My challenge to Tyler

by Russ Roberts on September 20, 2011

in Data, Standard of Living, Uncategorized

There is a new theory from Noah Smith, for the alleged stagnation of America’s standard of living, the Great Relocation (HT: Tyler).

The idea, in a nutshell, is that economic activity is relocating from rich Europe, America, and Asia to developing Asia faster than technological progress can replenish it.

This makes no more sense to me than Tyler’s Great Stagnation story–but I will save that for another time. For this post, I want to focus on Tyler’s reaction to Smith’s story. His first point is this one:

1. Median income begins to stagnate in 1973, before this trend is significantly underway.

You hear this claim about median income all the time (and you are going to hear a lot more between now and November 2012) and I do not understand it. What is it supposed to mean? Does it mean that the person who was the median or family in 1973 continued onward at a constant standard of living without any gains despite enormous gains in per capita income? This is the way the story is usually told–the rich (as if they were a fixed group of individuals, an exclusive club) somehow managed to gain all of the gains of the intervening 38 years for themselves. This is clearly not true. If you look at any data that follows the same people over time, you will see that their lives improve as they get older and that they are typically better off than their parents. Better off in absolute terms, not relative ones. Some people move up relative to others. Some move down. But the entire distribution moves up.

Or does it mean that the typical family or individual in America today has the same standard of living as people back in 1973? Is the median a surrogate for the middle class? This is a different claim from the first one. The problem with this claim is the types of people in the middle in 1973 are different from the types of people now. There was a major demographic change in the 1970′s. The divorce rate exploded. Suddenly (and it was pretty suddenly) new households were created as couples divorced. The rate of household creation grew faster than population.

The effect of this increase in the divorce rate was to change who was at the median. A lot of below-median families were created in the 1970′s headed by recently divorced single women who suddenly found themselves wanting to be in workforce. They had not prepared for this. Their skills were different. Adding those families pulls the measured median down. That fall in the median does not mean that the family that was at the median was now worse off. It’s like the median height falling at the party when the Celtics leave. Nobody in the room gets any shorter. Similarly, in the individual data, people who weren’t working (their wages were zero but non-workers earning zero aren’t included in the measured median) were working unexpectedly. They were typically people with below-average wages. The measured median fell.

This of course created a lot of economic hardship. The surge in divorce rates made a lot of people poor. But you don’t want to conclude that the American economic system is broken because of an increase in the divorce rate. Most people, and I think this includes Tyler, don’t view the stagnation of wages or incomes as the result of a social change but as the result of a change in how the system treats someone today relative to yesterday. When you keep repeating that median income is stagnant, you usually mean that people are stuck or are not getting ahead.

The same phenomenon occurs when there is an increase in immigration by low-skilled workers. That reduces the median wage. That statistical change doesn’t make anyone worse off in and of itself.

I will also mention, as I have before, that the standard measures of median income understate growth because they overstate inflation and understate compensation–they leave out many forms of compensation that have grown more important since 1973.

Here has what has truly changed in the fabric of the American workforce since 1973. Before 1973 you could graduate from high school or not even finish high school and live pretty well. You could work in a factory or do a number of things that paid well in the relative sense–you could be somewhere near the middle.

That isn’t true any more. Not finishing high school is very bad for your probable place in the income distribution. And such a person may actually have a lower standard of living in absolute terms relative to 1973. Factory jobs are disappearing. Yes, some are part of the Great Relocation. But many or maybe even most are part of the great increases in productivity that have occurred since 1973. America manufactures more stuff since then with fewer people. There is no evidence there of a great stagnation but rather the opposite.

The difficult financial life of a high school dropout and even many high school graduates who do not go on to a college is a symptom not a cause of economic change. It is the symptom of a more productive economy based on knowledge and information. It’s an unpleasant symptom but the underlying cause is a good thing. The way to deal with the symptom is to improve the education system.

