Income has fallen from the boom times though employment is rising.

[Swamp Fox]

Ahem, those who disagree with me and want to back it up, PLEASE DO NOT CLICK ON THIS LINK. (http://www.iht.com/articles/2005/09/02/business/wbmarket03.php)

While incomes have fallen from the dot-com bubble times, the jobless rate in the US has fallen to a four-year low, which is less than the 1999 era, but still better than before. (http://www.theglobeandmail.com/servlet/story/RTGAM.20050902.wnonfarm0902/BNStory/Business/) I don't expect wages to rise for now, but in Canada, they did rise 4.4% from last year. (http://www.canada.com/national/nationalpost/financialpost/story.html?id=14d61b64-5c87-456c-bab9-d18864fbf920) I don't know if 4.4 % is good, but it feels like it. That said, in Canada, as the article suggest, taxes have eaten a bigger share of that gain, which would be grounds for a tax cut.

The trend for the next ten years seems obvious: the economy will grow, jobs will be added, but, like the 1980's, incomes will stagnate or fall. The challenge for governments, then, is to find policies that will ensure incomes will grow as well.

[Coot]

The challenge for governments, then, is to find policies that will ensure incomes will grow as well.

Why Stan? Shouldn't a free market sort this out? If companies (and their paid for elected lackeys) weren't hellbent on importing cheap labor, the value of the existing workers would rise as the demand for their labor increases.

[eakes]

Free market economics works, but like mother nature, free markets are not very compassionate. Comparing todays wage rates with the bubble years in the late 90s is really not fair. Companies at that time were hiring most anyone who was breathing at what were astronomical rates.
After the retrenchment in 2000 and 2001, companies have been slow to hire employees and have held wages basically constant at a lower level than the bubble years. There has also been an increase in productivity which has affected the hiring rate and has tended to hold wages down. However, the unemployment rate is now approaching mid-90s levels and this could begin to force wages up as competition for skilled workers increases.

[Swamp Fox]

Why Stan? Shouldn't a free market sort this out? If companies (and their paid for elected lackeys) weren't hellbent on importing cheap labor, the value of the existing workers would rise as the demand for their labor increases.

I consider my self a Keynesian and a pragmatist. First, as a Keynesian capitalist, I look at the free market as a dominatrix, a beautiful women in leather and chains, who uses a whip to demand better performance. Her lash does cause the poor victim (the economy) to do his task well, but the government is needed as a nurse to administer to the red streaks.

That's as a Keynesian. As a pragmatist, I know that people will not accept a system that leaves too many behind, and the free market can cause great inequality. Furthermore, interest groups will force the government to intervene and protect their selfish interests. So, for example, the sugar producers in Florida will lobby the government to keep quotas on imported sugar, to the detriment of the American consumer and also to the detriment of Central American producers. But, if the government does have policies to encourage growth and to compensate the losers, people will know that they can always have other opportunities. So the sugar producers can be encouraged to grow other products or, if farming is not feasible, the individuals can go to other lines of work or other industries without too much pain.

This perspective is especially relevant here. We have to create a world system where everybody can have jobs and live reasonable lives - the challenge in the Middle East is finding work for the youth, so they won't turn to Islamic fundamentalism. And the same is true for China. But, if that comes at a cost to those in North America, then government intervention is also needed to ensure that those others can find higher-value-added work so they don't end up as losers. And that's the challenge for this new century - to ensure that the world economy grows, to everyone can benefit.