Moglen, Eben – Innovation under Austerity – 20120522

Moglen, Eben – Innovation under Austerity – 20120522

Video.

Transcription by Ben Asselstine.

Thank you. it’s a pleasure to be here, and to see so many friends. I’m very grateful to David for the invitation, it’s a privilege to be here. I’m going to talk of mostly about a subject almost as geeky as stuff we all talk about all the time, namely political economy. I’m going to try and make it less snooze-worthy than it sometimes seems to be, but you’ll forgive me I’m sure for starting fairly far from OpenSSL, and we’ll get closer as time goes by.

The developed economies around the world, all of them now, are beginning to experience a fundamentally similar and very depressing condition. They are required to impose austerity because levels of private debt have gummed up the works and the determination of the owners of capital to take vast risks with other peoples money have worked out extremely badly for the last half decade. And so austerity is the inevitable and politically damaging position for all the governments in the developed world, and some of those governments have begun to slip into a death spiral, in which the need to impose austerity and reduce public investment and welfare support for the young is harming economic growth, which prevents the austerity from having its desirable consequences. Instead of bad asset values being worked off and growth resuming, we are watching as the third largest economy in the world, the European Union, finds itself at the very verge of a currency collapse and a lost generation, which would have a profoundly depressing effect on the entire global economy.

For the policy-makers–I recognize that few of them are here, they have of course, better things to do than to listen to us–for the policy-makers in other words, an overwhelming problem is now at hand, how do we have innovation and economic growth under austerity?

They do not know the answer to this question and it is becoming so urgent that it is beginning to deteriorate their political control. Marginal parties in several very highly developed and thoughtful societies are beginning to attract substantial numbers of votes, and threatening the very stability of the economic planners’ capacity to solve, or to attempt to solve, the problem of innovation under austerity.

This is not good news for anybody. This is not good for anybody. We have no opportunity to cheer for this outcome, which is largely the result of incompetence in those people who claim to be worth all that money because they’re so smart, it is partly the result of the political cowardice that gave them too much room to swing their cats. It is not that we are glad to see this happen, but there is a silver lining to the cloud. There are very few people who know how to have innovation under austerity. We are they.

We have produced innovation under austerity for the last generation and not only did we produce pretty good innovation we’ve produced innovation that all the other smart rich people took most of the credit for. Most of the growth that occurred during this wild and wacky period in which they took other people’s money and went to the racetrack with it, was with innovation we produced for them. So now, despite the really bad circumstances which we too can deplore, because the unemployment is my graduating law students, your children, and all those other young people whose lives are being harmed for good by current bad economic circumstances. The people beginning their careers now will suffer substantial wage losses throughout their lifetimes. Their children will get a less good start in life because of what is happening now, we cannot be pleased about this.

But we have a very substantial political opportunity. Because we do have the answer to the most important question pushing all the policy-makers in the developed world right now. That means we have something very important to say and I came here this morning primarily to begin the discussion about precisely how we should say it.

And I want to present a working first draft of our argument, I say “our” because I look around the room and I see it’s us here this morning. Our argument, about what to do with the quandary the world is in. Innovation under austerity is not produced by collecting lots of money and paying it to innovation intermediaries. One of the most important aspects of 21st century political economy is that the process we call disintermediation, when we’re begin jargony about it, is ruthless, consistent, and relentless. Television is melting. I don’t need to tell you that, you know already. Nobody will ever try to create a commercial encyclopedia again. Amazon’s lousy little I-will-let-you-read-some-books-unless-I-decide-to-take-them-back machine is transforming publishing by eliminating the selective power of the book publishers, much as Mr. Jobs almost destroyed the entire global music industry under the pretense of saving it. A task his ghost is already performing for the magazine publishers as you can see.

Disintermediation, the movement of power out of the middle of the net, is a crucial fact about 21st century political economy. It proves itself all the time. Somebody’s going to win a Nobel Prize in economics for describing in formal terms the nature of disintermediation. The intermediaries who did well during the past 10 years, are limited to two sets: health insurers in the United States owing to political pathology, and the financial industry.

Health insurers in the United States may be able to capitalize on the continuing political pathology to remain failing and expensive intermediaries for a while longer. But the financial industry crapped in it’s own nest and is shrinking now and will continue for some time to do so. The consequence of which is that throughout the economic system, as the policy-maker observes it, the reality that disintermediation happens and you can’t stop it becomes a guiding light in the formation of national industrial policy. So we need to say it’s true about innovation also.

