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

true - although there once was a time when it seemed completely counter intuitive on a subjective level that increased productivity of labour brought about a decline in the rate of profit, not a rise!

Here's what's complete and utter nonsense about the "contribution" as compensation scheme; the notion that pension and medical payments have raised the real compensation of workers as a class:

1. About "some degree of certainty of pensions" being a benefit, according to the Employee Benefits Research Institute, a record percentage of workers is "not at all confident" about retirement income.

2. About the real benefits, maybe I missed the day in school when they were passing out the magical-thinking pills, but it reads like this to me. Most employees in the US have NO employer sponsored retirement plan. Those employees that are covered experience a significant drop in income upon retirement. How significant? Well, I don't know the exact percentage, but I can say with "some degree of certainty" that the portion of income from the employer [in this case the employer plan] will drop anywhere from 30-70 percent.

OK, so most aren't covered, those that are covered will experience a decline in income.

So tell me again, how with numbers of workers moving to a lower income level, we get an increase in the real compensation of the workers?

3. And we don't need all these magical contortions to assess real compensation. We can do it as we've done it before, and we will see that wages for US workers declined from 1972-1994, and then moved up with the 1994-2000 uptick that recorded real increased rates in US capital investment, real gains in US labor-productivity, real increases in US profits, real increases in rates of profit... until it no longer didn't

4. And that's my last word on this, because there's no point arguing with those who believe that IOUs can be treated as real income. They aren't. You might be able to sell them in a secondary market and get some income, but until you do that, you got bupkus.

In the immortal words of 3rd officer Ripley of the Nostromo at the board of inquiry:

Did IQs drop dramatically while I was away?

double post

This is absolutely absurd. In post #168 you claimed that the PBGC had control of 1.4 million failed accounts. Out of how many? 90 million according to the BIS statistics. Even adding simple reductions (rather than failures) to this, it's hard to imagine that the total numbers will go down anywhere near 70 or even 30 percent.

In any case, I ran through the Economic Report to the President spreadsheets and assumed losses to employer contributions of 50%, and looked at total income as a percentage of GDP. The number shows a downward (instead of upward) trend, but only from about 57 to 55 percent from the early 1970s to 2006 (this is going peak to peak). And this is with a highly unrealistic assumption to boot.

(I don't really know how to post spreadsheets but I can try to figure it out if you question what I'm saying.)

So no, this doesn't anything of the overall picture Kliman gives.

(Note: It should actually be GDP net of depreciation, as Kliman notes, since depreciation isn't income for anyone. I unfortunately don't have and am too lazy to get those numbers. But this doesn't matter for my point because depreciation has been going up as a share of GDP, which means my denominator is higher than the correct denominator, which means that income as a share of GDP is actually understated in my figures, and increasingly so over time. Which means that the actual trend is actually flatter than my estimates suggest.)

Mikus,

Pensions do not replace 100% of an income. Unless you're an executive. This has very little to do with failure rates. Even the more generous employer-sponsored plans rarely exceed 65% of the employees pre-tax income.

Autoworkers retiring from GM do not receive benefits equal to 100% of their pre-retirement earnings. Neither do railroad workers, airline employees, telephone company employees, etc. There is (almost) always a decline in compensation.

Of course. What's your point? I never said nor implied that they did. I looked at 50% losses to actual employer contributions to pensions and medical. I.e. I assumed that workers would receive on average 50% of what their employers put in. And the results didn't change much of anything in regards to Kliman's main point that the wage share of total income has been roughly constant.

This is amazing. I worked for railroads for 36 years, At the end of that period I have a pension, which both the railroads and I contributed to for 36 years and is approximately 40% of my former wage.

The point of all this is that unlike wages, pension contributions are a cost that does not alter the real rates of compensation.

Continuing from...

You're implying all taxes here but...

That reads to me as saying that he's only looking at social security taxes here. Moreover, the note I mentioned on page 223, where he gives the details of his calculation process, also seems to indicate that he's only subtracting social security taxes.

