While attempting to refute the idea that the poor haven't improved their station since the 70s, they cite a lot of stats that show most households make more income than their parents did (inflation adjusted), but they completely neglect to account for the <i>huge</i> factor that is the number of people working (or cumulative hours worked) per household in order to achieve that improvement. In the 1970s, there were a lot more single-income households. The new standard of multi-income households, I expect, entirely accounts for any gains made by the lower income quintiles of people.
This is an astoundingly bad comparison if it's missing the point I think it's missing. It's arguing that the average person makes more than their parents by comparing <i>household income</i>. I searched the article a few times for a few keywords trying to make sure I hadn't missed anything, but I see <i>no mention</i> of number of wage earners per household.<p>All the rest, about "fringe benefits" and the conclusion that everything's not perfect because we still have excessive occupational licensing and minimum wages is just garbage hand-waving.<p>edit: I re-read it, and the panel data that shows the same income gains per cohort is not clear on how the data was gathered, but the Pew and Brookings data is CLEARLY household data, NOT individual data.<p>edit2: the Splinter data also appears to be household-level:
<a href="http://www.davidsplinter.com/Splinter-Mobility_and_Inequality.pdf" rel="nofollow">http://www.davidsplinter.com/Splinter-Mobility_and_Inequalit...</a><p>Splinter mentions "Some reasons for increased household-level income inequality include skill- biased technological change (Acemoglu, 2002), decreased marriage and employment rates (Larrimore, 2014), and the exclusion of employee benefits and government trans- fers from most income definitions (Burkhauser, Larrimore, and Simon, 2012; Auten and Splinter, 2018)."<p>So, he's discussing how decreased marriage rates might drive down household wages (increasing inequality, particularly among the poorer groups), but a quick command-F is not finding any mention of how the impact of these decreased marriage rates may be counterbalanced (and possibly/likely?) outweighed by increased total number of wage earners per household.
The author Russ Roberts runs the EconTalk podcast and is a well respected economist/journalist/thinker in the field, definitely worth reading for a fair assessment.<p>Here he presents a few studies that go against general economic consensus popularized mainly by Piketty in "Capital in the 21st century" and through papers/writing by Krugman, Saez, Zucman, Stiglitz, etc. that most of the economic gains in the past 100 years have gone to a concentrated few owners of capital.<p>Roberts highlights a few studies that use panel data (same people tracked over time) instead of cross-section data (snapshots of different populations at different times) and show that 70% of children from low-income households generally earn more than their parents, and usually end up with about 2x more income (only 33% of high-income children earn more than their parents.)<p>Another study looks at people age 35-40 in 1987 and then how they did when they were 55-60 in 2007. Median income was down for the top 5%, middle quintile was up 27%, and bottom quintile median income rose 100%.<p>Basically - absolute mobility (how much people gain over time) is still decently healthy today in percentage terms in the US, but relative mobility (how easy it is to move between classes) is widening and the wealthy in 1980 still have a much higher income on average than the poor in 1980.<p>Also, the poor in 2014 were actually <i>worse off</i> than the poor in the 1980s which Roberts attributes to poor people reporting less income in 2014, that there could be more poor immigrants in 2014 with less education, and that 2014 could be an unrepresentative year.<p>Personally I don't buy Robert's "glass half full" argument, but I appreciate him bringing some panel data into the discussion to temper the prevailing economic narrative.<p>I think if he looked at studies that include <i>wealth</i> and <i>net worth</i> panel data, not just income, that account for assets such as homes, the results would be much much different.
The whole point of much of this analysis (and the videos shown) is that household income can be very misleading. But most if not all of the analyses I report on are for individuals over time. So changes in the number of earners are actually more of a problem for most of the gloomy studies that look at households by quintile. Incredibly, the proportion of households with two earners is LOWER in 2014 than in 1980 because of the large increase in households with one or no earners. Marriage is not nearly as common as it used to be. The data are here in Table H-12: <a href="https://www.census.gov/data/tables/time-series/demo/income-poverty/historical-income-households.html" rel="nofollow">https://www.census.gov/data/tables/time-series/demo/income-p...</a><p>I also would add as I did in the essay, that I am not claiming that everything is OK in the economy. I am trying to respond to the relentless claim that the rich got all the gains of the last few decades. It's simply not true. That doesn't mean everything is fine. But just figuring out what actually happened is surprisingly complicated. The people who claim that the economy is only helping the rich should be more nuanced.
The gains have been looted by the healthcare providers. It is not uncommon for health coverage to exceed $2k/mo for a typical family of 4, that's $24k/year. The median US household income is $59k, so the total comp is $83k/year. See the gains now?<p>This absurd amount is not reflected in a paycheck and one may think "my job pays for it" but that is still your money.
