Blackadder’s Lair

The home of many a cunning plan

Stagnant Thinking II: The Price of Progress

As I noted last time, the claim that real wages have been stagnant over the last several decades is a common place among certain groups. But is it true?

A look at the Census Bureau’s Historical Income Tables shows that the median income for individuals was more than 30% higher in real terms in 2007 than in 1974 (from $20,230 to $26,625 in 2007 dollars). Of course, the fact that real median income for society as a whole is up 30% over the last 35 years doesn’t mean that real median income was up that much for all groups within American society. Breaking down data based on race and sex, what one finds is that while real median income for women roughly doubled in the period between 1974 and 2007 (from $11,687 to $20,922 in 2007 dollars) and real median income for blacks increased by nearly fifty percent (from $14,338 to $21,888 in 2007 dollars) the real median income for White and Hispanic men was virtually the same in 2007 as in 1974 (from $33,575 to $35,141 in 2007 dollars for Whites, $24,432 to $24,451 in 2007 dollars for Hispanics). No doubt if one was to focus on even more specific subcategories, one could find groups that where real median wages were doing even better or even worse than the above, but of course as a simply matter of statistics any subgroup you found doing worse would have to be more than balanced by other groups doing better (since real median wages overall are up 30+%).

Based on the Census data, then, one would have to conclude that the last 35 years have been a time of great progress if you were black or were a woman, but were not so great for White males. Indeed, one might be tempted to conclude that it is precisely because blacks and women have seen such progress over the last 35 years that the real median income of White men has remained flat. That is, until the late 1960s both blacks and women were subject to a significant amount of discrimination in the job market, both legally and socially. This discrimination meant that the wages of both blacks and women were significantly lower than what they should have been given their productivity. Since the late 1960s, however, this sort of discrimination has waned considerably (though it obviously hasn’t gone away completely), with the result that the real wages of blacks and women have risen to more closely reflect their true value to employers. The flip side of this, however, is that White males now face more competition from blacks and women, which serves to suppress the growth in their own wages.

Whether one views this trend as a good thing or not will, of course, depend on your values. A White supremacist, for example, would view the above trends with horror. Likewise, someone who tended to frown on women working outside the home might be inclined to focus on the lower growth in real wages for men, and discount the vast improvements for women as being relatively unimportant. I suspect, though, that most people would view flat wages for White men as being an acceptable price to pay for the increases in the incomes of blacks and women over the last 35 years, and so to the extent that the two trends are related, would be inclined to view the overall trend as being positive.

As it happens, I don’t think that the above is anywhere near the whole story when it comes to the issue of wage stagnation. That is, I think that the lot even of White men has improved a lot more than what simply looking at the Census numbers might lead you to believe, and in future posts I hope to explain some of my reasons for thinking this. Nevertheless, even if the above numbers were the whole story, the relatively flat wages of White males would be worth it, in my view, as the price of progress achieved over the last 35 years by historically discriminated against groups.

One final note. You might wonder: what about Hispanics? Clearly they weren’t the beneficiaries of discriminatory policies against minorities, so why should their wages be flat? My guess is that this is just a matter of statistical illusion. If you compare the median age of the children of the Octomom today versus a year ago, you will find that it has dropped considerably. But that obviously doesn’t mean that any of her children are younger today than they were a year ago. If you add a bunch of people at the bottom of an income distribution, it is going to exert a downward pressure on median income even if the income of each individual keeps improving. Given the large increase in HIspanic immigration over the last 35 years (most of whom are below the median in terms of income) it’s not surprising that real median income for the group would not have improved that much.

May 14, 2009 Posted by | Uncategorized | 1 Comment

Stagnant Thinking: An Introduction

The recently canceled television series Life on Mars featured a somewhat unusual premise. The show’s protagonist, Sam Tyler, is a cop in present day New York City who, after being hit by a car, finds himself mysteriously transported back to the year 1973. The show was a strange blend of police drama and science fiction, as Tyler sought to undercover how he had ended up in the past, and whether anything that was happening to him was even real.

The premise of the show was, as I said, somewhat odd. But equally odd is that, according to plenty of pundits and commentators across the political spectrum, Tyler may actually have lucked out in being sent back in time. The reason for this, according to these commentators, is that once you account for inflation the material condition (or at least the wages) of the typical American are no better, and may in fact be considerably worse, than in the early in 1970s. The following snippet from a recent Bob Herbert column in the New York Times is typical:

As hard as it may be to believe, the peak income year for the bottom 90 percent of Americans was way back in 1973, when the average income per taxpayer, adjusted for inflation, was $33,000. That was nearly $4,000 higher . . . than in 2005.

Men have done particularly poorly. Men who are now in their 30s — the prime age for raising families — earn less money than members of their fathers’ generation did at the same age.

While the claim that the wages of the typical American have stagnated is most often found on the left, the idea is hardly confined to such quarters. Many libertarians have also been pushing the claim (though whereas those on the left tend to blame Reagan and “neoliberalism” for the supposed stagnation, among libertarians government is the natural culprit). I know that several of my co-bloggers have also made some version of the claim at one point or another. Continue reading

May 14, 2009 Posted by | Progress, Statistics | Leave a comment