Editore"s Note
Tilting at Windmills

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April 8, 2007
By: Kevin Drum

VICTORY FOR THE PROLETARIAT?....Mickey Kaus claims vindication for burger-stand economics: a week after he posted about an encouraging help-wanted sign at a local In-N-Out stand, official government reports show that unemployment is down and wages are up. Hooray! I wouldn't get too excited about a single month's data myself, but hey — fair enough.

Except for one thing. Mickey then goes on to note that "the government's 'average hourly earnings' figures have been controversial in the past because they appear to understate wage gains." So maybe things are actually even better than the government's wage figures indicate?

Sadly, no. The study Mickey links to is about alternate methods of calculating average wages. I have no idea if the authors' critique is reasonable or not. However, Chart 1 makes clear that they think BLS data consistently understates wages, not that it understates wage growth. In fact, over the study period of 1988-1999, their alternate measure increases about 42% while the official BLS data increases 46%. If anything, they're claiming that the BLS data overstates the rate of growth.

But don't worry about it. Virtually every measure of middle class and working class wages — median wages, cash wages, cash plus health benefits, lowest quintile, etc. — has been close to flat for over 30 years despite steady gains in productivity during the entire period. 30 years! Tyler Cowen, for some reason, says he is "increasingly of the belief" that this disconnect between wage growth and productivity growth is a thing of the past, but gives no clue why we should believe that. I'd recommend a bit more skepticism that a few months of wage growth really suggests the end of a three-decade pattern of productivity gains going almost exclusively to the wealthy. It's still a grand time to be rich and powerful in America, and Republican economic policies aim to keep it that way.

Kevin Drum 1:09 PM Permalink | Trackbacks | Comments (81)

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Comments

Why should someone with capital to reinvest do so in the United States?

Posted by: Ten in Tenn on April 8, 2007 at 1:54 PM | PERMALINK

Money is like manure.

It doesn't do any good unless it is spread around.

Posted by: angryspittle on April 8, 2007 at 1:57 PM | PERMALINK

I would say it's time to eat the rich, but the Paris Hiltons of the world are really thin and stringy and full of dangerous chemicals.

Posted by: craigie on April 8, 2007 at 1:57 PM | PERMALINK

kaus, of course, doesn't understand economics, as he keeps demonstrating. the question, kevin, is why you should give him real-estate to demonstrate his ignorance.

as a simple matter of fact, the unemployment rate is not a good indicator because it is subject to variations of definition and because of the inherent weakness of the "discouraged worker" concept. when we want to know how employment is doing, we look at things like absolute job gains and the ratio of employed to employable age.

on these bases, we are seeing decent results, but nothing special: employment under bush has not kept up with the growth of the labor force.

kaus could learn this sort of thing, but he'd rather proof what an idiosyncratic thinker he is by demonstrating that he's an idiot.

Posted by: howard on April 8, 2007 at 2:01 PM | PERMALINK

Sadly, no

Sadly, no Sadly, No today.

Anyone else having trouble?

Posted by: skeg on April 8, 2007 at 2:04 PM | PERMALINK

Virtually every measure of middle class and working class wages — median wages, cash wages, cash plus health benefits, lowest quintile, etc. — has been close to flat for over 30 years despite steady gains in productivity during the entire period. 30 years!

So sad. So sad.

Add to that, we are running out of water and energy, and subsidies for agriculture are rising. Plus, Easter is cold this year. We don't even have better access to news than 30 years ago, and the classical music recording industry is dying out entirely.

So sad. Why does anybody even try to come here anymore, much less invest money?

Posted by: MatthewRMarler on April 8, 2007 at 2:08 PM | PERMALINK

Employed, well-paid clueless republicans like Kaus are fond of citing the notoriously biased employment figures as if they actually mean something.

As the comic sometimes states, "George Bush has created a lot of new jobs. I know personally, since I have 3 of them." The jobs being created today are increasingly McJobs, with no benefits, and often cleverly designed to not be full-time.

The employment figures have been cooked for years. I pay no attention to them. I think that the unemployment rate should be usually either doubled or trebled.

Posted by: POed Lib on April 8, 2007 at 2:08 PM | PERMALINK

It's still a grand time to be rich and powerful in America, and Republican economic policies aim to keep it that way.

Aristocracy. Maybe we can get it right this time.

Posted by: typical repug on April 8, 2007 at 2:18 PM | PERMALINK

Tyler Cowen is seamlessly merging into a Major Hoople style of blowhard bloviater- "I am increasingly of the belief- harumph-..."

Before you know it, Cowen will be a regular at Ma Goldberg's boardinghouse.

Posted by: serial catowner on April 8, 2007 at 2:22 PM | PERMALINK

Yes, that's true. Wages went up - in service industry.

Whoopie.

Posted by: Cheryl on April 8, 2007 at 2:22 PM | PERMALINK

and often cleverly designed to not be full-time.

While legislators periodically consider bumping up the minimum wage, is there any movement afoot to close some of these odious loopholes?

(Whew! I just learned that the minimum wage in Kansas is $2.65/hr.)

Posted by: skeg on April 8, 2007 at 2:22 PM | PERMALINK

Mickey Kaus should be done double-double animal style...And shut up about econ.

I truly believe he knows less than me and I have never claimed any real understanding of the voodoo science.

Posted by: Blue Girl, Red State (aka G.C.) on April 8, 2007 at 2:24 PM | PERMALINK

Let us know when the unemployment numbers improve to the point that DC can go back to the pre-Reagan counting method without embarrassment.

Posted by: Forrest on April 8, 2007 at 2:24 PM | PERMALINK

Missouri passed a truly progressive minimum wage increase in November that is indexed to the cost of living. It passed by over 70% - but one 15-year-old state representative is trying to thwart the will of something like 77% of his districts voters by holding legislation in committee that would exempt emergency personnel who work longer shifts and fewer of them. Says if it's COLA indexed he won't let the exemption out of committee.

Strannix has the details.

Posted by: Blue Girl, Red State (aka G.C.) on April 8, 2007 at 2:28 PM | PERMALINK

are carpenters proletariate? more sad news here:

http://www.southcoasttoday.com/apps/pbcs.dll/article?AID=/20070408/NEWS/704080330

Posted by: MatthewRMarler on April 8, 2007 at 2:32 PM | PERMALINK

this idea isn't going anywhere. It's noteworthy that it even got published. An anti-progressive recommendation for Michigan:

Posted by: MatthewRMarler on April 8, 2007 at 2:34 PM | PERMALINK

http://detnews.com/apps/pbcs.dll/article?AID=/20070408/OPINION03/704080306

Posted by: MatthewRMarler on April 8, 2007 at 2:36 PM | PERMALINK

I might check those out if you would post links.

Posted by: Isle of Lucy on April 8, 2007 at 2:39 PM | PERMALINK

One of the major reasons why wages have been so flat for working class Americans is because, under Greenspan at least, whenever too many Help Wanted signs started sprouting up the Fed would hike up interest rates to prevent wage increases. For some reason people like Kaus who will work themselves into a frenzy denouncing unions don't breathe a word about this sort of action which is kind of like unionism for the rich.

Posted by: Guscat on April 8, 2007 at 3:02 PM | PERMALINK

besides, you can't get one of these:

http://www.popularmechanics.com/blogs/automotive_news/4215177.html?series=16

Posted by: MatthewRMarler on April 8, 2007 at 3:08 PM | PERMALINK

Meanwhile, in CEO land:

$ 1 Million a day.

http://www.yahoo.com/s/551977

Posted by: Ten in Tenn on April 8, 2007 at 3:14 PM | PERMALINK

Has anyone mentioned that In-N-Out has traditionally ALWAYS had high wages in relation to other fast food restaurants? It's a small chain, and immensly popular here in California. In the Bay Area, they have been hiring people at $9.5 to $10 an hour for at least the last six years. To make some kind of grand point about this is kind of silly...workers at McDonalds, Burger King, Wendy's, Taco Bell, etc. certainly don't get to appreciate the largesse of In-N-Out's much higher-than-average wages. And those national companies would be a much more accurate barometer of things, woudn't they?

Posted by: Jason L on April 8, 2007 at 3:14 PM | PERMALINK

Add to that, we are running out of water and energy, and subsidies for agriculture are rising. Plus, Easter is cold this year. We don't even have better access to news than 30 years ago, and the classical music recording industry is dying out entirely.

So sad. Why does anybody even try to come here anymore, much less invest money?

"Boo hoo. So we're headed dead for that iceberg. This ship is unsinkable. And if things are so bad then why is the band still playing? And why aren't certain passengers panicking?

If we do hit it and take on water someone's probably going to invent a way for the ship to fly long before it sinks. So I don't see why we should even bother steering away. Captain Bush knows exactly what he is doing. It's unproductive to question him."