The greatest technological innovation of the late 20th century is the thing we now call the World Wide Web. An invention less than 8000 days old. That invention is already transforming human society more rapidly than anything since the adoption of writing. We will see more of it. The nature of that process, that innovation, both fuels disintermediation, by allowing all sorts of human contacts to occur without intermediaries, buyers, sellers, agents, and controllers. And poses a platform in which a war over the depth and power of social control goes on, a subject I’ll come back to in a few minutes. For now what I want to call attention to is the crucial fact that the World Wide Web is itself a result of disintermediated innovation.

What Tim first did at CERN was not the Web as we know it now, the Web as we know it now was made by the disintermediated innovation of an enormous number of individual people. I look back on what I wrote about the future of personal homepages in 1995, and I see pretty much what I thought then would happen happening, I said then those few personal homepages are grass seed and a prairie is going to grow, and so it did.

Of course, like all other innovation there were unintended consequences. The browser made the Web very easy to read. Though we built Apache, though we built the browsers, though we built enormous numbers of things on top of Apache and the browsers, we did not make the Web easy to write. So a little thug in a hooded sweatshirt made the Web easy to write, and created a man in the middle attack on human civilization, which is unrolling now to an enormous music of social harm. But that’s the intermediary innovation that we should be concerned about. We made everything possible including, regrettably, PHP, and then intermediaries for innovation turned it into the horror that is Facebook. This will not turn out, as we can already see from the stock market result, to be a particularly favourable form of social innovation. It’s going to enrich a few people. The government of Abu Dhabi, a Russian thug with a billion dollars already, a guy who can’t wait to change his citizenship so he doesn’t have to pay taxes to support the public schools, and a few other relics of 20th century misbehavior.

But the reality of the story underneath is, if we’d had a little bit more disintermediated innovation, if we had made running your own web-server very easy, if we had explained to people from the very beginning how important the logs are, and why you shouldn’t let other people keep them for you, we would be in a rather different state right now. The next Facebook should never happen. It’s intermediated innovation serving the needs of financiers, not serving the needs of people. Which is not say that social networking shouldn’t happen, it shouldn’t happen with a man in the middle attack built into it. Everybody in this room knows that, the question is how do we teach everybody else.

But as important as I consider everybody else to be right now, I want to talk about the policy-makers: how do we explain to them? And here we begin to divide the conversation into two important parts. One, what do we know about how to achieve innovation under austerity? Two, what prevents governments from agreeing with us about that?

So let me present first my first draft of the positive case for innovation under austerity, it’s called “We Made The Cloud”.

Everybody understands this in this room too. The very point about what’s happening to information technology in the world right now, has to do with scaling up our late 20th century work. We created the idea that we could share operating systems and all the rest of the commoditizable stack on top of them. We did this using the curiosity of young people. That was the fuel, not venture capital. We had been at it for 15 years, and our stuff was already running everywhere, before venture capital or even industrial capital raised by IT giants came towards us. It came towards us not because innovation needed to happen, but because innovation had already happened, and they needed to monetize it. That was an extremely positive outcome, I have nothing bad to say about that. But the nature of that outcome, indeed the history as we lived it and as other can now study it, will show how innovation under austerity occurred. It’s all very well to say that it happened because we harnessed the curiosity of young people, that’s historically correct. But there’s more than that to say.

What we need to say is that that curiosity of young people could be harnessed because all of the computing devices in ordinary day to day use were hackable. And so young people could actually hack on what everybody used. That made it possible for innovation to occur, where it can occur, without friction, which is at the bottom of the pyramid of capital. This is happening now elsewhere in the world as it happened in the United States in the 1980s. Hundreds of thousands of young people around the world hacking on laptops. Hacking on servers. Hacking on general purpose hardware available to allow them to scratch their individual itches, technical, social, career, and just plain ludic itches. “I wanna do this it would be neat.” Which is the primary source of the innovation which drove all of the world’s great economic expansion in the last 10 years. All of it. Trillions of dollars of electronic commerce. Those of you old enough to remember when fighting Public Key Encry ption tooth and nail, was the United States government’s policy will remember how hard they fought, to prohibit 3.8 trillion dollars worth of electronic commerce from coming into existence in the world.

We were supposedly proponents of nuclear terrorism and pedophilia in the early 1990s, and all the money that they earned in campaign donations and private equity profits and all the rest of it, is owing to the globalization of commerce we made possible, with the technology they wanted to send our clients to jail for making. That demonstrates neatly I think, to the next generation of policy-makers how thoroughly their adherence to the received wisdom is likely to contribute to the death spiral they now fear they’re going to get into. And it should embolden us to point out once again that the way innovation really happens is that you provide young people with opportunities to create on an infrastructure which allows them to hack the real world, and share the results.