The whole thing he is explaining is just regression to the mean. Yes, if you take people who are currently rich and people who are currently poor, over time the poor will likely go up in income and the rich go down.<p>Using this as a counterpoint to accusations of the rich taking all the gains is like pointing out that a wealthy duke could only pass his whole dukedom to one of his children, and the others would have to make do with much less.<p>It is simultaneously true that the gains of the last few decades have largely gone to "those who are rich", and that the identities of "those who are rich" are not completely stable.
This reads like research sponsored by a tobacco company showing that cigarettes are actually not that harmful.<p>I like how it frames the economy as this independent entity that we just sort of observe and hope for the best. Oh our divining rod produced these arbitrary statistics so the glass is half full guys!<p>In reality, though, the forces of human nature driving the economy don't change. Since the dawn of the surplus, there have always been a handful of kings and many serfs, and there probably always will be.
The income divide increasing int he past few decades is due to globalization. This much is obvious.<p>Many huge American companies have done super well as we move to a global economy - tech is a great example. There's more money to be made when you can start selling more iPhones to India and the development costs stay the same.<p>Whether this new global revenue wealth goes workers vs corporate pockets depends on the supply of labor. Does Apple mostly want to employ Americans? If so, these rich global companies need to compete for a limited supply of American workers - our salaries rise. Tech workers in the USA make much more money than other countries - we have many successful companies here all wanting American tech labor.<p>On the flip side , not all American labor falls under this category. If companies don't care if the labor is domestic or outsourced or immigration is easy (flexible supply), then American workers don't see much gain from these global companies making more global money - the new wealth is split between top American executives and developing countries..<p>Most companies fall into the latter category - which is why we've seen the income divide grow, the average American worker's wage stagnate, and developing countries wages grow.
This bullshit article tries to paint a rosy picture of the economy by dismissing proportional median income gains between quintiles and instead argues that absolute income gains of individuals over time is enough evidence to suggest everything is actually great. This chart [1] seems to be the crux of their argument, as in - Surprise! Over 30 years poor people gained an average of almost $30k in income! I sure fucking hope someone who started at minimum wage in 1980 is making $30k more today.<p>And even though the median income of the top 1% went from $189,000 to $843,000 in that sime timeframe, that's not important because in our sample, the average income of those in the top QUINTILE actually FELL $7k. Guess you couldn't find any 1%ers for your study?<p>Bottom line - if the economy can't support a living wage for the working class, it's not doing all that great.<p>[1] <a href="https://cdn-images-1.medium.com/max/2000/1*Z5rBoco1CtNVHYZdhWn4QQ.jpeg" rel="nofollow">https://cdn-images-1.medium.com/max/2000/1*Z5rBoco1CtNVHYZdh...</a>
<i>Adjusted for inflation, the US economy has more than doubled in real terms since 1975. How much of that growth has gone to the average person? According to many economists, the answer is close to zero.</i><p>First of all, the population has increased from around 200M to 325M. The inflation-adjusted economic output would have to increase by that same factor just to say the same <i>per capita</i>.
The problem with most economic analysis is that adjustments are generally based on arbitrary metrics like PPP or inflation.<p>If a child (or couple) in Britain earns three times as much, in "real" terms, that their parent (or parents) did at that stage of life, they will probably have to live in a smaller house, further from the center of town, with a worse commute.<p>Pretty much the biggest QoL improvements knocked out. The fact they can buy a few more toys or nicer food is not really that consequential.
On top of the studies within the article, there are other really interesting papers. Some time back I was searching information on the chiseling out of the middle class, and I found this paper [1]. And the paper does describe that chiseling out. In 1979 the middle class controlled 46% of all income, and the upper/rich classes controlled 30%. Today (as of 2014) the rich and upper class control 63% with the middle class left with 26%. There's even been a chiseling out of the middle class as a whole declining from 38.8% of society to 32% of society. That's where most media outlets leave it. It sounds grim.<p>But the eye opener is this. This is the change in the size of each economic group between 1979 and 2014 as a percent of the total population:<p>- Rich: 0.1% -> 1.8%<p>- Upper Middle Class: 12.9% -> 29.4%<p>- Middle Class: 38.8% -> 32%<p>- Lower Middle Class: 23.9% -> 17.1%<p>- Poor or Near-Poor: 24.3% -> 19.8%<p>Statistics like this are certainly subject to biased interpretation and 'massaging'. If one is curious about the source, wiki has a section on the political stance of the Urban Institute [2]. Though the paper itself is very transparent in their methodology and extremely readable. I found it all eye opening to the point that it literally changed my worldview. This change is only since 1979! We are doing something <i>incredibly</i> right from an economic point of view. I don't understand the media motivations in choosing to omit these crucial, and greatly encouraging, data when writing on this topic.<p>[1] - <a href="https://www.urban.org/research/publication/growing-size-and-incomes-upper-middle-class" rel="nofollow">https://www.urban.org/research/publication/growing-size-and-...</a><p>[2] - <a href="https://en.wikipedia.org/wiki/Urban_Institute#Political_stance" rel="nofollow">https://en.wikipedia.org/wiki/Urban_Institute#Political_stan...</a>
"Some studies leave out important components of compensation such as fringe benefits which have become increasingly important in recent years."<p>And why are those fringe benefits increasingly important, eh?