Please note: NIPA Table 2.1, Line 24 = "Other current transfer receipts, from business" (IE, business contributions to social security, unemployment and other taxes).

Again, not subtracting income or taxes other than payroll. I would guess that Kliman is doing this because he is following the BEA's own approach. As I said, this may work for the BEA's purposes but it seems problematic for the purposes of aggregating the real income of the working class.

BEA figures involve double entry book keeping. When they report their figures, to balance their two tables, they add up various values from one table to get a benchmark, and then subtract values from the other table to get zero and make the their two tables balance (I don't mean to condescend, just set the stage with this elementary stuff. The original quote was an indication that personal taxes are on the second table - they subtracted afterward rather than being added beforehand).

Now, if you look at a National Accounts table (such as here), first a variety of items are added together, including social security taxes (but excluding personal taxes) to make compensation of employees, received. Total compensation is then added with all the other incomes sources, including transfer payments to make personal income. And then, only then, do they subtract personal current taxes to get disposable income (and then personal outlays are subtracted to get personal savings).

Both the Kliman quotes above would indicate that "personal taxes" line are not being removed from the total he's deriving. It should also be noted that, at least as far as I can tell, the personal current taxes figure is not broken up into taxes on wage income in particular. This is also logical given that taxes are collected by the IRS using their rules which aggregate income sources and then give a variety of deductions. But it presents a problem for anyone looking to keep track of "post-tax income plus transfer benefits" for the working class. For the reasons above, I don't see how anyone could derive this figure by merely aggregately NIPA.

Further issue #1 is that both sales taxes and incomes taxes are taxes on the working class so the "personal taxes" figure also might not reflect those total taxes on the working class (sales taxes, a highly regressive tax form, have risen as income taxes have fallen over the last twenty years, right?).

Further issue #2 is that Kliman's overall figures seem to imply that the American state has engaged in an increasing series of transfers from non-workers to workers to make up for falling direct compensation. Given the well publicized changes in the tax code and government expenditure over the last twenty years, that also seems like an extraordinary claim.

Further issue #3 is the validity of inflation indices. Not an issue for relative share of national income but very much an issue for any claim of working people actually being better off today. We can wait on that discussion but I wouldn't want the issue to go entirely unmentioned.

I'm sorry, but I'm still not following you. Nothing I wrote implies that pension payments are at all related to your former wage. I'm not old enough to have received a pension, but I am old enough to have paid into pensions and I'm quite aware that my employer's and my own contribution together are not equal to my wage.

I didn't assume that pension contributions were equal to wages and then subtract 50% of that. I took actual pension contributions and subtracted 50% of that.

If that still doesn't answer your issue, then put some numbers on it to make yourself understood.

"Tax contributions for benefit programs" would include other taxes beyond just Social Security and Medicare, no? Veteran's benefits and other programs were included in his discussion so I'd assume he did deduct them, if data was available on this.

You also bring up the issue of sales taxes. As I mentioned to anatti, if less and less of worker's compensation is being received as direct wages, then less money is going to sales taxes.

In any case, do you really think any of this is going to make a huge difference and change our overall picture of this? Do you really think that the supposed immiseration of the working class is caused by veteran's benefit and sales's taxes? Give me a break, you're nitpicking at statistical issues that even at their extreme wouldn't change much at all.

If you're referring to things like "ShadowStats" then that whole thing is a joke. I used to believe it for a short period of time but Paul Krugman has shown over and over again that independent estimates of inflation such as the Billion Prices Index have closely tracked the actual government statistics. (See, for example, here: http://krugman.blogs.nytimes.com/2012/04/01/billion-price-update-2/ )

As I mention above, this is (according to the BEA) "Tax contributions for benefit programs" by employers rather than the money workers "contribute" with income taxes.

However, I'll give you that this is not entirely social security taxes (employee unemployment is probably included). But I payroll/social security tax is the main thing accounted for under compensation by the BEA and income and sale tax appear elsewhere on the BEA "books".