When Richard Stallman wrote the call at the university in Suffolk for the universal encyclopedia, when he and Jimmy Wales and I were all much younger than we are now, it was considered a frivolous idea. It has now transformed the life of every literate person in the world. And it will continue to do so.

The nature of the innovation established by Creative Commons, by the Free Software Movement, by Free Culture, which is reflected in the Web in the Wikipedia, in all the Free Software operating systems now running everything, even the insides of all those locked-down vampiric Apple things I see around the room. All of that innovation comes from the simple process of letting the kids play and getting out of the way. Which, you are aware, we are working as hard as we can to prevent now completely. Increasingly, all around the world the actual computing artifacts of daily life for human individual beings are being made so you can’t hack them. The computer science laboratory in every twelve year old’s pocket is being locked-down.

When we went through the anti-lockdown phase of the GPL 3 negotiations in the middle of last decade, it was somehow believed that the primary purpose for which Mr. Stallman and I were engaged in pressing everybody against lock-down had something to do with bootlegging movies. And we kept saying, this is not the Free Movie Foundation. We don’t care about that. We care about protecting people’s right to hack what they own. And the reason we care about it is, that if you prevent people from hacking on what they own themselves, you will destroy the engine of innovation from which everybody is profiting.

That’s still true. And it is more important now precisely because very few people thought we were right then, and didn’t exert themselves to support that point of view, and now you have Microsoft saying we won’t allow third-party browsers on ARM-based Windows RT devices. And you have the ghost of Mr. Jobs trying to figure out how to prevent even a free tool chain from existing in relation to IOS, and you have a world in which increasingly the goal of the network operators is to attach every young human being to a proprietary network platform with closed terminal equipment that she can’t learn from, can’t study, can’t understand, can’t whet her teeth on, can’t do anything with except send text messages that cost a million times more than they ought to.

And most of the so-called innovation in the world, in our sector, now goes into creating IT for network operators that improves no technology for users. Telecomms innovation in the world has basically ceased. And it will not revive so long as it is impossible to harness the forms of innovation that really work under austerity.

This has a second-order consequence of enormous importance. Innovation under austerity occurs in the first-order because the curiosity of young people is harnessed to the improvement of the actual circumstances of daily life. The second-order consequence is that the population becomes more educated.

Disintermediation is beginning to come to higher education in the United States, which means it is beginning to come to higher education around the world. We currently have two models. Coursera, is essentially the googlization of higher education, spun-off from Stanford as a for-profit entity, using closed software and proprietary educational resources. MITx, which has now edX through the formation of the coalition with Harvard University, is essentially the free world answer. Similar online scalable curriculum for higher education delivered over Free Software using free education resources. We have an enormous stake in the outcome of that competition. And it behooves all of us to put as much of our energy as we can behind the solutions which depend upon free courseware everybody can use, modify and redistribute, and educational materials based on the same political economy.

Every society currently trying to reclaim innovation for the purpose of restarting economic growth under conditions of austerity needs more education, deliverable more widely at lower cost, which shapes young minds more effectively to create new value in their societies. This will not be accomplished without precisely the forms of social learning we pioneered. We said from the beginning that Free Software is the world’s most advanced technical educational system. It allows anybody anywhere on earth, to get to the state of art in anything computers can be made to do, by reading what is fully available and by experimenting with it, and sharing the consequences freely. True computer science. Experimentation, hypothesis formation, more experimentation, more knowledge for the human race.

We needed to expand that into other areas of culture, and great heroes like Jimmy Wales and Larry Lessig laid out infrastructure for that to occur, we now need to get governments to understand how to push it further.

The Information Society Directorate of the European Commission issued a report 18 months ago, in which they said that they could scan 1/6th of all the books in European libraries for the cost of 100 km of roadway. That meant, and it is still true, that for the cost of 600 km of road, in an economy that builds thousands of kilometers of roadway every year, every book in all European libraries could be available to the entire human race, it should be done. [shout of “Copyright” from audience] Remember that most of those books are in the public domain, before you shout copyright at me. Remember that the bulk of what constitutes human learning was not made recently, before you shout the copyright at me. We should move to a world in which all knowledge previously available before this lifetime is universally available. If we don’t, we will stunt the innovation which permits further growth. That’s a social requirement. The copyright bargain is not immutable. It is merely convenient. We do not have to commit suicide culturally or intellectually in order to maintain a bargain which does not even relevantly apply to almost all of important human knowledge in most fields. Plato is not owned by anybody.

