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The one thing that Republicans in the government have feared for at least the past twenty years is wage inflation. When wages go up, since wages constitute the lions share of expenses in a business, profits go down and hence dividends go down. One reason for the push to off-shoring is to drive down labor costs. Automation is a big component of that as well. The problem of course was that this was one of those rather bizarre systemic gotchas - while increased wages were considered bad at the individual business level, in the aggregate increased wages move more money into the economy, result in more goods purchased and increasing the bottom line of those same companies. However, when businesses are run to only focus on the bottom line this quarter, these larger scale benefits didn't show up in the bean counters figures.
The other problem with this approach is that as people have more spending power in their pocket, they also tend to save more. This is where greed came into play. If you run a credit card company, you don't want people to save. You want people to spend, in order to get larger amounts of interest onto your balance sheets. If you're an automotive finance company, you want people to buy more expensive cars so that you get more from the finance charges. If you're a bank, you don't want people to put your money into savings accounts where it's inaccessible - you want them to buy financial instruments, mortgages for expensive houses, longer term obligations that paid in both fees and interest, and that you could use for more speculative purposes. Especially if you can manage to get the government to lower the barriers between bank types and to relax regulatory requirements on mortgages and related loans, you make far more on these than you do with piddling savings accounts.
Local effects all working in tandem produce collective behaviors that are often counterproductive to those local effects. Most people have at best a sixth grade education in economics, and that almost invariably microeconomics (and this is being generous). Many people cannot balance a checkbook, cannot compute even simple interest on a loan or set up a budget. Moreover, most people will tend to overestimate their ability to earn money in the long term. The banking industry knows these facts as well as anyone (and more so than most) and so they typically preyed upon people's ignorance in order to set them up in loans that they couldn't afford, knowing full well that it didn't matter because they could always sell off the properties to a slice and dice securities fund.
About that overestimation on income - take into account that on top of everything else, inflation of the currency has produced a decline of 2%-8% (officially) or 8% to 14% unofficially, in the value of their earnings compared to the cost of goods and services. These percentages aren't additive - they're multiplicative. In the last ten years, total inflation has risen 102% * 102% * 103% * 103% * 104% * 104% * 105% * 105% * 106% * 108% = 152%, meaning that real value of wages has effectively dropped to 1/1.52 = 65% of its value - in just ten years. This means that if your wages have stayed relatively stagnant in nominal terms, they've lost 35% of their value in real terms ... and that's assuming you accept the government inflation figures as gospel. If you go with John Williams ShadowStats, which uses the inflation measure incorporating food and energy costs (which are usually excluded "due to volatility), the rise has been close to 241%, meaning that your income has lost nearly 60% of its value.
Of course, after all of this, lets say that you have been contributing to a 401K plan that has effectively earned nothing in the last decade - if you had an indexed fund to the DOW for instance, you're actually a little down over the course of the decade ... in nominal terms. In inflation adjusted terms, your nest egg has similarly lost nearly 60% of its value - and that's assuming you've been conservative.
So, yes, of course, lack of wage growth is a definite issue. Of course, one of the dangers of inflation is that it's subtle - even as you do gain wages over the course of your career, inflation is leeching it away - you get a 5% raise, and you increase your spending because you have the perception that you're getting wealthier. Instead, you're just keeping up with inflation or in many cases losing to inflation, and your increased spending occurs against a backdrop of less real money in the paycheck at the end of the month. Add into this the periodic explosive bubbles (health care spending, education, housing and so forth) which could not in general be predicted by the average person even if they had been budgeting, and you get the crisis we're in today.
This is part of the reason why this is going to be such a painful period, not just for those who were economically unsophisticated but even for the middle class wage-earner who thought he was. The hyper-wealthy (who generally have gained that wealth either by being paid through the government trough in the latest "wars" or who made money siphoning out what value people did have) will complain that its the people's fault, that people should have been more aware of the debt they were taking on, even though in point of fact the vast majority of people were simply trying to take advantage of the same things that most people expect - that if you work hard you can own your own home and build your own security. It was a convenient lie. I suspect that the class wars are going to start getting ugly soon as people realize just how much of a lie it was.
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