Some critical remarks on Kliman's proposition of increasing workers' income

And how is every economist in the world, other than Kliman and that mad right winger I can't remember the name of, wrong on such basic empirical matters. Going to watch the video after I finish an infuriatingly shit BBC doc on Marx (Masters of Money, it has already done Keynes and Hayek) which btw has every tom, dick and harry from across the spectrum of economists stating confidently that workers income has dropped massively in contrast to the top 1% odd.

Am expecting big things from Kliman in that video.

Oh ffs mikus, you didn't tell me that video is over an hour and a half long, I've got a second job interview tomorrow morning

I think Kliman's rabbit out of the hat will have to wait, can't afford to look like the kind of waster piece of shit who sits up all night watching paunchy bald men get all worked up and sweaty talking about fetishes on obscure websites.

Also having had a brief glimpse of the video I think I've worked out why Kliman is such a prickly fuck about Harvey et al, it might have something to do with the fact Harvey's lectures and discussions have the production value and audience of a Spielberg movie compared to his.

Well, I'll take Kliman's Marxism over Harvey's any day of the week.

This notion that there are some facts that we shouldn't tell the "average worker" because it might make socialism seem less appealing or because it might make capitalism look a little less bad is elitist and deeply dishonest.

S. Artesian, a key problem with the statistic you use is that they refer to "households." If they are not adjusted for size, then you wind up with the result that inequality can "increase" simply because household size shrinks (and therefore the variation of income between households is higher). This is why a key measure that Kliman uses is the level of income (and total compensation) of households adjusted for size.

Again, Kliman discusses this at length in the video I posted and it's worth watching. He also addresses the issue of the GINI coefficient. And again, the unit used (household, family, tax unit, whatever) is decisive.

The short answer is that every Tom, Dick and Harry is using "tax units" instead of size-adjusted households and also is generally using a narrow definition of "income" to include only actual wages rather than total compensation.

I'd say that this probably reveals much more about your own psyche than it reveals about Kliman.

I don't think the social wage (and profit rates) are anything like a basic empirical matter

It's not like you can just look at a graph of inflation adjusted social wages to draw these conclusions (and most economists/commentators are content to look at basic wage developments which are available from all kinds of government statistics and then stop there and then draw all kinds of conclusions from a data set that doesn't necessarily support or warrant those conclusions - so it's not quite as basic and empirical as you make out. And to view this kind of thing as basic & empirical is tending towards the kind of vulgar political economy that Marx despised)

Increased real wages (basic or social and across all income scales) is perfectly compatible with increased income inequality - these are two quite different things which are not joined at the hip in a negatively correlated binary fashion. This also touches on (in terms of dynamic) something similar which Marx was fond of pointing out where the living standards of labour rising is perfectly compatible with increased exploitation (and therefore inequality) of that labour as that happens

Okay basic is maybe overstating it but still it's not just bourgeois political economists saying this stuff.

Who is arguing against that? The point is Kliman holds that workers share has held (and grown slightly) whilst profits have declined, that is workers have slightly more of a shrinking cake. Considering the obvious assaults on the working class since the late 70's not just in pay terms but across the social wage it seems a massively counterintuitive claim. What forces have allowed the working class to actually maintain and slightly increase their share of national income in the face these assaults? Have profits really shrank by that much? Is the fact Kliman is quite narrowly focused on the US national economy and not capital globally not an issue.

This is glib. There is a difference between groceries and acute health care needs - to do with inelasticity of demand. If your kid breaks their arm, you don't have a whole heap of choice where to take him or her. Again it is anecdotal, but I have heard figures quoted at me in the region of $50,000 for resetting an arm and putting a cast on it, in US ERs. A priori that does not particularly look like goods and services exhanging at their prices of production. The question then, is to consider the possibility that some kind of "biofinancial" rent is being extracted here, to analyse that possibility with a view to figuring out what kind of empirical research could prove or disprove the hypothesis and what the wider implications might be. Dogmatic reflexes of "I refuse to even consider anything that isn't specifically mentioned in Volume III" are not just glib, they're lazy. I don't have that much knowledge or experience of US society, but even said that, I find the idea that health care costs are a marginal issue, hardly worthy of serious consideration, highly suspect.