So here we are, asking ourselves what the educational systems of the 21st century will be like, and how they will socially distribute knowledge across the human race. I have a question for you. How many of the Einsteins who ever lived were allowed to learn physics? A couple. How many of the Shakespeares who ever lived, lived and died without learning to read and write? Almost all of them. With 7 billion people in the world right now, 3 billion of them are children; how many Einsteins do you want to throw away today? The universalization of access to education, to knowledge, is the single-most important force available for increasing innovation and human welfare on the planet. Nobody should be afraid to advocate for it because somebody might shout “copyright”.

So we are now looking at the second-order consequence of an understanding of how to conduct innovation under austerity. Expand access to the materials that create the ability to learn, adapt technology to permit the scientists below age 20 to conduct their experiments and share their results, permit the continuing growth of the information technology universe we created, by sharing, over the last quarter century, and we’d begin to experience something like the higher rates of innovation available, despite massive decreases in social investment occurring because of austerity.

We also afford young people an opportunity to take their economic and professional destinies more into their own hands, an absolute requirement if we are to have social and political stability in the next generation. Nobody should be fooled about the prospects for social growth in societies where 50 percent of the people under 30 are unemployed. This is not going to be resolved by giving them assembly line car-building jobs. Everybody sees that. Governments are collectively throwing up their hands about what to do about the situation. Hence, the rapidity with which, in systems of proportional representation, young people are giving up on established political parties. When the Pirates can take 8.3% of the vote in Schleswig-Holstein, it is already clear that young people realize that established political policy-making is not going to be directed at their future economic welfare. And we need to listen, democratically, to the large number of young people around the world who insist that internet freedom and an end to snooping and control is necessary to their welfare and ability to create and live.

Disintermediation means there will be more service providers throughout the economy with whom we are directly in touch. That means more jobs outside hierarchies and fewer jobs inside hierarchies. Young people around the world whether they are my law students about to get a law license, or computer engineers about to begin their practices, or artists, or musicians, or photographers, need more freedom in the net, and more tools with which to create innovative service delivery platforms for themselves. A challenge to which their elders would not have risen successfully in 1955, but we are new generation of human beings working under new circumstances, and those rules have changed. They know the rules have changed. The indignados in every square in Spain know the rules have changed. It’s their governments that don’t know.

Which brings us I will admit to back to this question of anonymity, or rather, personal autonomy. One of the really problematic elements in teaching young people, at least the young people I teach, about privacy, is that we use the word privacy to mean several quite distinct things. Privacy means secrecy, sometimes. That is to say, the content of a message is obscured to all but it’s maker and intended recipient. Privacy means anonymity, sometimes, that means messages are not obscured, but the points generating and receiving those messages are obscured. And there is a third aspect of privacy which in my classroom I call autonomy. It is the opportunity to live a life in which the decisions that you make are unaffected by others’ access to secret or anonymous communication.

There is a reason that cities have always been engines of economic growth. It isn’t because bankers live there. Bankers live there because cities are engines of economic growth. The reason cities have been engines of economic growth since Sumer, is that young people move to them, to make new ways of being. Taking advantage of the fact that the city is where you escape the surveillance of the village, and the social control of the farm. “How you gonna keep them down on the farm after they’ve seen Paris?” was a fair question in 1919 and it had a lot do with the way the 20th century worked in the United States. The city is the historical system for the production of anonymity and the ability to experiment autonomously in ways of living. We are closing it.

Some years ago, to wit, at the beginning of 1995 we were having a debate at the Harvard Law School about Public Key Encryption. Two on two. On one side Jamie Gorelick, then the Deputy Attorney General of the United States, and Stewart Baker, then as now at Steptoe & Johnson when he isn’t in the United States government making horrendous social policy. On the other side, Danny Weitzner, now in the White House, and me. And we spent the afternoon talking back and forth about whether we should have to escrow our keys with the United States government, whether the clipper chip was going to work and many other very interesting subjects now as obsolete as Babylonia. And after it was all over, we walked across the Harvard campus for dinner at the Harvard Faculty Club and on the way across the campus Jamie Gorelick said to me “Eben, on the basis of nothing more than your public statements this afternoon I have enough to order the interception of your telephone conversations.” In 1995 that was a joke. It was a joke in bad taste when told to a citizen by an official of the United States Justice Department. But it was a joke. And we all laughed because everybody knew you couldn’t do that.