Posted by: First Mate Marler of the Titanic on April 8, 2007 at 3:42 PM | PERMALINK

An entry level job at your fav. Petsmart pays ` $7.50 and after taxes it nets at $6.16 per hour.

That nets $240.00 per week. That will qualify you for what used to be called food stamps.

The CEO makes about $2,000,000 per year with another $5,000,000 in options.

Be sure to enjoy those simulated lambs' wool cat beds.

Posted by: Keith G on April 8, 2007 at 3:45 PM | PERMALINK

REGRESSIVE-FASCISTS (i.e., self-styled Progressive-Democrats):

You keep making the same self-interested mistake. Wage levels are one thing, wage gains are another. Wage levels can remain exactly the same in either real or nominal terms and wages of individuals can and do rise spectacularly in this economy.

Example: Wage levels at Starbucks have been the same for 10 years (not so, but for illustration). But someone just reasonably continent and diligent who started at Starbucks 10 years ago is in 95% of cases worked their way through management and perhaps even into a corporate job - yes. So their wages are in many cases triple or quadruple what they were. Someone else might be making the same or nearly the same 10 years hence and thus wage levels remain the same, but there is no wage stagnation; the opposite, people who work just reasonably well are rising like rockets.

The true indicator of wage stagnation is polling, i.e., interviewing individuals (or IRS data) to see if THEIR wages have been stagnant for 1, 5, 10 or 20 years. The triumph of the Reagan Revolution has been low uenmployment and thus the ease of advancement for the working-poor. Studies show that on average those in the lowest quintile in 1987 are in the 4th highest now, 20 years later, on average. And those who work and study to advance faster are in the top quintile. During the Carter years (the Dark Age of Regressive-Fascist rule), unemployment was 12% and thus while wage levels might have risen somewhat, labor - experienced labor even -was not in demand so invidiuals were rising along their careers are a relative snails pace. If you want to quickly guage real wage increases for actual workers, the best determinant is unemployment. It means that labor is in demand; people without experience are in demand and people with experience and a proven record or relatively (reasonably) sober, continent, socially-respectful, consistent work history are in hyper-demand. Their wages are rocketing. It's the hipster-doofus-hustler-addict created in large part by Regressive-Democrat social value advocacy and welfare policy incentives who are struggling; but to give them money and in-kind benefits without strict oversight (which civil libertarians resist) is both destructive of them and their communities (urban USA 1970s).

The point: wage levels have NOTHING to do with wage increases. In fact, what has happened since 1981 is not trickle down, deluge down -- for all who want to work consistently (not free lance performance artists, heroin hobbiests, children abandoners). This is true quantitatively: job availablity and actual wealth creation for individuals (again wage levels are meaningless to measure career path ascendence) and social reparations caused by increased educational opportunities (the schools are great; it's the Regressive-Facist trained students who are disasters) and crime, deliquency, etc. reduction. It's easier to get wage increases when you actually do your homework at the schools provided for you at $12,000/student and you're not getting shot at either directly or indirectly on 125th and Lenox.

Successful socialism can only begin with a recognition of the boon economy that the poor, the working-poor, and the middle income have had thanks to the Reagan/Bush I/Clinton (honorary Reaganite thanks to tiny (appeasement) tax increase, NAFTA-Mexico expansion, and welfare reform)/Bush II. To delude the USA public into thinking wage level movement (which real after-taxes has actually improved impressively since Reagan whatever MEANINGLESS (as to actual invidiual wage increases of real workers) relative stagnation they've had in the first 6 years of this decade.

I am a friend of the poor, the USA soldier, and the working USA citizen at all income levels (incl. our noble taxpaying elite who carry us on their broad hardworking backs and whose funds should spent with reverent care); as a friend, I have to be grateful for the Reaganomics that rescued them from the Carter-Regressive-Fascist (economic Fascist) malaise you would condemn them to again if you had the chance. This wage level deception is just another attempt to fool the ignorant into that same chimeric trap.

BEWARE poor and miserable; the Regressive-Fascists disguise themselves as Progressive-Democrats and cause you unemployment and career stagnation, calling it progress while re-rendering you into their depraved uncivilized 1970s nightmare of deliquency and viciousness and violence. All this to suit one purpose: to fuel their Boss Tweed Payola-Power machine while the poor suffer at their feet and they blame the virtuous taxpayer and the civil liberties that is USA free enterprise which carries us all forward. BEWARE.

TOH

Posted by: The Objective Historian on April 8, 2007 at 4:06 PM | PERMALINK

Wage levels can remain exactly the same in either real or nominal terms and wages of individuals can and do rise spectacularly in this economy.

Without bothering to read the rest of your gibberish, let me just ask: if this is true at the bottom, why is it not also true at the top? Why isn't Mr CEO content with cheaper TVs and scullery maids? Instead, those people seem to regard real wage increases as very, very necessary.

I wonder why that is...

Posted by: craigie on April 8, 2007 at 4:29 PM | PERMALINK

OH, "PRODUCTIVITY GAINS":

It's most deceptive when R-Fs (Regressive-Facists) talk about wage level stagnation (ref. above, not at all meaning personal wage stagnation; personal wages have skyrocketed since both 1981 and 2001) they talk about it at the lower levels. Productivity, however is discussed as an average. Productivity has increased, yes; thanks to those at the higher end of the income spectrum who, er, uh, actually are more productive. The McJob holders are not more productive than they were and are probably less judging how Main Street has become Meth Street, and the year-end bonus is whatever one collects all year from stealing from the register. The productivity increases are from the knowledge workers who live virtuous lives (generally) from kindergarden on; not the life-long debauched. Those with educations are both fueling the average productivity increase and getting, if anything, to little in income proportionate to their share of the productivity increase. Further, taxes are MORE progressive now than during Clinton's presidency (they are just generally lower). In truth, the poor and middle income are vastly better off in terms of career prospects and growth, personal wage increases, educational opportunities, safety on the streets, benefits relative to their tax burdens, etc.

This who economic woefulness on the part of the poor and middle income and the contrived injustice thereto is an R-F "frame" (egregious deception) of the USA people. In fact, polls show people, low and middle and rich, consider themselves much better off economically than 6 years ago; they just have been misled by these crazy statistic abuses to think the poor and middle income are generally poorer and lacking in opportunity.

But, if you really want to help the poor and middle income, hmmmmm . . . , maybe it's about time to send the 12 million illegal job competitors they face back to where it is legal for them to live and seek employment . . . hmmmmm . . . Or, well, we could end teacher unionization and/or create voucher-based schooling so that the poor have more equitable educational opportunities . . . hmmm . . .

The Democratic Party is the greatest poverty creating institution in world history; never has one political grouping turned so manyauspicious economic opportunities into such misery and poverty. It's just so sad the deception you working on both the poor and the middle income, and the taxpayer.

TOH

Posted by: The Objective Historian on April 8, 2007 at 4:30 PM | PERMALINK

TOH:

Lengthy screed proving nothing. How about some actual links to actual data in actual tables?

Posted by: Wolfdaughter on April 8, 2007 at 4:34 PM | PERMALINK

Craigie:

Those CEOs do not regard those wage increases as "necessary" but available. They charge more because they are valued more and can do so. You see, that is productivity gain. Floor moppers at McDonalds, whom I respect earnestly, are not more productive so their wages, as long as they keep that job, remain about the same in real terms. But the diligent floor moppers are just making money, hopefully sharing living expenses with others and saving for education, job-training (work is the best training for harder work), and impressing if not their bosses, the world market. If I had to admit someone to a univesity(or JC or CC) I put the McMopper up on the list right away; they always make the best students. If I had to hire someone well-recommended who mopped floors at McDonalds for 2 years or some hipster-doofus college grad with a displayed disdain for work: give me the mopper. CEOs are our most noble citizens generally. Notwithstanding the cases the MSM put on the headlines to malign them, the biographies of nearly all CEOs read like biographies of saints; even better (or shall we say differently) in that they have worked in the real world to produce real added value to their organizations, society, and the workers in their employ. If you want the world be better, encourage McJob holders to be more like CEOs, not to take without merit from CEOs.

Just a side-note; I have to laugh at the civil liberties ranting on this website. CEOs and their corporate employers are invoking their civil liberties when they pay CEOs or when they pay minimum wage. You Regressive-Fascists would act as authoritarians to stop it. What you should be doing is acting as authoritarians to put an end to the drugged, debauched, criminal lifestyles (and criminal immigration) that are far more causing of economic inequalities than what IBM decides to pay it's CEO.