So my challenge to Tyler is to tell me what he thinks the stagnation in median income signifies. Has there been a change in the returns to education or creativity? Or is it mostly a statistical artifact? Whichever answer he gives, I would like to see him reconcile it with the panel data–the surveys of economic information that follow the same people over time. Others are of course welcome to chime in as well. If Tyler responds I will link to either his post or his email if he wishes.

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{ 73 comments }

Craig S September 20, 2011 at 2:05 pm

The other thing that bother’s me about the whole notion of income “stagnaion” is that its predicated on the notion that walth is a zero sum game, that there is a finite amount of wealth and “rich” getting more means everyone else has less, which is nonsense.

Josh September 21, 2011 at 11:26 am

I agree, as other people become wealthy, more oportunities for entrepreneurs open up, especially given the internet etc. Its always a good economic thing.

Martin Brock September 20, 2011 at 2:09 pm

O.K. Median income is an aggregate, and changes in the aggregate bear many interpretations. Changes in median household income bear even more interpretations.

But what about the Great Relocation? Is the U.S. one giant farm or not?

“Capital can flow relatively easily across borders (i.e. you can put your factory anywhere you like), but labor cannot.”

That’s a key assumption behind Noah’s theory, and it happens to be true. Trade in the single most valuable resource, which is more valuable than all other resources combined, is the one form of trade that states routinely forbid more than any other, but nominal “free traders” often ignore this point. Why is that?

Josh S September 20, 2011 at 3:24 pm

Because nominal free traders tend to also be cultural nationalists, and both fear and loathe the idea of too many foreigners changing their culture.

To some degree, the concern is legitimate–you don’t want to flood a liberal democracy with people who believe in totalitarian Islamic rule, not if you want to keep your freedom. And to another degree, it’s just xenophobic.

Martin Brock September 20, 2011 at 4:04 pm

Believers in totalitarian Islamic rule seem unlikely to flood into a liberal democracy, but some nominal free traders presumably think this way.

Methinks1776 September 20, 2011 at 9:32 pm

Believers in totalitarian Islamic rule seem unlikely to flood into a liberal democracy,

I don’t stay awake at night worrying about it, but it’s not as unlikely as you think. Although, it depends on the liberal democracy. The difference between Europe and the United States is astounding.

All immigrants to America find an open, interested culture and a relatively easy time opening businesses and finding work. If they were hell bent on establishing a caliphate, they get distracted by prosperity. Immigrants to European countries are greeted with extreme xenophobia and a lack of opportunities. Most end up on the dole, remain outsiders, seethe and plot.

I sure am glad we’re becoming more like Europe, aren’t you?

Josh September 21, 2011 at 11:28 am

I agree, but culture is important too, hard core muslims are less likely to go to such a far away, hostile, christian land.

Harrison September 20, 2011 at 4:14 pm

Like most other things, this key assumption is a problem that is magnified by the state. The best solution is to eliminate legislation and regulation that hampers the free flow of labor both domestically and abroad. Ignoring the importance of creative destruction allows the few to stand in the way of improvements for the rest.

Josh September 21, 2011 at 11:30 am

The talented and highly educated can work anywhere, the unemployed carpenter no one wants or needs. 2 tier labour rules benefiting those who need it least.

Ken September 21, 2011 at 10:11 pm

Josh,

Everyone wants and needs a quality carpenter. And having a lot of education does NOT mean you can work anywhere. A carpenter has far more options of living and working than almost ALL other professions.

Regards,
Ken

Bret September 20, 2011 at 2:16 pm

Why can’t there be both statistical artifacts (divorce, changing demographics, etc.), inherent structural changes (Great Relocation and Great Stagnation), and government based distortions (tax policy and regulation)?

I think that Tyler has a point. That doesn’t mean it’s the only thing going on, nor have I ever seen him explicitly write that.

Jason September 20, 2011 at 2:29 pm

Is a stagnation in median wage equivalent to a price stabilility?

Sam September 20, 2011 at 2:34 pm

I think you made a typo,or this head cold is confusing more than I thought?
“Before 1973 you could graduate not finish high school and live pretty well.”

