Dearie me Polly, dearie me

The tragic upshot has been the steep erosion of wages for the powerless bottom half, as income, wealth and property is sucked up to the top.

I\’m afraid that this just has not happened.

Wages and incomes simply have not fallen.

It is true that of the growth in general more has gone to the upper part of the income distribution. But that is not the same as saying that the poor now have less. It is saying that the poor don\’t have more. Really, quite different.

19 thoughts on “Dearie me Polly, dearie me”

  1. “It is true that of the growth in general more has gone to the upper part of the income distribution. But that is not the same as saying that the poor now have less. It is saying that the poor don

  2. I think for Polly they are the same. She should go to North Korea to see what the actual amount is important.

  3. Hmm. If (as I think is true from past Tim posts) the Gini index has gone up (or down, I can never remember which way around it is) so that the income distribution has changed, then almost by definition you have what Pol is saying in spirit if not in precise terms.

    Why? Well, our basic economics tells us that we get richer not because we are more productive, but because other people are. You can’t raise the aggregate income; instead, aggregate prices fall. So, a man does not get an improved standard of living because he produces more (in the aggregate case) but because other people do. Only competition forces he himself to produce more, which he ends up doing for the same money-income.

    So, if aggregate production has, say, doubled, and half the population are getting more than twice the stuff, and half are getting less than twice the stuff, by a significant margin, we can say that somebody’s probably being naughty and ratcheting income from the have-nots to the haves, possibly by fucking around with the money system might be a good guess.

    So, you can have a system where everyone has more, but there’s still a rip-off going on because some people are getting less more and it’s being transferred to people getting more more. When we all ought to be getting approximately the same more proportionately.

  4. Just to add, I think the interesting thing here is that Pol, blundering about in her vague understandings of economics, gets it a bit half right. Part of the error was indeed the Thatcherite deification of the money business, all that “engine room of the economy” nonsense. Part of the reason for the Gini going down (or is it up?) has certainly been the manipulation of the money system and particularly <DBCReed>property prices</ DBCReed>.

    But the other half, perhaps the bigger half, is more Polly’s side’s fault; the massive, destablising immigration, which introduced a competition differential between those in Polly’s lower half and those in her upper half. To quote Hitchens recently-

    And it […] meant cheap servants for the rich new middle-class, for the first time since 1939, as well as cheap restaurants and – later on – cheap builders and plumbers working off the books. It wasn’t our wages that were depressed, or our work that was priced out of the market. Immigrants didn’t do the sort of jobs we did. They were no threat to us.

    Now it has to be said that the “Neoliberals” have been similarly to blame for this, seeing immigration as cheap labour with, additionally, the externalities socialised. But the Left’s dogmatic pursuit of this policy and continued refusal to accept the blame for its consequences is utterly unforgivable. Polly would still shout “racist” at a working class man complaining as new competitors flood through customs, safe in the knowledge that the number of those newcomers competing with her will be vanishingly small.

  5. I agree re house prices and immigration, though I think neither would have been much of a problem had the govt kept out of manipulating the system via interest rates/benefits etc.

    But the other element I would add is the collapse of the family.

    Half of all kids born out of wedlock, many of them not having an relationship with their fathers – not a good thing on a number of fronts.

  6. My glib response to those who obsess on relative poverty is “if Elton John’s share portfolio collapsed tomorrow, would you be wealthier?”

  7. Ian B,

    Actually, I would blame housing benefit more than immigration. Immigrants didn’t make employment any cheaper out here in the sticks.

    But in London, they get a huge subsidy from the rest of us. The HB bill is

  8. My glib response to those who obsess on relative poverty is “if Elton John’s share portfolio collapsed tomorrow, would you be wealthier?

    To the extent that I am better able to compete with him for tournament type goods like property, fine art, good looking women/men, and status, yes, I am wealthier.

    And if share prices are massively reduced while the underlying businesses and my income remain the same, then yes again as I can now buy a larger stake in those businesses for the same money. (Ok, I accept not all conditions are likely to hold for this.)

