I love that chart, Kevin. It explains so much about politics in my adult lifespan. It explains why white males are so pissed off. It explains why they are angry and suspicious of feminists and immigrants. It explains why so many folks don't seem to be willing to live and let live, and whine about "special privileges".

I don't say that because I want to keep women from equal pay. I don't say that because I want to keep America pure and lily-white. But we need to think win-win.

it would be nice if the graph was labeled as to whether it is in real or nominal dollars.

Looking at the comparison between the post-WWII 30 years and the most recent 30 years started me wondering how representative the first period was -- decline after an unusual upward surge doesn't mean the same as decline after a steady slight growth. I honestly don't *know* the economic history on this, but I'd think it might be relevant.

WAGE GROWTH....Tyler Cowen suggests that U.S. wage growth hasn't been quite as bad as liberals make it out to be:

Unless I'm reading the chart incorrectly (no apostrophes), there hasn't been any wage growth in the last 30 years (except, probably, in the top 5%).

Alas, a blog isn't the place for serious social science research. (Much less the comments to a blog.) But my first question would be: what does the corresponding chart of male and female wages look at the 75th and 25th percentiles? In other words, have male wages stagnated and female wages risen at every income level?

"We should be trying to figure out why."

Hmmm... I think this is probably no big mystery.

Higher-paying unionized jobs (traditionally male) have declined. A large part of the uneducated or unskilled portion of the male workforce has been forced down-scale as a result.

The downward mobility has been partially offset by wage increase for the higher-educated and/or skilled male workers. (Offseting effects - the rich getting richer and mid/lower-range losing ground).

On the female side, you're seeing the effects of a segment of the female workforce moving upward out of traditional low-paying jobs. There was not nearly as much downside movement available.

Another reason not to fear drowning:

"It's true that median depth of the stream we're crossing hasn't been very shallow for the last 30 yards..."

Growth industry: Typing furiously in Mommy's basement, parrotting Limbaugh's lies.

Go to it, Al and Eggy!

Something is wrong with this graph. I used to work in the pension department of a large company where I looked at earnings over the last 30 years. They didn’t look anything like this graph. Presumably the graph is adjusted for inflation, but there must be some problems with the methodology.

Look around! My parents didn’t have anywhere near the standard of living I have now. Most homes have much larger, higher-quality TV’s, cell phones and microwave ovens didn’t exist but are now in most every home. Homes and cars have air conditioning.

I don’t have the exact stats handy, but the average square footage of a home in the US has doubled in the last few decades. The average immigrant owns a home after 10 years in this country.

Maybe technology has brought relative prices down, I don’t know. But this graph does not tell the entire story. We have more comforts than any society in history. We have all the opportunities we could ask for. America is a great place to live if you have even a little motivation. Some try to use graphs like this to convince us that it’s all doom and gloom. I don’t have the numbers to prove it, but life is getting better here. Lighten up!

Most homes have much larger, higher-quality TV?s, cell phones and microwave ovens didn?t exist but are now in most every home. Homes and cars have air conditioning.

All bought on credit.

There's another angle to this that is almost always ignored.

In finance and investment, any time the volatility of a risk increases, that should be reflected in the price. Look at how the market prices bonds - U.S. Savings bonds will have effectively much lower interest rates than distressed corporate bonds, because investors expect to be paid for the difference in risk.

For median laborers, there has been a substantial increase in risk in the last 30 years. Layoffs have gotten more common, there are fewer high-wage blue collar jobs out there. That change in risk should be included.

IMHO, that's one of the reasons why many people rate this economy so poorly, because they feel the increased risk and the rewards ain't getting any better.

Isn't this only half of the story, with the other half being inflation?

You are talking about income, Cowen is talking about wages. They aren't the same thing.

