Average Is Over

Tyler Cowen “Average Is Over” Dutton, 2013, 259 pp.

Author Tyler Cowen is a professor of economics at George Mason University and a well-noted economist writing regularly for the New York Times as well as the WSJ.  In this book, he documents the widening gap between rich and poor occurring in the US.

The widening gap between rich and poor means dealing with one emerging fact: If you’re not at the top, you’re at the bottom--the middle is disappearing; average is over.  About three quarters of the jobs created in the United States since the great recession do not pay significantly more than minimum wage. Still, the United States has more millionaires and billionaires than any country ever.  The top echelon is committed to educating themselves in Science, Technology, Engineering, and Math (STEM).  Finance & Marketing can be added to this list even though they do not fit the mnemonic.  Low earners not educating themselves to this STEM matrix have limited their prospects. 

With The Great Stagnation, Cowen explained why median wages stagnated over the last four decades; in Average Is Over he reveals the essential nature of the new economy, identifies the best path forward for workers and entrepreneurs, and provides actionable advice to make the most of the new economic realities.

My Notes:

Pg. 3:  Unemployment rates for young college graduates have been running for years now in the neighborhood of 10 percent and underemployment rates near 20 percent, even several years after the financial end of the recession in 2009.  The labor market troubles of the young—which you can observe in many countries—are a harbinger of the new world of work to come.  Lacking the right training means being shut out of opportunities like never before.  At the same time, the very top earners are earning much more.  Average is over.  This “average is over” maxim will apply to the quality of your job, earnings, where you live, your education and to the education of your children.

These trends stem from some fairly basic and hard-to-reverse forces: the increasing productivity of intelligent machines, economic globalization, and the split of modern economies into both very stagnant sectors and some very dynamic sectors. 

Pg. 38:  Of the jobs lost during the recession, about 60 percent of them were in what are called “mid-wage occupations.  Seventy-three percent of the jobs added since the end of the recession have been in lower-wage occupations, defined as $13.52 an hour or less.  This general trend can be seen in the numbers from 1999 to 2007, so we can’t blame it on the financial crisis.  For men, from 1969 to 2009 it appears that wages for the typical or median male earner have fallen by about 28 percent.  These figures are disputed by the Brookings Institution that argues that the rate of decline is only 9 percent—still a dismal figure. (Pg. 53)

It’s pretty common to see new jobs at companies such as General Electric or Caterpillar, and the new jobs cover pretty much the same tasks as the old jobs.  Yet the new workers are now earning ten or fifteen dollars less an hour.

Pg. 44:  Labor markets are tough, and not always fair, but intelligence will be rewarded for a long time to come.  So will the right skills in STEM fields, finance, management, and marketing, all of which meld together the strengths of diverse intelligences, whether those intelligences are human or not. 

Pg. 60:  Kaiser Family Foundation estimates that a health insurance premium today for a family of four averages over $15,000; in ten years it will be $32,000 or more.  That’s more than a lot of workers are worth.  Keep in mind that the 2010 median wage in the US for an individual (not a household) was about $26,363.  If we force employers to provide health insurance, a lot of workers won’t be worth hiring at good wages.

Pg. 162: The most detailed study of labor’s falling share in output finds that new information and communications technologies—which can substitute for labor—play a larger role in compensation shifts than does foreign trade.

Pg. 251:  About 19 percent of Florida is over the age of sixty-five.  By 2030, 19 percent of the United States will be over sixty-five years of age. 

Pg. 255:  Political conservatism is strongest in the least well-off, least educated, most blue-collar, and most economically hard hit states.  As of 2011, the most politically conservative states are, as measured by self-identification, Mississippi, Idaho, Alabama, Wyoming, Utah, Arkansas, South Carolina, North Dakota, Louisiana, and South Dakota.  Conservatism, more and more, is the ideology of the economically left behind.