Wednesday, October 13, 2010

Unemployement and Crises

Menzie Chin at Econobrowser had an interesting post post last week:

It showed a chart of unemployment rates at various income levels.   At the bottom income bracket (less than $20k) per year, you have about 45% of the population under- or unemployed.   At the next bracket ($20k to $40k) you are at 25%.  Those are some huge numbers.

With numbers like this, why are we not at the EOTWAWKI already?

IMO one of the largest reason is that no "elite" group has left the game.  When the truly poor and low status revolt on their own, you generally get a sort of peasant revolt.  Peasant revolts are pretty scary, but they rarely come to much.  It is the breaking away of a group of the inner elite that generally get the real revolutionary movements going. 

Although the Tea Party movement is upset, they are simply trying to reestablish the old status quo.  They are also at cross purposes with the African American and Hispanic workers who are some of the groups that are most badly effected.  But since these groups have never done particularly well within the satus quo, they are not as likely to be attached to it. 

But if unemployment hits more of the upper income groups you could have some very quick radical changes to the current situation.

Here is the chart:
Note that the blocks (up to about $60K) on the left each make up about 20% of the population.  So Up through $60k is about 60% of the population.

Figure 2: Unemployment (blue), underemployment (red), and labor force reserve (green) as ratio to sum of labor force and labor force reserve, for January-August 2010, based on household income over the previous twelve months [corrected 10/6/10]. Blue dashed line is average unemployment ratio for entire sample; purple dashed line is average unemployment plus underemployment ratio for entire sample; teal dashed line is average unemployment plus underemployment plus reserve ratio for entire sample. Source: Calculations based on estimates provided by Andrew Sum and Joseph McLaughlin.

It is an update of information found here:  Study.

Andrew Sum,Ishwar Khatiwada, Labor Underutilization Problems of U.S. Workers Across Household Income Groups at the End of the Great Recession: A Truly Great Depression Among the Nation’s Low Income Workers Amidst Full Employment Among the Most Affluent.

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