Russ Roberts September 20, 2011 at 2:53 pm

thanks–will fix

kebko September 20, 2011 at 2:44 pm

Russ,

I think the story is even more backwards than you give it credit for. I think these statistical artifacts are, in fact, the result of greater wealth for most households. I realized this by looking at my own earnings history and noticing that my own data was much more unequal than the national statistics.
Since people have high expectations for lifetime earnings, we go to school longer, we retire earlier, we take sabbaticals. In short, we pepper our lifetimes with many years of low stated earnings because we are wealthy enough to afford it. Statistically, this looks like a nation of haves vs. have nots. But, it is the inevitable product of being wealthy. I’d like to know how much of the reversal in leisure time studies among income groups is the result of this. I’d also like to know what percentage of low income earners are in school or retirement.

I’d also put the issue of household size in this story. One reason divorce skyrocketed is because people were wealthy enough to leave miserable situations. Women now are powerful enough to strike out on their own. A miserable housewife in 1950 might have been stuck where she was because there was no way she could raise the kids on her own. But, a housewife in 1990 could. She wasn’t going to be as well off as she was in her marriage, but she could earn enough now that the tradeoff between lower earnings outside the marriage and higher earnings within the marriage was reasonable. Again – the divorce creates a situation where the statistics look worse even though the people are better off.

I am pessimistic about the notion that this story could ever compete with the self-serving conventional wisdom that the poor are ever getting poorer at the hands of commercial interests, though.

Josh S September 20, 2011 at 3:25 pm

And now everyone is divorced and happy!

kebko September 20, 2011 at 7:59 pm

Well, you have a point. Since it was women who were most vulnerable, and presumably it was their new freedom that led to increased divorces, the women may be happier, but not necessarily the men, nor the children. I think you might have missed the broader point, however.

Josh September 21, 2011 at 11:32 am

true, I think conventional wisdom is probably wrong, we are richer in most ways, but many people choose not to capitalize. At least, the’d rather take more time off, or get more education, than make more money.

Ken September 20, 2011 at 3:02 pm

Russ,

“Not finishing high school is very bad for your probably place in the income distribution.”

It’s important to recognize what that means. A high school drop out working full time has an average income of $27K/year. Not too bad. That’s $9K less than what I was making when I first graduated college.

Regards,
Ken

Andrew September 20, 2011 at 4:18 pm

And when was that?

Ken September 20, 2011 at 5:00 pm

Andrew,

When was what? Me graduating college with my BS? 2003.

Regards,
Ken

Andrew September 21, 2011 at 10:27 am

You were getting seriously underpaid.

Ken September 21, 2011 at 10:34 am

Andrew,

Not really. I switched careers (from electronic tech to mathematician) and had zero experience in my new career.

But that wasn’t really the point of my post. My point was that people who work full time earn enough to have a fine life. The idea of “working poor” is a myth.

Regards,
Ken

Invisible Backhand September 20, 2011 at 6:35 pm

Your neighbor is keeping slaves. You take them away by force.

Ken September 20, 2011 at 6:41 pm

IB,

Are you still trying to win the argument you so definitively lost on another thread? Are you really so pathetic that you would attempt to hijack this thread just to try to win? Well if you want to play that game, fine:

An adult who lives within his means, works hard, saves, and invests is akin to a neighbor keeping slaves? Hardworking responsible adults are like slave owners and politicians are like the Union Army? Is this really the argument you are making?

Also, my neighbors are not keeping slaves.

Regards,
Ken

Invisible Backhand September 20, 2011 at 8:15 pm

An adult who lives within his means, works hard, saves, and invests is keeping slaves. (Let’s call him Jefferson Davis). You take them away by force.

Ken September 20, 2011 at 8:28 pm

IB,

You’re moving further from the original argument. Go ahead and refresh yourself with it. Your analogies didn’t hold up then. Simply switching threads doesn’t mean they’ll magically hold up.