OK, lets consider this abstractly. We accept that goods and services do not exchange at their individual values, but at their prices of production - i.e. that individual capitalists do not receive as profit, the particular surplus value produced in their own immediate process of production. That is to say, that any account of the aggregate surplus value produced in a given economy (and we need to recognise that it is not given that the boundaries of that necessarily stop at national borders, n.b.*) has to take into account that fact that surplus value may be effectively transferred between not only different industrial sectors, but also between different agents of exploitation, including land-rent seekers, financial capitalists, etc.

Consider then the hypothetical case of an industry in the consumption goods sector, that through "natural" monopoly, extreme inelasticity of demand, etc, is able to raise prices above what would otherwise be the prices of production. Does this raise the price of labour to other industrial sectors, thus reducing their rate of profit? Yes. But the profit they deprive the other sectors of, is the profit they make, so at the socially aggregate level, there is theoretically just transfer between different sectors, rather than actual reduction in overall surplus value realised.

In terms of investigating this empirically, I do know anecdotally that a com who used to be involved with SEIU hospital organising in LV, did mention that according to their research, the whole private health care and insurance sector was one of the most profitable in the US. But putting some numbers on that I'm less clear (which reminds me to ask him, next time I'm talking to him). But in the meantime, there is the obvious share price masking issue - i.e. that making super-profits will simply result in your share price rising until correlation with average p/e ratios is re-established. Presumably then, the only way to penetrate that is to compare market capitalisation with actual operational running costs - here my lack of accountancy background leaves me at a disadvantage, but it appears that it should be entirely feasible to put numbers on that.

* I note that everyone so far has studiously ignored my other a priori criticism of Kliman's thesis - namely its substitution of the US economy for global capitalism as a whole.

you put forward the case that because:-

workers income has dropped massively in contrast to the top 1%

then this somehow contradicts Kliman's claim that real social wages (across all income levels for workers) have held/grown slightly in the same period - or at least there was certainly the implication there. So from that it comes across like you were conflating two separate things. If you weren't then fair enough, but in that case then your point about increased inequality of income (raised by every tom dick and harry) has no relevance to the points that Kliman is making (or at least cannot be used to contradict them)

Also as you'll see in the book, Kliman specifically shows that the reason for the rate of profit decline (i.e. rate of profit decline, not profits in absolute terms which is the equivalent of the cake you refer to) is not explained by any substantial increase in real (social) wages for labour (i.e. decreasing surplus value extraction for capital), but instead it's pretty much all due to an ever increasing composition of capital in a classically marxian falling rate of profit scenario (absolute levels of profits are increasing but the level of constant capital employed in the mix, means that the rate of profit declines)

How is it glib to note that as far as a company is concerned, whether they pay money out to a worker or to the insurance company is completely irrelevant -- they lose the money in question and it is therefore not a part of their profit?

Furthermore, I have said absolutely nothing about commodities exchanging at their prices of production. No commodity is exchanged at its price of production except by accident. Why exactly this is relevant, you have not said. I'll go a step further and say that you can't say why it's relevant to the issue at hand, because it simply isn't.

Where have I or anyone else said that we wouldn't consider any issue that isn't in Vol. 3 of Capital??? And where have I said that health care costs are a marginal issue??? You're knocking down straw men. This is completely dishonest.

And your point is... what exactly? This isn't at all relevant to the issue at hand, which is the wage and profit shares of total income. Your point would only be relevant if the profits of the health care industry were not included in the total income Kliman is considering, which it is.

As with the rest of your post, you've said a whole lot of nothing. We're not investigating share prices or profit to earnings ratios, we're talking about the profit and wage shares of total income.

On page 2 of the book he makes it clear that he does not glibly substitute an analysis of the US for global capitalism as a whole, or automatically assume that the analysis of the US case automatically applies to other countries. He makes clear the book focusses on the United Status and gives reasons for doing so. He also makes a case for the analysis on the US to be relevant beyond the US, but makes no empirical claims that it is

What does the size of the household have to do with it? If there's total households, and a total national income, and we look at how much of that total goes to households that are in the top 10% or bottom 10% of income reported over time, what does size have to do with it? The measure is income per household, not income per capita.