TOH

Posted by: The Objective Historian on April 8, 2007 at 4:41 PM | PERMALINK

always the challenge: who is the stupidest right-wing commenter of the day?

it will be hard for someone to beat the objective historian today, that's for sure!

what a marooooon.

Posted by: howard on April 8, 2007 at 4:43 PM | PERMALINK

If Mickey Kaus is so happy about flipping burgers then he should quit what he is doing and go get hired at In-N-Out.

Am not sure the pay will allow him to achieve the American dream; but his quitting will increase the quality of writing in the world.

Posted by: James on April 8, 2007 at 4:46 PM | PERMALINK

STATISTICS:

The statistics are commonplace in all I've presented. I don't have time to track them down. But even without them, the theoretical basis for wrecking your worldview based on your misuse of statistics is manifest. Wage levels as a matter of pure logic DO NOT speak to wage stagnation so the great economic woe of the Regressive-Facists ("Progressive-Democrats") is clearly a charade and in fact it is YOUR DATA that proves nothing. Moreover, you have no data for productivity gains on the part of the lowest and second lowest quintiles of our income earners. So, your whole theory if wage stagnation and unjustly rewarded productivity gains is absolutely without statistical bases. You see, I'm not the one impugning the economy; I can point out your inanities and simply point to all the positive data (low unemployment, solid consistent GDP growth - esp. relative to the rest of the late-state industrialized world, low inflation, increased home ownership, lower crime, higher $$$/student spending (can't make the horse drink), etc.)

But, while I don't have the time to track down the data itself nor do I need to to destroy your arguments and the premises upon which they are based, all you have to do is take 30 minutes to look into it and you'll see what I've written is confirmed statistically regarding surveys of upward mobility and overall productivity gains; but the point undermining your views holds without the data.

TOH

Posted by: The Objective Historian on April 8, 2007 at 4:48 PM | PERMALINK

I don't have time to track them down.

What have you ever offered that would lead us to take you at your word?

And how convenient that you can go on at length, but lack the time to produce any evidence to back up your piffle.

Posted by: Blue Girl, Red State (aka G.C.) on April 8, 2007 at 5:06 PM | PERMALINK

"Virtually every measure of middle class and working class wages — median wages, cash wages, cash plus health benefits, lowest quintile, etc. — has been close to flat for over 30 years despite steady gains in productivity during the entire period. 30 years!"

I'm basically on your side on the income distribution issue, but I do think the above quote opens you to charges of using lies, damned lies and statistics. The main impact over the last 30 years that statistics like this show is the changes in family structure in the lower quintiles of the economy. If you compared apples to apples and limited these stats to married with children households the increase in the general standard of living would be a lot more obvious.

Posted by: minion on April 8, 2007 at 5:13 PM | PERMALINK

First Mate Marler of the Titanic on April 8, 2007 at 3:42 PM,

I forgot to add: a flat CPI-adjusted median wage, CPI adjusted, for 30 years is as disastrous as the voyage of the Titanic. We are almost all of us, except the richest, going to perish on this voyage.

If anybody rose from below median in the 1970s to above median now, they don't count. Upward mobility is just another theft from the poor people in steerage, when it even happens.

Posted by: MatthewRMarler on April 8, 2007 at 5:26 PM | PERMALINK

on the other hand, this really is good news:

http://www.lifestraw.com/en/high/maincont2.asp;

no matter what your politics.

Posted by: MatthewRMarler on April 8, 2007 at 5:32 PM | PERMALINK

Anecdotal evidence to support the contention that American employees are very mobile throughout the income quintiles.

First, my background. Born in the 1960's to a lower income family (father's parents worked in mining industry in Colorado and Nevada, mother's parents were farmers in central California, mother and father had no college degree, etc.). Graduated from high school in the early 1980's. Joined the Army instead of college. Left the Army after 10 years, entered private workforce. Some college, no degree. Married, two kids.

So, over 25 years of work, I have gone from bottom quintile to top quintile. When I joined the Army, I made about $400/month. When I left the Army, I was making $3500/month. Immediately after leaving the Army, my income dropped to about $2000/month, in the early 1990's. Over a 13 year period, my income increased from roughly $25K/yr to $100K/yr. Not too long ago, I got a job as a corporate officer (i.e. CxO type person, the despised "rich") and my total compensation skyrocketed even higher. Base salary is about double, to $200K, plus bonuses, stock options, benefits and retirement.

Please note two things. First, I have experienced massive income mobility by working hard and being smart. Second, I have none of the advantages you folks would probably claim someone like me would have. I don't have a college education, my family is not well to do (in fact, my father just retired from a job with the county he lives in after working in "blue collar" jobs his whole life) and I'm not politically connected. My service in the Army was as an enlisted soldier, not an officer. And so on.

Now, based on the people I know (more anecdotal evidence), my story is not atypical. My father-in-law went from a minimum wage, entry level position in his industry to CEO of one of the most successful companies in his industry over a 30 year period of time. Of my four direct reports, two do not have college degrees, none started out in privileged families. Interestingly, 3 of the 4 served in the military. My boss (another CxO type), is a gay, white man (openly gay, at that). The executive council of the company is fully 40% women (i.e. the most senior VP's and President). The senior IT management is nearly 40% female. I know all of them well, none come from a privileged background.

In fact, I read recently (Boortz: "Someone's Gotta Say It") that less than 10% of the top wealth holders in this country are from families that were already wealthy. Certainly Bill Gates, Paul Allen, Donald Trump and Steven Forbes all come from middle class backgrounds. The reality is that income mobility is alive and well and is a far better measure of economic well being than whether the wages for a given job have increased. Unless, of course, you believe that someone should continue to mop the floors for their entire life, but get paid more money to do the same job next year than this year. Wage growth is a very poor indicator of economic well being. It would indicate that we are paying more for the same work. Now, why would we want that? That's called inflation. It would cause prices to increase as well, wiping out the wage gains of the employee. Which, in fact, is why wages for a given job are stagnant.

Now, about unemployment. You can claim that the numbers are false. I will tell you, as a hiring manager, that I can't find qualified people easily for open jobs. That means one of two things. Either, we aren't producing quality employees anymore, or we actually have low unemployment. One of those is not good (but not true, in my experience). The other (low unemployement), of course, has the side benefit of creating job and income mobility for good employees.

Finally, about the wages of place like In and Out and WalMart. They certainly don't pay $100K/yr. The work is not worth that much. Would you pay $100K for a $10K automobile just because everyone claimed you should? A thing is worth what someone will pay for it, regardless of our wishes otherwise. This is very basic economics. If wages at retail establishments go up, the price of their products must go up (again Econ 101). This causes inflation, eroding the value of the wage increase. Leading to the "dreaded" wage stagnation (still in Econ 101, nothing complex here). Interestingly, the vast majority of the minimum wage earners in this country are not the sole source of income for themselves or their family (they are, actually, single and under 25). The typical entry level WalMart employee makes about $10/hr. Yes, still low, but I bet that increases their desire to work hard, improve their skills and get a better job. And I would be willing to bet a significant amount of money that the typical entry level WalMart employee moves on to a better job, in or out of WalMart, fairly quickly.

Of course, you folks sound the battle cry of the Nintendo generation. I want it now! I don't want to wait and work to improve! Or, in the words of Homer Simpson, "I don't want to wait for a gun, I'm angry now!"

So, basic Econ 101 shows us that wage increases for the same job are not really a good idea. What is, then? Equality of opportunity is a good idea. That is, everyone has as close to the same opportunity to do well in the economy, given hard work and native intelligence, as possible. Forcing employers to pay more for a given amount of work than it is worth doesn't achieve equality of opportunity. In my 25 years of work experience, that is more the case now than it was in 1980. I'm living proof that a child of working class parents, with no college education, can hold a very high paid job and become wealthy in this country.

We used to believe in the ideas that income mobility exemplifies. That hard work would pay off, that you could do better today than yesterday. You folks are trying to prove that you can't. Yet my experience says that what you are trying to prove simply isn't true. Why do you try and prove it?

Posted by: Eric on April 8, 2007 at 6:55 PM | PERMALINK

Marler:

If anybody rose from below median in the 1970s to above median now, they don't count. Upward mobility is just another theft from the poor people in steerage, when it even happens.

Do you realize just how inane that sounds?

Posted by: Eric on April 8, 2007 at 6:56 PM | PERMALINK

Marler:

If anybody rose from below median in the 1970s to above median now, they don't count. Upward mobility is just another theft from the poor people in steerage, when it even happens.

Now that my visceral reaction is over. First, you are implying that no one went from below the median to above the median. Since I have given you evidence of two people doing so (actually more, but that's another story), that implication is clearly wrong.

Now, tell me why my hard work to move upwards is theft?

