Review 1 PPT

Review 1 PPT - Bernstein Waking Up from the American Dream CLAIM 1: •  Dead End Jobs Choke Off Upward Mobility – Dead End

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Unformatted text preview: Bernstein Waking Up from the American Dream CLAIM 1: •  Dead End Jobs Choke Off Upward Mobility – Dead End Jobs = f (WalMar>za>on) CLAIM 2: •  High Cost of College Chokes Off Upward Mobility  Hire temps and part ­6mers  Eliminates long ­term employees and benefits that go along with long term employment  Fight unions  Slows down rate of growth in wages  Reduces benefits  Dismantle internal career ladders  This reduces upward mobility for current employers  Explosion of dead ­end jobs – jobs w/o career ladders  Outsource to lower ­paying contractors  This eliminates middle class entry level (or stepping stone jobs) required for upward mobility  This maintains the low wage jobs and keeps people stuck Bernstein’s Walmar>za>on and Reich •  Robert Reich claims that corpora>ons pursue cost cuSng strategies to please American consumers who are always looking for lower priced items and beUer deals. •  Americans have become expert consumers, expert investors but have sold out their ci>zenship in the process •  Thus, Americans end up undercuSng their own ability to be economically successful Bernstein’s Walmar>za>on and Tilly •  Chris Tilly suggests that when corpora>ons pursue cost cuSng strategies they are pursuing a “low road” strategy to higher profits and financial stability. •  The “high road” strategy to profitability is through innova>on. •  Corpora>ons have to be pressured into pursuing “high road” strategies. •  They can be pressured by public policy but ul>mately the pressure on public policy either comes from lobby groups, poli>cal ac>on commiUees, or ci>zens •  These are referred to as “pressure effects” Bernstein Education is the Key – The U.S. has experienced the crea6on of millions of jobs that pay less than the poverty level wage of $8.70 and hour – The U.S. has lost millions of middle income jobs – Most of these workers low ­wage workers only have high school diplomas – Increased creden6aliza6on in the labor market means that upward mobility requires more educa6on •  Yes, but… – Its not 2 year degrees – 4 year degrees essen6al for success – 4 year degrees out of reach of the poor – Intergenera6onal progress is significantly diminished for those who cannot acquire a college educa6on •  Jobs that are being outsourced are middle income jobs •  They are the stepping stone jobs that allow workers to move from entry level into the top rung jobs •  As more and more of these jobs are outsourced, the only way to achieve mobility is to leap from the boUom rungs to the top rungs of the economic ladder •  A 4 year degree is the only creden>al that will enable one to leapfrog over the missing rungs • Tilly argument is consistent but a bit different. • Tilly argues that equality is the key to economic growth and education is the key to equality. • Educated workers are more productive when they are “matched” with educated workers as opposed to uneducated workers • Likewise, workers with sophisticated technical skills and access to technology are more productive when they are “matched” with workers with similar skill sets. • If equalize education by making it more accessible and affordable, workers would be better “matched” and productivity would increase and generate economic growth • Ledebur’s study showed the more equal the income in 85 metropolitan areas, the greater the income and employment growth in that area • Conclusion: Equality Promotes Growth What about Wessel on Bernstein’s Educa>on is Key •  Wessel 1 agrees somewhat.. •  According to Wessel, even though the U.S cannot be defined as a mobile society, “the escalators of social mobility con>nue to move, ” and this movement does tend to be the result of educa>on. •  “Nearly a third of the freshmen at four ­year colleges last fall said their parents hadn't gone beyond high school.” •  And immigrants are also faring well. At UC Berkeley … 52% of last year's undergraduates had two parents who weren't born in the U.S But... Wessel on Educa>on cont’d •  Wessel 2 (w/Levy) argues that it has to be the “right” educa>on. •  Educate American students in areas that will have jobs in the future. •  Wessel 1 argues mobility is a func>on of inherited advantage •  Parents income can buy higher quality educa>on and higher educa>on •  Parents educa>on can prepare children to be successful in an academic seSng. •  Robert Reich argues that … •  We need to spur "upward mobility by geSng more Americans a good educa>on, including access to college. •  There will be plenty of good jobs to go around. But too few of our ci>zens are being prepared for them." •  Krugman believes that the slowdown in mobility may have some educa>onal causes but… •  Rising income inequality is not the result of an educa>on premium or increasing returns to educa>on •  While highly educated workers have done beUer than those with less educa>on, a college degree has hardly been a >cket to big income gains. •  Income at the 99th percen>le rose 87 percent •  Income at the 99.9th percen>le rose 181 percent •  Income at the 99.99th percen>le rose 497 percent. No, that's not a misprint. The Tax Policy Center es6mates: •  In 2006, the 99th percen>le corresponded to an income of $402,306 •  In 2006, the 99.9th percen>le corresponded to an income of $1,672,726. •  The es>mate for the 99.99th percen>le is well over $6 million a year. •  Wealth and income in the U.S. is increasingly concentrated in a few hands •  This should concern us because a rising economic >de has failed to lin most boats but also because both history and modern experience tell us that highly unequal socie>es also tend to be highly corrupt. •  Alan Greenspan, former Fed Chair, repeatedly warned that growing inequality poses a threat to a "democra>c society." Berstein claims its Walmar6za6on but Krugman says Public Policy also plays a role. •  •  •  •  •  •  •  •  What policies is Krugman talking about? Estate Tax Tax Rates on Highest Income Earners Tax Rates on Corporate Profits Tax Rates on Dividends Tax Rates on Capital Gains Payroll Tax Rate for Working Americans Spending cuts to healthcare, k ­12 educa6on, and state aid for higher educa6on Top Income Tax Rate •  In the 1920’s the top income tax rate was 25% •  In 2011, the top income tax rate is 35% During the New Deal •  FDR’s 1st Term 1933 ­1936: Top Income Tax Rate 63% •  FDR’s 2nd Term 1937 ­1940: Top Income Tax Rate 72% •  By 1950’s Top Income Tax Rate was 91% Top Estate Tax (Tax on Inherited Wealth) •  The Top Estate Tax in 1920s 20% •  Between 1929 and Mid ­1950s the top estate tax rose from 20% to 45% to 60% to 70% and finally to 77% •  The top estate tax in 2010 was 35% •  It was scheduled to increase to 55% in 2011 But… consider the fact that … •  The richest .1% of the popula6on owned 20% of the na6on’s wealth in 1929 but only 10% of the na6on’s wealth by the mid ­1950s When are estates taxed? When does the inheritance tax kick in? •  According to the IRS, an estate tax filing need only be made if the value of an estate exceeds the following amounts: •  2005: First $1,500,000 in assets •  2006 ­2008: First $2,000,000 in assets •  2009: First $3,500,000 in assets •  2010: Unlimited •  2011: First $1,000,000 but…. Maximum Estate Tax Rate •  The maximum estate tax rate that can be applied to the amounts in excess of these figures are as follows: •  2005: 47 percent •  2006: 46 percent •  2007 ­ 2009: 45 percent •  2010: 0 percent •  2011: 55% (law sunsets to pre ­Bush years) ...
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This note was uploaded on 10/25/2011 for the course ECON 303 taught by Professor Battista during the Winter '11 term at Cal Poly.

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