As far as Tyler's argument that "twenty-eight percent growth in median wages is the best available estimate", well, I think that's not really established by the article he points to. The justification for the selection of the PCE deflator -- which is the main reason the results look "good" -- rather than the CPI-W or the CPI-U/CPI-U-RS is twofold:

1. A single series is available back to 1975. So, why use 1975? The CPI-U-RS is a consistent series back to 1978.
2. The PCE relfects the final basket of goods purchased in the market during the year. So, why is this good? The basket of goods actually purchased in the market would be a good deflator, arguably, to use for a measure of mean income, since its a distribution-insensitive aggregate and thus compatible with the mean. Median measures are distribution sensitive, and thus a deflator that is either focussed on the kind of worker likely to making near the media (like the CPI-W which is designed toward urban wage earners and clerical workers) seems most appropriate, while a distribution-insensitive aggregate like the PCE seems least appropriate.

What seems likely to be the real reason the PCE was selected is also given the piece, though of course not cited as a reason for its selection: "The inflation rates implied by the three price indexes differ notably. While the average annualized rates are similar, the cumulative effect over 30 years is not so modest. Inflation as measured by the CPI-W index is more than 40 percentage points higher than inflation as measured by the PCE deflator."

The inclusion of benefits in the calculation is problematic, too; because health insurance is a large share of "fringe benefits", the including benefits lets the well-documented faster-than-general-inflation (by any common measure inflation measure) cost increase for health insurance be reflected as an improvement in overall labor conditions, all else being the same. This is clearly distorting.

The only legitimate conclusion of the original article is that the various series studied are considerably less incompatible than they appear on their face: their results are much more consistent if common assumptions are made. The author shows this by adjusting the least pleasant results to match the underlying assumptions of the series that produce the best result, and rather nakedly this is because of an agenda to show "stronger growth in middle America's standard of living." But the same result could be reached by doing the reverse of those adjustments.

The idea that the assumptions of the rosier series better reflect the reality of relative conditions over time for workers are, however, for the reasons I've mentioned above, highly questionable.

"My parents didn?t have anywhere near the standard of living I have now" says Ed.

I can't speak for Ed's case, but for most people for whom this is true, it's true because Mom didn't work and wifey does.

Ed (or whatever troll you are). The standard of living has improved because we have better televisions? That's a fair measure?? Those things didn't exist? Not because we couldn't afford them -- because they hadn't been invented yet. My parents at my age had two children and a were on their second home. And my mother was a stay at home mom. I couldn't even begin to afford that on my salary -- and I have more education than my parents did as well.

Does anybody know a quick and easy way of accessing these source data? The BLS site is not very user friendly.

The standard of living has improved because we have better televisions? That's a fair measure??

Certainly, all other things being equal. The question that's trickier is how to weight them to make meaningful comparisons when all other things are not equal -- and thus the debate over hedonic adjustments in cost-of-living deflators.

Frankly, I think it is painfully obvious that anything held up as a cost deflator that is supposed to be of general utility across the economy without a very tight focus on a specific context is useless for anything but producing a false sense of understanding. The relationship between the worth of a 1975 dollar and 2007 dollar is not simple, and is instead highly sensitive to the context in which you intend to use the dollar.

Good point, Kevin. The fact that women have only had modest success in playing catch-up to men is hardly a reason to celebrate.

.... I don t have the numbers to prove it, but life is getting better here...Ed at 4:14 PM

This misses several factors that matter to workers because few were lacking the equivalent gadgets and living standards of their day. They lived well, if not better, with fewer hours of labor, fewer two-earner families and greater family savings. The current savings rate is negative for the first time since 1933. Living on credit portends trouble ahead.

Well, a 30% increase over 30 years (the highest Tyler's source allows, maybe only 25%) is still less than 0.9% per year, and that's giving credit for the increase in health care costs that employees have been eating in lieu of wages. Pretty paltry.

Now where't the chart comparing this rise to the rise in median CEO pay. I want to see that one.

There are three tricks here. Two have already been noted: choice of lowest inflation index, and inclusion of benefits that rise faster than inflation.

But there is a third that is important. Note that Cowan indexes total wages. But hours worked have risen a great deal. A graph showing real HOURLY wage instead of annual wage would show anything like as large an increase.

Look around!

If you look around gated communities, everything is fine. People are living well.

If you look around the another part of town, the part you fear to drive through, you will see terrible living conditions, poor services, overcrowding, lots of homeless people and higher crime rates. You might even notice this part of town is about 1/3 of the whole city. Those being held captive in gated communities never go to that part of town. They do not eat lunch at the soup kitchens.

