Meanwhile, the long awaited equilibration between manufacturing labor costs here and abroad has begun -- the Times reports a drop of almost 50% in hourly compensation for new workers at Caterpillar (and other midwestern manufacturers) versus what older "grandfathered" workers are making (about $20 per hour including benefits, versus about $40 in the good old pre-globalization days). Equilibration can hurt!
On a related note (via Economistsview), Krugman emphasizes that the main beneficiaries of the new economy are a tiny elite of super-rich -- it's not just manufacturing workers losing out, average white collar compensation is stagnant as well. I'm going to check in with some of my financier friends to see whether they wouldn't mind sharing some of the gains from globalization with me ;-)
So who are the winners from rising inequality? ... A new research paper by Ian Dew-Becker and Robert Gordon ... gives the details. Between 1972 and 2001 the wage and salary income of Americans at the 90th percentile of the income distribution rose only ... about 1 percent per year. So being in the top 10 percent of the income distribution, like being a college graduate, wasn't a ticket to big income gains.
But income at the 99th percentile rose 87 percent; income at the 99.9th percentile rose 181 percent; and income at the 99.99th percentile rose 497 percent. No, that's not a misprint. Just to give you a sense of who we're talking about: ... the 99th percentile will correspond to an income of $402,306, and the 99.9th percentile to an income of $1,672,726. The ... 99.99th percentile [is] probably well over $6 million a year. ...
4 comments:
According to that projection, you've got about 18 months until the mini-bubble bursts. That should give you some breathing room.
4 years ago, I decided not to buy a house here in England, and continued to rent instead. Financially one of the worst decisions of my live. I think the situation in England is different from the US, as the market is massively distorted due to heavy planning restriction. I do not expect a bursting of the bubble anymore. It might be different in the US, though.
The main reason I like to display the Japan data is that the timescale of 20 years is clear. Things can go very well for 5-10 years, but by time you sell your house you might find it was a terrible investment! Many people in Japan are trapped in apartments or houses whose outstanding mortgages are much greater than the current sale price.
People do not understand that bubbles can last much longer than they think. 4 positive years could easily be mapped onto the early part of the Japan bubble. If you have perfect timing and sell near the top, no problem. But calling the top is notoriously hard!
um, so as a homeowner, considering a bubble will soon burst, what's recommended? sell, rent for a while, then buy back later?
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