Posted by: Eric on April 8, 2007 at 7:01 PM | PERMALINK

The Objective Historian has, in the past, shown himself to be neither. I'll venture that his economic credentials are worse than his Historian ones. Obviously, any professional historian or economist would know that making claims such as "Studies show that on average those in the lowest quintile in 1987 are in the 4th highest now, 20 years later, on average" without giving references are justifiably ignorable.

You'd also think that someone who makes such a big deal about productivity growth would have something to say about the recent anemic productivity numbers - or might have something to say about how France has higher productivity than the U.S.

Posted by: mcdruid on April 8, 2007 at 7:04 PM | PERMALINK

mcdruid:

or might have something to say about how France has higher productivity than the U.S.

First I've heard that, and I pay a lot of attention to economic data. Source?

Oh, and for the record I'm not TOH, for anyone inclined to accuse me of such. Which is obvious simply from my grammar and spelling. ;-)

Posted by: Eric on April 8, 2007 at 7:09 PM | PERMALINK

I don't believe that Bill Gates came from a middle class background. If memory serves, his da was a lawyer at one of Seattle's top firms. Certainly his mother's acquaintance with top IBM executives was a critical factor in his success.

Posted by: mcdruid on April 8, 2007 at 7:11 PM | PERMALINK

Define middle class mcdruid. There are two ways to define wealthy, neither of which makes Bill Gates wealthy when he started out his adult life.

1. I own enough income producing assets that I do not need to work to support myself. This is the best definition for wealthy, but one you are unlikely to accept.

2. Being in the top 1% of all income earners (Or do you want that broader, 10%? 20%? above the median? Makes more than you do?).

Either way, Bill Gates doesn't qualify when he started Microsoft, as a college drop out.

P.S. when I was a middle class employee (making about $80K/yr in California, certainly middle class), I knew executives in IBM, EDS, Cisco and Sun. So what?

If this is your rebuttal, it's pretty weak.

Posted by: Eric on April 8, 2007 at 7:19 PM | PERMALINK

Oh, and I should note that as far as I can tell, Bill Gates' parents were not wealthy either. Unless you subscribe to the idea that people who make above the median are "wealthy". They certainly were not wealthy by any objective measurement of the term. Therefore, Bill Gates wealth is first generation. He didn't start with some base of millions of dollars of money and assets to work from.

Posted by: Eric on April 8, 2007 at 7:30 PM | PERMALINK

If Mickey Kaus is so happy about flipping burgers then he should quit what he is doing and go get hired at In-N-Out.

Nickel and Dimed! Barbara Ehrenreich is still the only pundit/scribe/opinion-maker with the huevos to put her, um, hairnet where her mouth is.

Posted by: ThresherK on April 8, 2007 at 7:42 PM | PERMALINK

eric, i'm not unsympathetic to your attempt to understand, but you do yourself no favors when you push the line that bill gates didn't start out from a comfortable background.

gates' dad is a founding partner of a very sucessful white gloves law firm in seattle. you are not a founding partner of a white gloves law firm and of the middle class.

as for the definition of middle class, why doncha try, you know, the middle: from, say, the 30th percentile in income to the 80th percentile in income is a reasonable span (i wouldn't argue with 25 to 85); in today's dollars, that would put the top of the middle class at roughly $80 - $85K in household income.

The upper middle then run up to the upper 1% by income, where the dividing line is on the order of $340K, although the average of the upper 1% is north of $1M.

as for class mobility itself, actually, the plural of anecdote is not data. While there will always be examples of income mobility (if you want a microsoft founder from a real middle class background, the one you want is Paul Allen, who came from true middle class circumstances to become the third wealthiest person in america), there are, in fact, many studies demonstrating that income mobility in america is rather modest.

this is different from the fact that over the course of a working life, you are likely to make more money. A child of the upper-middle class who goes to college, teaches for a couple of years at $25K, then goes to law school and becomes a partner at gates' dad firm, is not experiencing income mobility in any meaningful sense of the term.

matthewrmarler brings his trademark mixture of intelligence and ignorance equally applied (he's trying to be sarcastic, Eric), but he obviously doesn't know squat about the hedonic adjustment. Basically, the idea of the hedonic adjustment is that if you pay $1000 for a computer in 1995 and you pay $1000 for a computer in 2006, you are getting much more computer for your money.

Translate that broadly and you can understand the essence of the hedonic adjustment: if you pay the same price for a better product, then the product is effectively cheaper.

as a result, recorded inflation is much lower than actual inflation; the hedonic adjustment makes it go away.

Thus, when we speak in terms of flat median income over the last 30 years in real terms, what we mean is that the sole gain between a median household in 1977 and a median household today is that today's median household does, in fact, have a higher standard of living due to better quality goods.

but they don't have a penny more to spend; indeed, they have fewer pennies, which is why, since roughly 1973, most middle-class families have needed two wage-earners to support the middle-class lifestyle.

The statistics Kevin cites, while broad, nonetheless point to a completely recognizable picture: other than the improvements of the hedonic adjustment, virtually all of the fruits of an economy whose size, in real terms, has more than doubled over the past 30 years, have gone to a very limited number of households.

and that's before we even get to the kinds of things that cost-of-living doesn't cover, such as the declining number of people with health-care coverage at work....

Posted by: howard on April 8, 2007 at 9:01 PM | PERMALINK

Eric: If anybody rose from below median in the 1970s to above median now, they don't count. Upward mobility is just another theft from the poor people in steerage, when it even happens.
...
Do you realize just how inane that sounds?

Yes.

In this forum, discussions of the fairness of the U.S. economic system seriously avoid or discredit the considerable upward mobility that occurs. Most wage earners in the bottom decile or quintile of the income distribution are no longer in the bottom decile or quintile of the income distribution a decade or two later, if they have worked steadily.

I also had a below median income in the 70s and an above median income now, and I know many others. I usually maintain that a median income now buys more real wealth than a median income 30 years ago (or any multiple of decades ago).

for example, defibrillators and computer-assisted heart attack diagnosis are cheaper now, as a fraction of the median annual income.

Consider also QALYs. A QALY is a "qualtity adjusted life year", or roughly a year of good health without pain or debilitation. When patients go to hospitals for heart attacks, strokes, cancers, what they really want to receive are QALYs, not merely treatments or face-to-face time with doctors. They, and their families and insurors, are paying for health, not contact time. For almost any disease you might want to mention, that actually existed some decades ago, for a 55 year-old man or woman entering the hospital with a disease, the resultant QALYs are cheapter now, as a fraction of median income, than they were before. For median earning women (or wives of median earning men) who have breast cancer, a treatment for breast cancer costing up to half of the median annual income now buys many more QALYs than it did in the 70s. This increase in an actual kind of purchasing power, omitted as it is from the consumer price index, is generally considered irrelevant on this forum.

In the last twenty years, effective treatments for HIV and HCV infections have gotten cheaper, as a percent of median annual income. They are not cheap, but median earners with AIDS in 1987 could expect to die soon, whereas now median earners are both more likely to be diagnosed before there are florid symptoms, and are more likely to be able to afford many years of healthy life.

It's a shame mother nature invented HIV/AIDS, but she invents new diseases all the time. We may see an epidemic of H5N1 flu; if we do, effective treatments will cost less than in the post WWI great pandemic, where there were none.

In all of American history, the median earners of today have the greatest real wealth, all things considered, of all the median earners.

Posted by: MatthewRMarler on April 8, 2007 at 9:42 PM | PERMALINK

howard:

eric, i'm not unsympathetic to your attempt to understand,

Nicely condescending tone. Do you practice it? I'm not trying to understand, I'm trying to explain something.

.... but you do yourself no favors when you push the line that bill gates didn't start out from a comfortable background.

First, I'm not trying to do any favors with you, when you clearly have a closed mind, filled with ideas from the so-called progressive Left. That isn't what I said. I said that his family was not wealthy. Apparently, commenters on this blog like to re-interpret what people say to fit their own desires, prejudices, etc.

The upper middle then run up to the upper 1% by income, where the dividing line is on the order of $340K, although the average of the upper 1% is north of $1M.

Middle class, even upper middle class, is not wealthy. So, you are saying that you agree with one of my two definitions of wealthy. Thanks. And, that validates my point that Bill Gates is not the scion of a wealthy family. Thanks again. Good to know we agree.

the plural of anecdote is not data

Heh, that happens to be a maxim of statisticians. So, apparently you disagree with them? By the way, anecdotal evidence is where we normally start in trying to understand something. We then gather empirical evidence, which is anecdotal at root in the social sciences. Of course, I don't have a degree, so maybe I should just be quiet. Except, of course, that I use statistics and economics every day in my job. I would guess, however, that it's not the lack of degree that is at issue here.

if you want a microsoft founder from a real middle class background, the one you want is Paul Allen, who came from true middle class circumstances to become the third wealthiest person in america

I re-read what I posted. Sure enough, I cited Paul Allen. Hmmmmmmm. And, of course, we are in agreement that you are part of the middle class, albeit the upper middle class, if you are below the top 1%. Seems that would mean that Bill Gates was a middle class founder of Microsoft. Hmmmmmm again.