So we ate our dinner, and the table got cleared and all the plates went away, and the port and walnuts got scattered around, and Stewart Baker looked up and said “alright, we’ll let our hair down”, and he had none then and he has none now, but “we’ll let our hair down” Stewart said, “we’re not going to prosecute your client Mr Zimmerman. We’ve spent decades in a holding action against Public Key Encryption it’s worked pretty well but it’s almost over now, we’re gonna let it happen.” And then he looked around the table and he said, “but nobody here cares about anonymity do they?” A cold chill went up my spine.

And I thought, “OK, Stewart, I understand how it is. You’re going to let there be Public Key Encryption because the bankers are going to need it. And you’re going to spend the next 20 years trying to stop people from being anonymous ever again, and I’m going to spend those 20 years trying to stop you.” So far I must say from my friend Mr. Baker has been doing better than I had hoped, and I have been doing even worse than I had feared. Partly because of the thug in a hoodie, and partly for other reasons. We are on the verge of the elimination of the human right to be alone. We are on the verge of the elimination of the human right to do your own thinking, in your own place, in your own way without anybody knowing. Somebody in this room just proved a couple of minutes ago that if he shops at a particular web-store using one browser, he gets a different price than on the other. Because one of the browsers is linked to his browsing history. Prices, offers, commodities, opportunities, are now being based upon the data mining of everything. A senior government official in this government said to me after the United States changed its rules about how long they keep information on everybody about whom nothing is suspected – you all do know about that right? Rainy Wednesday on the 21st of March, long after the close of business, Department of Justice and the DNI, that’s the Director of National Intelligence, put out a joint press release announcing minor changes in the Ashcroft rules, including a minor change that says that all personally identifiable information in government databases at the National Center for Counter-Terrorism that are based around people of whom nothing is suspected, will no longer be retained as under the Ashcroft rules for a maximum of 180 days, the maximum has now been changed to 5 years. Which is infinity.

I told my students in my classroom, the only reason they said 5 years was they couldn’t get the sideways eight into the font for the press release, so they used an approximation. So I was talking to a senior government official of this government about that outcome and he said well you know we’ve come to realize that we need a robust social graph of the United States. That’s how we’re going to connect new information to old information. I said let’s just talk about the constitutional implications of this for a moment. You’re talking about taking us from the society we have always known, which we quaintly refer to as a free society, to a society in which the United States government keeps a list of everybody every American knows. So if you’re going to take us from what we used to call a free society to a society in which the US government keeps a list of everybody every American knows, what should be the constitutional procedure for doing this? Should we have, for example, a law? He just laughed. Because of course they didn’t need a law. They did it with a press release on a rainy Wednesday night after everybody went home, and you live there now.

Whether it is possible to have innovation under conditions of complete despotism is an interesting question. Right-wing Americans or maybe even center-right Americans, have long insisted that one of the problems with 20th century totalitarianism, from which they legitimately distinguish themselves, was that it eliminated the possibility of what they call free markets and innovation. We’re about to test whether they were right.

The network, as it stands now, is an extraordinary platform for enhanced social control. Very rapidly, and with no apparent remorse, the two largest governments on earth, that of the United States of America and the People’s Republic of China have adopted essentially identical points of view. A robust social graph connecting government to everybody and the exhaustive data mining of society is both governments fundamental policy with respect to their different forms of what they both refer to, or think of, as stability maintenance. It is true of course that they have different theories of how to maintain stability for whom and why, but the technology of stability maintenance is becoming essentially identical.

We need, we, who understand what is happening, need, to be very vocal about that. But it isn’t just our civil liberties that are at stake, I shouldn’t need to say that, that should be enough, but of course it isn’t. We need to make clear that the other part of what that costs us is the very vitality and vibrancy of invention culture and discourse, that wide open robust and uninhibited public debate that the Supreme Court so loved in New York Times against Sullivan. And that freedom to tinker, to invent, to be different, to be non-conformist for which people have always moved to the cities that gave them anonymity, and a chance to experiment with who they are, and why they can do.