Regards,
Ken

Methinks1776 September 20, 2011 at 9:24 pm

Ken, give up.

Private slave ownership is immoral.

State slave ownership is salvation.

You forget that you’re dealing with a not particularly useful idiot here.

Rob September 20, 2011 at 6:59 pm

$27K/year is more money than I make…..and I have a BA.

Andrew September 21, 2011 at 10:28 am

And this is good?

Ken September 21, 2011 at 5:00 pm

Andrew,

It’s not bad.

Regards,
Ken

LoneSnark September 20, 2011 at 3:04 pm

Kebko has it. I myself am doing what he describes right now. I have earned enough money that my family owns what we need to take yet another year off work and travel. If it was the 80s I would be desperate for work and take whatever I was offered. Last year I was a have, earning far above the median wage, probably the top quarter of filers. This year, my tax return is going to be any liberals worst nightmare, with kids subsisting on a tiny fraction of the poverty line. I will most likely qualify for the Earned Income Tax Credit for God’s sake, and use it to pay for airfare to Europe.

Cathyby September 20, 2011 at 4:05 pm

You ask what the claim “median income starts to stagnate” means. Given that median income is the income level such that half earned incomes are less than it, and half are greater, it means that the mid-point of the range of incomes has changed little or not at all.

This can happen even if salaries for each individual rise year on year, if you have sufficient new entrants starting at the bottom each year. So the panel data can record increasing income while the median (including new entrants) remains the same.

I’m a bit bemused by your point about divorcees – whatever happened to the median in the 70s does not necessarily affect the median now. If you are talking about a two income family, and median income (as opposed to median household or family income) the median will remain the same. If you are talking about median household income there is an effect – but is it balanced by the numbers getting married? That would seem probable.

As for those who don’t graduate from high school – yes, that is true. If those who do not graduate high school tend to be at the lower end of the income spectrum and median income has stagnated, that suggests wages at the lower half have also stagnated. The net effect is a lower standard of living. But given only 5% over age 25 have not graduated high school, it is clear that a lot of high school graduates are also in this lower half seeing a lower standard of living.

The story you talk about, that the “rich” are taking more income, is based on breaking the income spread into percentiles. Based on that, the income the top 5% (and particularly the top 1%) are earning has increased by large amounts since the 1970s. So income stagnation at the median is not due to overall income stagnation. That does not, of course, imply that there is a fixed amount of income to go around, it simply says that what increases in income there have been have, in fact, taken place at the top.

So whatever Tyler ascribes this to is not undermined by panel data.

Russ Roberts September 20, 2011 at 4:28 pm

The increase in the divorce rate didn’t just happen for one year. It was a steady increase for a while that has only recently reversed.

I don’t understand your last longish paragraph. My claim is that the alleged stagnation of median income tells us little or nothing about what has happened to the prospects for material progress in the last 35 years. You say that the rich have gotten richer but the median has stagnated. I am disputing the last point. Your first two paragraphs are exactly my point. I don’t think it’s Tyler’s.

Will September 20, 2011 at 4:24 pm

Even if there is stagnation and people are locked in a a fixed income their entire working life, so what? If I and my wife made the same income, I would have been very well off while I was in school, no kids, mortgage, etc. We would be broke now, two kids, mortgage, student loans, etc. But if we budget correctly we will make plenty of money at the stationary income once we pay off the debt, send the kids off to make their own way in life, and are back to the two of us. We will probably even be able to retire comfortably without social security. This all assume we understand how much money we make and spend and save accordingly.

Dan J September 20, 2011 at 9:21 pm

My income has remained fairly the same with only a slight increase, but I work a little less. Ten years ago, I had to work 5 days and fifty hours to earn what I know take home home at 4days and 38 hours on avg.
This is absolutely, true.
Now, I am investigating a small business opportunity I can work on with my extra time.

