Economic Stresses

Popular economic discussions focus on unemployment, GDP, and median income. The discussions generally fail to distinguish between money and real wealth. In failing to make this distinction we have failed to recognize increased stresses affecting workers and families in the current economy. Here we address that oversight.

Draft: March 2012

 

Part 1: Stress Limits Profits

We believe in maximizing profits. Our government issue reports on productivity. We believe that maximum productivity means maximum output and maximum profit. But is this assumption correct?
As we push for higher outputs, we increase the stresses on both our workers and our machines.

Fatigued workers are more accident prone, more mistake prone, and more illness prone. Similarly, machines pushed to their limits break down more frequently. Thus, pushing too hard for output will increase stress related costs.

Conversely, the total output does not continue to rise linearly with pressure for more. Only so much juice may be squeezed out of a lemon. After that a lot of energy gets invested into each drop. A person runs out of hours in a day. A machine must be shut down for maintenance. Diminishing returns is reached.

When we put stress costs together with diminishing returns we see that maximum production and maximum profit do not occur with maximum pressure for output. Maximum profit requires keeping production related stress sufficiently low. This requires respecting workers and running equipment within its optimum range. It also requires allowing workers downtime to rest, live, and recharge. It requires giving machines downtime for maintenance.
When recessions occur we tend to push for maximum output. That can actually make the problems worse. We really need to push for maximum respect of the workforce and the tools that they utilize.

In parts 2 & 3 we will look at evidence that stress costs have risen significantly.

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Part 2: Time Related Stress on Workers

To estimate the time-stresses on American families we might start by comparing what we see now to a previous generation. We start by looking at how working money affects our time.
In the 1960s the typical American family had 5 or more members. One was a breadwinner and one was a housekeeper. Now, the typical American family has two breadwinners 3 or more members. With smaller families and more workers we should be nearly twice a wealthy. But that doesn't seem to be the case. To figure out why we can list time requirements typical then and now. In the 1960s it was common to hear about workers with 3 weeks' vacation, two 15 minute mandatory breaks, and 5 paid holidays. Now it's common to hear of workers who work on holidays, have only a few days of paid leave, work through lunch and take work home with them. We will first chart time spent working for money.

Activity per family 1960 typical current typical scale
time at work 40 - 50 60 - 80 hours per week
Take home work & missed breaks minimal 2 - 4 hours per week
Worked holidays & vacation days 1 - 2 3-6 holidays per year
Commuting for work 30 - 60 45 - 90 minutes per day
Mandated Training at work 1 Saturday per year

Without these increased hours most families feel they cannot keep up with their careers or with their bills. The total hours that the typical family spends working for money and working for the opportunity to earn money has risen significantly putting added stress on both individuals and relationships. Workers are exhausted.

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Part 3: Financial Stresses on Workers

In discussions of incomes and wages we frequently fail to recognize that employment comes at a cost. Above we looked at the time demands related to employment. Here we review the financial costs required to be employed.
In the 1950s and 1960s it was common for people to find work with sufficient income to raise a family without pursuing a degree. Now, most jobs that offer pay enough to keep workers out of poverty require a college degree. Since 1960 the cost of college education rose sharply. In the 1950s a year of college cost about half a year's pay for a typical laborer. Now, a typical year of college costs about two years pay for a typical laborer. Even after grants and scholarships citizens can expect to pay over $50,000 just to get a degree.

Many jobs in the modern economy require cyclic training or retraining. Many companies require the worker to pay the cost of the training. A laid-off worker has to pay for his own training. Many jobs require workers to have a certification which the worker typically has to pay for and maintain with retraining.

In the 1950s most Americans could walk or take public transportation to work, the store, or the services they needed. Now, most of these things require a car. In most areas it is hard for workers to find employment less than a 20 minute drive away. Most families now require two cars - so that either both adults can get to work, or so that one can get groceries purchased and tasks completed while the other is at work. Most jobs and job searches now require internet access. Most jobs require workers to check e-mail or on-line information which frequently occurs from home.

In the 1950s with a more stable economy workers moved less. They could rely on one parent, extended family, and neighbors to take care of their children most of the time. Now with both parents working, most families must rely on child care for a few years, summers, or after school.

With both parents working, commuting, and running kids to daycare or soccer, less time is available for home cooked meals. Families are more dependent on prepared foods, fast foods, and restaurants. Families are not so much eating out for the experience as they are buying prepared foods because they're too rushed and tired to cook.

To see how all these costs affect our real income we need to amortize them over the span of our adult working life (roughly 21 through 65 years old.)
Item initial costs time span amortization per year of working life
college tuition > $50,000 4 years $1,136
lost wages during college > $60,000 4 years $1,364
periodic training > $100 annual average $100
car > $500 per month $6000
PC + Internet > $60 per month $720
   
Annual Total:
$9320

It's a little hard to imagine, but it currently costs the typical American nearly $10,000 a year just to productively participate in the American economy! But this does not include the cost of the second college degree, the second car, or the child care so that both parents can work for money.

Item initial costs time span amortization per year of working life
2nd college degree > $50,000 4 years $1,136
2nd lost wages during college > $60,000 4 years $1,364
2nd car > $500 per month $6000
child day care >$5000 for 5 years $568
Second adult working:
 
Annual Total:
$9,068
Both Adults working:
Annual Total:
$18,388

So just to enter the economy currently costs the typical family over $18,000 per year. That does not include the costs of food, housing, health care, or retirement. As with time above, we see that families are stressed to their limits. The costs of being available to work are a large percentage of the typical wages leaving minimal funds left for the actual experience of life.

 
 

Observations & Conclusions:

Although the median annual salary has remained relatively unchanged since the mid-1970s, the total amount of work that families are doing to earn than money has increased significantly. The costs of finding decent work with decent pay have risen significantly also. Effective hourly wages are down from their peak in the early 1970s.
From the Great Depression until the early 1970s wages for most Americans increased and with the increase in wages leisure time increased. From about 1980 until 2000 Americans maintained their increasing material wealth by giving up leisure time, working more, and saving less. Since roughly 2000 Americans attempted to maintain their standard of living by borrowing faster than they were earning. The official reports showed incomes stable (stagnant) and GDP up. But the higher GDP failed to produce a higher standard of living.

 
 

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