Saturday, September 10, 2016

Broken promises

Incomes for the top 10% increased by about 40% in inflation-adjusted terms in the past 20 years, while growing little at the bottom according to the International Monetary Fund (IMF).

The McKinsey Global Institute says that between 65 and 70% of households in 25 advanced economies, the equivalent of 540m to 580m people, were in segments of the income distribution whose real market incomes — their wages and income from capital — were flat or had fallen in 2014 compared with 2005.

The American Dream has taken a severe hit:

THE PROMISE
America had an economic model that wouldn’t fail.
THE REALITY
American median household incomes, adjusted for inflation, have fallen 7% since 2000. In the process, a persistent majority of individuals have come to believe the country is on the wrong track.

THE PROMISE
Central banks can manage the balance between growth and inflation and the fallout from financial bubbles.
THE REALITY
The Fed didn’t deliver the growth it expected, consistently undershot its own inflation objective, and missed the buildup of financial excesses which caused the 2007-2009 financial crisis.

THE PROMISE
Technology would lead to rising incomes and broadly shared prosperity. Between 2000 and 2012, estimates Harvard economist David Deming, the hollowing-out of work spread to professions including librarians and engineers. Those with the right skills came out ahead, a big reason the income gap widened. The top 20% of American families accounted for 48.9% of total income in 2014, Census figures show, versus 44.3% in 1990.
THE REALITY


Productivity and output growth have slowed and technology has been polarizing the workforce.

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