Brooks' Crystal Ball

Greg Mankiw thoughtfully presented Us with a major Quotation from David Brooks’ column. The Devil is making me to do it, but I feel I must comment on Brooks on a Point by Point basis. David's first Point is that real average wages rose by 2% in 2006; indeed it did, but what does this say about the disappearance of medium-Wage jobs with the decline of Labor Participation rates? The bottom fifth of Income Earners did indeed find their earnings increasing by 80% between 1991 and 2005; might he have forgot what this increase level was in 2001? He mentioned about a 20% increase in the three middle segments; yet he does not mention the increase for these groups for the interval of 1991-2001, or the potential decrease for the interval 2001-2005. He contends that Income volatility is probably not trending upward; still he fails to detail the direction of that Income volatility–are Incomes going up or going down?

Brooks makes the contention that Education finds greater Compensation these Days, and that a major element of increasing inequality is performance pay. The first can be easily subtracted by finding the number of Speciality Graduates finding Employment in their chosen field, a rising curve would justify Brooks’ thesis, a dropping curve would nullify the claim. The impact of performance pay can be examined by creating a graph of Percentage increase of Wages per year of Seniority in position for 1980 and 2005. The Year 1980 is used because it can be seen as the last year before Reagan conservatism, and 2005 can be seen as the Year of prime Bush conservatism. I have not done such a Study, but imagine there was a much greater spread of performance pay across a wider segment of more equally-paid labor in 1980.

Brooks’ Sixth contention states that higher Income Employees work more hours and longer. I might state that Those engaged in hard physical labor require greater length Rest periods. I could a number of other things, but it might suffice to say I drank Coffee with a Friend for Two hours, when he was hard at Work because he was "On Call". I once had association with a major national Corporation, but quit because of the lengthy Conferences; which had a tendency to resemble Hour-long Coffee breaks conducted sometimes four times a Day.

I am getting tired of Trivial Pursuit, so I will simply state I have known a number of major CEOs, both socially and in Operating mode, and cannot see the great talent unmatched by literally thousands of wannabees. I cannot see the great boost to American Household Income coming from Globalization, especially if We had the Labor Participation rates consistent with the Clinton administration’s later years. Finally, Brooks claims that the Deficit is down to 1.5% of GDP, a historic low. I simply wonder what Percentage of GDP the Deficit would represent, if the Stock and Financial Markets were subtracted; might it not be around 12% of GDP? A reasonably strong Recession could wipe out half of the nominal assets of these Markets. lgl