In heaven everything is fine
In heaven everything is fine
You got your good thing...
And you got mine.

Looks like the angry white males who have been fueling Republican party dominance since Nixon's reelection in 1972 have been getting screwed under Republican rule.

Furthermore Ed your experience is at one firm, that's hardly representative of the country as a whole. For all you know that firm outperformed all of it's competitors and was able to offer a better salary ladder than anyone else.

That doesn't mean that the median wages for men didn't decline at the same time. Median income means that half the population earned more than that and half less. And any change means that either some small percentage of wage earners had a significant drop in income or a very large portion had a smaller drop.

What your seeing is competitiveness at work. All hail the free market.

in 1950 - One earner could work 40 hours a week at a factory job and support a wife and two children, own a house, own a car, etc.

in 2007 - Two earners work 50 hours a week at a factory job and support themsevles and two children, own a house, own 2 cars, etc. Toss in increased avg household debt that is twice that of a 1950s family (counting inflation) and the picture becomes clearer.

Poor people do not pay in cash, they pay in time. I honestly do not care that much about money, I care about how much time it takes to earn said money, enough to pur a roof over my head, food on the table, keep the cars running, etc.

And Ed. Since we now have Large Screen TVs, Microwave ovens and cell phones, could your company now work on a Cure of Cancer and Heart Disease? I wouldn't mind a solution to Global Warming while your at it.

Seems to me the story doesn't tell us anything we didn't already know -- Republicans lie.

Just by reviewing the chart a few minutes we have discovered about half a dozen lies.

Here are some things we know:

Minorities are doing better.
Women are working more.
Men and women are working more hours.
Cost of living has skyrocketed.

We have more gadgets and neat stuff.
We demand a higher standard of living.

Men have seen flat earnings 'growth'.
Everyone is much further in debt.

Compare all that to the GDP growth. Got numbers?
Compare it to CEO pay growth.
Compare it to executive employee pay growth.
Compare it to Congressional pay growth.

They are keeping pay under control because it's part of the plan to 'control inflation'. Republicans have signed onto a specific idea of keeping 6% unemployment, so people won't feel comfortable asking for pay raises.

You and I, my friend, are just another corporate cost to be kept under control, but which has been used more productively over the last 30 years and is making 'the man' a LOT more money.

Nice chart.
I would really like to see a follow up chart that is not only adjusted for inflation but also for hours worked.

It would appear that some of the rising wages for women probably result from women working longer hours in the work force more than anything else.

Ultimately typical Americans are working harder and longer in order to esentially tread water.

The relationship between the worth of a 1975 dollar and 2007 dollar is not simple, and is instead highly sensitive to the context in which you intend to use the dollar.

So, does that mean a dollar for gasoline today is different that a dollar for food?

But hours worked have risen a great deal.

This table shows that for the last 10 years, the number of hours worked has decreased slightly making the wage figures look (slightly) better

So, does that mean a dollar for gasoline today is different that a dollar for food?

No, it means the relative value of a dollar today vs. in 1975 is different for someone whose marginal consumptions is weighted toward (to follow your set of options) gasoline than for someone whose marginal consumption is weighted toward food (though that may not be the best example, ISTR seeing somewhere that energy and food prices tend to vary pretty closely together.)

I don t have the numbers to prove it, but life is getting better here

I'd trade my iPod in a heartbeat for the Blue Cross/Blue Shield plan my parents had, and the 40-hour workweek with a solid month of vacation.

Oh, and a pension.

I got it the first time but couldn't resist, having just come back from the UK where I can tell you I noted the difference in a $ today vs. a $ 2 years ago.

The problem with your differing baskets, though, is that you're basically saying no comparisons can be made at all. Everyone has different baskets of goods. But, if you're going to choose differing baskets of goods, then the PCE is the better price deflator (or something like it).

The BEA has data on regional price differences (COL)and so does the BLS, although not on purchases, I don't think.

Aaron,

It's not just competitiveness.

It is more about power. Big business has been allowed to fire any worker caught even speaking favorably of a union (let alone actually trying to get a union vote) for at least three decades now. That means that all the power for distribution of profits within profitable businesses has been entirely to managers and owners, or the case has been retained by the company. The investment of worker's time on the job and skills has ceased to be a factor in pay rates.