-- As far as sales tax goes, you might have noticed also that it has gone up. Moreover, food stamps is the only "in kind" transfer payment I know of. SSI is paid in money and so SSI recipient pay sales tax on their benefit.

You did not answer my my point, which was:

The other benefit programs are tiny in comparison with social security and medicare.

In the version of the figures I'm discussing, what isn't being accounted for is income tax and sales tax.

That is rather large chunk of money, to say the least.

It would make no sense to count total income tax, what would need to be counted would be the total income tax that goes to those social programs and then the total amount of money received from those programs. And that is indeed a relatively small proportion of what is already counted in social security and medicare taxes.

I'm not quite following here.

My point is that Kliman is adding pre-income-tax compensation to state transfer income and calling the total income of the working class.

But income tax removes money from workers income. If you are counting post-tax payments, transfer payments, it is entirely reasonable, indeed necessary I'd say, to look at post-tax income. That income after income taxes which is quite significantly less than income before income taxes and after social security and other payroll-type taxes.

Okay, so you want to look at post-tax income in general.

The chart on the second page of the handout of that talk gives median income figures pre and post-tax. The rise in income between 1979 and 2007 income is close to 30% of size-adjusted households. This doesn't disaggregate between workers and managerial income but given that this is median (rather than average) income, it shouldn't make a big difference unless you're assuming that the number of managers has increased greatly faster than the number of workers.

No necessarily. I simply assert that if someone counts transfer payments, then they have to look at post-tax incomes since transfer payments transfer money that comes (at least partly if not entirely) from taxes.

I mean, I believe the earned-income tax credit is fairly subtantial transfer payments today. It is extra money you get back on your tax return. You couldn't very well say your income was pre-income-tax income plus earned income tax credit (neglecting money owed to income taxes).

That is Burkhauser et al? Assuming that is derived using a different methodology than Kliman's, its validity would be a different question.

It is rather fascinatingly baroque. I'll give kudos to Kliman for saying at the start of the his video something like "there isn't an income, there are simply incomes". I would add that a lot of income derivations are related to political agendas (including leftist agendas but also including mainstream positions).

And so there is the problem; if you find ten different studies showing incomes increased, someone else can point to ten other studies claiming it declined.

Wouldn't call it "trickery." Doubt that Kliman is trying to trick anybody or fool anybody. And I wouldn't call it "neoliberalism" since a) this process started well before the "official" Thatcher/Reagan inauguration of "neoliberalism," b) the source of the trend is not in the ideology, the ideology is a response to declines in profitability.... BUT, that all being said, I think the substance, that what is being identified as income or compensation of the working class is neither.

I thought I would mention something very crucial here that perhaps people have not been keeping in mind. Kliman's analysis only goes up to about 2007. He does this because he want's to show what the underlying causes of the crisis are that started in late 2007 (the official start of the last recession in the US). Therefore, he is only looking at empirical data that goes up to that point for that very reason (and perhaps also for the reason that past 2007, data is less reliable).

Now it has been about 4-5 years since the start of the last recession (and it officially ended in 2009 I believe?) and it is possible that total compensation has fallen in the aggregate since then. However, I do not want to make any claims either way regarding that.

A lot of posters here say things like , "this is just so counter-intuitive to recent experience". Kliman is not out to show that all the way up to now, 2012,, workers have been getting an increase in total compensation etc, and that's not the point of the book. The point of the book is to show what was happening up till the crisis in order to get a clear understanding of what caused the crisis. So lets keep this in mind,

Agree. But I do find it unusual, for all his early discussion about countervailing tendencies, Kliman really does not explain what the history of the run-up to the "Great Recession." IMO he glosses over the 90s as simply the "dot.com bubble" and gives an OK description of inflated asset values, [and the repeat with the housing bubble and the deepening encumberment of the assets]... as if all there was to the 90s was the dot.com bubble.

Just not so. The dot.com bubble came about after 1997-1998, and was based on the prior real success US manufacturing and transportation, etc. had achieved with applying the digital technologies to the the production process, and the real boost to profits this gave the recovery from the 1991 recession.

