The Atlantic ran a piece recently titled The Most Important Economic Stories of 2013 – in 44 graphs.  I thought it might be interesting to recreate the graphs using Australian data, where possible. I’ve taken the US graphs, selected by a range of economists and economics writers in the US, and tried to recreate them the best I can using the Australian data I have to hand. The first instalment is below – I’ll try and post the rest soon.

US chart:

Australian chart:

1 Private sector WPI

Source: ABS 6345.

US nominal wages have been growing by around 2% a year, or a little less, since the financial crisis. We’ve fared better, with average wages growing faster than inflation. But the pace of wages growth has slowed dramatically, as you can see. The wage price index for the private sector grew by just 2.7% in the year to September – that’s near the lowest wages growth in the 15 year history of this index. This reflects the slowing in the economy and the rise in unemployment over the last year.

Ryan Avent described the US chart as follows:

If the economy were actually close to putting all willing and productive laborers to work, we would expect wage growth to rise steadily, indicating that employers were having to jack up pay to compete for scarce labor (and pointing to growing inflationary pressure). Instead, average wage growth has been flat and well below rates associated with full employment. While wage growth remains dormant, talk of tapering or tightening strikes me as premature.

While wages growth is near its lowest-ever level, talk of the RBA lifting interest rates strikes me as premature.

Incidentally, when economists talk about labour market ‘flexibility’, this is one of the measures they’re referring to – the extent to which wages growth rises and falls in line with the strength of the labour market. The pattern shown in the chart above, with slower wages growth as the economy softens, should be textbook evidence of this ‘flexibility’. Alas, the campaign against the Fair Work Act continues regardless.

US chart:

Australian chart:

2 Decoupling

Source: For a full list of sources and methods for this chart, see this paper. Note: Output and hourly compensation are deflated using the GDP implicit price deflator; median full-time earnings deflated using consumer prices.

I don’t have a median earnings series for Australia that goes further back than 1975, so I used that as my base year here. You can see other versions of the chart in this paper.

Binyamin Applebaum says “wages are supposed to rise with productivity.” In the US, the two have diverged markedly. The divergence is less striking here, but still present. After rising at roughly the same pace in the 1990s, earnings didn’t keep up with productivity in the 2000s. This is partly a temporary effect of the mining boom (which I expect to reverse, and I expect mining companies will whine endlessly when it does), but mining isn’t the whole story.

US chart:

Australian chart:

 3 net worth

Source: RBA B20.

Ben White from Politico nominated the nominal net worth of households and unincorporated enterprises as his most important chart. I don’t know why. The Australian equivalent is above – I don’t think it is particularly informative.

Here’s a slightly more interesting chart:

3b household wealth and liabilities

US chart:

Australian chart:

4 top income

Source: Atkinson and Leigh, updated by Andrew Leigh.

Australia’s top 1% share shows a similar U-shape as the top 1% share in the US. Heather Boushey says “with top earners now receiving as much as that group did during the Roaring Twenties, this chart is a reminder of just how inequitable our income distribution has become.” We’re not quite back to 1920s levels (and our top income shares are still well below those of the US), but this is pretty striking nevertheless.

US chart:

Australian chart:

5 min wage

Source: Bray 2013, Appendix A. Combines Series I and Series II.

Jordan Weissmann of The Atlantic presents the US version of the chart above and says “there is something a bit crazed about America’s minimum wage policy,” because it involves freezing the minimum wage in nominal terms for years at a time, between rare periodic increases at the whim of Congress. Our system has always involved having an independent tribunal of some sort make a regular, binding decision about minimum wage increases, so we don’t have the same “craziness” as the US.

US chart:

Screen Shot 2013-03-04 at 12.37.51 PM.png

Australian chart:

6 profits gdp tce

Source: Calculations based on ABS 5206. All in nominal terms. Does not include an imputation of the capital income of unincorporated enterprises.

Heidi Moore says the US equivalent of this chart ” it nails the issue with the inequality at the center of our economy right now.” I don’t really think it does, and the Australian chart (above) certainly doesn’t.

US chart:

Australian chart:

7 ceo pay min wage

Source: ACSI and FWC.

Australian CEO pay has come down a little from its pre-GFC peak, while the real minimum wage has been more or less flat – in 2012 it was basically the same as in 2005 in inflation-adjusted terms.

US chart: 

Australian chart:

8 occupational shares

Source: ABS 6291.0.55.003. Employment shares are annual averages.

The US version of this chart shows how different occupational groups’ shares of employment have changed since 1979. The ABS data on employment by occupation doesn’t go back that far, frustratingly, so I’ve replicated it using data from 1997.

There are a lot more professionals and managers than there used to be, as a proportion of the workforce. The proportion of people employed as labourers or clerical workers has fallen sharply.

I have a much more granular version of this chart, showing employment change in 85 or so occupational groups, ranked by average earnings, but it’s not ready to post.

More to come, if and when I get the time.

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