There is NO ECONOMIC THEORY that provides an optimal distribution of corporate profits between capital (including management) and labor. The distribution is always one of comparative power when negotiating wage rates, and a large company facing an organized mass of labor always has a monopoly on the power.

Since Capital and management have the power, they set the labor rates as low as possible, and the market for labor outside the company follows the rates set by big business.

As Paul Krugman points out in "Conscience of a Liberal" the reduction of relative wages compared to management pay and profit has been directly associated with the last thirty years of union-busting by the conservative movement. It hasn't happened in Canada or in Europe. Just here in the U.S.

That's why Krugman argues that the pay rate for labor follows political decisions, not economic results.

Oh, I'm going to make all us males feel soooo much better.

The way to look at this is to put it in the context of GDP per capita growth.

More particularly, GDP per capita at PPP. See Table 1. 1960-2006.

This is based on 2002 PPP, and 1976 $21,694 and 2006 $39,682 gives a net growth of 82% in GDP over 30 years.

So while the economy has near doubled in size per capita, men's wages have declined, women's wages have risen but remain at approximately 50% of men's median wages.

So if we are doing worse, then the "good little women" are doing no better. Where does all that education and productivity go?

This really is indicative of a sick and disenfranchised (and/or ignorant) society, not of a progressive, mobile, healthy one.

It's certainly not government of/by/for the people.

Since you rightly mention "benefits", how one valuates them makes a big difference in "how much income" a person gets (which of course isn't just direct pay!) How can we do that? Is it being done honestly or not, and by whom? This really matters.

>This table shows that for the last 10 years, the number of hours worked has decreased slightly making the wage figures look (slightly) better

Umm yeah, but that is average hours per worker. It does not take into consideration the higher number of workers working. Look at the BLS total earning for nonsupervisory workers, then at the BLS hours index for non supervisory works. Average wage per hour peaked in 1973 and has gone up and down since then without ever reaching the 1973 peak again.

Interesting that the average wage per hour peaked in 1973 and so did our domestic oil output give or take a year or two.

What happens to both parts of that chart when you remove the top 10% of earners? How does real wage growth look for the bottom 90%? How about the bottom 75, 60, 50 or 25%? How are the middle 50% of wage earners doing?

Averages can lie, obviously. Let's get better data and really figure out what's going on.

Roland, from the source.

How did the workers above or below the median fare? .... The 40th and 60th percentiles of hourly wage rates rose by 18 percent and 21 percent, respectively. As indicated in the preceding section, the wage gains are much larger at higher wage rates.

Roland,

The charts are for median icnome, not mean.

It's obviously porno. "Deep Throat" came out in 1972, just when male median income peaked. Since then, men have been wanking their brains out and have become even stupider and lazier than they were before. In the meantime, women, less distracted by frustrated men, have had a chance to inch up the income scale. Prove me wrong.

Obviously for white males wages have gone significantly as minority males are doing much better than in 1972.

"We should be trying to figure out why."

Gosh, let's see.

More women in the workforce: increased supply.

Even some Leftists could work out what comes next.

a: Even some Leftists could work out what comes next.

And even some Rightists understand the lump of labor fallacy, but you're clearly not one of them.

alex: I want to believe that "lump of labor" is a fallacy, so can you explain? Simplistically, it does seem more people looking for work would depress wages (but even that wouldn't explain why so much went to the top.)

Wages aren't an infallible indicator if prices are rising. Prices rising == Wages falling.

I've noticed in this area that land prices are so high due to the demand from the massive legal immigration and illegal infiltration that they don't even build real houses anymore--just bunny hutch condos. In other words, people may be making more, but able to afford less.

Neil B.: I want to believe that "lump of labor" is a fallacy, so can you explain?

It's the idea that there is only a market for a fixed amount of goods and services, and hence only so much labor. By that argument, we should all be worse off for the industrial revolution, as modern productivity means that all the goods and services that were previously produced could be produced today by a small fraction of the working population.

Obviously that didn't happen - people just buy more goods and services than they used to, and wages are certainly higher than they were 200 years ago.

