so.

Anyhow, I'd like to point out some interesting things from the report that my friend Sean O'Leary dug up. It's all about one thing that is messed up with today's economy. According to conventional wisdom, "a rising tide lifts all boats." And sometimes it does. Just not so much around here lately.

People used to assume that if the economy was growing, jobs would too. And that if productivity went up, so would wages. Here's what Sean pointed out on GDP and jobs:
West Virginia ranked 3rd highest among the 50 states in real GDP growth from 2012 to 2013, at 5.1 percent. But the state ranked dead last in job growth, actually losing almost 7,000 jobs. West Virginia actually lost jobs even as the economy grew. In fact, the link between the growth of the economy (real GDP) and job growth has been weak for much of the past decade. While real GDP grew by 17.2 percent since 2002, job growth has been an anemic 3 percent 
Ditto the wages and productivity thing:

 West Virginia’s productivity, or economic output per worker, increased by 5.8 percent from 2012 to 2013, the third biggest increase among the 50 states. But just as growing GDP has not translated into more jobs, even though West Virginia’s workers are producing more, their pay has not reflected their production.
Since 1979, West Virginia’s worker productivity has increased by more than 50 percent, while median compensation, the wages and other benefits earned by the worker in the middle of the distribution, has only increased by 4.5 percent,,.Workers are benefiting little from both economic and productivity growth.
Holy surplus value extorted from the toiling masses, Batman! Just kidding. Mostly. But clearly something is out of whack.  One symptom of that is rising inequality. Sean again:

West Virginia’s economic growth and productivity gains of the past three decades have not resulted in widespread broad prosperity. Instead, more and more of the state’s wealth and income are flowing to the top, benefiting the wealthiest.
Between 1979 and 2011 the state’s average real income grew just 3.9 percent, but over that time period, all of that growth was captured by the top one percent of richest West Virginians. The average real income for the top one percent grew by nearly 71 percent, while the average real income for the bottom 99 percent fell by almost three percent.
Because of that lopsided income growth, the share of income held by the top 1% in West Virginia has steadily grown since 1979, and is reaching historically high levels (Figure 2.4). And as the West Virginia’s economy grows more top heavy, the income gap widens. In 1979 the average income of the top 1% was 10.1 times higher than the average income of the bottom 99%. By 2011, that ratio had grown to 17.7 times higher.
The average income of the bottom 99 percent in West Virginia would be 12.3 percent higher if they still earned the same share of income they earned in 1979. That is equal to about $5,200 per person. Instead, those income gains were collected by wealthiest in the state.
Short summary: once upon a time in the USA, we grew together. Now, we're growing apart. And we will continue to do so at great cost to our democracy unless things change. Which means unless people change things.

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