Andrew September 21, 2011 at 10:34 am

You’re falling behind. In 10 years, inflation was 28%. That means you should only be working 36 hours now to earn the same as you were earning in 50 hours ten years ago.

Ken September 21, 2011 at 10:50 am

Andrew,

Inflation has been consistently over stated for pretty much as long as it’s been measured (a topic regularly discussed here at the Cafe), making your statement suspect at best. Additionally, I’m sure people value their free time MORE than the value their work time.

Regards,
Ken

Josh September 21, 2011 at 11:38 am

Says who? There are different ways to measure and experience inflation, with some people feeling the effects more. Take fuel, some use much more than others.

Ken September 21, 2011 at 12:25 pm

Josh,

“Says who?”

Says anyone familiar with the data.

Fuel is an excellent example of how inflation is over estimated. Machine efficiencies are not accounted for in fuel.

Regards,
Ken

Andrew September 20, 2011 at 4:25 pm

“The difficult financial life of a high school dropout and even many high school graduates who do not go on to a college is a symptom not a cause of economic change. It is the symptom of a more productive economy based on knowledge and information. It’s an unpleasant symptom but the underlying cause is a good thing. The way to deal with the symptom is to improve the education system.”

There may be more work for the better educated, but that doesn’t mean that there is sufficient work. The fact that there are five seekers for each opening (last I heard) says that there is a problem. If you gave each of the unemployed high-school dropouts a graduate degree in business (I could print the diplomas), would we have solved any problem? I think not.

Ken September 20, 2011 at 5:04 pm

Andrew,

“The fact that there are five seekers for each opening (last I heard) says that there is a problem.”

Yes, that government should stop closing opportunities for job creators to create jobs.

“If you gave each of the unemployed high-school dropouts a graduate degree in business (I could print the diplomas), would we have solved any problem? I think not.”

And you’d be correct, but that’s the logic being used to justify ALL subsidies: if we just throw money at this industry, this industry will magically create jobs. It’s why the housing market collapsed. It’s why education is currently a bubble and actually popping in some industries, like law.

Regards,
Ken

Josh September 21, 2011 at 11:39 am

England has enough job creators and a 50 top tax rate.

Ken September 21, 2011 at 12:26 pm

Josh,

England? That’s your counter example? A country that is in the process of meltdown due to leftist ideology?

By the way, the fact that you have the hubris to announce that any entity anywhere that isn’t composed of exclusively you has “enough” of anything shows just how ignorant and out of touch with reality you are.

Regards,
Ken

Jim September 20, 2011 at 4:26 pm

Most estimates also ignore benefits; health care, vehicle and cell phone subsidies, clothing, etc. The list is very long. I believe in my last job for a large company the non-taxable benefits alone were worth about $15,000, not including stock options and health care and such. Great deal for me and the company.

Many people stay at a crummy job just because they get health care, which the company likes because it is tax deductible and they don’t have to pay FICA on it.

muirgeo September 20, 2011 at 4:32 pm

Don’t have much time but quickly if as you say Russ, ” The way to deal with the symptom is to improve the education system” is the solution it doesn’t explain the mass of college graduates coming out unable to find a job. In fact, as a group college graduates are currently the largest group filing for bankruptcy. So you want more people to graduate college. Sure it’s good for the college industry but I’m not sure it will help with the problems we have.

Also, it doesn’t matter who the median wage earners are. What matter is aggregate wages. If the aggregate wages of middle class consumers ( 60-70% of all spending) is stagnant you will get an economy like ours.

http://www.infiniteunknown.net/wp-content/uploads/2009/08/income-inequality.gif

You just can take that much of GDP and oncentrate it amongst a few people playing a game to see who can be the richest man in the world.
Those CEO’s with golden parachutes leaving behind bankrupt companies and the Wall Street speculators are taking tons of money out of the productive economy that would ormally have been spent by iddle and lower class workers.

ErikOlsen September 20, 2011 at 5:26 pm

muirgeo – I’m curious about your comment that college graduates are the larges group filing for bankruptcy. Is that a total number or a percentage number? And are college gradutes more likely to have credit available to them? If you don’t have credit extended to you, you can’t file for bankruptcy.