Of course, the application of such technologies to perhaps the most capital intensive sector, the oil industry, created a bit of overproduction, dropping the price of oil below $10 a barrel, after driving down real lifting and finding costs in the early 90s, and eventually bringing another OPEC "intervention" which interventions have been, for the past 40 years, the canary in the coal mine for approaching recessions.

Overproduction of semi-conductors, and semiconductor fabrication plants, had hit that sector particularly hard in Asia as the shift to the 300mm disk for processing drove production costs down.

Prior to that intervention, the rate of profit in US manufacturing had concretely, if modestly, recovered, peaking in about 1997-1998.

There is a cyclicality within the long term "failure to recover." Kliman correctly notes the long term US failure to recover from the 73-74 contraction-- which is not "crisis," but misses the "interlude," a real countervailing offset in US industry profitability that takes place in the 90s.

Rereading the book now, so maybe I'll pick that up if I missed on the first go round.

S. Artesian

It's okay to have your own theories about what happened in the 80's and 90's. But Kliman published a pretty thorough, empirical study concerning the rate of profit, the composition of capital, national income etc. If you think he is wrong about those things, then you should provide evidence to the contrary.

S.Artesian wrote

Kliman looks at more than just manufacturing

He writes about more than just a particular manufacturing industry too.
you seem to be looking at the trees, but missing the forest. You should prolly finish the book .

I've read the book, completely once. Using Kliman's own data, there is a recovery in the rate of profit in the US that peaks in 1997. Using Kliman's own explanation for the rise and decline for profit and profitability, we find the source of both in the amplified productivity of labor brought about by greater investment in the means of production.

Such real investment, real improvements in productivity, and improved profitability actually occurred in the 1990s. The expansion was not a dot.com "bubble," although it certainly produced one.

Perhaps you should try reading Marx, reading what really took place in the 1990s, or simply reading period.

@kingzog

You can also see above my criticism of Kliman's use of transfer payments as part of the real income of the working class.

If I understood you correctly, your criticism wasn't the counting of transfer payments as such, so much as the supposed lack of accounting of certain taxes.

The taxes that are very plausibly used to pay for the transfers, yes. Either you should count (income) taxes and transfers or you shouldn't count either.

S.Artesian wrote

whats your point? the trend between 1970-2007 was downward, with a slip uptick in the 90's. most of that was because of software increasing 'moral depreciation' which in turn increased the writting of of debts, which then lead to an increase in profits. But the trend has been downward, S. Artesian. That one fact is clear That's what kliman wrote in his book. Are you sure you've read it?

i don't even see what your point is about the 90's dot-com bubble, not being a bubble. That is an odd argument for sure, but it's not really all that relevant, since profits still trended downward.

EDIT: S.Artesian

gee wiz!

redhughes,

the point is that corporations pay for those benefits. Not the utility of a particular type of income. The whole point of the book is to show that profits have stagnated. Not a claim about workers having it good or that workers getting more benefits as opposed to money-wages is a pro or a con, you can make that judgement if you want to. But, the point is, corporations pay for those benefits out of profits.

There is no argument that the trend is downward; capitalism reproduces itself cyclically throughout the general trend. The point is that saying the "trend" since 1970 has been downward does not account for the cyclical nature of capitalism within the trend. That's the point.

There were, in the 1990s real changes in the production process, real amplification of the productivity of labor, real declines in costs of production and services due to the application of these technologies, real accumulations of technical components being animated as value-absorbing machinery by proportionately less labor-power.

Here's an example. Now this may be another tree in the forest, but that's what forests are, trees. In US freight railroading, costs per ton-mile dropped, and dropped dramatically with the application of digital technologies to traction control, wheel rail adhesion, fuel monitoring, "preview" of track geometry, maintenance techniques; with containerization, consolidations of dispatching offices, computer generated "conflict checkers," advances in train and traffic control technologies, and traffic management. Freight transport costs , reducing those costs, are key to improved profitability. That trend, in declining costs, comes to an end around 2000.

