FED STUDY SHOWS POOR GETTING RICHER,

FED STUDY SHOWS POOR GETTING RICHER,
MERELY WELL-OFF GETTING POORER.

A story posted on CNN last month, “The Poor Get Richer-
Blue-collar workers are making salary gains -- but don't cheer yet”,[i] cites a Recent Federal Reserve Board Study of family finances for a somewhat counterintuitive conclusion:

Between 2001 and 2004 (the most recent year for which data are available), incomes of the poorest 20 percent of families increased while incomes of the richest 20 percent fell.[Author’s note: The income of the top 1-2% of wage earners still increased. Their merely well-off neighbors were forced to supplement their incomes with home equity withdrawals] Basically, the poorest families' share of total incomes grew, and the richest families' share shrank. Incomes became just a little less unequal.

What could that trend reversal mean? The most obvious explanation seems highly counterintuitive: The skill premium, the extra value of higher education, must have declined after three decades of growing. The Fed researchers didn't pursue that line of thought, but economists Lawrence Mishel and Jared Bernstein at the Economic Policy Institute did, and they found supporting evidence in the new Economic Report of the President, issued within days of the new Fed survey. It cited Census Bureau data showing that the premium had indeed fallen sharply between 2000 and 2004. The real annual earnings of college graduates actually declined 5.2 percent, while those of high school graduates, strangely enough, rose 1.6 percent.

In an economic era where everyone agrees that the very rich, the top 1 to 2% of earners are making a lot more while the remaining are making less, these results are intriguing. It does not mean that the poor are actually getting richer, as inflation has outpaced the wage gains. But it does mean that the high school graduates are almost keeping up, while college graduates are slipping backwards.

TRY OUTSOURCING THE JANITOR’S JOB

The author of the CNN article infers from this data that certain jobs that require a physical presence, many in the lower wage band, cannot be outsourced. Truck drivers, nurses, and maintenance jobs cannot be shipped offshore. Accountants, lawyers and radiologists can perform their jobs in India as well as Indiana. And some of them are doing this work. Brains are brains and electrons are electrons. We are a big global village, remember?

REMAIN MOBILE AND AGILE IN THE DESERT OF THE REAL!

[i] www.cnn.com