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Old 02-19-2009, 08:27 PM   #41
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. . . The value of labor will drop even further until it no longer pays for both to work (and things needn't fall far for that to happen).
So there is massive unemployment, earnings per hour go down, and the anticipated response is that families will reduce their family income by 50% by having one wage earner stay home? If wages went down, the cost of hiring people to watch the kids, clean te house, etc etc would also be expected to go down, right?

The stay-at-home Mom was a product of the post-war boom in the US--a blip in time and not the pattern through the centuries. In the past, extended families were the norm, and old folks watched the kids much of the time. Except for this period of artificially high wages, a single breadwinner was not a practical or desireable situation for most American families. Women worked in the commercial world before the War, and their labor was essential to family survival when most families lived on farms.
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Old 02-19-2009, 08:42 PM   #42
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Is it just the value of the commissions he/she earned--which were in turn based on inflated home prices and a super-churning housing market fueled by easy cash? How about bankers, insurance agents, appraisers, etc.
Yes. The same way G.D.P. is measured.


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Even doctors-- Does the ILO value a tonsillectomy performed in the US the same as the tonsillectomy "product" produced in Botswana?
I assume some version of purchasing power parity is used to compare international output, but one would have to dig in to the methodology to be sure.


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Also note that while US workers may be the most productive, that doesn't mean that a dollar spent on labor costs inthe US buys more productivity than anywhere else.
More productive workers will get paid more than less productive workers, period. And you can be absolutely sure that worker productivity is higher today than it was before. According to the Bureau of Economic Analysis, durable goods production in the U.S. increased more than eleven fold since 1960 as measured in constant dollars. Over the same time, manufacturing jobs declined from about 30% of all jobs to about 13%. Much more production with far fewer jobs is called increased productivity . . . it's real.
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Old 02-19-2009, 08:49 PM   #43
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By the way, I’ve noticed a “chicken and egg” issue relating to two-income families.

Which came first, or which was the driving force in this transition: Did women enter the work force first, allowing families to buy more goods, or did improved efficiencies such as cheaper and better cars and appliances come first, allowing women to work?

I’m firmly in the workers came first camp. There was a huge one-time bonus here, with families suddenly having more money to chase better houses, buy more cars, etc. This spilled over into massive increases in national productivity and wealth. But once the transition was complete, that was it, people were stuck at that level unless they made very substantial sacrifices, for the cost of good housing had been bid up, they needed two cars and day care, etc. It was too late for families to gracefully back out; the noose was already uncomfortably tight around their necks.

A second wave occurred when outsourcing, etc., meant that labor was now cheaper than ever. Again, during the early days of the transition, it meant huge gains on the consumption side (DVD players were being given away with rebate checks bigger than the cost of the player), and yet profits also flowed back home (albeit substantially into the pockets of CEO's and stock-holders, etc.).

For the same sort of growth spurts to occur again, some new frontier to exploit (or bubble, if you will) must be found. The easy rape of resources is long done. Productivity at home is done. Labor abroad is done in the sense that it is becoming more pricey, not less. I suppose we might hope to profit from improving productivity in developing countries (another one-time spurt at best, though perhaps an extremely powerful one). Who knows, maybe a magic bullet of ubiquitous clean energy?
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Old 02-19-2009, 08:56 PM   #44
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In the past, extended families were the norm, and old folks watched the kids much of the time. Except for this period of artificially high wages, a single breadwinner was not a practical or desireable situation for most American families.
Sam, I didn't go back far enough to discuss the massive "blip" that industrialization brought to families and the country. You are certainly right about the wrenching effects, including some substantial financial benefits, that brought to families. But you are sort of making my point - a lot of the growth we have seen in the past century, if not most, has been the result of one time transitions and booms. The rest we could argue about on the margins.

P.S., if there are no jobs to be had, then someone isn't going to work. At least there are economies from a parent staying at home instead of working. Otherwise, wages will just keep falling, and we can all starve together while still at the yoke.
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Old 02-19-2009, 08:58 PM   #45
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For the same sort of growth spurts to occur again, some new frontier to exploit (or bubble, if you will) must be found. The easy rape of resources is long done. Productivity at home is done. Labor abroad is done in the sense that it is becoming more pricey, not less. I suppose we might hope to profit from improving productivity in developing countries (another one-time spurt at best, though perhaps an extremely powerful one). Who knows, maybe a magic bullet of ubiquitous clean energy?
Productivity is a function of technological advancement which is still moving forward . . . from man power, to mule power, to steam power, to gasoline, to Al Gore power. From ledgers to spreadsheets. From carrier pigeons to the internet. What is the next new thing? Who knows? But rest assured a whole world is busily working to find it in a million different ways, both large and small.

Be of good cheer.
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Old 02-19-2009, 09:03 PM   #46
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And from where I came from, both boys and girls looked forward to a career of their own. In fact, I think I remember a lot of folks making a big stink about getting rights to the same work opportunities as everyone else . . . I guess I never saw the dual income family as a burden forced upon people by the relentless crush of declining living standards.

I must have been somehow confused by all this great stuff I can easily afford that my parents could have never dreamed of.
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Old 02-19-2009, 09:08 PM   #47
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It's not all bad. A career can be a good thing. Seems it's often something that folks around here desperately want out of, though.
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Old 02-20-2009, 02:25 AM   #48
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Looking at my own family the stay-at-home mom model (the majority) have 100% children with high school educations; the working mom model have 100% children with Masters or above degrees. The former children have many life traumas and divorces. The latter have life traumas but no divorces. This is for the generation born in the 1940s. Economics seems to have won over breast-feeding.