Nevertheless, real operating ratios, which do not, on a railroad include depreciation in the calculations, but are based on actual operating revenues and actual operating costs, improved.

There were real profits, that were the product and producer of real accumulation, and real overproduction of the means of production as capital, leading to the contraction of 2001. I did not say the dot.com bubble was not a bubble. I said that is not the proper characterization of the period of the 1990s. The dot.com boom was completely derivative, and not causal.

Did you look at his chart 7.12--- his adjusted rate of profit? It shows the uptick coming in 1993, peaking in 1997. It's lower than the BEA based rate, but it follows the same trend friend. Get it? The trend is the same, the rates differ.

So I think it would have been nice for Kliman to account for the uptick in the 1990s, the real decline in production costs. Call me an incurable romantic, but there it is.

Certainly the 1990s look good only in comparison to the 1970s and 1980s. They don't look so good in comparison to the 1945-1970 period . No one's arguing about that.

And the trends after 1997 still track each other. In the years 2001-2003, there was a recession, which helped drive wages down from their previous peaks. Draconian restrictions on capital spending were pretty much enforced through 2005, as fixed asset replacement rates fellow below 1.

You, in your iteration, might as well ignore the real determinants of everything. You might say, "Fuck it, no need to understand what's happened in maritime transport that laid up 10% of the world's transport fleet, dropped daily hire rates on dry bulk carriers and tankers to historic lows, drove the industry to adopt "slow steaming" techniques and navigate around the cape of Africa rather than use the Suez Canal, because I know what the long term trend is."

Big fucking deal. Me, I like looking at the increases in investment in fleet dead haul tonnage, the increases in fleet size ordered in say 2005, 2006, for delivery in 2008, 2009... it's just those kinds of things, that overproduction of the means of production of capital the ups and downs that cause the anomalies in the trend, anomalies like world trade volumes actually dropping for the first time in 40-50 years; bankruptcies; unemployment; layoffs... and increased class struggle. Call me romantic again.

The point is that countervailing tendencies continue to work throughout the long-term trend, which is why there is no such thing as a permanent crisis, and no such thing as a "final collapse" of capitalism, two concepts Kliman EDIT: refutes, and properly so, and its just those countervailing tendencies that animate the class struggle.

The point is to arm the working class in the class struggle, not ignore actual moments in the reproduction of that struggle because we know "what the trend is."

You can look at my detailed argument on earlier posts in this thread.

Kliman's using NIPA (At least in his chapter on the underconsumptionists), which accounts for corporate payments to social security, retirement and etc fund to wages as "employee compensation" and then adds in "transfer payment", meaning both the government adding extra to social security as well wealth and similar payments. The problem with taking the sum of these values as "what the working class gets" is that this "total compensation" starts wit before-income-tax wages but then adds transfer payments, which come from ... income taxes (it's avoid double counting social security taxes but is doing something double counting income taxes). I mean, transfer payment are, to some substantial extent, transfers between one group of wage earners and another. So "compensation plus transfer payments" is not reasonable measure if you are using NIPA.

My post above with the most detail, including links to various BEA documents as well as quotes and page numbers for Kliman:

http://libcom.org/forums/theory/some-critical-remarks-klimans-proposition-increasing-workers-income-27092012?page=5#comment-497141
http://libcom.org/forums/theory/some-critical-remarks-klimans-proposition-increasing-workers-income-27092012?page=6#comment-497255

Analyzing national accounts is certainly difficult. One key concept for understanding NIPA is that it looks at the flows of the fund the government can most easily keep track-of. This leads to the problem for us that there's no figure of how much of wages in particular are taken via income tax and sales tax - income and other similar taxes are just aggregated because the IRS operates that way (so taxes on rental income, stock appreciation and similar things are included).

Anyway, I could be mistaken in my general claims but I have documented them. Maybe there's a counter-argument I'm missing...