Thus, when we speak in terms of flat median income over the last 30 years in real terms, what we mean is that the sole gain between a median household in 1977 and a median household today is that today's median household does, in fact, have a higher standard of living due to better quality goods.

Those horrible people who kept all of us from having wages, just a higher standard of living. How can we live with that?

but they don't have a penny more to spend; indeed, they have fewer pennies, which is why, since roughly 1973, most middle-class families have needed two wage-earners to support the middle-class lifestyle.

Actually, if you were to live at the standard of living of 1973, on today's median wage, you would have much more disposable income. Hmmmmmm, sounds like either way, we are better off at the median than we were in 1973. Can you please show me how we aren't?

Also, why aren't you using the same starting dates consistently throughout your post? One could accuse you of cherrypicking data to support your beliefs when you do that.

virtually all of the fruits of an economy whose size, in real terms, has more than doubled over the past 30 years, have gone to a very limited number of households.

Like Paul Allen, I come from a below the median background. I am now in the top 1% of all income earners (although not top 1% of wealth owners, that's different and I'm not wealthy yet). I'll take it. I worked my ass off, didn't come from privilege and I'm living proof that it can be done, regardless of what Kevin, and the rest of you, want to claim.

And, I would have to argue that you are wrong. The economy has roughly doubled in the past 30 years, agreed. The standard of living of the median household is much higher than it was 30 years ago. Probably double. Are you old enough to remember what it was like 30 years ago at the median? I am. I'll tell you, I sure like it better now. Even when I was only making middle class wages I did. ONLY, how horrible.

Now, let's try to understand another of your points.

this is different from the fact that over the course of a working life, you are likely to make more money. A child of the upper-middle class who goes to college, teaches for a couple of years at $25K, then goes to law school and becomes a partner at gates' dad firm, is not experiencing income mobility in any meaningful sense of the term.

What a handy way to make sure that ideas of equality of opportunity and income mobility don't get to count. So, if I start my working life at $400/month and am now at $17K/month, it doesn't count if I'm a child of the upper middle class? Neat. Even though two things are true. First, that money is my parents, not mine. Second, even though I started in one grouping (since we have imputed my parents wealth to me) and moved to another, that isn't income mobility. Neat. It only counts if you like it, apparently. So much for using actual statistics.

Sorry Howard, all you have done is filter life through left wing prejudice.

Posted by: Eric on April 8, 2007 at 9:49 PM | PERMALINK

matthewrmarler, let's explain this one more time: everything you're discussing at 9:42 is already taken into account by the hedonic adjustment.

now, people debate the hedonic adjustment and its extent, so it may be over or understating the reality, but it is, nonetheless, embedded within all the data: it's not some secret that you've stumbled across.

and let's explain mobility one more time: yes, during people's life course, they will have different levels of income. what makes sense to look at is the same type of scenario - i.e., a median-income household - at different historic moments.

we can actually track pretty carefully how much the upper 1% of households earns (this article covers 1913- 1998: http://elsa.berkeley.edu/~saez/pikettyqje.pdf and this one updates it: http://www.cbpp.org/7-10-06inc.htm#_ftn1).

in short, a tremendous percentage of the increased income in america in general has gone entirely to the upper 1% of households by income (yes, we get it that some of those households aren't the same households, but the point is how little income is left over for everyone else to experience advances, which is why they haven't, and why most middle-class families have two wage-earners today, not one).

Posted by: howard on April 8, 2007 at 9:50 PM | PERMALINK

Marler:

In all of American history, the median earners of today have the greatest real wealth, all things considered, of all the median earners.

So, what's your point?

By the way, a below median earner today is much better off than the equivalent below median earner was in, let's say, 1970. In fact, the same statement about a below median earner today could be made, that they have the greatest real wealth, all things considered, of all below median earners throughout our history. This is almost certainly true.

My family, in 1970, was definitely bottom quintile. We received medicaid and food stamps, and both my parents worked full time. We really were working poor. We had no TV, two cars that my father barely managed to keep running in his spare time. We ate food that was truly considered poor then (liver, chicken, canned vegetables, etc.) and McDonald's was a treat.

Most bottom quintile families today have cable and a TV, a computer, eat pretty decent food (when's the last time they bought liver or ham hocks because they were very cheap, for example?) and so forth. Often they are at this significantly better than 1970 standard of living with only one income.

So, I have to ask, based on observed evidence, where does the idea that people's standard of living is stagnant come from?

Oh yeah, I know all about QALYs. I'm a CxO in a fairly large hospital system. We won't even start talking about how government intrusion and intervention has increased the cost of healthcare, or made more and more people uninsurable.

Posted by: Eric on April 8, 2007 at 10:00 PM | PERMALINK

howard: Thus, when we speak in terms of flat median income over the last 30 years in real terms, what we mean is that the sole gain between a median household in 1977 and a median household today is that today's median household does, in fact, have a higher standard of living due to better quality goods.

Eric, note how Howard turns the higher standard of living today to a "sole gain". Hence some of my mockeries of earlier: actual increases of wealth are here discounted on the grounds that there are no increases in extra cash.

If you track across a few decades, and look either at what exactly the same goods cost, or look at exactly what can be bought for 10% or 50% of median income, you find what I claim: constant goods and services undergo reductions in price (expressed as a fraction of median income), or constant fractions of a median income buy better goods. Median earners of today can buy more real wealth than median earners of any previous decade.

The major exception, and it is major, is housing, and housing price changes vary dramatically across the nation, and dramatically by class of housing costs. From 1984 to 1986, for example, in Pittsburgh, PA, in Squirrel Hill north of Forbes avenue, the median price of housing declined a few percent while the mean price of housing increased a few percent. For median earners, this meant that they could buy better houses in 1986 than in 1984. Unfortunately for me, I was selling near the median, and I sold for less than I had bought. This phenomenon, of the median house price falling while the mean house price rises, has happened in many areas of the U.S. In San Diego, the median prices have increased, but the median houses have gotten bigger and better-appointed, so a real comparison is hard to make.

Part of the problem with comments like Howard's is that people think the CPI accurately measures what it is intended to measure. In fact, it is a very poor measure of what it is intended to measure.

Posted by: MatthewRMarler on April 8, 2007 at 10:01 PM | PERMALINK

Howard:

yes, we get it that some of those households (top 1%) aren't the same households

In fact, more than 90% of those households did not have parents in the top 1%.

Aside from that, unless you really think that raw wages is the only way to measure standard of living, everyone is better off today than in 1970.

Oh yeah, my wife hasn't worked since I was at the, roughly, $60K/yr point, in California. In the California market, that isn't all that great, barely above median. Hmmmmm, actually, even that is untrue. When our kids were young only I worked. Making below median income. We accepted we wouldn't have luxuries such as new cars every two years, Disney World vacations in the Disney hotels, etc. We, however, had a good, comfortable life. On one income. Below the median. Then, when our kids got into school, my wife worked for a while.

When it became obvious that I had a significant shot at upper management and a top 1% income, my wife elected to stop working so that we could focus on that opportunity. We, again, chose to make some sacrifices (of luxuries) in order to have long term gain.

I'll say it again, it's Nintendo generation thinking. Combined with typical left wing zero sum thinking.

Posted by: Eric on April 8, 2007 at 10:08 PM | PERMALINK

eric, obviously you don't have the slightest frickin' clue what "left-wing prejudice" is.

but let's put that aside: your claim was that bill gates was from a "middle-class" background. he was not. your further claim is that he wasn't from a "wealthy" background. that is somewhat definitional, but by a reasonable definition that encompasses the upper couple of percent of households by net worth, he was (i happen to know something about his family).

yes, you did mention paul allen elsewhere in your comments, and i missed that.

as for the rest: you seem to have a problem with understanding a basic point. yes, it is true that today's median income household has a higher standard of living than did 30 years ago (i use 1973 because that's when the initial oil embargo was, which most economic historians cite as a major inflection point in the american economy, after which we witnessed a number of changes, but i also used the term 30 years because that's what Kevin used up above). that was my point about the hedonic adjustment: qualitatively, of course, today's median income household has cable tv, and a better car, and a better tv.

but so what? you could have said that in 1973 about 1943; you coudl have said that in 1943 about 1913. you could tell a truly poor person today that he's never had it so good, and it would be true, but it wouldn't mean anything. in lots of respects, i live better than a king did 500 years ago - so frickin' what?

