Economics Questions

Re: The Myth That Is Falling Real Wages

jjminelli — Fri, 22 Jun 2012 02:55:24 GMT

(Hey everybody, never posted here before even though I often read posts, so go easy on me!)

In response to the above post, even taking in inflation, wages have increased a little bit since then(1972 as you cited). Since the late 1970's the rate of increase in real wages has declined, but at the same time health care and other forms of compensation like pensions have gone up. Also, the share of national income between waged workers and the upper class(salaried, managment etc) has remained more or less the same. The real change in the last 40 years has been a fall in the rate of profit and capital acumulation, which probably lead to the "restructuring" that happened in the late 70's and 80's.

In response to the orignal post. I have to say that not every left-winger or marxist believes that wages have fallen since the 70's in the USA. In fact, some prominent marxit theorists have gone to a great deal of trouble to put away this fallacy. The economist, Andrew Kliman, being the most notable. He wrote a very interesting book recently that goes almost into painfull detail explaining how total compensation and wages have not fallen (although evidence suggests the rate of increase has declined) for the working class. To add, his critisicisms of left-wing theories on this issue is tied to his belief that under-consumption is not a cause of recession, but a result of one. Many of you regulars here might be interested in reading this book, "the Failure of Capitalist Production," if you are up for an intellectual challenge since I am assuming most of you are ardent followers of the Austrian School and Kliman is indeed a Marxist! ;) http://akliman.squarespace.com/failure-capitalist-production/

Re: The Myth That Is Falling Real Wages

jodiphour — Thu, 21 Jun 2012 23:54:56 GMT

ChroMattic wrote the following post at 04-17-2010 9:00 AM:

Funny how "education", "health care", and "housing" are all things that the government is extensively involved in, no?

Isn't the government extensively involved in food too? Where isn't the govt involved?

Re: The Myth That Is Falling Real Wages

wb8594 — Sat, 26 May 2012 00:09:41 GMT

Your charts do not take into consideration for inflation (thats what REAL WAGES mean, median wage increase adjusted to inflation),

since a high of 1972 real wages have been in decline for the past 40 years.

As such your argument is bunk.

Re: The Myth That Is Falling Real Wages

Dogstar — Thu, 12 Apr 2012 02:09:01 GMT

We consume more, not because we earn more, but because we borrow more. The only reason we had gains in real household income is because women have joined the workforce in increasing numbers since 1970. We went from one-income households to two-income households.

The past 25 years of prosperity have been an illusion. We've been living through a 25-year long consumer debt supercycle that's now being replaced by a government debt supercycle.

Many of these problems are due to Keynesian Economics & the Fed.

Re: The Myth That Is Falling Real Wages

TheQuaklic — Thu, 29 Dec 2011 22:05:56 GMT

'Commies and other wacko leftists often like to claim that real wages are falling in the United States, and that this fall is due to "free markets."'

How I love a polemic argument! So, the BLS data that Dr. Perry has plotted I believe to come from the following report, and other similar reports that cover earlier decades.

http://www.bls.gov/web/eci/ecconstnaics.pdf

For those who are actually employed, the wage rates are indeed rising, especially if one includes the rapidly rising cost of health care benefits and the indirect contributions to compulsory government pension and social security programs through payroll taxes. However, there are two things to consider: One is that the these are averages that include a small minority of highly compensated individuals that skew the mean value upward. The second is that these are averages of those lucky enough to be employed. If you are unemployed, your "zero" wage rate is not included in the average. While I'm sure Ayn Rand would approve, I think there is a global free market effect that our 'wacko leftist' friends are rightly concerned about. It is that in the global labor commodity market, skill sets that take a long time to develop through training and education can rapidly become obsolete leaving a significant fraction of the population unemployed or underemployed. Moreover, it is not simply competition with cheaper human labor, elsewhere in the world, but also cheaper robotic technologies that replace much of the unskilled labor. Factories are slowly returning to the US market, but as often as not, these are so-called "Lights-Out" factories, that require little labor and no 'unskilled' labor. The growing number of people who have obsolete skills and will never be fully employed again, comprise a vast social problem for which both "commie pinkos" and "neo-liberals" must suggest solutions.

Re: The Myth That Is Falling Real Wages

Joe — Sun, 18 Dec 2011 17:43:09 GMT

In a recent Lew Rockwell Podcast, he mentions the idea of how we used to have great growth with only one individual in the household contributing to household income, then that started to stagnate (due to gov't intervention), and this encouraged more and more households to adopt a system in which two parents were contributing to income, which initially lead to incomes increasing again (at other obvious costs to the family), but then even that started stagnating and shrinking due to gov't intervention.

He didn't bring up the smaller size of household issue, which could also be put on the gov't for social engineering and playing the role of father in so many poor neighborhoods.

Re: The Myth That Is Falling Real Wages

krazy kaju — Sat, 17 Dec 2011 17:15:20 GMT

I'll be sure to check out the book. And I'm not denying that incomes have been growing less than before, I think that's a fairly wide accepted fact with quite a few explanations. But looking at the actual data, the household income has been falling as individual income has risen due to falling household size - I have not yet seen any reliable evidence regarding falling median incomes, but I'll definitely look into it.

