Labor Economics in the USA - Essay Example

Labor Economics The 1950s, 1970s and 2000s Near the middle of the last century, Ogburn (1955) hadnoted that “the standard of living in the United States was twice as high at the midcentury as at the beginning (Ogburn, 1955, Pg. 541)”. America had reduced poverty since great increases in income were noted while the less were getting less rich. Compared to the data from 1919, the top five percent got 22.9 percent of the individual income before taxes. By 1950, the top five percent was receiving 17.9 percent. Additionally, the lowest income group had come to a point where they were receiving more income than they had decades ago. However, the situation becomes quite altered when we compare it to the present day since those who could have been said to be living comfortably 50 years ago would today be considered as living below the poverty line. Brewer (2007) quotes John E. Schwarz who says: “In the early 1950s, fully two fifths of American households had no automobile, about a third did not have a private telephone or a television, and the homes of about a third of all Americans were dilapidated or were without running water or a private toilet and bath. Only a small minority of families enjoyed such basics as a mixer or had a hot-water heater (Brewer, 2007, Pg. 1)”. Thus, in comparison to the life lived in the 1950s, people living as a part of the middle class or even the lower classes today have a higher standard of living. In the 1950s, a person working full time at a middle class standard would have been able to afford to keep a family of four. Surprisingly, the same could be done today by an individual who is working at minimum wage but only if s/he is willing and able to give up ‘luxuries’ such as hot running water, an automobile and private toilets (Brewer, 2007). The situation and the comparison becomes more complicated when we consider the 1970s since it was a time where the country experienced a rising standard of living coupled. Automobiles, televisions and other items which were considered luxuries became more common but the nation experienced a falling standard of living towards the end of the decade. It thus became the beginning of the time where the family which had only one breadwinner could find itself in economic trouble and this prompted the rapid entry of women into the work field in large numbers (Gruber, 2005). However, political and economic forces such as the policies enacted by the government, the high levels of inflation, unemployment and low productivity growth are blamed for a lack of growth in real income in the 1970s (Gruber, 2005). From 1973 to 1982, real income decreased across America. After 1982, the real median income saw an increase until it came to a level of $34,413 in 1989. The data produced by Slesnick (1991, Pg. 369) in Table 1 shows that the overall trend for the standard of living in America has been a risking one even though there are certain years where the standard of living fell. Table 1: Slesnick, D. 1991, ‘The Standard of Living in the United States’, Review of Income and Wealth, vol. 37, no. 4, p369. After the 1970s, the distribution of wealth in America begins to get wider; working families facing as well as those who only had a single bread winner started seeing a decline in the standard of living. The income disparity between the richest individuals living in the states and the poorest families increased but the standard of living for all Americans also improved significantly as technology and social development also improved. Amongst other things, weakened labor laws, reduced strength of unions as well as exploitation of unprotected and illegal immigrants may have added to this increase in disparity. In essence, a greater share of the country’s wealth was pushed towards the richest people in America while the poor and the lower social classes experienced a decline in their incomes (Gruber, 2005). In 2000s, technology penetration and the increased availability of goods and services can be credited for a rise in living standards. Compared to the 1950s and 1970s, the American household changed considerably in shape and size. As discussed by Gruber (2005), despite the fact that many houses have two incomes, “Americans are stretched thinner than in the past because of the rising costs of fixed obligations such as a mortgage or health insurance (Gruber, 2005, Pg. 1)”. In fact, the majority of disposable income from the money brought in by a second earner goes towards fixed obligations such as healthcare insurance, mortgage payments and car payments. In fact, the expenditures on healthcare and housing have risen much faster than the increase in incomes and there is considerably more spent on these fixed items than other things such as clothing and food. However, it is also noted that the quality of these items i.e. size of houses, build quality and reliability of cars has also added to the standard of living. Comparing the 1960s to 2000s, Americans have started looking towards comfort more than economizing. Gruber (2005, Pg. 1) reports that: “In 1960, there were 0.64 cars per worker in the United States, and by 2000 there were 0.88 cars per worker. How did 1960s households make do with fewer cars per worker? By carpooling, taking public transportation, or using other approaches that may have been less comfortable, but which were more economical”. Finally, when we consider the non-material standards of living, it seems that all decades discussed are at parity. In terms of health we had incurable diseases in the 1950s, 70s and even today we have problems such as AIDS which remain without a cure. Undoubtedly, health standards have improved but so have the costs associated with healthcare and insurance. The work effort required by a family to maintain a reasonable lifestyle has also increased since our possessions and our demands have increased. Security has also remained at more or less the same levels since instead of having the threat of a communist attack; we have to live with the threat of a terrorist attack. It seems that American families living in the 1950s that were ignorant of the technological developments that were to come in 2000s might be better off than us. Considering the technological developments which have made life easier today in the 2000s as compared to the 1950s would make me select this era as my preferred era to live and be in. 2. Labor Leisure Model The labor-leisure model suggests that an individual will select a combination of hours between leisure and labor so that utility is maximized. More leisure means less work and that would consequentially result in lower income. The ideal solution would be to work the least hours while maintaining a level of income which is suitable for the individual. The overall trends of rising incomes in since the 1840s has meant that people globally have found more time for leisure and can also afford to give less time to work (Hotchkiss, 2006). Institutional forces which enacted the forty hour work week through the new deal after the great depression certainly helped in fixing lower hours for individuals (Higgs, 1992). 3. Research According to the U.S. Census Bureau (2008), the average family income in the U.S. stood at $50,233 in 2007. The idea of what the average family spends monthly by categories such as housing food and other expenses has a lot of variables such as the size of the family, the region they are living in and the individual choices made by the family. From the data provided by the Bureau of Labor Statistics (2007), the average family expenditures on major categories for the year 2005 were: Shelter $8,805 Food $5,931 Utilities $3,183 Healthcare $2,664 Entertainment $2,388 Vehicle Purchases $3,544 Insurance $5,204 The average income of the household in 2005 is listed as $58,712 while the total expenditures are listed as $46,409 (Bureau of Labor Statistics, 2007, Pg. 3). This leads me to believe that an income around the $55,000 mark should be sufficient for a middle class life style. Works Cited Brewer, P. 2007, ‘Our high, high standard of living’, [Online] available at: http://www.wisebread.com/our-high-high-standard-of-living-1 Bureau of Labor Statistics, 2007, Consumer Expenditures in 2005, Department of Labor Gruber, J. 2005, ‘The middle class has a higher standard of living than ever before. Who should pay for it?’, [Online] available at: http://www.bostonreview.net/BR30.5/gruber.html Higgs, R. 1992. ‘Wartime Prosperity? A Reassessment of the U.S. Economy in the 1940s’, The Journal of Economic History, vol. 52, no. 1, pp. 41-60. Hotchkiss, J. 2006, ‘Changes in Behavioral and Characteristic Determination of Female Labor Force Participation, 1975-2005’, [Online] available at: http://findarticles.com/p/articles/mi_qa5423/is_200604/ai_n21395966 Number of Uninsured Down’, [Online] available at: http://www.census.gov/Press-Release/www/releases/archives/income_wealth/012528.html Ogburn, W. 1955, ‘Implications of the Rising Standard of Living in the United States’, The American Journal of Sociology, vol. 60, no. 6, pp. 541-546. Slesnick, D. 1991, ‘The Standard of Living in the United States’, Review of Income and Wealth, vol. 37, no. 4, pp. 363-386. U.S. Census Bureau. 2008, ‘Household Income Rises, Poverty Rate Unchanged’, [Online] available at: http://www.census.gov/Press-Release/www/releases/archives/income_wealth/012528.html Read More