Darren September 20, 2011 at 7:03 pm

I suspect one reason college graduates might have trouble finding a job is that they got the wrong degree, but this would only explain a part of it. Still, it would be interesting to break down the numbers unable to get a job out of college by degree type. It’s also my impression we are in a society where people out of college take for granted there will be a job waiting; that someone else (usually some evil corporation) will be doing the job creating.

Dan J September 20, 2011 at 9:23 pm

They went into the wrong field and some have refused to accept a less compensation than what was being offered when they began their academic degree. Tough titty.

g-dub September 20, 2011 at 10:23 pm

At the previous company I worked for, a young woman had gotten some admin job, and had a BA Sociology degree. I don’t know what the heck that is, but she alluded to some idea that she should get paid some base rate automatically because she went to college.

I thought about asking her “but what is the job you’re doing for the company worth to the company?” Meaning, what would they be willing to pay? Then I decided I better not ask.

John Dewey September 20, 2011 at 4:41 pm

Russ: “Similarly, in the individual data, people who weren’t working (their wages were zero but non-workers earning zero aren’t included in the measured median) were working unexpectedly. “

I agree, Russ. In fact, I think you sentence doesn’t emphasize enough what has happened with household work.

In the 1950s and 1960s when we grew up, much economic activity was performed by households and not included in economic reports. Consider these trends:

1960s food preparation: housewives fixed meals from scratch
21st century food preparation: fast food and meals-in-a-bag

1960s auto maintenance: fathers changed oil in their driveways
21st century auto maintenance: Jiffy Lube

1960s lawn care: teenagers cut yards and didn’t report income
21st century lawn care: lawn service companies

I could list many more. What was once uncompensated work has now been moved into the workforce. We are much more productive, and those tasks earn much more (even minimum wage is better than $0 wage). But comparisons of compensation data across four decades are all out of whack. That’s especially true since much of the previously uncompensated work is performed by low-skilled labor imported from Mexico.

I’m not arguing that movement of household work into the compensated sector accounts for all of the change in median income. But it is significant.

Ken September 20, 2011 at 5:11 pm

JD,

“In fact, I think you sentence doesn’t emphasize enough what has happened with household work.”

I’ve often wondered the same thing. I do tons of work around the house. The house I bought in 2003 was an old (built in 1946) fixer upper. I upgraded many things and finished the basement myself. I paid someone to install carpeting, which cost less than $700. I transformed my house pretty dramatically for less than $3000 in materials, including tools. However, I’m sure I would have spent $15,000 at least if I paid a contractor to do all the work.

People make all sorts of improvements in their lives as DIYers. I don’t think any of this captured in economic statistics. It makes me wonder just how much is NOT captured. Don regularly talks about how quality improvements aren’t included.

On the other hand, there isn’t much incentive for saying “Everyone’s lives are getting better and dramatically so.” despite it being true. How would politicians convince people to give up their money and liberty if they couldn’t convince people that the sky is falling?

Regards,
Ken

John Dewey September 20, 2011 at 5:16 pm

Ken: ‘How would politicians convince people to give up their money and liberty if they couldn’t convince people that the sky is falling?”

Good point.

Invisible Backhand September 20, 2011 at 8:16 pm

Don’t forget to tell him about your $190/month health insurance.

Ken September 20, 2011 at 8:48 pm

IB,

That’s what a non-sequitur looks like. What are you talking about?

Regards,
Ken

Invisible Backhand September 20, 2011 at 10:34 pm

Ha ha, you lost track of your lies, regardsken. You shouldn’t tell such whoppers. From 4 whole days ago:

Ken September 16, 2011 at 10:41 am
Mikenshmirtz,

I’m curious what type of coverage and deductible you’re looking at. I found a plan for $190/mo for a family of four with a $5K deductible. Most I found were around $350 – $450 per month. The more you want covered and the lower you want your deductible the higher your monthly premiums.

