It s the economy stupid!

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Lionel Spencer
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1 It s the economy stupid! (and it doesn t have to be this way!) October 28, 2011 Alameda, CA Sylvia A. Allegretto, PhD Center on Wage & Employment Dynamics University of California, Berkeley

2 The critical role of unions Unions Corporate power & the wealthy U.S. Economy: Workers & citizens Allegretto 2011

3 Wealth Policies Political access Allegretto 2011

Econ 101 (in very colorful but not so pretty pictures) The mess we are in today is man made: it was an Inside Job Wall Street, K Steet & PA Avenue Ayn Rand is popping bennies & partying like it s

4 Econ 101 (in very colorful but not so pretty pictures) The mess we are in today is man made: it was an Inside Job Wall Street, K Steet & PA Avenue Ayn Rand is popping bennies & partying like it s 1929! Those at the alter of the free market are kidding themselves at best. Greenspan (Rand fan) didn t know banks wouldn t regulate themselves what? Plutocracy: of the 1%, by the 1%, for the 1% Allegretto 2011

5 Top priorities Effective regulation Reasonable tax policy EFCA & unions Fix the ongoing housing crisis Fair trade policies Allegretto 2011

6 The only deficit that matters 2% CA 2001 CA % % -4% US today (as of Sept. 11) -4.8% or -6.6 million -6% -8% CA today! (as of Sept. 11) -7.2% or -1.1 million -10% Source: Sylvia Allegretto s analysis of Current Employment Statistics data.

7 These numbers represent people, forever lost output & heartache 12% 12% 10% United States California 10% 8% 8% 6% 6% 4% 4% 2% 2% 0% % Source: Sylvia Allegretto s analysis of BLS Current Population Survey data.

8 Incomes of typical households in California plunge back to 1998 levels $70,000 Real Median Household Income ( 2010 Dollars) $65,000 $60,000 $55,000 $50,000 $45,000 $40,000 $35,000 $46,202 $56,042 $49,076 $59,274 $59,821 $53,252 $52,823 $54,459 $49,445 $30, Source: Sylvia Allegretto s analysis of U.S. Census data 2011.

9 I am trying to enjoy the fruits of my labor... ~Lucinda Williams Productivity Index (1973 = 100) Average hourly compensation Average hourly wage Source: Economic Policy Institute s stateofworkingamerica.org

10 Union decline and middle-class woes Union Membership Rate Middle-Class Share of Total Income Source: David Madland, Karla Walter, Nick Bunker, April 4, 2011, Center for American Progress. Allegretto 2011

11 We need a plan to restore manufacturing 35% 32.0% 30% 28.4% 25% 25.1% 20% 15% 20.7% 16.2% 13.1% 10% 10.1% 9.8% 9.1% 8.9% 5% 0% Source: Sylvia Allegretto s analysis of CES manufacturing data. Allegretto 2011

12 We need an economy that makes things (the financial industry makes $ from $) Jan-79 Jan-80 Jan-81 Jan-82 Jan-83 Jan-84 Jan-85 Jan-86 Jan-87 Jan-88 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Source: Allegretto analysis of CES manufacturing data. Allegretto 2011

13 Widening wedge of wage inequality Guys 95th 90th 80th Index (1973 = 100) th 10th 20th Source: Economic Policy Institute s analysis of CPS data downloaded from stateofworkingamerica.org Allegretto 2011

14 Widening wedge of wage inequality Galz 95th 90th 80th Index (1973 = 100) th 10th 20th Source: Economic Policy Institute s analysis of CPS data downloaded from stateofworkingamerica.org Allegretto 2011

15 Retirement risk shift 70% Defined contribution 60% 50% 40% 30% 20% 10% 0% Defined benefit * Source: Munnell, Alicia H., Golub-Sass, Francesca & Muldoon, Dan *Note: Data for 1986 is not available. The data were estimated using the midpoint between 1983 and 1989 downloaded from EPI.

16 Work Vs. a call to your broker 40% The rise of the plutocracy 35% Top Capital Gains Tax Rates 30% 25% 20% 15% % % 10% Source: Citizens for Tax Justice Allegretto 2011

17 Pre- & post- tax income shares, % 40% 35% 38.6% 35.6% 30% 25% 20% 19.9% 19.0% 21.3% 17.1% 15% 14.0% 12.2% 10% 5% 2.5% 5.1% 7.3% 9.2% 0% Lowest quintile: <20% 2nd quintile: 21%-40% 3rd quintile: 41%-60% 4th quintile: 61%-80% 81st-99th percentiles Top 1% Source: Congressional Budget Office Allegretto 2011

18 Astonishing picture of income growth (Growth in inflation adjusted after-tax income from 1979 to 2007) 300% 277.5% 250% 200% 150% 100% 65.0% 50% 18.3% 27.5% 35.2% 43.3% 0% Lowest quintile: <20% 2nd quintile: 21%-40% 3rd quintile: 41%-60% 4th quintile: 61%-80% 81st-99th percentiles Top 1% Source: Congressional Budget Office Allegretto 2011

