Sep 10 2008
Welker’s daily links 09/09/2008
Published by Jason Welker at 12:30 am under Daily Links
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Mixed Economic Data Show A Changing Business Cycle – WSJ.com
“The U.S. economy looks like it is traveling along two tracks.
If you look at output — the amount of goods and services Americans produce — the economy has been rising at a decent clip. But people aren’t feeling it in their wallets because the factors driving their own incomes — such as jobs and wages — are under strain.”
About the author: Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course.
Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this authorRelated posts:
At first these statistics did not quite add up; the people do not feel like they are being compensated considering the output being produced. Not only that, but I read in another post that the American unemployment rate has actually increased to 6.1% from July 2008 where the rate stood at 5.7%. There are more people without jobs and yet the production continues to increase. I think that one of the factors which may partially explain these facts is the tide of immigrants that continue to arrive in America. It is a very controversial subject where two main sides are presented; are immigrants lowering the wages of Americans and are they taking away low-skill jobs from the natives? While many think this is the case, there is another side which argues that the economy growth is due largely to these immigrants and to banish these people from their country would be to bring their own downfall to their economy. Returning to the quote, the immigration in America could be what is distancing the track of productivity away from the American income.
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After learning about economic growth vs. economic development, I realized that this is a good example of the difference between these two characteristics. When looking at America's output one can see there has been economic growth, however this does not represent the true status of the American people. For example their wages are not increasing according to the increase in economic growth, so although the economy grows, it is not developing at the same rate.
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Hi Laura,
Thanks for the post. In America, the economic growth has been increasing the American wages. You will learn that economic growth is really measured by a statisistic called real GDP which is exactly the same thing as real income (they both add up to the same number).
I think what you are actually referring to is the fact that although America's real income growth ("purchasing power") has been strong this decade (2.5% average annual growth which is nominal income less inflation), the growth has been virtually non-existent for America's middle class and poor. The real income gains have accrued almost exclusively to the educated "white collar" workers, the entrepreneurs, and the business owners (stock holders). Global competition has kept the middle and lower class wages down keeping a large part of the labor force at the same standard of living that they were at in 2000. The middle class is, however, enjoying many of the non-financial, quality gains such as Google search engines, cell phones, and game systems even though their quantity of goods & services received has remained flat.
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