Is Kliman arguing that somehow conditions are less unequal than they appear because of the greater number of single parent households? That would be crazy, as during the 1980s the fastest growing sector of poor households are single female parent households.

I will watch the video, but I sure would like it if someone would explain how family size impacts the aggregate numbers and the distribution.

Suppose I'm a single parent, household size two. I make 28,000 a year. How does the size of the household distort how much of the total national income I claim? How does the size of the families in my quintile distort the portion of national income claimed?

Oh, and not to put too fine a point on it, and not that I grasp the significance, the US CBO does adjust its numbers for household size. From the "methodology page" in its report on trends in the distribution of household income 1979-2009:

I got the job, so im going to go get hammered and wont be on this bumfight for a while or truth be told reading much more of Kilman. By the time I come back I want someone denounced as a neo Bernstein and another as Kautsky.

Im suspecting (guessing really) that kilman's focus on the US is going to be pretty important as it excludes the huge rise in the labour force around the world.

Yes, I had already read that, thanks. It's also bollocks. I would say "obviously", but clearly it isn't. Kliman isn't just analysing "a little local difficulty" in recent US economic history (even that, imo is impossible outside of a wider, at least trans-Pacific, context), or knocking down the sub-Keynesian proposition that the current crisis is a symptom of mal-distribution of income shares, he's also trying to use it to flog his FROP pony, and in that context, it just doesn't wash to treat the US in isolation from the global economy.

It is completely relevant to the wage and profit shares of total income. If, to take the hypothetical limit case, all the increase in health insurance costs in the wage bill went directly into the profit of the health care corps, then the rise of the wage costs to other sectors does not represent a rise of the wage share relative to the profit share of total income, rather just a transfer of profit from the non-health sector enterprises to that sector, leaving the overall wage/profit share of total income unaffected.

You do seem to have problems distinguishing between the dynamics of the individual enterprise and that of the aggregate social profit. I noted this confusion also in the discussion on the OCC. Perhaps it is a general condition relating to FROPpery.

Look, the fact that money transferred to employee health care plans winds up in the pockets of other capitalists makes no difference to the fact that it is a transfer to employees. Where does the wage wind up? The pockets of capitalists. Has to. This is capitalism. Doesn't mean the workers don't receive a wage, and it doesn't mean wages don't really go up when they really go up. They really do. Sometimes. Sometimes they really go down.

I think Kliman's argument is incorrrect, and that is based on his own data. Look at figure 8.2 on page 157, shows an inflation adusted decline in wages for production and non-supervisory workers from 1972-1994. And then an upturn. No shit, sherlock, the "Clinton years" in the US saw the first real increases in workers' wages 20 years. We all, in this little part of the world, knew that, as that period saw real increases in fixed asset accumulation, capital investment, rates of profitability.

And by 2000? Those wages were only 95% of the 2009 level, and a whopping 90% of the all time high. Sound like progress to you? Don't sound like "progress" to me.

My own investigations have the real wage peaking in 2000, Kliman shows it at 2002-2003, and I don't want to quibble, but neat trick to pull that off in a recession. Meanwhile the wage starts to turn down again but "bubbles up" in 2006 to reach its 2009 level. I found that the wage in 2006 finally reached its previous highs, of year 2000, coincident with the resumption of capital spending among manufacturing, mining, oil, sectors of the US economy, with the rate of profit, not so coincidentally, peaking also and then turning down.

Some other items, that I don't think Kliman accounts for (in the book, haven't watched the video yet) is that if we are going to included corporate pension contributions, we should include only cash contributions, not stock. In addition, if we are going to count pension distributions then we have to increase the numbers included in the "aggregate" of workers by that amount, and only include cash distributions.

Same-same with social security, unemployment, welfare, food stamps, medicare, medicaid etc. The class is a class as a whole, an aggregate, that includes pensioneers, welfare recipients, unemployed, disabled, children, etc. Maybe he explains it and I missed it.

