March 7, 2005
Bad economic history watch
Matthew Yglesias, Josh Marshall (twice), and Digby all wonder about Joe Klein's statement that:
I agree with Paul in that private accounts have nothing to do with solvency and solvency is the issue. I disagree with Paul [Krugman] because I think private accounts a terrific policy and that in the information age, you're going to need different kinds of structures in the entitlement area than you had in the industrial age. (emphasis added)
Ah, no. Most of the change in the industrial composition of the American labor force has come from declines in the share of the agricultural sector. Between 1940 and 2000, the share of the labor force in trade, services and government--which you might equate with the information sector--grew from 40 per cent of the labor force to 70 per cent.
More than half of this change was from agriculture's share declining from 17 per cent to around 2 per cent. Declines in the share of the workforce in manufacturing only accounted for a quarter of the shift into trade, service and government.
The industrial composition of the labor force has little to do with the arrangements we make for retirement income.
What is important is life cycle labor force participation--how much people work over their lifetimes--and the length of employment contracts and spells with the same employer. These things are somewhat related to the industrial make-up of the workforce, but not that closely.
(Click on image for larger view)
Data from the IPUMS.