The important matter is that from 1945 (i'm picking this date, eric, because world war ii ended, ok? and i picked the previous two dates to use the 30-year spectrum, ok?) to 1973, not only was there a hedonic improvement, there was an income improvement. and since then, there hasn't been.

as for income mobility, try and read, will ya? when i say there will always be examples of income mobility, how is it that you seem to doubt that i concede without question income mobility (as it happens, eric, yes, i remember 30 years ago, and yes, i earn more than my parents did).

but yes, from an analytical basis, there is a difference between typical life course changes in income and a change in your class status from your family of origin. you earn more today than you did when you were younger: this makes you completely typical and has nothing to do with the issue of where the median household was 30 years ago and is today.

you start from an upper middle-class family of origin and you end up upper-middle class, you haven't experienced income mobility in a sense that is meaningful to your shout-out to equality of opportunity.

meanwhile, i have no idea what you think you were "explaining" at 6:55. here i thought you were trying to contribute to a dialgoue in a rough-hewn kind of way, but apparently i was wrong. now care to explain what you were "explaining" (you can't even seem to come to terms with whether you are "wealthy" or not).

Posted by: howard on April 8, 2007 at 10:08 PM | PERMALINK

eric, since i have made it perfectly clear that wages and standard of living are two different matters, i don't know what your chip on your shoulder is.

and since the consideration with the top 1% of households that i introduced was where has the increased national income gone, whose parents were in the top 1% is a complete irrelevancy that i guess your should chip keeps you from grasping.

for a guy as well-off as you are, you seem to be amazingly angry. i wonder why?

Posted by: howard on April 8, 2007 at 10:11 PM | PERMALINK

Marler:

Hence some of my mockeries of earlier

Got it now, you and I are in agreement. Kevin, mcdruid, Howard and the rest of the commenters here turn reality on its head to claim that the world is now a horrible place, where people are worse off than they were in the past. Even though they live better, have more luxuries, live longer, have nicer houses, better cars, better diets, etc.

Sorry for my earlier attack, your post sounded so much like the typical progressive attack that I thought that's what it was.

Posted by: Eric on April 8, 2007 at 10:12 PM | PERMALINK

Howard

for a guy as well-off as you are, you seem to be amazingly angry. i wonder why?

Oh, I'm not angry. I just detest the twisting of reality around income mobility and standard of living that you are practicing. And, I'm hoping that the silent readers will be helped by what I'm saying and see through the falsity of what you have to say.

Posted by: Eric on April 8, 2007 at 10:14 PM | PERMALINK

Eric: Marler:
..
In all of American history, the median earners of today have the greatest real wealth, all things considered, of all the median earners.
..
So, what's your point?

my point is to contradict the following:

Virtually every measure of middle class and working class wages — median wages, cash wages, cash plus health benefits, lowest quintile, etc. — has been close to flat for over 30 years despite steady gains in productivity during the entire period.

In the following measure, namely what can be bought a fixed fraction of earnings, wages have continually increased. Productivity gains in many areas have increased the purchasing power of median earners. A median earner of today can afford more effective care for a heart attack than a median earner of decades ago; a median earner of today can afford more effective care for HIV/AIDS than a median earner of a decade ago.


So, I have to ask, based on observed evidence, where does the idea that people's standard of living is stagnant come from?
...
Oh yeah, I know all about QALYs. I'm a CxO in a fairly large hospital system. We won't even start talking about how government intrusion and intervention has increased the cost of healthcare, or made more and more people uninsurable.

As to the first question, I do not purport to know the answer. As to the issue of government intervention, loads of government funding goes to the medical research that drives down particular costs, so government intervention can work both ways. As a percent of the median income, in your hospital, what effective treatments have increased in cost over the last 3 decades? Adjusting for age of onset, for what diseases have the QALYs become more expensive, compared to the median income, in the last 3 decades? For all diseases that I know of, either the treatments are new, so no comparison is possible, or else 50% of the median annual salary will buy more healthy life expectency than before.

Posted by: MatthewRMarler on April 8, 2007 at 10:18 PM | PERMALINK

eric, let's shed some scholarly light on this, shall we? this is just one of many possible examples, but i don't have all afternoon:

21
Of those who started in
the lowest quintile in the late 1960’s, 31.0 percent still
had incomes below that fixed threshold two decades later,
despite the fact that they were more than 20 years older.
This represents a substantial persistence of low income over
a period of positive, but slow, economic growth and rising
inequality. An additional 25.4 percent of those who started
in the lowest quintile moved only into the next higher group.
On the other hand, some individuals who started in the
lowest quintile made substantial absolute progress -- 11.4
percent ended up in the highest group.22 Eighty percent of
those in the top quintile in the late 1960’s were still in
the highest group two decades later. Among those who were in
the highest income group in the early 1990’s, over half were
also in the two highest quintiles in the late 1960’s and only
4.5 percent started from the lowest quintile in the late
1960’s.23

http://fmwww.bc.edu/ec-p/wp398.pdf

matthewrmarler, let's try one more time: if the official inflation measures did not have a hedonic adjustment built in, then we would see a loss in purchasing power. instead, the hedonic adjustment is built in and we see that therefore wages are stagnant, but your standard of living for that stagnant wage is higher.

it's not that hard a concept to grasp, really.

Posted by: howard on April 8, 2007 at 10:21 PM | PERMALINK

Again Howard, if you choose to define wealth as the amount of income that you earn in a fashion that is dependent on someone else's assets, then I am wealthy. Although only recently (past 12 months). If, on the other hand, you choose to define wealthy based on what you own (which is a far better definition, since it is not dependent upon someone else's assets or stability), I am not wealthy. Although I fully expect to be truly wealthy within another decade, give or take.

That said, I have a definition of wealthy that is pretty solid, and does not depend upon income. I consider employment income to make you middle class (and there's good reason to think that way).

Actually, the fact that the bottom quintile of Americans live better than a king 500 years ago is of importance. It means that the position of everyone in this society has improved, economically, in real and absolute terms.

Why did you get so upset that I called you out on using different dates and starting points? Don't like an accusation that you're cherrypicking?

I happen to know something about Gates' family too. Everyone in this country who cares to know, does. They were certainly upper middle class, but not wealthy.

P.S. I would suggest that government's economic intrusion and intervention has as much, if not more, to do with stagnation of real wages as anything else. Care to discuss.

Posted by: Eric on April 8, 2007 at 10:25 PM | PERMALINK

eric, for an unangry guy, you sound pretty angry, and you're having an enormous amount of trouble articulating why (your attacks on matthewrmarler are pretty revealing in this respect).

what you've presented is your personal life story. on the basis of it, we're supposed to ignore all the actual data which has been chewed over and over by economists and others for a very long time now.

i have been 100% accurate about standard of living information, and you are overly glossy about income mobility, but that's an irrelevancy to the discussion that you can't seem to grasp.

Posted by: howard on April 8, 2007 at 10:25 PM | PERMALINK

howard: yes, it is true that today's median income household has a higher standard of living than did 30 years ago (i use 1973 because that's when the initial oil embargo was, which most economic historians cite as a major inflection point in the american economy, after which we witnessed a number of changes, but i also used the term 30 years because that's what Kevin used up above). that was my point about the hedonic adjustment: qualitatively, of course, today's median income household has cable tv, and a better car, and a better tv.
...
but so what? you could have said that in 1973 about 1943; you coudl have said that in 1943 about 1913. you could tell a truly poor person today that he's never had it so good, and it would be true, but it wouldn't mean anything. in lots of respects, i live better than a king did 500 years ago - so frickin' what?

You have directly contradicted one of Kevin's points, and you have directly contradicted the very point that I also contradicted. Why does that not mean anything? You and I both seem to agree that real wealth for middle Americans is increasing. You want more for the middle Americans, as does everyone. But that's different from the claim that real wealth is stagnant.

Posted by: MatthewRMarler on April 8, 2007 at 10:26 PM | PERMALINK

Somehow I am reminded that on 4/20/05 Bush signed the bankruptcy bill that made it much harder for average citizens to recover from misfortunes of a financial nature, with absolutely no exceptions even for victims of identity theft, those experiencing debilitating illnesses, or--US service members.......

Posted by: consider wisely on April 8, 2007 at 10:30 PM | PERMALINK

Howard:

what you've presented is your personal life story.

And the stories of some other people I know. But, you're correct, it's anecdotal. I never claimed it wasn't. I also pointed out that data within the social sciences, which includes economics, is built on anecdotal evidence.

on the basis of it, we're supposed to ignore all the actual data which has been chewed over and over by economists and others for a very long time now.

Hmmmmmm, not all economists agree with the ones you choose to quote. But, of course, that's inconvenient to your argument.