Re: The Myth That Is Falling Real Wages

Student — Sat, 17 Dec 2011 08:32:17 GMT

Income is falling by some measures (like median income) but stagnant by others. I would agree with Cowen that over all the evidence tells us income is *at best* stagnant.

Cowen also deals with the shrinking household claim in his book and in the EconTalk podcast. The long and short of it is this has been dealt with in the literature and shown to not be the primary driver. Intuitively this should make sense. During the 1960s and 70s households shrank much more greatly than they have today, yet income grew more rapidly than now. So something else must be going on (Cowen argues a productivity slow down).

Check out the book. All the references and data are there.

Re: The Myth That Is Falling Real Wages

krazy kaju — Sat, 17 Dec 2011 08:23:02 GMT

Income stagnation and falling incomes are two different things... which is it, Student?

IIRC, household data frequently shows falling income - but this is because household size has shrinked (shrunk?) in recent years.

Regarding stagnant, not falling income, I wouldn't be too surprised by that claim. International trade does have some redistributive effects, and it wouldn't be surprising to see stagnant incomes for unskilled and low-skilled laborers in the United States has a result of greater trade.

Re: The Myth That Is Falling Real Wages

Student — Sat, 17 Dec 2011 08:06:24 GMT

I've went back two pages and can't find any mention of Tyler Cowen and his latest book the Great Stagnation. I think the discussion would benefit greatly from his discussion of the data and research alone.

As he notes, median real income is actually lower today than it was 1998.

http://www.census.gov/prod/2009pubs/p60-236.pdf

As he notes, there have been real quality improvements in the goods we consume that are not captured in the CPI and we could thus be underestimating real median income. But the same could be said for the 1940s, 50s, and 60s when we saw much faster median income growth as well the introduction of new products.

You could try talk about changes in composition of compensation. But that argument has little intuitive appeal explaining income stagnation over the past decade. And even if you look at average GDP per person (data which should not be sensative to this argument) we see that year-over-year average income growth has been slower for the past two decade than previous post-war decades (illustration below).

Cowen offers even more evidence in his book, and a variety of data from a variety of sources all pretty clearly show that real incomes have stagnated in recent decades. For some reason this is a controvertial claim on this board. But in an EconTalk with Russ Roberts Cowen cleverly asks why libertarians would think otherwise. If misguided government intervention in the economy is suppose to make us poorer, why shouldn't we expect to that in the data when the government has interevened so much since WW2?

Of course, Cowen doesn't blame income stagnation entirely on government policy. But I think it is an excellent question to ponder when so many libertarians attack the notion that of falling income. Really, every one should read what Cowen has to say before moving forward with the thred.

Re: The Myth That Is Falling Real Wages

Bebob — Tue, 13 Dec 2011 12:50:05 GMT

Also interesting data about income growth can be found here:http://www.census.gov/prod/2004pubs/p60-226.pdf

Income, Poverty, and Health Insurance Coverage in the United States: 2003
Carmen DeNavas-Walt, Bernadette D. Proctor, Robert J. Mills
August 2004
U.S. Census Bureau
U.S. Department of Commerce
Table A-3: Selected Measures of Household Income Dispersion: 1967 to 2003
pages 36-37

The tables on pages 36-37 break down household income at quintiles and selected percentiles over the period 1967-2003. You can see income growth for the very rich and the very poor alike.

Re: The Myth That Is Falling Real Wages

Scrooge McDuck — Sun, 11 Dec 2011 22:00:25 GMT

Does anyone know what is included in "compensation" in the first graph? I looked around research.stlouisfed.org but couldn't find the data for what is being measured. I would like to get data specific to real wages, benefits such as vacation time, sick leave, pensions, 401k, etc. This would be more illuminating than just lumping it all in with " real compensation."

Re: The Myth That Is Falling Real Wages

sastm — Thu, 10 Nov 2011 02:32:47 GMT

i know this discussion has been stale since 2010 but i just encountered it and it's just as applicable today of course... i'd be very curious to see either mises' or stefan's video - can't locate either one though. can you post a link? in general i was looking for a detailed discussion on the subject of fed's money supply and falling standards of living in us. any links/pointers would be much appreciated...

Re: The Myth That Is Falling Real Wages

Talents Academy — Thu, 20 Oct 2011 13:22:04 GMT

Talents Academy!

http://talentsacademy.com.pt/

Re: The Myth That Is Falling Real Wages

magnetic — Wed, 06 Jul 2011 03:04:35 GMT

Although the price of eggs doesn't tell us much by itself, it does indicate that productivity increases have made life-necessities like food much more affordable to the average person.

An egg in 1900 is not the same good as an egg today (or dozens, as they are commonly sold). Not because they are larger or packaged differently (though modern packaging is likely superior in protecting the eggs from breaking). Pastured eggs (as they mostly were in 1900) are nutritionally superior:

http://www.localharvest.org/pastured-eggs.jsp

The comparison should be between pastured eggs from 1900 to the present. The failure to account for such an important factor means the graph is that much less informative. The same can be said of many food products which differ nutritionally when one compares them: grain-finished versus grass-finished beef, milk from grass-fed cows, and so on.

But empirical data have no place in economic theory anyway.