Anyway, Kliman is absolutely right and about several things: 1. the cause of the stagnation, or contraction, or whatever is not workers' incomes declining or stagnating [IMO, that's an effect]. 2. there has been no extended dearth of "capital investment" in the US since the end of WW2. There have been periods of reduced capital investment, slower rates of investment, and even a period of real deterioration in the fixed asset replacement rate, where essentially the fixed assets were consumed and not replaced with the replacement rate falling below 1 [my numbers show that being the case for the period 2001- 2004. But overall private non-residential fixed investment has been humming along, and a bit too loudly for profitability.

As for Kliman's argument being US centric-- of course it is. He says it is. He is arguing against the US underconsumptionists.

An illustration of why this doesn't matter. Two companies, one health insurance and one a bread producer. They both advance $100 of variable capital and both have a profit rate of 100%. Let's say that half of the wages are spent on bread and half of the wages are spent on health insurance ($100 each). Total profit is therefore $200 and total variable capital is $200, so the overall ratio of profit to wages is 1.

Now the price of health care rises by one half while its costs remain unchanged, and demand is completely inelastic. $150 of wages are now spent on health care and $50 is now spent on bread.

The profit of the health care company rises to $150, the profit of the bread producer falls to $50.

Total profit is still $200 and total variable capital is still $200. The total ratio of profit to wages is still 1.

It is you who does not understand what "aggregate" means.

Edit: It seems I've missed Ocelot's main point, which still seems to me not clearly expressed. I suppose his point is that while the profit share of one industry can fall, the profit of another industry will rise in proportion and that therefore pointing to a declining profit share in the original industry will be misleading, because there has just been a transfer of surplus-value to another industry. The very simple and obvious answer is that this is relevant if and only if we're NOT looking at aggregates, which we are. So the profit of the health care corporations is already accounted for in this aggregate, and transfers to this industry are already going to show up in the figures. I don't think ocelot understand what the word "aggregate" means.

what is obviously bollocks?

That the book focuses on the United States?

That the book mainly consists of detailed analysis of empirical data?

That the equivalent data is not as readily accessible or reliable for other countries and that someone from the United States living in the United States who is familiar with the United States data and the national accounts is going to be more qualified to analyse United States data than that of other countries

That to do the same analysis at a Global Level, even if the data was available could be relied upon and interpreted correctly, would be a herculean task?

That the recent crisis had its epicentre in the US?

That it can't be automatically assumed that the analysis of the US case applies to other countries?

where does he say that he is - you seem to be simultaneously building up strawmen at opposite ends of the spectrum here

So basically if you're going to do a data driven empirical study of something to see what it serves up, unless you're prepared to do the same thing for the whole world immediately and at the same time (putting aside the various factors which mitigate against such an analysis even being possible in the first place) it's not only less than worthless, but also dishonest, isolationist, self serving and also a priori theory led?

there's a lot to chew on from Kliman's work with this US focussed study. It's by far the last word on the matter and neither does he claim that it is, but if this work set some kind of framework or approach which encouraged similar data driven studies of this sort to be done around the world (because lets face it, there's not exactly much of this kind of stuff done from a marxian research perspective) then this whole subject matter would be moved on considerably. If you want to sit around and let perfection be the enemy of the good (when the stated aim is not perfection) then fair enough, that's up to you.

what do you mean by his FROP pony anyway? are you saying that his work is theory led and not data driven?

FYI, this seems to be a direct link to the video:

http://blip.tv/marxisthumanist-initiative/why-trickle-up-economics-won-t-work-6372818

oisleep, whilst I'm not competent enough in economics to participate in the discussion that you're having, I have to comment on your indirect assertion above.

All work is 'theory led', and the idea that 'data drives' work (similar to 'grounded theory', perhaps?) is essentially a conservative method.

Sorry to derail, just felt I had to comment - I hope that you're not a fan of the 'data driven' method, which your comment seemed to imply.

an empirical study of this type (i.e the book being discussed) is essentially data driven. prior to doing the research for this work Kliman had the opposite view of things like movements in profit rates and real wages as he does now. armed with this empirical data that he has collated/crunched/analysed he has put forward a theory as to what he sees as the cause of the current crisis (one that is in line with Marx's) - in this sense the work and outcome was driven by the data, not set in stone at the start by dogmatic theory (now that would be conservative)

the diagram below gives a pretty good overview of what i'm a fan off

I'm afraid 'data' can't 'drive' any sort of study. There is always a pre-existing need for a 'theory' which provides parameters of 'selection'. Without these, any study would by mindlessly random.