I think the answer is polygamy. Since two wages no longer has the advantage that was gained back then, add productivity to the family unit. For people who believe in stay at home moms - two dads and one mom. For people who want greater productivity - two or three working dads and one or two moms (one works). For families where all work, any combination of three or more adults.

The efficiency gain is shared resources such as housing. The fertility rate can be lower when adults use less resources.
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Old 02-20-2009, 07:27 AM   #49
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I think the answer is polygamy. Since two wages no longer has the advantage that was gained back then, add productivity to the family unit. For people who believe in stay at home moms - two dads and one mom. For people who want greater productivity - two or three working dads and one or two moms (one works). For families where all work, any combination of three or more adults.

The efficiency gain is shared resources such as housing.
True, and also a person doesn't need to be in someone's family to share housing with them. There's such a thing as a roommate. I remember some families (even some with children) having a roommate to help share expenses, babysitting, household chores, and so on back in the 60's. Rent helped in making mortgage payments as well. Maybe that practice will become more popular as people try to economize more due to the recent downturn.

I have often wondered why anyone would get behind on mortgage payments while living in a house, sometimes even losing their home, without first attempting to rent out a room. A roommate can sometimes make all the difference.
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Old 02-20-2009, 08:14 AM   #50
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It's not all bad. A career can be a good thing. Seems it's often something that folks around here desperately want out of, though.
I thought I wanted a career. It turns out that I just wanted paychecks.
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Old 02-20-2009, 08:58 AM   #51
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Looking at my own family DW - Stay at home mom
Both kids advanced degrees
Both still married
Both seem quite happy

Anecdotal evidence often if not always proves nothing!
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Old 02-20-2009, 09:23 AM   #52
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Interesting discussion.

I've thought for many years that the upward spiral of the standard of living would have to come to an end or at least slow down. Neither of those possibilities bothers me too much. I can adjust to a gradual shift. What is frightening is the "collapse" of our standard of living which may be in the works. When the net lenders decide to stop lending, the party will truly be over. Then, we might find ourselves back in "the good old days". Except they weren't all that good - and it will be difficult to adjust.

Since the majority of posters so far seem to believe we are at the end of an era (post WWII boom or bubble) do we have strategies to deal with this scenario? I have built considerable slack into my FIRE plan, but if the whole game has changed, I'm not sure there are any obvious moves. We don't even know if we're headed for deflation or inflation in the future. Makes planning problematic, especially for those of us who've already committed to retirement.

I'm pessimistic by nature, but it sounds like I'm not the only one at this point.
My strategy for dealing with a long term poor economy is to go back to the "good old days". I'm old enough to remember that they weren't all that good, but I think I can adjust because I've been there before. My kids would have more problems.

Financially, I'm like you. I have considerable slack in the FIRE plan. I was defensively invested back in 2006 (lots of TIPS and I-bonds) and stayed there. I don't see any obvious moves from here, though I'd be glad to hear any ideas that people have.
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Old 02-20-2009, 09:26 AM   #53
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More productive workers will get paid more than less productive workers, period. And you can be absolutely sure that worker productivity is higher today than it was before. .
Productivity may have gone up, but CPI-adjusted median wages for males have been stagnant. Sometimes the productivity gains are captured by someone other than the workers.
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Old 02-20-2009, 12:00 PM   #54
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Nota bene: I am either a moron or an idiot. So don't pay any attention to anything I say or you are one too. Please consult your financial advisor, astrologer or proctologist for whatever it may be that you are seeking.
Ha, I gotta say - this is the best signature line I have ever read. Really good job.

Now, I can't resist. I took your advice and consulted - with the proctologist. I asked for his outlook. His response - he said things looked sh*tty.
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Old 02-20-2009, 12:29 PM   #55
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Now, I can't resist. I took your advice and consulted - with the proctologist. I asked for his outlook. His response - he said things looked sh*tty.
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Old 02-20-2009, 08:31 PM   #56
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Productivity may have gone up, but CPI-adjusted median wages for males have been stagnant. Sometimes the productivity gains are captured by someone other than the workers.
Can happen, at least for a while. Capital has been grabbing a disproportionate share in recent years. Feels like the pendulum may start to swing back the other way given how the political winds are now blowing.
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Old 02-20-2009, 08:42 PM   #57
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Interesting factoid to consider when thinking about "the good old days". In 1955 Americans spent 38.4% of their budget on food and clothing. In 2008 that percentage dropped to 19.5%. So basic necessities account for roughly half as much of our spending as they did 43 years ago, leaving a 19% slice for other things. Sounds like we enjoy not only more discretionary income but also a much greater financial margin before we go hungry.
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Old 02-20-2009, 09:58 PM   #58
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Wow! Another observation to agree with! As a retired manufacturing guy, I think you're spot on. It was inevitable that our offshore sources of manufactured goods and natural resources would only be willing to send them to us in exchange for our "paper shuffling" abilities for so long.
I don't know about that. Some of the paper shuffling jobs I have done have been pretty freaking hard. Imagine sitting at your desk at 2 AM knocking your head against the monitor because somebody wrote some weird bug in a program, and the program needed to be fixed by 8 AM the next day.

As long as somebody is willing to pay for your expertise, then it doesn't matter if your jobs involves heavy iron and heavy lifting.
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