About Marler, as soon as I recognized that he is using sarcasm to mock your position, I said so. Ironic that his mockery was so close to what I would anticipate, based on past experience, to read on a site like Kevin's, that I mistook it for the real thing.

Posted by: Eric on April 8, 2007 at 10:32 PM | PERMALINK

Howard:

i have been 100% accurate about standard of living information, and you are overly glossy about income mobility, but that's an irrelevancy to the discussion that you can't seem to grasp.

First, your discounting of standard of living is silly. If standard of living improves, then you are better off.

Second, the quotes you cited indicate significant amounts of income mobility. Not as much from one 30 year period of time to another. Interestingly, the second 30 year period cited is the first one with the impact of the Great Society programs having true influence on the economy. Again, care to discuss?

Posted by: Eric on April 8, 2007 at 10:35 PM | PERMALINK

Eric, it's getting hard to figure out what you are talking about, because you don't seem to be using terms in a meaningful way.

Household wealth is the household balance sheet: it is your net worth, inclusive of all your assets minus your liabilities.

Income is the household p+l: it is the money you take in from your job and from other assets.

so i can't for the life of me figure out what you are trying to say in your first 2 paragraphs at 10:25.

as for your remaining paragraphs, the point is that the economy has grown for quite a few centuries now: the fact that the economy has grown as a collective entity, and the fact that the growth has led to higher standards of living all around, doesn't make up for the fact that the median household today has no more income floating around than it had 30 years ago. it is, in short, irrelevant to this discussion.

you didn't "call me out" on anything, by the way. i quite deliberately used two different dates for purposes of discussion; i'm not cherrypicking anything.

and you obviously don't know enough about bill gates family background, or you have a rather different definition of wealth than i proposed.

as for your PS, sure, make your case, Eric: i'd love to see it. maybe you'll even acknowledge, in the course of it, that we don't have a free market in america, we have an oligopolistic system in which those with wealth and power can influence the lawmaking process in their favor.

Posted by: howard on April 8, 2007 at 10:37 PM | PERMALINK

Howard:

Household wealth is the household balance sheet: it is your net worth, inclusive of all your assets minus your liabilities.

Indeed. Which is what I said. And said that using income as a definition for being "rich" or "wealthy" was incorrect. Thus, I am not wealthy. I am, as I've stated, in the top 1% of income earners. You seem to have trouble reading what I say, which has been consistent.

and you obviously don't know enough about bill gates family background, or you have a rather different definition of wealth than i proposed.

Once again, the Gates' family in the early 1970's, was not wealthy based on a definition of wealth = assets and income generated by assets. They were upper middle class, as we both agreed early on, but you now choose to change.

maybe you'll even acknowledge, in the course of it, that we don't have a free market in america, we have an oligopolistic system in which those with wealth and power can influence the lawmaking process in their favor.

Laughs, I've been saying that for years. The question, of course, is how come. I wonder what you think? I'm willing to bet it's not what I think, but we shall see.

Aside from that, let's point out that there is still far more income mobility, real wealth and economic freedom in this country than almost any other. I base that on Cato's annual economic freedom index.

Posted by: Eric on April 8, 2007 at 10:51 PM | PERMALINK

Eric:

Interestingly, the second 30 year period cited is the first one with the impact of the Great Society programs having true influence on the economy.

Before I forget, it's also the first 3 decade period where massive government regulation and steeply progressive taxation systems could come into play. Regulations and taxation that only the wealthy, whether corporations or individuals, could afford to deal with. The progressive quest to make America better enabled the wealthy to build barriers against entrepreneurs. What are your thoughts Howard?

Posted by: Eric on April 8, 2007 at 10:55 PM | PERMALINK

Eric, i have no idea what this sentence means: "Again Howard, if you choose to define wealth as the amount of income that you earn in a fashion that is dependent on someone else's assets, then I am wealthy."

it does not register as the definition of wealth that i proposed, although you say that we are saying the same thing.

more broadly, we agreed that bill gates' father is upper middle-class in income; this of course doesn't speak to his wealth status. Unless you want to restrict wealth to the upper one-tenth of one-percent (the Forbes wealthiest americans list and a few more), it is entirely possible to be upper middle-class in income and wealthy. Bill Gates' dad is an example.

second, i don't know why you have a problem understanding this: i am not discounting standard of living. that doesn't mean that people's income has increased: it means that what it means to be a median household is more comfortable in terms of material possessions than it once was. since the discussion is about income - at least, that is the original point here - the fact that you have a safer car today isn't relevant.

the quote i provided you (and it's one of many) is intended to demonstrate that it is true that people's incomes do change over time; it also demonstrates how modest actual income mobility is. read the whole article and you'll learn something. in point of fact, income mobility in america is declining.

as for your sense of history, we've had a progressive income tax system for much longer than 30 years. indeed, during the 1945-1973 period, we had a much more progressive income tax structure and we also had better gdp growth, more income mobility, and the ability of the median household to obtain real wage gains.

correlation is not causation, of course, but it's not irrelevant, either.

the fact that owners of capital are (and have been, at least since the progressive era) to use regulation to help secure their positions is neither here nor there to why we've had income stagnation. my own opinion (shared by many economists) is that we've had an incomplete period of globalization (that is, manufacturing has been globalized; service professions have not), a very strong and well-funded anti-union movement, the end of the fairness doctrine, and a lack of interest in the political class (other then the clinton years) in the status of the median household, all of which have contributed to the flatlining of median household income.

matthew, you're confusing terms in the way that eric incorrectly thinks i am.

kevin wrote very specifically about wages. real wages have been flat. it is not contradicting kevin to note that what you can buy with your flat real wages has gotten better. it is a fact that from 1945-1973, not only could what you buy with your wages get better but your real wages increased as well.

Posted by: howard on April 8, 2007 at 11:29 PM | PERMALINK

You folks are flinging definitions and statistics and anecdotes back and forth to little effect.

Isn't Kevin's point that the three lowest quintiles now command a smaller share of the overall pie?

If this is so, how did it happen? Is it a good thing? If it's not a good thing, was it avoidable?


Posted by: skeg on April 8, 2007 at 11:40 PM | PERMALINK
… more income mobility, real wealth and economic freedom in this country than almost any other…. Eric at 10:51 PM
CATO, all is clear Here is a chart of American family income mobility

…One study, by Greg Duncan of the University of Michigan, measured income mobility during two time periods. In the first, 1975 to 1980, incomes were more equal than they are today. In the second, 1981-1985, income inequality began soaring. And what happened to income mobility during these periods? Duncan found that the middle class began shrinking after 1980, with correspondingly more people leaving the middle class (for either the upper or lower class) than entering it. Here are the exact figures:….

Comparing income mobility between the US and Europe
…The study reviewed data on economic and social measures to assess how well the U.S. has leveraged its vaunted dynamism to improve American living standards. It found that the U.S. is the most unequal of the major OECD countries, with a higher Gini coefficient, lower relative incomes among poor households and a bigger gap between rich and poor. The report notes that:
The U.S. has a smaller share of low-income workers that make it to higher income levels than any other OECD country. This contradicts the widespread belief that American workers have a much greater chance of getting ahead than do European workers…..

Posted by: Mike on April 8, 2007 at 11:45 PM | PERMALINK
….real wealth for middle Americans is increasing…MatthewRMarler at 10:26 PM
Here are some nice charts showing that what is rising is debt and productivity while real earnings are flatish and saving decreasing.

Wages have certainly not kept up with GDP which leads to a decrease in purchasing power, the lower cost of DVD players notwithstanding.

Posted by: Mike on April 9, 2007 at 12:31 AM | PERMALINK

The Objective Historian writes:

But, if you really want to help the poor and middle income, hmmmmm . . . , maybe it's about time to send the 12 million illegal job competitors they face back to where it is legal for them to live and seek employment .

You write in such a convoluted, verbose manner that it becomes a chore to read the rest of your post after the first couple of sentences, but explain why unemployment is at record low levels with all these illegal job competitors and outsourcing.

Posted by: Andy on April 9, 2007 at 12:43 AM | PERMALINK

Eric,
I am with Howard on this one, you need to write more clearly. I do not understand your idiosyncratic definition of wealth and the distinction you are making.

Secondly, anecdotes are not the currency of social sciences: perhaps they are triggers to data - which is the real life blood of understanding. Anecdotes illuminate and personify, but it is the studies that prove it.

