Category Archives: Daniel Alpert

Labor’s Share of National Income Is Falling

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The latest issue of the Economist shows quite dramatically in the article “Labour Pains” that labor’s share of national income is dropping.  In the U.S. workers’ wages have historically been about 70% of GDP.  In the early 1980s this figure started falling and is now 64%.  Similar declines are occurring in many other countries.
This phenomenon is closely related to what others are observing as I have reported recently.  Tyler Cowen’s new book “Average is Over” discusses the threat of technology to the middle class.  Daniel Alpert in “The Age of Oversupply” talks about the increase of competition from various global forces.  Stephen King’s “When the Money Runs Out” makes the case that “a half-century of one-off developments in the industrialized world will not be repeated.”
Historically the stability of the wage to GDP ratio “provides the link between productivity and prosperity.  If workers always get the same slice of the economic pie, then an improvement in their average productivity – which boosts growth – should translate into higher average earnings. … A falling labour share implies that productivity gains no longer translate into broad rises in pay.  Instead, an ever larger share of the benefits of growth accrues to the owners of capital.”
A shrinking share of a GDP which itself is slowing down is a double whammy.  The only way to address the problem effectively is to deal with the root causes.
First of all, we need to boost overall economic growth by the proven methods of broad based tax reform, especially including much lower corporate tax rates, making regulations less onerous, carrying out immigration reform, and giving special attention to helping entrepreneurs create new businesses.
How can we, additionally, help low skilled and low waged workers move up the ladder?  Long term the most worthwhile action is to change K-12 education by putting more emphasis on career education to produce more highly skilled workers.  Short term, we should provide crash job training for the estimated three million current job openings in the U.S. which require skilled workers.
Economic inequality in the U.S. is becoming progressively worse all the time.  There are fiscally sound ways to address this alarming problem and it is important that they be clearly and forcefully advocated.

A Pessimistic View of America’s Future IV. The Age of Oversupply

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Today’s New York Times has an interesting Op Ed column by Daniel Alpert, a partner at the investment bank, Westwood Capital, LLC, “The Rut We Can’t Get Out Of” .  It is based on Mr. Alpert’s new book, “The Age of Oversupply: Overcoming the Greatest Challenge to the Global Economy”.
“Hundreds of millions of people who once lived in sleepy or sclerotic statist and socialist economies now compete directly or indirectly with workers in the United States, Europe and Japan, in a world bound by lightning-fast communications and transportation,” says Mr. Alpert.
During the “Great Moderation,” beginning in the early 1980’s, with the tech bubble of the 1990’s and the housing bubble of the 2000’s, we could ignore this threat from the developing world.  But now, after the financial crisis and the Great Recession which followed, this huge new source of global competition for jobs and cheap goods is a drag on our recovery.
Mr. Alpert’s main prescription for recovery is to put the unemployed back to work “by any means, including big public sector investments to improve infrastructure and competitiveness.”  He would do this with massive new deficit spending, arguing that U.S. debt is not a serious problem in the short term.
I agree with his argument that the global oversupply of workers, money and goods is a huge threat to future prosperity.  Where I disagree is when he says that faster economic growth is more important than controlling deficit spending.
In my opinion, “America’s existential threat is fiscal” (Glenn Hubbard and Tim Kane).  In other words, as important as it is to boost the economy and create more jobs, and this is very important indeed, it is more urgent to get deficit spending under control and to do this quickly.  We can actually accomplish both of these critical tasks simultaneously, as I discussed in my post of September 20, 2013.