Rock and Roll Economics and Rebuilding the Middle Class

Rock and Roll Economics and Rebuilding the Middle Class -...

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1 “Land of Hope and Dreams: Rock and Roll, Economics and Rebuilding the Middle Class” Alan B. Krueger, Chairman, Council of Economic Advisers June 12, 2013 Cleveland, OH Remarks as prepared for delivery Introduction Thank you very much for your kind introduction. I have always felt that this is a magnificent museum, one of the few in the world that brings people of all backgrounds together, young and old, rich and poor – there is something here for everyone to marvel at. Particularly at a time when economic forces have been chipping away at the middle class for decades, I think it is essential to have institutions like the Rock and Roll Hall of Fame that can bring people together, and remind us that we are one nation, united by our hopes and dreams. I gave this talk the title, “Land of Hope and Dreams: Rock and Roll, Economics and Rebuilding the Middle Class” because many of the forces that are buffeting the U.S. economy can be understood in the context of the music industry. I have also learned from 25 years of teaching that the best way to explain economics is through the example of the rock ‘n roll industry. The music industry is a microcosm of what is happening in the U.S. economy at large. We are increasingly becoming a “winner-take-all economy,” a phenomenon that the music industry has long experienced. Over recent decades, technological change, globalization and an erosion of the institutions and practices that support shared prosperity in the U.S. have put the middle class under increasing stress. The lucky and the talented – and it is often hard to tell the difference – have been doing better and better, while the vast majority has struggled to keep up. These same forces are affecting the music industry. Indeed, the music industry is an extreme example of a “super star economy,” in which a small number of artists take home the lion’s share of income. The music industry has undergone a profound shift over the last 30 years. The price of the average concert ticket increased by nearly 400% from 1981 to 2012, much faster than the 150% rise in overall consumer price inflation (slide 1). And prices for the best seats for the best performers have increased even faster. At the same time, the share of concert revenue taken home by the top 1% of performers has more than doubled, rising from 26 percent in 1982 to 56 percent in 2003 (slide 2). The top 5 percent take home almost 90 percent of all concert revenues. This is an extreme version of what has happened to the U.S. income distribution as a whole. The top 1% of families doubled their share of income from 1979 to 2011 (slide 3). In 1979, the top 1% took home 10 percent of national income, and in 2011 they took home 20%. By this
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