This more than anything else, is what sustains social vitality and economic growth in the 21st century. Of course we need anonymity for other reasons. Of course we are persuing something that might be appropriately described as protection for the integrity of the human soul. But that’s not government’s concern. It is precisely the glory of the way we understand civil society that that is not government’s concern. It is precisely our commitment to the idea of the individual’s development at her own pace, and in her own way, that has been the centerpiece of what we understood to be our society’s fundamental commitment that means that the protection for the integrity of the human soul is our business, not the government’s business. But government must attend to the material welfare of its citizens and it must attend to the long run good of the society they manage. And we must be clear to government that there is no tension between the maintenance of civil liberty in the form of the right to be let alone, there is no distinction between the civil liberty policy of assuring the right to be let alone, and the economic policy of securing innovation under austerity. They require the same thing.

We need Free Software, we need Free Hardware we can hack on, we need Free Spectrum we can use to communicate with one another, without let or hindrance. We need to be able to educate and provide access to educational material to everyone on earth without regard to the ability to pay. We need to provide a pathway to an independent economic and intellectual life, for every young person. The technology we need, we have, I have spent some time and many people in this room, including Isaac have spent more time now, trying to make use of cheap, power efficient compact server computers, the size of AC chargers for mobile phones, which with the right software we can use to populate the net with robots that respect privacy. Instead of the robots that disrespect privacy which we now carry in almost every pocket.

We need to retrofit the first law of robotics into this society within the next few minutes or we’re cooked. We can do that. That’s civil innovation. We can help to continue the long lifetime of general purpose computers everybody can hack on. By using them, by needing them, by spreading them around. We can use our own force as consumers and technologists to deprecate closed networks and locked-down objects, but without clear guidance in public policy we will remain a tiny minority, 8.3% let’s say. Which will not be sufficient to lift us out of the slough into which the bankers have driven us.

Innovation under austerity is our battle-cry. Not a battle-cry for the things we most care about, but the ones the other people most care about. Our entree to social policy for the next five years, and our last chance to do in government what we have not been able to do by attempting to preserve our mere liberties. Which have been shamefully abused by our friends in government as well as by our adversaries. We have been taken to the cleaners with respect to our rights, and we have been taken to the cleaners with respect to everybody’s money.

I wish that I could say that the easiest thing to do was going to be to get our freedoms back, it isn’t. Nobody will run in the election this year on the basis of the restoration of our civil liberties. But they will all talk about austerity and growth. And we must bring our message where they are.

That’s my first draft. Inadequate in every way, but at least a place to start. And if we have no place to start, we will lose. And our loss will be long. And the night will be very dark.

Thank you very much.

Thank you that’s very kind of you, now let’s talk about it.

OECD – Median Disposable Income – Working Age Population 18 – 65 years – 2012

Demographics

The OECD defines the “Working Age” as 18 – 65 years old. Table 1 of OECD – Labour Force Statistics provides the total population for 31 countries of interest in 2012 . We use these figures and the Age group share data in OECD – Age group share, 18-25 year oldsOECD – Age group share, 26-40 year oldsOECD – Age group share, 41-50 year olds, and OECD – Age group share, 51-65 year olds to derive numbers of individuals within four exhaustive, mutually exclusive categories of Working Age individuals:

Country 18-25
000s
26-40
000s
41-50
000s
51-65
000s
Total
000s
Australia 2,545 4,908 3,181 4,067 14,702
Austria 876 1,516 1,407 1,702 5,502
Belgium 1,068 2,192 1,624 2,169 7,055
Canada 3,801 7,150 5,266 7,115 23,334
Czech Republic 1,008 2,448 1,408 2,154 7,020
Denmark 570 1,028 816 1,068 3,483
Estonia 153 284 176 251 866
Finland 514 1,007 714 1,142 3,378
France 5,526 12,132 8,956 12,513 39,127
Germany 6,880 14,826 12,942 17,529 52,178
Greece 887 2,328 1,630 2,107 6,953
Hungary 1,170 2,073 1,150 2,172 6,567
Iceland 36 63 42 58 200
Ireland 444 976 582 839 2,842
Israel 917 1,685 846 1,162 4,612
Italy 4,901 12,042 9,682 11,618 38,245
Luxembourg 51 113 85 92 343
Mexico 16,504 24,932 13,461 14,514 69,413
Netherlands 1,641 3,082 2,597 3,384 10,706
New Zealand 505 851 642 802 2,801
Norway 537 1,018 727 913 3,197
Poland 4,123 9,016 4,855 8,246 26,241
Portugal 904 2,187 1,566 2,050 6,708
Slovak Republic 708 1,189 767 1,092 3,758
Slovenia 197 442 310 423 1,373
Spain 3,788 10,802 7,669 8,464 30,725
Sweden 1,009 1,761 1,313 1,618 5,701
Switzerland 815 1,599 1,311 1,567 5,294
Turkey 9,021 18,568 9,697 9,923 47,210
United Kingdom 7,071 12,613 9,364 11,530 40,580
United States 34,526 61,519 42,686 60,263 198,996

Table 1. Census within four Age groups of Working Age (18-65 years old) individuals. Source: OECD.

