Morgan Stanley are revisiting the idea that the world has seen its peak working-age population growth come and go.
They’re also, we think, revisiting a favourite slogan of ours even if they can’t say it explicitly:
The two key cohorts of the labour force – the prime working age population and the aged – are likely to find themselves in a political battle. As the ranks of the aged swell, their political clout will increase significantly. The prime working age population will not have quite the same ability to grow its influence through numbers. However, what they will have on their side is a declining supply of a commodity – labour – whose price is likely to be on an upward trend. The compensation for the loss of political power to the aged may thus be something that workers counter-balance by seeking higher wages, given that they will not be able to withhold their own supply of labour, i.e., they will not be able to quit their jobs.
Peter Orszag has a new column arguing that insufficient attention is being paid to “profits at some companies well in excess of what’s necessary to keep them in the market” as a source of inequality. This is far from being an original idea, although we appreciate Orszag’s citation of data on factory-level productivity.
However, we were struck by an odd omission. While Orszag is quick to note the importance of patents and land values, he leaves out any mention of the large subsidies enjoyed by the financial sector. (Orszag is paid several million dollars a year as a vice chairman at Citi.) That obscures a lot. Read more
Another data point for those keeping track of the impact of “Abenomics”, via a recent speech by Bank of Japan governor Haruhiko Kuroda:
Split in half the six years from the start of the US recession at the end of 2007 through the end of last year, and consider them as a pair of three-year periods.
In the first period — from 2007 through 2010, and which we’ll refer to as the crisis years — wealth inequality in the US spiked while income inequality actually contracted quite aggressively, the latter a reversal of the pre-recession trend. “Crisis years” isn’t a perfect label, as the recession actually ended in mid-2009, but it’s good enough for our purposes here. Read more
The Federal Reserve has just released its Survey of Consumer Finances for the year 2013.
These surveys occur every three years, so this is the first comprehensive update we have gotten about the distribution of income and wealth in the US since the economy hit bottom four years ago.
The most striking finding is that the median American family earned 5 per cent less in 2013 than in 2010 after inflation even though the average American family took home 4 per cent more.
Gary Jenkins of LNG Capital confesses in a note on Friday that reading Piketty’s Capital in the 21st century was not an easy affair. Here’s the strategy he resorted to in order to get through the 577 pages of the book:
We commented yesterday on a column by Martin Wolf that considers how the economy will change as robots become ever more intelligent. The rise of the machines will indeed present society with multifaceted challenges; super-rich robot owners, however, are unlikely to represent one of them.
The fear of exploding inequality from robots is widespread. Wolf writes: Read more
Ryan Avent takes issue with my take on Piketty. He makes two points, which I’ll address in turn.
First, the French data [Smith] considers is a bit of an outlier. You can download Mr Piketty’s data tables (in French) here and see the figures for Britain and America. In Britain the recent rise in the capital-income ratio is about two-thirds attributable to housing and one-third attributable to other domestic capital. In America growth in other domestic capital is actually more important than growth in housing.
A hat tip to reader @zapatique for sending us to Thomas Picketty’s recent lecture, which previews the forthcoming English-language edition of his new book (click here to open pdf):