The belief that 'theory' is not needed is a conservative ideological stance. There is always a theory; but using this method, the 'theory' remains unexamined and hidden. Thus, it favours the dominant set of ideas, which are actually being employed.

But 'data' has to be selected from a endless morass of available data sources: the unspoken theory employed will determine the data, which will then merely confirm some unexamined theory, rather than produce a new theory.

Unfortunately, conservatives always call theory 'dogmatic', because then they can pretend that they're dealing with the 'real' world, not some ideological construct formed by Communists. Of course, they too have a theory: the world that 'exists' is the 'real' world, rather than the creation of humans trying to understand the world.

Anyway, once again, sorry to derail: I've had my say. 'Data driven theory' is a conservative ideological construct, similar to 'grounded theory', if anyone is interested in reading further on the issue.

PS. Apologies if I've misunderstood you: your diagram was not displayed - probably an incorrect setting on my computer.

Say you're a two person household making a total of $50,000 a year, $25,000 each. Now you split up. Now you're two single person households making $25,000 a year each. Assuming everyone else's income is unchanged, inequality has increased because you have just increased the number of households at the bottom tail of the income distribution. You also will see a reduction in total income per household, since it has just been halved even though there has been no change in actual pay.

Since average household size has been shrinking, this is a serious issue with statistics that don't adjust for these changes. When Kliman goes through various measures of changes in income and changes inequality, you can see that the more you adjust for changes in household size, the less is the change in inequality (though there still is an increase) and the faster is the increase in total income.

That said, you've pointed to some statistics that do adjust for these changes, so I'll give those a look later.

OK,

I'm watching the video. It is quite interesting.

He is asking and answering the question "what matters, wages or total compensation?"

But isn't there also are the question "matters for what?" The most extreme example is of course health care. If your wages go down by $1000/year and your employer paid health insurance goes up by $2000/year without otherwise improving, after twenty years your compensation will be $10,000 higher but you might feel $10,000 poorer. Of course, your higher compensation matters to your employer and so matters very much to calculations of the rate of profit and thus does matter to you. But your experience of what feels and looks like increased poverty should matter to you too, right?

Also, Kliman's graph shows that total compensation has basically risen only for the group of people fifty five and older (on page 3 of acrobat pdf within Mikus' link, Kliman says "page 2" of his handout). That brings up anatti's point 4 - that pension income is savings from the past and so perhaps should not be accounted for as compensation received by the working class on the year that it was receive. IE, the argument would be the higher pension income we see now is workers receiving the pensions they earned during the era of higher wages during the seventy. Again, I don't think you can simply say "that doesn't matter" but ask "what does this matter for?"

Edit: Skipping ahead, Kliman does deal with these questions, by saying that greater health care spending does involve more benefits. Now I would say that is, in itself, simply an extremely complex question - we all have anecdotal experiences of $2000/hour hospital costs but I recognize that doesn't prove things one way or another. I have had relatives cured of cancer using the hugely expensive machinery of modern medicine and friends who weren't cured but who still consumed health care which the government would value at millions of dollars and which was paid-for by the government. So the whole question is complicated (as Kliman says at the start of the video, before getting down to saying that the others are wrong).

Kliman asks "what does this matter for" throughout the whole video -- that's the whole point of the video. And he addresses the issue of older people receiving more income relative to younger people later in the video. The basic point is that it makes sense that some groups of workers feel poorer. It makes sense that some don't. In any case, aggregate has not gotten poorer.

Re household size 1) CBO studies do account for it 2) You know what happens when a couple earning $40,000 (20,000 each) with a child split up? Here's what happens, the man still earns his 20,000, and sinks into poverty. The woman, who generally has the kid, sinks into deeper poverty. They all drop from say, the second lowest quintile to the lowest quintile. So explain to me how this distorts the measure of shares of the national income; how this distorts the trend in the distribution of the national income? It does not.

Kliman thinks he's stumbled onto something new and scintillating-- that wages declined from 1972-1994, but then recovered and actually reached-- never it's high water mark of around 1970, 90-95% of that level, only to run into the Bush era, and the great contraction of 2008-20??.