Regards,
Ken

http://cafehayek.com/2011/09/govmint-aint-us.html

Ken September 20, 2011 at 11:24 pm

IB,

I knew what you were referencing. And it wasn’t a lie. I’m just wondering what it has to do with the post or my comment. I know that you are prone to making random statements that are completely unrelated, but when you are addressing me I like, and expect, clarity and specificity. Something you seem incapable of delivering.

So I’ll ask it again: what are you talking about? Is it possible, I mean at all, for you to make a coherent, logical, relevant statement?

Regards,
Ken

g-dub September 20, 2011 at 8:35 pm

“It makes me wonder just how much is NOT captured.”

One of the most obvious is, for example, a “stay-at-home mom,” including those who homeschool. I’m guessing it is not captured. That is day-in, day-out. 7 days a week.

ccresci September 20, 2011 at 4:53 pm

I am open to the idea that globalization is contributing to economic stagnation. However, the solution is to attract productive capital by eliminating government intervention in the economy, eliminating restrictions on the movement of capital and eliminating corporate taxes. The “pie” may not be fixed, but capital is scarce and it goes to the jurisdictions where it is wanted. In this sense, countries are competing for capital in the same way that companies do.

JS September 20, 2011 at 9:05 pm

Globalization does not lead to economic stagnation, but preventing it does.

ccresci September 20, 2011 at 10:13 pm

JS-

I think that we need to face up to the fact that in a globalized economy where capital is located determines wages in that jurisdiction but that corporate profits can originate and travel anywhere. If we as a country do not go out and compete for capital then capital and high-skill, well-paying jobs will leave the US for foreign markets. I am not saying that globalization is bad and that protectionism is good. Rather, the competitive forces unleashed by globalization are moving American jobs offshore. I believe we both would agree that keeping capital in-country through fiat is impossible and counterproductive. However, I believe that dismissing the stagnation of the wages of the middle class in this country as a statistical anomaly is denying the adverse effects of our policies and the general trend of other countries towards liberalization. In short, if the government continues to make America an uncompetitive destination for capital globalization will cause income inequality to increase as the economy becomes sclerotic, investment moves overseas and wage earners find it more and more difficult to find high paying jobs.

ArrowSmith September 20, 2011 at 7:41 pm

There are objective ways to see if standard of living has improved for the middle class:

* average life expectancy
* medical care
* quality and availability of food
* entertainment options
* quality of autos
* low debt

Have any of these gone down since 1973 or up?

g-dub September 20, 2011 at 8:36 pm

* joules of energy used

muirgeo September 21, 2011 at 1:02 am

Have any of these gone down since 1973 or up?

http://www.creditwritedowns.com/2008/07/chart-of-day-household-debt-vs-savings.html

People are spending far more on housing, transportation, medical care and education while putting less and less into retirement. It doesn’t fit with Russ or Dons claim that the wage data is wrong. Russ and Don are wrong.

Dan J September 21, 2011 at 1:56 am

Those are mostly choices. Housing prices was a govt manipulated corruption of market and you choose to live further into burbs for picket fence and larger house options. Choose more affordable accommodations. Same for transportation. Govt imposes taxes on fuel. Govt inhibits domestic harvesting. People choose the expense of car, is size, luxuries, etc. And, they choose to move further out adding higher costs. ALL choices.
Debt? Really! Each individual can look in mirror for that. Impulsiveness and instant gratification is one’s own fault.
Entertainment options? Choice. Gizmos galore. Yet, cubans find plenty of easy and cheap ways to entertain. That is superficial.
Food! We have so much we have an ‘obesity epidemic’ and ‘diabetes epidemic’. Stores are all well stocked to point of throwing quite a bit out from non-consumption. And there are at least 8 different grocers to choose from within a 5 mile radius. Prepared meal businesses (McDonalds, Subway) on every flipping corner.
There are fat homeless people.
I am too fat and lazy to get up and make a sandwich and I am hungry. Add me to the stat of Americans who have gone hungry in any one given day.
Silly. The standard of living for middle class has made leaps and bounds. Standard of living for non earners has made leaps and bounds.
What is the percentage of Americans with a colored tv? With cable? How about A/C? Furnace? Cellular phones ?
How many people eat tripe out of necessity? Pigs feet? Chickens feet? Chitlins?