Of course there is a transient effect. But considering that female workforce participation increased dramatically in the 1970's, and has been pretty stable in recent years, any transient effects have long since disappeared.

This is really quite meaningless without some context. So what if median income has gone up, if the price of goods and services has gone up by twice as much? What about affordability? How much healthcare or education does a dollar of income buy, relative to an hour's wages?? That is the only meaningful measure of relative prosperity.

White men voting Republican has paid them back handsomely for the last three decades.....friggin' morons!

And more women are working longer hours to get those incomes up, whether they always want to or not.

Bet Tyler Cowen didn't figure that in.

The conservative economist over at EconoLog have suggested Krugman's new book has been thorougly refuted. I suggested to them (in the comment box) that they check Kevin's post here.

Assuming that the chart is accurate (and other, less formal-looking sources have been saying similar things) then wages are not just stagnating, for men they have actually declined from earlier peaks.

The obvious answer to the question "Why?" is, as many commentators have observed, "Because people in power want wages to stagnate/decline." (Note that very rich people's income comes largely from other sources than wages; the poorer you are, the more your income comes from wages.)

But the other question is "Why are people putting up with this?" As has been pointed earlier, the GDP is increasing, and the media, who focus on rich people, are constantly telling Americans how well-off they are. By rights people should be immensely peeved. (In twenty years, according to the chart, even women have increased their wages by only 25%, whereas the economy has approximately doubled in size.)

Yet, during this period, we have seen: the unusually right-wing Reagan, the conservative Bush I, the unusually conservative Democrat Clinton, and the extraordinarily right-wing Bush II. In other words, people have been voting energetically for people who are more or less guaranteed not to protect them against being screwed. Moreover, the biggest supporters of the right-wing tend to be men (the ones who get screwed the most).

What's the matter with Kansas?

Nradisc, the immigration debate and the Bill-Clinton supported NAFTA have a lot to say about how much Democrats REALLY care about the working people in this country. They moved all their jobs oversees and tried to important 'guest workers' to drive down wages even further.

So let's not pretend the Democrats are really friends of the working people.

I'd trade my iPod in a heartbeat for the Blue Cross/Blue Shield plan my parents had, and the 40-hour workweek with a solid month of vacation.

I'm sure you could get the exact same Blue Cross/Blue Shield plan that your parents had for peanuts, if you were limited to the treatments that your parents had available to them. Rising medical costs are in part due to the fact that there are tons more treatments, expensive ones, than were available back in the day.

Recently I plotted my wages since beginning work in 1977, both in current dollars and in 1977 dollars. It was depressing--after a slight rise the first couple years (promoted after being a newbie), there was a downward trend. And that did not even account for the additional 4.5 hours/week we had to work beginning a dozen years ago.

Hey, I think Ed's right. General standard of living seems much higher now than when I was a little kid 25 years ago. Even the coffee tastes better. The way this shows up in the numbers is that even a 1% adjustment to the CPI would mean +30% to income growth over the past 30 years.

I guess I just want to bitchily suggest that if you want to complain, find something real to complain about. Such as the fact that consumption growth doesn't seem to be leading to an increase in happiness.

Mo: Bull. What are the chances most providers will actually pay for you to get those better treatments?

PS: Is it really possible to get cheap health insurance plans based on limitation to "less-advanced" treatments equivalent to the progress of medicine 30 years ago? Please, show us the companies and their links, some of us may want to try that (heh, I doubt they exist.)

For the commenter who was asking about what these trends look like at different points in the distribution, the best summary of the evidence is from Rebecca Blank:

http://www.house.gov/apps/list/hearing/financialsvcs_dem/htblank021607.pdf

Does anyone know what percentage of the population are actually unemployed, as opposed to reportable as unemployed? I remember that one of the first things the Nixon administration did was change the formulae by which various economic indicators were calculated for reports. The unemployment formula was changed by eliminating folks who had been out of work so long that they had given up the search from the ranks who were reported as 'unemployed'. I considered it a fine example of 'lying with statistics' and I have no doubt the same BS goes on today.

How do we find out how many people are actually without jobs who want/need them? Not from elected officials who want to stay in office or keep their party in control.

If not them, who?
Anne

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