Maybe it's new and scintillating to him, but not to me, and not to people I know. Maybe it's a good argument against Moseley, Wolff, the Monthly Review crew, and the accurately self-named, self-condemned Union of Radical Political Economists. Good for him.

But you CANNOT count corporate pension contributions to workers' pensions as compensation because such contributions do not belong to the workers, individually or collectively. They are a corporate assets. "Overfunding"-- i.e if contributions made, particularly in stock, exceed the target growth to match projected obligations, that "overfund" can be moved directly back to the corporate bottom line, and as cash. Moreover, as the last 20 years has made painfully clear to the most casual observer, pension funds can be abandoned, sold off with a division of a company, without any obligation of the new owner to maintain the funds. In fact, such a sale allows the new owner control of all the assets with a free hand to change the terms of the fund. In fact, nothing is less sure that benefits promised by corporate pension funds.

If you want to include government transfers to the class, then include all members of the class-- unemployed, disabled, single mothers, retirees. If you're going to include health benefits, then provide the details on what costs you are identifying as "compensation" going to the workers.

What's next? Is somebody going to tell me that the index of children being born into poverty didn't climb after the early 1970s? Didn't reach new highs in the 1980s, dip temporarily from 1994 to about 2001, and then kick up again, because underconsumption is not Marx's critique of capital?

I'm all for blowing the underconsumptionists out of the water. I think Marx's theory and the reality of overproduction do that. But, as we used to say back in the day, don't piss down my leg and tell me it's raining outside.

1. Yes, the CBO studies do account for it as I acknowledged before. However, those studies are about income inequality and not about the overall wage profit share nor the trend of inflation-adjusted income. Kliman acknowledges that income inequality has gone up.

2. The issue is not just of people splitting up (that's only the example I happened to give because I thought it would be clearest), but of the marriage rate declining. If fewer people are married than before, then income is going to be counted as lower per household than before.

3. If you think that a situation in which wages are unchanged but a couple splits up should be counted as a decline in income, then by your own reasoning if two people with $20,000 income each get married, then this should be treated as a doubling of income. I highly doubt you'd want to say that a rise in the marriage rate should be counted as an increase in income, but that's the implication of what you're saying.

I don't evaluate arguments based on whether they're "new and scintillating", but rather based on whether or not they're true. I really don't know what your point here is, you're actually agreeing with Kliman but seem almost angry about it.

I'm going to look at the sections of the book dealing with pensions again before I respond to this.

He does this. He just reaches the opposite conclusion of you.

He's referring to the actual amount paid out by corporations for health services. This seems fairly straightforward. If not, explain why not.

You're making an ridiculous accusation by stating that the reason Kliman is criticizing the views you hold on wages is because he thinks Marx was against underconsumptionism. Kliman actually agreed with the prevailing views on wages as late as 2009 in a published article (he mentions this both in the video and in the book). He changed his mind because of the data he looked at. If his claims were based on his disagreement with underconsumptionism, then he wouldn't have made opposite claims just three years back.

Apologies if this is all a hallucination my part but...

Well, I'd say you "probably shouldn't" count corporate contributions as being payments to workers.

However, one approach that is definitely wrong is to both count employer contributions to pension plans and count employee withdraws from pensions. That would lead to double counting. Either the money becomes the workers' when it is added to the pension fund and pension expenditures are just transfer OR employer contributions are just transfers and the money becomes the workers' only when they are able to spend it as a pension payment (as per Artesian, probably the latter).

The thing is, Table "B-29" on the pdf of the handout from the video on the website seems to indicate, however, that Kliman is doing that kind of double counting - since it's adding pension contributions and I know from elsewhere he counts pension payouts. Maybe there's something I'm missing.

Also, the same reasoning would seem to apply to social security. Either social security/payroll taxes are payments to the working class and social security payments are just transfers or social security taxes are transfers within the capitalist class and social security payments are real payments to the working class. Moreover, considering Kliman has been very careful to calculate outlays of capital at the point they are made, it would seem that pension payments and social security payments should also be considered alocated/paid on the year when they need to be set aside rather than on the later year when they are actually made. But that issue seems less important than the double counting issue (thought we did spend a couple pages and a meme-image on the historic costs issue already).