Over at EconLog, David Henderson took issue with a recent article by the journalist David Cay Johnston, and Johnston replied (in comments to David’s post at EconLog) to David H.’s criticisms. David H. then responded to David C.J.’s comments. Regular Cafe patrons will be unsurprised to discover that I believe that David H. has the better argument than does David C.J.
I here, though, wish to weigh in only on a small part of this debate. (Apologies if I missed any commenters at EconLog who’ve already addressed this issue.) In his original article, David C.J. repeats a version of the widely believed claim that the incomes of ordinary Americans have long been stagnant:
the median wage has been stagnant for almost a generation.
(I think he means much longer than a generation: here’s the plot of the average real hourly wage rate of private-sector production and nonsupervisory employees from January 1973 through April 2014.* [Click on the figure to enlarge it.] Looks pretty stagnant, doesn’t it? Yet this true statistic is economically very misleading; it paints a wholly inaccurate picture of what’s happened to the economic well-being of actual flesh-and-blood people. See the links listed below.)
David C.J. also said, in one of his replies to David H. that “there is exactly zero evidence of rising incomes for the vast majority.”
It’s David C.J.’s assertion of the alleged undeniable reality of middle-class economic stagnation that I want to briefly address here. The fact is that there is zero evidence (if not zero assertions) that there is zero evidence of rising incomes for the vast majority. David C.J., Robert Reich, Paul Krugman, and others might think that the evidence of rising incomes for the middle-class (even rising incomes for the poor) in America is weak, unpersuasive, or inadequate. That would be a fair point to argue. But a journalist of David C.J.’s reputation and access to research resources ought not to be allowed to get away with saying that “there is exactly zero evidence of rising incomes for the vast majority.”
Listed below (in no particular order) are only some of the many pieces of evidence in support of the proposition that ordinary and poor Americans’ real incomes have in fact risen quite impressively over the past several decades (at least up until the start of the 2007 recession).
W. Michael Cox & Richard Alm, Myths of Rich & Poor (1999).
Donald J. Boudreaux and Mark J. Perry, “The Myth of a Stagnant Middle Class,” Wall Street Journal, January 24, 2013.
Mark J. Perry, “Yes, the middle class has been disappearing, but they haven’t fallen into the lower class, they’ve risen into the upper class,” Carpe Diem, July 12, 2013.
Scott Winship, “What Has Happened to the Incomes of the Middle Class and Poor?” e21 (2013), in three parts: first, second, and third.
Scott Winship, “Poor and Middle Class Incomes Have Increased Significantly,” e21, November 13, 2013.
Terry J. Fitzgerald, “Has Middle America Stagnated?” The Region, Federal Reserve Bank of Minneapolis, September 2007.
Terry J. Fitzgerald, “Where Has All the Income Gone?“ The Region, Federal Reserve Bank of Minneapolis, September 2008.
Ronald A. Wirtz, “Supersize Me,” fedgazette, Federal Reserve Bank of Minneapolis, September 2008.
Again, these links contain only some of the evidence in support of the proposition that real income gains for middle-class and poor Americans have been significant over the time span – roughly, 1975 until today – that pundits and politicians on the political left (and, I presume, David C.J.) insist has witnessed only economic stagnation for the masses.
* I can find no good, extended data on the real median wage in the U.S. through time. If someone can point me to such data, I’d be grateful. The data I show here, taken today from the website of the Bureau of Labor Statistics (BLS), is of the average wage of “production and nonsupervisory workers” – a group that the BLS says encompasses four-fifths of all non-farm workers on private payrolls in America. (If the stagnation thesis were true – that is, if it were true that nearly all income gains over the past several decades have gone to the top one percent – then any plot of the real median wage of such workers would appear to be even worse for ordinary Americans than does the graph I show above.) The nominal wages in the graph above are adjusted for inflation using the Consumer Price Index.
I constructed this figure at www.bls.gov by typing in CEU0500000032 into the search engine in the upper right hand corner. I then clicked on “Total Private,” and then chose 1973 as my Start Year and 2014 as my End Year, and then clicked on Update. The result is the figure that you see above (with April 2014 being the most recent date available now for this data-constructed graph).