Disposable Income

The OECD provides Median Disposable Income data (using the new definition of income) for Working Age Population 18 – 65 years old in 30 of 35 countries surveyed in 2012. Our analysis also includes the corresponding figure for Canada in 2011. 1

Table 2 presents the Median Disposable Income for the Working Age Population in these 31 countries – expressed in the national currency and in US dollars:

Country National
Currency
Median
Disposable Income (MDI)
National Currency per US dollar MDI
(US dollars)
Australia Australian Dollar 51,242 1.52809 $33,533
Austria Euro 26,481 0.85858 $30,843
Belgium Euro 26,084 0.89261 $29,222
Canada‡ Canadian Dollar 38,248 1.28458 $29,775
Czech Republic Czech Koruna 235,111 14.5582 $16,150
Denmark Danish Krone 246,775 8.40991 $29,343
Estonia Euro 8,149 0.6211 $13,120
Finland Euro 27,154 0.98624 $27,533
France Euro 22,318 0.88583 $25,194
Germany Euro 22,480 0.81703 $27,514
Greece Euro 9,629 0.75303 $12,787
Hungary Forint 1,592,591 143.793 $11,076
Iceland Iceland Krona 4,145,840 142.563 $29,081
Ireland Euro 22,495 0.96521 $23,306
Israel New Israeli Sheqel 78,690 4.25607 $18,489
Italy Euro 18,572 0.83991 $22,112
Luxembourg Euro 38,559 0.96569 $39,929
Mexico Mexican Peso 50,269 9.17818 $5,477
Netherlands Euro 23,200 0.88103 $26,333
New Zealand New Zealand Dollar 41,881 1.57817 $26,538
Norway Norwegian Krone 361,039 9.72688 $37,118
Poland Zloty 26,435 1.91796 $13,783
Portugal Euro 9,981 0.66846 $14,931
Slovak Republic Euro 8,549 0.5719 $14,948
Slovenia Euro 14,052 0.67771 $20,735
Spain Euro 15,908 0.77144 $20,621
Sweden Swedish Krona 266,301 9.1096 $29,233
Switzerland Swiss Franc 59,621 1.55332 $38,383
Turkey Turkish Lira 12,000 1.25179 $9,586
United Kingdom Pound Sterling 17,648 0.76649 $23,024
United States US Dollar 32,819 1.0000 $32,819

Table 2. Median Disposable Income, Working Age Population 18 – 65 years old in 2012. ‡ Canadian figures are for 2011. Source: OECD. 

Disposable Income Ratios

We use the P50/P10 ratio and the P90/P50 ratio to derive the upper bound value of the first and ninth decile, respectively, from the Median (P50) Disposable Income (US dollars) in Table 2:

Country P50/P10 P90/P50 P10 P50 P90
Australia 2.3 1.9 $14,580 $33,533 $63,713
Austria 2.0 1.7 $15,421 $30,843 $52,432
Belgium 2.1 1.6 $13,915 $29,222 $46,755
Canada‡ 2.3 1.9 $12,945 $29,775 $56,572
Czech Republic 1.7 1.8 $9,500 $16,150 $29,069
Denmark 1.8 1.6 $16,302 $29,343 $46,949
Estonia 2.4 2.1 $5,467 $13,120 $27,553
Finland 1.9 1.7 $14,491 $27,533 $46,806
France 1.9 1.9 $13,260 $25,194 $47,869
Germany 2.0 1.8 $13,757 $27,514 $49,526
Greece 2.7 1.9 $4,736 $12,787 $24,295
Hungary 2.1 1.8 $5,274 $11,076 $19,936
Iceland 1.8 1.7 $16,156 $29,081 $49,437
Ireland 2.0 2.0 $11,653 $23,306 $46,612
Israel 2.7 2.1 $6,848 $18,489 $38,827
Italy 2.4 1.9 $9,213 $22,112 $42,013
Luxembourg 1.9 1.9 $21,015 $39,929 $75,865
Mexico 2.9 2.8 $1,889 $5,477 $15,336
Netherlands 2.0 1.8 $13,166 $26,333 $47,399
New Zealand 2.2 2.0 $12,063 $26,538 $53,076
Norway 2.1 1.6 $17,675 $37,118 $59,388
Poland 2.1 1.9 $6,563 $13,783 $26,187
Portugal 2.4 2.1 $6,221 $14,931 $31,356
Slovak Republic 1.9 1.7 $7,868 $14,948 $25,412
Slovenia 1.9 1.6 $10,913 $20,735 $33,175
Spain 2.5 2.0 $8,249 $20,621 $41,243
Sweden 2.1 1.7 $13,920 $29,233 $49,696
Switzerland 1.9 1.7 $20,202 $38,383 $65,251
Turkey 2.4 2.4 $3,994 $9,586 $23,007
United Kingdom 2.2 2.0 $10,466 $23,024 $46,049
United States 2.9 2.2 $11,317 $32,819 $72,202