I have nothing against this article.. its all analysis and information.. but is it just me or does it have very little to do with what we actually think of when we consider where the benefits have gone?<p>Where are the numbers on average expected spend, including spending expectations for disposable income. so that we get a reasonable idea of someones saving power. and compare this to various income levels. We don't live in a vacuum and we all have to be living up to the expectations of those around us.<p>Also looking at social mobility, security to find a job etc. numbers are irrelevant freedoms are relevant.<p>If the poor earn lots more than the rich (in comparison to previous generations) do these days but rich people living expenses have not gone up and tax evasion has increased and the spending expectations on the poor have increased then I would still say the benefits have gone to the rich.<p>if the poor are still working 40 hour weeks and a few people are becoming so rich that if they reduced their income to millions per year that they could reduce average working hours to 30 hours per week i would still be hard pushed to say that the benefits were not being hoarded by the rich.<p>I don't know.. there are many ways to look at this but these numbers seem among the least relevant - like they have absolutely no causal link with the concerns that people have.<p>Are there any articles that go attempt to put numbers on some of these vaguer but more relevant things? i feel like even data with huge error bars could be very damning - or am i just naive and jealous of my parents :)?
Two issues:<p>- Income levels indicate practical income that market is willing to pay, therefore claiming that unreported income boosts poor people's income is bogus. Unreported income going into poor peoples pockets will not exceed median levels. It may shift what is considered median, but I absolutely disagree that all of that money drastically changes the state of poorer people.<p>- Adding up poorer people gains and saying that their gains are 70%, while rich people's gain are 33% is also misleading. Wealth transfer and accumulation is totally ignored by this.<p>Wages have stagnated is a technically incorrect statement. If you take wealth accumulation, you'll have to change the tune... Wealthy people become wealthier, at a rate considerably higher than the average individual.<p>Just mere tax "optimization" options are way more readily available for rich people, than to poor people. According to Warren Buffet - his taxes are lower even in relative terms, than his own secretary's. Which makes an employee's wage growth of 70% not even close to 33% of a rich person's.
If you look at that first report of increased family income, also in the referenced Pew report it says 59% of sons make as much or more then their fathers, which means 41% are doing worse. So 4 of every 10 sons does worse than his father in this time of economic growth.<p>Two more factors come into play. US working class stagnation started in the early 1970s and got going in the 1980s. The study starts in 1968, which means some of the growth pointed to for the children is actually what is kept from late 1960s and early 1970s growth, not now. If the study had started five years later, the results would look worse.<p>Also the politically influenced Boskin commission revised historical inflation estimates in the mid 1990s, also making things look rosier. If you believe, as I do, that inflation estimates were correct in 1996 and that Boskin was wrong, then things look bleaker in that light as well.<p>Although 4 in 10 sons doing worse than their fathers (from the Pew report <i>he</i> cites) is bleak enough.
I'd like to add to this argument.<p>If Ohio's steel industry grows by 500% who reaps the benefits? Me? The guy writing code in Portland, Oregon?<p>No... its pretty clear that a specific subset of people receive the benefits. The people who own the steel mill. The people who receive employment from the steel mill. The governments which tax the steel mill. But not me.<p>Economic growth isn't uniform. Its an uneven field that benefits some and not others. That's why people move and change jobs. That's why societies abandon old interests and embrace new interests.<p>I don't know why anyone should feel entitled to economic growth if they didn't participate in it in any way.
Am I completely mis-reading the report? By following the same people, the report grossly states that someone's salary tend to go up with age. How revolutionary! I'm pretty sure the vast majority of people draw better salaries with teh more experienced they get. This has nothing to do with the repartition of the increase of the economy.
>This does not mean that everything is fine in the American economy. There are special privileges reserved for the rich that help them reduce their risk of downward mobility — financial bailouts are the most egregious example.<p>That is such an important thing to note. It's so important to make an even playing field. Equal opportunities allow people to climb that ladders. The economy does much better when people are able to take risks,like start businesses. Also business opportunities open up when the big incumbents fail. To me, the financial bailouts are the worst thing to happen to the economy in a long time. Risks were taken by investment companies and they shifted the burden of those risks not working out on to the tax payer, that is so wrong.