For example, a quick google on "france productivity" brings up first:
"Still, French workers remain among the most productive in the world, ahead of Britain, Germany, the United States and Japan, according to the European statistics agency Eurostat, the AP reports. "

w.forbes.com/2005/03/22/cx_da_0322topnews_print.html

These are real numbers and not anecdotes. Speaking of Gates, Jobs, Buffet and Trump are anecdotes. The actual study (see above) is the truth (well, an approximation thereof.)
------
When I mentioned Gates' father, I purposely didn't state whether he was rich since I realized that we hadn't defined it. But there is this:

"A 2003 Gallup poll found ... the public's median definition of "rich" was an income of $120,000 -- or assets of $1 million. We asked the same question of money-savvy MSN Money readers, and a majority of the more than 11,000 who responded felt that they would need at least $5 million to consider themselves rich."
articles.moneycentral.msn.com/RetirementandWills/EscapeTheRatRace/JustHowRichIsRichReally.aspx

Googling Gates Sr. and you find a few sites calling the family "wealthy:"
"His family was wealthy; his father was a prominent lawyer, his mother served on the board of directors for First Interstate Bank and the United Way, and her father, J. W. Maxwell, was a national bank president."
w.zoominfo.com/Search/PersonDetail.aspx?PersonID=267246

and a statement by Bill Gates: "My parents are very successful, and I went to the nicest private school in the Seattle area. I was lucky. But I never had any trust funds of any kind, though my dad did pay my tuition at Harvard, which was quite expensive."

w.windows-vista-update.com/Bill_Gates.html

In 1967 tuition at Lakeside (his private school) ran $5,000 a year -- much more than Harvard.
philip.greenspun.com/bg/

Posted by: mcdruid on April 9, 2007 at 2:39 AM | PERMALINK

In order to avoid the censors, I removed the http:// and all but one "w" from my links.

Posted by: mcdruid on April 9, 2007 at 2:41 AM | PERMALINK

Remember that when you read of talk of wage increases to 'service workers' that includes banking and financial services.

The huge gains at the top obscure real losses in all other categories. Wall Street accounts for only 5% of employment in NYC, yet receive 20% of all wages.


Working Harder for the Man
By BOB HERBERT

[snip]
'There are 93 million production and nonsupervisory workers (exclusive of farmworkers) in the U.S. Their combined real annual earnings from 2000 to 2006 rose by $15.4 billion, which is less than half of the combined bonuses awarded by the five Wall Street firms for just one year.

Just these bonuses — for one year — overwhelmingly exceed all the pay increases received by these workers over the entire six-year period,” said Mr.[Andrew] Sum [Center for Labor Market Studies at Northeastern University in Boston].

Any time the argument is framed in terms of 'averages' you're being spoon fed lies and distortion. Rising Per Capita GDP per se doesn't mean a damn thing if all the gains are at the top 1%.

The government numbers for unemployment are a joke. The true rate is probably around 9 - 9.5%.
The official projections (guesses, by any other name) are released with much fanfare, then a month later are adjusted, usually downward, but that gets buried (as do the downward adjustments to GDP).

Take out expanding government employment and the real gains are minuscule and don't begin to cover the number of new entrants into the market.


'Fast economic growth, after all, is a means to an end--namely, higher living standards for most people. By any decent moral calculation, an economy that does not produce higher living standards for most people is not a good one. '

Over the last quarter century, the portion of the national income accruing to the richest 1 percent of Americans has doubled. The share going to the richest one-tenth of 1 percent has tripled, and the share going to the richest one-hundredth of 1 percent has quadrupled.

"If the rich control a growing share of the national income, they will turn their financial power into political power to protect their holdings. Untrammeled economic inequality will inevitably lock itself into place as the rich buy political influence and propagate policies that safeguard their wealth."

"Third, the whole pattern of rising inequality does not suggest a split between the educated and the uneducated. The rise in inequality isn't between the top one-fifth and everybody else; it's between the top one-hundredth and everybody else. " Were Clintonites Wrong About the Economy?
Freakoutonomics
by Jonathan Chait

Posted by: MsNThrope on April 9, 2007 at 7:41 AM | PERMALINK

' And then there’s the question of who’s getting the new jobs. According to statistics compiled by the Center for Labor Market Studies at Northeastern University in Boston, the only groups that have experienced a growth in jobs since the last recession are older workers and
immigrants.'- The Danger Zone
By BOB HERBERT

http://select.nytimes.com/2007/03/15/opinion/15herbert.html
March 15, 2007

I've seen estimates (Pew I believe) that 46% of all 'new jobs' created are filled by immigrants.
This is the parallel 'ethnic economy' which operates in flagrant violation of Title VII of the Civil Rights Act among other things. It's an economy of, by and exclusively for immigrants.


Posted by: MsNThrope on April 9, 2007 at 9:02 AM | PERMALINK

Meanwhile:

Pink slips litter loan industry - Los Angeles Times
www.latimes.com/business/la-fi-layoffs6apr06,0,376...

[snip]

Nationwide, job losses in the category that includes mortgage lending, real estate and construction climbed 346% in the first quarter, to 21,245 from 4,764 in the same period last year, according to outplacement firm Challenger, Gray & Christmas Inc.

"It's a whole sector of the economy that's leaking," Chief Executive John A. Challenger said.

In California, the 3,679 mortgage industry jobs lost in the quarter pales compared with the 70,000 construction jobs that economists figure could disappear over the next two years. When considered individually, though, the loss of a higher-paying white-collar position can be more significant for the economy.

"Each one of these finance jobs is worth at least two construction jobs," said Ryan Ratcliff, an economist with UCLA's Anderson School of Business.

[snip]

Posted by: MsNThrope on April 9, 2007 at 9:30 AM | PERMALINK

http://www.prospect.org/deanbaker/
Debt: The Secret of Private Equity

Floyd Norris has a good piece for people like me who were wondering how so many public companies could suddenly become hugely profitable when they are taken private. The answer is debt. The private equity funds borrow to the hilt against the companies' assets and then pay out huge "dividends" to themselves. This gives the private equity funds a quick payback, it allows the company to deduct the interest on the debt, and leaves ill-informed bondholders with the risk that the company won't make enough to pay back the bonds.

It has been widely reported in the business press that spreads between safe bonds (e.g. government debt) and highly risky bonds have collapsed. This creates a great opportunity for private equity managers to make a fortune. The trouble will be for the holders of the bonds, who apparently don't recognize the risk they are taking. (Unfortunately, the ill-informed investors are often people who get paid a lot to manage other people's money, for example pension fund managers.)

The workers who may lose their jobs as heavily leveraged companies lack the money to invest and remain competitive are also potential losers in this story, as is the economy as a whole, with massive amount of resources being devoted to financial arbitrage rather than productive investment. After the collapse, we will not doubt read many good analyses of the situation from the "who could have known" school of economics.

--Dean Baker

Their newest target: Dow

*shudders*

And as I posted elsewhere here, it isn't any longer merely the assets but nonexistent future profits which are being stripped out in these entirely fictitcious grants of 'dividends'.

Posted by: MsNThrope on April 9, 2007 at 10:31 AM | PERMALINK

That the LBO sharks are now going after companies of vital importance such as this is cause for us all to be afraid, very afraid.


'Today, 110 years later, that philosophy remains the same, with our 43,000 employees working hard to shape a better quality of life for people across the globe.

[snip]

Dow’s six operating segments (Performance Plastics, Performance Chemicals, Agricultural Sciences, Basic Plastics, Basic Chemicals, and Hydrocarbons and Energy) help bring thousands of consumer goods and industrial supplies to market—from toys, tools and textiles to pharmaceuticals, personal care products and water purification technologies. We are one of the world’s largest chemical companies, we have customers in more than 175 countries and manufacturing sites in 37 countries, and our sales in 2006 topped $49 billion.'

Source: Dow annual report 2006
dow.com

Posted by: MsNThrope on April 9, 2007 at 11:19 AM | PERMALINK

howard: it is not contradicting kevin to note that what you can buy with your flat real wages has gotten better.

If the products and services have gotten better, then your real wages have increased, not stayed flat.

Mike, your comment about debt certainly is true and does complicate the picture. The following is false: Wages have certainly not kept up with GDP which leads to a decrease in purchasing power, the lower cost of DVD players notwithstanding.

If a consumer can actually buy more stuff (or better stuff) for the cost of 50% of median income, then purchasing power has increased. That stuff is DVDs for some and breast cancer tratments for others, and automobiles for others. Loads of stuff is either cheaper (as % of median income) or better, or both. A median income can buy more stuff than ever before. Real purchasing power has increased for median earners.

Posted by: MatthewRMarler on April 9, 2007 at 4:25 PM | PERMALINK

In fact, as I've pointed out somewhere before, the official inflation measurement does account for improved quality of certain goods such as autos and computers. So the median income figures do take that into consideration.

Posted by: mcdruid on April 9, 2007 at 5:17 PM | PERMALINK




 

 

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