Friday, September 6, 2013

The Auto Industry As A Mirror Of The Economy

The Atlantic has an article describing the recent boom in the auto industry, but why it has not translated to many jobs in the United States. The author then muses about how this reflects on the economy as a whole:
Young vs. old might not be the most important binary for car companies. That would be rich vs. poor. The U.S. is beginning to look like the aristocratic auto market we're used to seeing in Europe, McAlinden said, where the top 25 percent buys most of the new cars and the bottom 75 percent only buys old and used. "Seventy-five percent of households here are relying on used cars, thinking 'I hope that rich guy is done,'" he said. 
Plutocracy in the car market isn't unique, but rather illustrative. There is “no such animal as the U.S. consumer,” three Citigroup analysts concluded in the heart of the real estate boom in 2005. Instead, we have the rich and the rest. As Don Peck wrote in his summer 2011 cover story for The Atlantic, for many industries, "the rest" just don't matter. 
"All the action in the American economy was at the top: the richest 1 percent of households earned as much each year as the bottom 60 percent put together; they possessed as much wealth as the bottom 90 percent; and with each passing year, a greater share of the nation’s treasure was flowing through their hands and into their pockets. It was this segment of the population, almost exclusively, that held the key to future growth and future returns."
The last two years have done nothing to make those Citigroup economists look anything less than prophetic. Middle-income jobs (like, say, auto-parts workers) made up 60 percent of jobs lost in the recession, but lower-wage occupations have accounted for about 60 percent of jobs gained the recovery. ...

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