  9. On the immigration thing it is still true (if to a lesser extent than in the past) that wages at the bottom of the skill heap are essentially protected. Do something middle class profession-y and because the job requires qualifications, has a good salary, or whatever the other requirements are to get a visa, those people have always had their pay set by global competition. Even more so now a lot of those middle class functions can be done in Chindia and the output emailed or telephoned, with no import duty to pay.

    The further down the skill ladder you go the more protection there is for domestic workers. So immigration restrictions, even those still there, are essentially a form of income redistribution.

  10. Julia-

    Yes, as a general thing. Subject to variation in specific cases. It’s a counterintuitive thing as I said above; a person doesn’t get a higher real income by producing more, but as a result of everybody else producing more. So, if aggregate production doubles, but you are still producing exactly the same as you were before it doubled, you can afford twice as much stuff because everyone else’s price has (on average) halved.

    So, if you can’t afford about twice as much stuff, that means your income has gone down proportionately. That might well happen in an individual case (maybe you make Rubiks cubes and the craze is over, so your individual price has fallen in real terms) but if it’s happening across the whole economy, something’s gone wonked. The difficult thing for the eager econometrician is to figure out which is the case.

  11. Ian,

    I am a fisherman. I used to be pretty poor, but I’ve recently become more skilled at finding fishing grounds. Now I can catch twice as many fish as before and sell them for twice the money.

    Why am I not receiving a higher real income?

  12. Luke,

    London value added is apparently GBP 35k per head, compared with 21k for the UK as a whole. I suspect the taxes, rates etc outweigh the housing benefits. And EU farming subsidies are somewhat more limited in London than the sticks.

    The total of agricultural subsidies paid in the UK is around 3bn, or about the same as the annual subsidy paid to London Transport.

    I presume your figures includes all the things that London gets? HS1, St Pancras development, disproportionate spending on museums and the arts, disproportionate lottery spending, how much is channeled via our BBC license fees into London, cheaper teachers, doctors and nurses, because the rest of us are subsidising them via London weighting, the Dome, the Olympics, Jubilee Line Extension, Crossrail, and then, the fact that a huge amount of industry exist because that’s where the government is, from lobbying companies to fake charities, to the

  13. Potarto-

    Because you doubled the fish supply, and thus the unit price of fish halved. (Probably. Approximately. JS Mill, and all that). You’re the victim of a fish glut.

    But, bad for you, but good for everyone else, who now have copious cheap fish.

  14. No I’m not. The extra fish from one fisherman wouldn’t cause a glut. On the one hand you argue that a single person can’t become richer through being more productive, only by the majority becoming more productive.

    But in this example, you seem to implies all fishermen have become more productive, preventing me from becoming richer.

    I’m having trouble following the logic.

  15. Potarto-

    You’re in the wrong context. We’re looking at how wealth in general increase, the world of aggregates. We’re not interested in one isolated fisherman. We’re interested in the fishing sector.

    Productivity is production per capita per time period. At any given time, there is some maximal efficiency of production for (say) fishermen. Anyone less efficient gets knocked out of the market. If one fisherman discovers a new production method to improve efficiency he can, initially, “steal” market share from the other fishermen. How does he do this? He lowers his prices per unit. Now the other fishermen must either equal his production efficiency (by copying his method) or go out of business.

    (We are presuming commodity fish, here.)

    So the net (haha!) result is the entire fishing sector offering more fish, cheaper. They don’t benefit from productivity gains at all. Everyone else does.

    This is basic market forces economics stuff here, I’m not making it up myself. It’s how growth happens. It’s why businesses try to use the State (tarrifs, guilds, etc) to shield themselves from competition. Because otherwise they have to get better and better and the benefits go to the customers. A good example is computers, which are now enormously better and enormously cheaper than they were. Who got all the productivity gains? We did, the consumers. That’s how the market benefits us all, by making producers cut their own throats just to stay in business.

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