19 The very rich are pulling away 1,600,000 1,400,000 Top 1% 1,200,000 1,000, , , , ,000 0 Bottom 90% Source: CBO $2008 Allegretto 2011

20 350 CEO's distance themselves from the average worker (Ratio of average CEO compensation to average worker compensation, ) Source: EPI analysis of Wall Street Journal/Mercer, Hay Group (2011). Note: Point markers denote where ratio is known. Allegretto 2011

21 The not so invisible hand (share of income growth ) 36.0% Top 0.1% Bottom 99% 40.1% increase 59.9% Rest of Top 1% 23.9% Source: EPI analysis of Piketty & Saez IRS data Allegretto 2011

22 The rich are getting richer! Trickle up economics. Wealth % 40.2% % 9.8% 10.2% % -2.0% -1.4% Lowest quintile: <20% 2nd quintile: 21%-40% 3rd quintile: 41%-60% 4th quintile: 61%-80% 81%-90% 91%-95% 96%-99% Top 1% Source: Allegretto 2011 EPI briefing paper The State of America s Wealth 2011

23 The Dow ain t gonna save you 100% 90% 80% Top 1% 70% 60% 50% 40% Next 9% 30% 20% 10% Next 10% Bottom 40% Middle 20% Next 20% 0% Source: Allegretto 2011 The State of America s Wealth 2011

24 What/Who is to Blame for State Budget Gaps? The Housing Bust & the Great Recession!!!

25 CEOs of Bell. Robert Rizzo, former city manager of Bell, California, was making $787,638 per year in that position.

26 Educational attainment of California s workers 40% 35% 30% Private sector workers State & local government workers 34% 25% 20% 22% 20% 17% 24% 21% 15% 10% 12% 13% 9% 12% 11% 5% 3% 0% Less than high school High School Some College Associates degree Bachelors degree Advanced degree* Source: Allegretto & Keefe CWED Brief October Allegretto 2011

27 Comparison of CAs public vs. private sector earnings and total compensation 2.00% 1.00% 0.89% 1.07% Annual Earnings Annual Total Compensation 0.00% 0.01% -1.00% -2.00% -3.00% -4.00% -5.00% -6.00% -7.00% -8.00% -7.77%** -7.55%* -7.86%** -9.00% State & Local Government State Government Local Government Note: **1% and *5% significance levels. Source: Allegretto & Keefe CWED Brief October Allegretto 2011

28 Teacher pay % -5.0% Females -6.6% -10.0% -12.1% -15.0% All -20.0% Males -25.0% -23.3% -30.0% Source: update of Allegretto, Corcoran, & Mishel 2011

29 80 Number of State and Local Government Employees Per 1,000 Residents The States With The Lowest Public Union Density The States With The Highest Public Union Density 10 0 Source: U.S. Census Bureau and the U.S. Bureau of Labor Statistics. From Allegretto, Jacobs & Lucia, 2011 Allegretto 2011

30 18% 16% 14.7% 14.4% 14.5% 15.2% 14% Share of State and Local Workers 12% 10% 8% 6% 4% 14.6% Aug-11 2% 0% Source: U.S. Bureau of Labor Statistics, Current Employment Statistics. From Allegretto, Jacobs & Lucia 2011 Allegretto 2011

31 The Housing Bust Specifications (1) (2) Controls: Public sector union density coeff 0.245* se (0.097) (0.082) House price decline coeff ** se -- (0.11) Set of union dummy variables N N Adjusted R Note: **1% and *5% significance levels. FHFA State house price change From Allegretto, Jacobs & Lucia, Allegretto 2011

32 Largest Shortfall on Record Last Recession Total state budget shortfall in each FY, in billions -$40 -$75 -$80 -$45 -$110 -$191 -$130* -$103* -$46** *Reported to date ;** Preliminary. From Allegretto, Jacobs,& Lucia, 2011 Source: Center on Budget and Policy Priorities 2011 Allegretto 2011

33 What the hell has been going on? The Free Market is BS rhetoric

34 Oh, Oh, Oh, Oh just like a YoYo ~The Osmonds 1971 smash hit #3 Billboard Hot 100! Rise & fall on merit or luck Doubling down on free market ideals Dismantling of public services & goods Shrinking social & worker safety nets Anti-labor sentiment & regulation Erosion of workers rights Shifting the tax, health care & retirement burden to workers Vilified public sector workers & government Allegretto 2011

35 A question of ideology A century of change in reverse: Unions leveling the playing field Progressive tax structure Investments in education Workers compensation Unemployment Insurance Social security & Medicare Child labor laws Pension plans & dignity in retirement Employer provided health care Allegretto 2011

36 The United Corporations of America? A Plutocracy of the 1%, by the 1%, for the 1%

Distributional National Accounts: Methods and Estimates for the United States

Distributional National Accounts: Methods and Estimates for the United States Thomas Piketty (PSE) Emmanuel Saez (UC Berkeley) Gabriel Zucman (UC Berkeley) November 2016 There is a large disconnect today