In my most recent column of AIER I summarize part of the case against the myth of middle-class economic stagnation. (There’s more to come in a follow-up column.) A slice:
Michael Cox and Richard Alm, in their still-relevant 1999 book, Myths of Rich & Poor, reasoned that a good measure of changes in real wages is the amount of time a person must work to earn the income necessary to buy goods and services. If the amount of work time required to earn the income necessary to buy a representative bundle of household goods and services is today the same as it was decades ago, then the stagnationist tale is true. But if the amount of work time required has fallen, then there is very good reason to doubt claims of economic stagnation.
And so Cox and Alm went to work. They, for example, divided the nominal price of a pair of jeans in 1973 by the nominal wage earned by an ordinary worker in 1973 to determine how much time that worker had to toil back then to earn enough money to buy a pair of jeans. Then making the same calculation for a pair of jeans today, Cox and Alm determined if jeans became more expensive or less expensive when measured by the amount of work time a typical worker must work in order to acquire a pair of jeans.
Doing this calculation for a number of ordinary consumer goods and services, Cox and Alm found that the typical American worker in 1999 earned real wages much higher than were earned by his or her counterpart a quarter-century earlier.
Impressed by this simple but brilliant method of measuring changes in real wages, a few years ago I purchased – using eBay – a Fall/Winter 1975 Sears catalog. (Readers who, like me, were born before the mid-1970s will remember that Sears back then was the great retailer to middle America. Its motto was “Sears has everything!” which wasn’t much of an exaggeration.) Using the nominal average hourly wage of production and nonsupervisory workers in 1975 – $4.73 – I divided the price of each of hundreds of the products offered for sale in the 1975 Sears catalog by this wage.
While I didn’t perform this calculation for all of the thousands of goods listed in the catalog, I did do so for a sample of over 400 goods. In my large sample I found only one good that costs more work time today than in 1975: men’s work boots. For all of the other goods in my sample – including, but not limited to, clothing, household appliances and furniture, recreational equipment, and auto supplies – the amount of time that a typical American worker today must work to earn enough income to buy those goods is less than in 1975, and in most cases it is much less.
