From the if you're a left wing hammer, everything looks like a nail department - Median Income Competition Edition

The New York Times as is it's wont triumphantly announced that "The American Middle Class Is No Longer the World’s Richest".  Ignoring the fact that the places where the middle class is suffering most are almost all blue paradises, they focus on three left friendly explanations:

1. Slower gains in educational levels than similar countries like Australia and Canada
2. Higher differentials between bosses and workers compensation
3. Less income redistribution from the top downward

I'm not surprised that they focus on 'governmental' reasons - 'inequality', 'education', 'greed'.  Because their answer is of course 'redistribution' and spend more money on sectors that NYT readers disproportionately work in like education.  All of these reasons fit perfectly with the newly regnant Neo Marxist theology that 'inequality' is the key, indeed if you listen to the left, the only issue (funny, it used to be healthcare but I guess that one has been 'solved').

So to get some perspective that isn't so gosh darn theological, I submit the following real reasons for why the US median income growth lags that of the countries most like us:  Canada and Australia.  Reihan Salam gave me some of the ideas for this:

Different stages of the Business Cycle.  First and foremost Canada and Australia are at almost the peak of their business cycle.  Both are just coming off of an at least 15 year long resource boom with economies that are much more reliant on oil and gas extraction, mining and agriculture.  In the US these sectors account for 2.6% of GDP, 12.6% in Canada and 12.22% in Australia .   Australia and Canada have benefited - both from the gain to GDP and the wealth of high paying semi-skilled jobs that extractive industries generate.

This is reflected in their housing markets.  Canada and Australia are at the peak of a multi-decade housing boom.  The US' boom crashed in 2008.  As was the case in the US, the boom resulted in much more consumer spending on new houses and other durable goods, higher unskilled and semi-skilled employment and overall GDP growth.  As the resources boom busts their housing booms will too and these countries will look a lot poorer relative to the US.


Immigration mix - Take a look at a map.  The nearest third world immigration border to Canada is 1500 miles south through the US.  Australia is surrounded by high seas.  Canada and Australia get the immigration that they want which is disproportionately South and East Asian and educated.  The US, facing a porous southern border that one of the two main parties wants kept open to boost their electoral chances, imports proportionately far fewer educated immigrants.   A Canadian or Australian style 'skim the cream from poor countries' strategy would yield much better results for us.  For the countries we skim:  not so much.  While I don't have the data handy, I hypothesize that the difference in mix of immigrants and immigrant's children constitute the whole of the 'education gap'.  After all we've tripled real lower education and quadrupled real higher education spending per pupil so it's hardly a case of the US not trying hard enough.

Finally, economic freedom - The US has been going backwards on economic freedom.  When compared to Canada and Australia we have fallen further and further behind .  Freedom matters - the security of property, the impartiality of the courts, the level of corruption, the simplicity of regulation and level and complexity of taxes all contribute to economic growth, investment and employment levels.  On the Heritage Foundation freedom rankings, the US has fallen out of the ranks of the 'free' economies and now battles it out with second tier economies with second tier income levels.  Our standard of living suffers accordingly. On the Heritage Index, the US scored a 78 in 2009 and a 75.5 in 2014  this was 4.6 points and 2.4 points behind Australia and Canada respectively in '09 and their lead had grown to 6.5 and 4.7 points respectively as of 2014.  It's hard to generate more wealth when you are discouraging the economic behavior necessary to do so.

If the NYT had its druthers, they would see 'soak the rich' and environmental policies implemented that would drive us even further away from economic freedom and wonder why oh why the economy ended up in the toilet. But we'd feel better because we'd all be more equally poor.

The moral of the story:  when all you have is a hammer you want to hit someone really hard.  Let's just hope the newly styled revolutionary class warriors don't hit our children any more than they already have.  Because it's obvious that they really don't care what the question is so long as the answer is pass more money to the state and it's favored New York Times reading minions.