This is an important way to look at the data. By looking at individuals over time, it essentially quantifies social mobility. But then you have to take it a step further. Does the difference in individuals' mobility over time change over time? In other words, has social mobility gotten better or worse? Only then are you comparing apples to apples in pessimism/optimism.
One flaw here, as others have noted, is the number of wage-earners per household.<p>But there is even a greater factor: the inflation-adjusted GDP per capita! In 1968 it was $24k; in 2008 it was $50k. Is the author really surprised that a lot of households make more than their parents?
I can only speak of my experience. Adam smith pointed out that the rich will always dominate the poor, as we are small and we can talk to each other. This has been my experience as well.
We're definitely due for a major shift in our political and economic systems over the next hundred years. At some point, the inequality and gains going to the top are going to boil over into something like the European-wide revolutions of 1848. Back then, much of central europe was still ruled by absolutist monarchs, with even the wealthiest business owners not having representation in government. Basically, people were scared of what a kingless republic is capable of after the reign of terror during the French Revolution. Within a few decades, and especially after WW1, the entire continent transformed republics. It's bound to boil over again at some point.
>Adjusted for inflation, the US economy has more than doubled in real terms since 1975. How much of that growth has gone to the average person? According to many economists, the answer is close to zero.<p>Simple question to ask yourself and anyone you know: would you rather be alive in your income bracket (inflation adjusted, etc.) today or 30 years ago?<p>I keep asking this question to people I've met and have yet to have any takers for the 30 years ago option. Clearly these types of economic measurements are missing something important. Deflationary technology improvements not being properly taken into account? Something else?
> possible overstatement of inflation<p>This has been the drum beat for well over two decades. Conservatives revised CPI and CPI markers to their liking in the mid 1990s with the Boskin commission.
Yet if you look at inflation over the past two decades and see idle class heirs enriched and the workers creating the wealth stagnant, it's back to the old inflation-is-overstated argument. I mean, Trump is saying it this week in criticizing the Fed chair.<p>An odd counterpart to German conservative bankers, who seem more obsessed with low inflation and currency stability.
So the trend disappears when the groups are disaggregated - I'm surprised that the author does not mention Simpson's Paradox: <a href="https://en.wikipedia.org/wiki/Simpson%27s_paradox" rel="nofollow">https://en.wikipedia.org/wiki/Simpson%27s_paradox</a>
I find it somewhat unsurprising that if you follow <i>individuals</i> over time, you would see that poor people gain more than rich people on a percentage basis.<p>The question is, what percentage of people are gaining? One success story can significantly affect the mean when you’re starting from a small number.
We have to share our resources with an increasingly larger proportion of a growing humanity and nobody can do anything about it. We just don't want to hear or see the facts until it's already a fact of the past.
Tl;dr: Wealthy and poor cohorts are not necessarily stable over time, generational boundaries in particular seem to be a relatively strong predictor of change. However people who are now poor are just as poor as the poor of the 70s, while those who are now extremely wealthy are even more extremely wealthy than the rich of the 70s.
TLDR Not so simple.<p>First, purchasing power is not considered. If wages are stagnant, but most consumer goods have gotten cheaper, then the bottom 50% with stagnant wages is capturing productivity gains.<p>Second, there’s no account for economic mobility. Wages for the bottom 50% are stagnant but most people don’t stay the same income all their life. There’s no account of economic mobility.<p>From the article: “As in the other panel studies, when you follow the same people, the biggest gains go to the poorest people. “
> And some studies include the elderly which lowers measured progress because the elderly are an increasing share of the population and they are less likely to be working full-time if at all<p>Should probably just burn them for fuel, right?<p>> And many of the most pessimistic studies about the fate of the American middle class ignore the fall in marriage and the increase in divorce since the 1970s and the effects that demographic change has had on the way we measure changes in household income<p>The right wing culture warrior says that if people got and stayed married they'd be better off. The left wing materialist says that if people were better off they'd be getting married more and staying together longer. Which is more likely: every young person got brain worms at the same time that made them want to not do monogamy/family things, or the stratum of society that has always tried to capture as much of its productivity as possible has made gains in its project?<p>As to the rest of it: I don't particularly care if the same exact individuals have effected a greater capture of the economic output of this country, I do care that as a whole the top Xtile captures a larger slice. That does, in fact, matter materially to me even though I'm imminently comfortable. I'll leave it to the real stats nerds to punch holes in the math.