Chart Of The Day: Recession Edition

Via Greg Mankiw, a stark portrayal of just how little we’ve recovered from the Great Recession:

FILED UNDER: Economics and Business, Quick Takes
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010 and contributed a staggering 16,483 posts before his retirement in January 2020.

Comments

  1. rodney dill says:

    It would look a little less dramatic if the scale went from 0% to 100%, but point taken.

  2. JKB says:

    Here, Paul Graham explained this back in 4 BB (before Barack):

    Making wealth is not the only way to get rich. For most of human history it has not even been the most common. Until a few centuries ago, the main sources of wealth were mines, slaves and serfs, land, and cattle, and the only ways to acquire these rapidly were by inheritance, marriage, conquest, or confiscation. Naturally wealth had a bad reputation.

    Two things changed. The first was the rule of law. For most of the world’s history, if you did somehow accumulate a fortune, the ruler or his henchmen would find a way to steal it. But in medieval Europe something new happened. A new class of merchants and manufacturers began to collect in towns. [10] Together they were able to withstand the local feudal lord. So for the first time in our history, the bullies stopped stealing the nerds’ lunch money. This was naturally a great incentive, and possibly indeed the main cause of the second big change, industrialization.

    A great deal has been written about the causes of the Industrial Revolution. But surely a necessary, if not sufficient, condition was that people who made fortunes be able to enjoy them in peace. [11] One piece of evidence is what happened to countries that tried to return to the old model, like the Soviet Union, and to a lesser extent Britain under the labor governments of the 1960s and early 1970s. Take away the incentive of wealth, and technical innovation grinds to a halt.

    Remember what a startup is, economically: a way of saying, I want to work faster. Instead of accumulating money slowly by being paid a regular wage for fifty years, I want to get it over with as soon as possible. So governments that forbid you to accumulate wealth are in effect decreeing that you work slowly. They’re willing to let you earn $3 million over fifty years, but they’re not willing to let you work so hard that you can do it in two. They are like the corporate boss that you can’t go to and say, I want to work ten times as hard, so please pay me ten times a much. Except this is not a boss you can escape by starting your own company. [emphasis mine]

  3. I don’t think the employment-population number is the best measure, but we know there are problems out there.

    (An 20-50 year-old employment ratio would say more about working age employment. A poverty ratio for 50+ year-olds would say more about retirement conditions.)

    @JKB:

    I think PT Barnum did a better job, seriously.

    Those who really desire to attain an independence, have only to set their minds upon it, and adopt the proper means, as they do in regard to any other object which they wish to accomplish, and the thing is easily done. But however easy it may be found to make money, I have no doubt many of my hearers will agree it is the most difficult thing in the world to keep it. The road to wealth is, as Dr. Franklin truly says, “as plain as the road to the mill.” It consists simply in expending less than we earn; that seems to be a very simple problem. Mr. Micawber, one of those happy creations of the genial Dickens, puts the case in a strong light when he says that to have an income of twenty pounds per annum, and spend twenty pounds and sixpence, is to be the most miserable of men; whereas, to have an income of only twenty pounds, and spend but nineteen pounds and sixpence is to be the happiest of mortals. Many of my readers may say, “we understand this; this is economy, and we know economy is wealth; we know we can’t eat our cake and keep it also.” Yet I beg to say that perhaps more cases of failure arise from mistakes on this point than almost any other. The fact is, many people think they understand economy when they really do not.

  4. JKB says:

    @john personna:

    If you had perused Graham’s essay, you would have seen he disposes of the idea of money, a means of exchange, as wealth, the creation of something of value for others.

    As for employment, I would recommend this exposition: Dear Person Seeking a Job: Why I Can’t Hire You

    In other words, as costs of hiring anyone to do anything have climbed while revenues have stagnated, the threshold to hire an employee keeps getting higher. Back in the day, I could hire a young person out of high school for a modest cost in overhead, and the work-value they produced to justify the expense was also modest. I could afford to hire marginal workers and as long as they didn’t get in the way too much and ably performed basic tasks then I could afford to have them on the payroll.

    The same was true of older workers, veterans living on the beach who wanted work, etc.–I could afford to give all sorts of people a chance to prove their value because the costs and risks were low.

    That’s simply less true today. The costs and risks are much, much higher.

  5. Console says:

    @rodney dill:

    It would also be less dramatic if the time period were bigger. Our absolute peak was just prior to the 2000 recession.

  6. Scott O says:

    @JKB: Well that’s an interesting essay. The author pulls some numbers out of his posterior and declares that someone could be 36 times more productive working in their own start up company as opposed to being an employee in a corporation. This is partly explained by the fact that the corporation keeps interrupting you when you’re busy thereby preventing you from accomplishing as much as you could otherwise. Silly corporation.

    Even if that’s possible in the profession he’s talking about are there any other areas where that might be possible. Could a writer, doctor, painter, whatever be much more productive if not for the shackles of the corporation? In short, what planet does Mr. Graham live on?

  7. al-Ameda says:

    Well, the chart shows that the actions Obama took to prevent the onset of another Great Depression actually took hold and worked. We are in an anemic recovery, but we are not now in a recession.

  8. john personna says:

    @JKB:

    Sorry, for some reason I just read that as advice tor the individual, rather than about “loses” to society.

    For me the problem with the “loss” story is that it falls victim to that same old Planet America fallacy. If America were a closed economy, then, etc.

    But America is not a closed economy, and the wage tension is far greater. A $1.70 per hour wage in China is going to trump anything you can do here, with our without minimum wage, with or without benefits on top.

    People (maybe even you) have tried to tell me that if labor costs were just $8 rather than $10 or whatever, we wouldn’t have outsourcing, but that IMNSHO fails math.

  9. john personna says:

    @Scott O:

    In short, what planet does Mr. Graham live on?

    A highly simplified one.

  10. Barry says:

    @JKB: And this has what to do with the topic?

  11. Barry says:

    @john personna: “A poverty ratio for 50+ year-olds would say more about retirement conditions.)”

    When large numbers of 50-somethings are leaving the labor force, do you really think that it’s because they are choosing to retire?

  12. Barry says:

    @JKB: What part of ‘slack demand’ do you not understand?

    When unemployment surges during a financial crash, it’s not structural.

  13. Barry says:

    @Scott O: “Well that’s an interesting essay. The author pulls some numbers out of his posterior and declares that someone could be 36 times more productive working in their own start up company as opposed to being an employee in a corporation. This is partly explained by the fact that the corporation keeps interrupting you when you’re busy thereby preventing you from accomplishing as much as you could otherwise. Silly corporation. ”

    It has a very Dot-Com Era feel to it.

  14. @Barry:

    That’s what that kind of number is going to show. Certainly we’ve heard about a wave of unintended retirement, and that is a concern.

  15. KariQ says:

    I know I’m late to this, but at Calculated Risk, there was a good discussion of the employment population ratio a few months back, http://www.calculatedriskblog.com/2011/12/comments-on-employment-population-ratio.html

    Basically, the key demographic is men 25-54, and their participation rate has been in a slight downward trend for decades, and the recession and recovery hasn’t really made a big difference.