JS September 20, 2011 at 9:12 pm

The standard of living is higher now than in the 70′s, but it could have been much higher without the increasing statism that we suffer under.

Russ says we need to improve our educational system, but that can’t ever be improved as long as it is considered or called ‘a system’ that ‘we’ can fix. That terminology means that it is not a market oriented product, but a state run unionized bureaucracy under no pressure to satisfy customers.

Andrew September 21, 2011 at 10:29 am

What makes the standard of living higher now? What do you mean by that?

Ken September 21, 2011 at 10:46 am

Andrew,

My first response to you is strangely “awaiting moderation”, something that doesn’t happen here and almost always means it won’t be posted. I won’t leave as long a post as I originally did, but check this out to get an idea of just how much living standards have improved since the 1970′s.

Regards,
Ken

Fred September 21, 2011 at 11:03 am

In the 70s we had a b&w tv, three networks with no cable, satellite tv didn’t exist, the Ma Bell owned the single rotary phone in the house, frozen food sucked, personal computers and cell phones didn’t exist, air conditioning was a luxury we couldn’t afford in either the home or the car, and we were doing pretty well by 70s standards.
That would be poverty by today’s standards.

ettubloge September 21, 2011 at 8:34 am

This was a great point:

“Before 1973 you could graduate from high school or not even finish high school and live pretty well. You could work in a factory or do a number of things that paid well in the relative sense–you could be somewhere near the middle.”

It was the reward to mediocrity through redistribution by the government. Those days are over, sorry to those under-achievers. These same “success stories” were able to retire 10-20 years ago and enjoy 20-25 years of paid vacations on the backs of young kids going forward. How was this year’s cruise? Is Florida hot this winter?

This generation’s experience will be seen in hindsght as the best joy-ride blip in histroy. No one was able to do that for millenia before them and most will be unable to do the same going forward.

Great job! Keep coming to the polls.

Josh September 21, 2011 at 11:16 am

technology is creating huge changes in the economy. People are going to have to be adaptable, (or have society pay their way I guess). Think of all the efficiencies/job destruction brought by the internet – postal workers, books, CD’s, retail in general, , it’s early I can’t think of all the industries but it is huge and increasing. Semi trucks will be able to drive themselves very soon. Cable TV and land line phones are going the way of the shoemaker. Entrepreneurs need time to figure out ways to put all this free labor to work, not even considering the financial crisis and aftermath effects.

Daniel Hunt September 22, 2011 at 12:26 pm

Curious why someone without a highschool education today is worse off than someone without a highschool education 40 years ago? I think I would always be better off in a more productive society than a less. A more productive society has more employment opportunites because the per capital income is greater. Many chores (mowing, snow removal, etc) become employment. . . Who cares where you fall on the Income Distribution if you are better off?

Or think of handicapped individuals. Would you rather be a quadriplegic today or 100 years ago? Today! Because a more productive society can make use of quadriplegics many orders of magnitude better than a 100 years ago.

In this case, it is ALL relative. . .

Lewis Kirvan September 29, 2011 at 8:15 am

I would just point out one major factor that was not considered, but that I think is a significant indicator of what actually changed for those in and around the median–indebtedness. Before 1973 was a quaint period when consumer debt was scant, and what did exist was relatively cheap. Now the barriers to entering median income status, particularly a college education, ensure that many, if not the majority of people in an around the median have unsupportable debt levels. Just look at the current bankruptcy rate, in the 2000′s more people/households filed for bankruptcy on a yearly basis than graduated from college, got divorced or got diagnosed with cancer.

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