Table 3. P50/P10  and P90/P50 ratios; P10, P50 (Median), and P90 values of  Disposable Income (US dollars), Working Age Population (18 – 65 year olds) in 2012. ‡ Canadian figures are for 2011. Source: OECD.

OECD Labour Statistics provides two views of total employment:

  • Table 20: Total Employment, including Armed Forces – too many missing entries
  • Table 22: Total Civilian Employment

Using Total Civilian Employment figures, we derive the number of civilian employees whose Disposable Income equals or exceeds the national P90 value  in 2012:

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Country P90 Civilian Earners >=P90 000s
Australia $63,713 1,134
Austria $52,432 417
Belgium $46,755 452
Canada‡ $56,572 1,750
Czech Republic $29,069 487
Denmark $46,949 268
Estonia $27,553 61
Finland $46,806 247
France $47,869 2,623
Germany $49,526 3,989
Greece $24,295 379
Hungary $19,936 386
Iceland $49,437 16
Ireland $46,612 182
Israel $38,827 335
Italy $42,013 2,263
Luxembourg $75,865 37
Mexico $15,336 4,900
Netherlands $47,399 842
New Zealand $53,076 221
Norway $59,388 258
Poland $26,187 1,559
Portugal $31,356 460
Slovak Republic $25,412 232
Slovenia $33,175 92
Spain $41,243 1,753
Sweden $49,696 465
Switzerland $65,251 477
Turkey $23,007 2,482
United Kingdom $46,049 2,926
United States $72,202 14,246

Table 4. Civilian employees whose Disposable Income (US dollars) equals or exceeds the national P90 value in 2012. ‡ Canadian P90 figure is for 2011. Source: OECD.

  1. We exclude Chile, Japan, Korea, and Russia from our analysis, as there were no figures available based on the new income definition.

Wages – OECD data and analyses

A young fellow I know was looking to model a sample of conspicuous consumers’ online behavior. We got to speaking about the prosperity of market segments across the globe, and that led me to consider parts of the Online OECD Employment database.

Definition

Average annual wages are obtained by dividing the national-accounts-based total wage bill by the average number of employees in the total economy, which is then multiplied by the ratio of the average usual weekly hours per full-time employee to the average usually weekly hours for all employees. This indicator is measured in USD constant prices using 2012 base year and Purchasing Power Parities (PPPs) for private consumption of the same year. Read more details on the estimation of average annual wages.

Links:

http://www.oecd-ilibrary.org/employment/average-wages/indicator/english_cc3e1387-en

Definitions

Earnings dispersion: this dataset contains three earnings-dispersion measures – ratio of 9th-to-1st, 9th-to-5th and 5th-to-1st – where ninth, fifth (or  median) and first deciles are upper-earnings decile limits, unless otherwise indicated, of gross earnings of full-time dependent employees. The incidence of low pay refers to the share of workers earning less than two-thirds of median earnings. The incidence of high pay refers to the share of workers earning more than one-and-a-half time median earnings.

Gaps: The gender wage gap is calculated as the difference between median earnings of men and women relative to median earnings of men. The age wage gap is calculated as the difference between mean earnings of 25-54 year-olds and that of 15-24 year-olds (respectively 55-64 year-olds) relative to mean earnings of 25-54 year-olds.  Earnings by skill (or education levels) refer to mean annual earnings of full-time full-year 25-64 year-old employees. Earnings gaps by skill levels are calculated as the difference between mean earnings of medium-skilled employees and low- (respectively high-) skilled employees relative to mean earnings of medium-skilled employees.

Links:

In a later post, we will look at deriving indices from the run-of-the-mill OECD datasets that might characterize the sort of prosperity that marks the conspicuous consumer.

Also see: