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Do the Rich Capture All the Gains from Economic Growth?

329 points by josephpmay 8y ago

resu_nimda 8y ago
This reads like research sponsored by a tobacco company showing that cigarettes are actually not that harmful. 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! 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.
- Hoasi 8y ago
  > Since the dawn of the surplus, there have always been a handful of kings and many serfs, and there probably always will be. One thing is different though: the thralls of today possess costly devices that simultaneously entertain and surveil them, among other things. Past kings would never even have dreamed about that.
  - resu_nimda 8y ago
    I think it's largely irrelevant. Do the kings of today have a harder or easier time maintaining the status quo? I think most changes and fluctuations there are more attributable to chance (i.e. mechanisms we don't understand) than our conscious efforts. The same devices that surveil can also empower, in the end it could be a wash. We change the world around us but I'm convinced there's a certain homeostasis to our social and cultural experience, at core we're having the same conversations and dealing with issues analogous to the ones they had 3000 years ago.
  - wasdfff 8y ago
    Past kings would have banned just possessing any inflammatory information. If Wikipedia was around 800 years ago and you, a serf, were caught using it, the king of England would have cut your head off in the city center, and the public would cheer and celebrate your death.
dreamdu5t 8y ago
TLDR Not so simple. 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. 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. From the article: “As in the other panel studies, when you follow the same people, the biggest gains go to the poorest people. “
- irq11 8y ago
  That is not the TLDR. The post is about cross-cohort vs. same-cohort comparisons. The argument is that if you follow the same people over time, the poor make the biggest percentage gains. Nothing in this is about inflation or prices of consumer goods. And in fact, inflation metrics take that into account.
  - rconti 8y ago
    the beginning of the piece implies that inflation measures will be covered, but they're not. I thought TL;DR was supposed to be FOR people who didn't read it, not FROM people who didn't read it.
- rfugger 8y ago
  If wages are stagnant with respect to the consumer price index, they are not capturing productivity gains, because the CPI accounts for lower prices on goods.
  - michaelmrose 8y ago
    While health insurance captures an increasing share of the stagnant income.
    - deleted 8y ago
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- 8y ago
kazinator 8y ago
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. 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 per capita.
- pulisse 8y ago
  The passage you quote is already talking about real GDP per capita. Aggregate real GDP has more than tripled in that time frame. [1] https://fred.stlouisfed.org/series/A939RX0Q048SBEA https://fred.stlouisfed.org/series/A939RX0Q048SBEA [2] https://fred.stlouisfed.org/series/GDPC1 https://fred.stlouisfed.org/series/GDPC1
- eyeinthepyramid 8y ago
  GDP per capita has doubled since 1975 in inflation-adjusted dollars according to this: http://www.multpl.com/us-real-gdp-per-capita/table/by-year http://www.multpl.com/us-real-gdp-per-capita/table/by-year
- rst 8y ago
  And it has increased by well over the ratio; two is substantially greater than 325/200, which is 1.625. What's your point?
  - jstanley 8y ago
    2 is less than 25% more than 1.625.
- pwaivers 8y ago
  I believe the rest of the article is making the same point as you. There are lots of factors at play.
rukittenme 8y ago
I'd like to add to this argument. If Ohio's steel industry grows by 500% who reaps the benefits? Me? The guy writing code in Portland, Oregon? 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. 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. I don't know why anyone should feel entitled to economic growth if they didn't participate in it in any way.
- philipov 8y ago
  Because many of those people have the experience of participating in economic growth then being denied the benefits, and so when they see it elsewhere, they assume the same thing is happening to those workers as well.
- gooseifer 8y ago
  The Federal government taxes the steel mill and the tertiary industries that are able to thrive because that steel mill is generating revenue. You directly benefit from countless federal programs and indirectly benefit from even more.
  - rukittenme 8y ago
    That's really not the point. Replace Ohio with China or consider what percentage of after tax growth you're entitled to.
  - rhacker 8y ago
    It's sad that people still think we benefit from taxes. If people patched their own roads, paid for their own schools, paid for the police, we'd still be far far far richer. Instead we're paying 10-20k PER BOMB. Every time we drop 5 bombs that could have been a freaking decent salary for a local teacher. Instead that money is killing, like 50-100 people. The world has become what it is because of the way we treat other people. People learn from people in power that -that is the way to treat others.
irq11 8y ago
I find it somewhat unsurprising that if you follow individuals over time, you would see that poor people gain more than rich people on a percentage basis. 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.
- xhrpost 8y ago
  Another issue with just using averages and math: say you're looking at the housing crisis 10 years ago. Math says that the middle class actually had a net gain in wealth because when your house gets foreclosed on, you no longer have all that debt. 2006 -> buy $200k house with $190k mortgage. 2008 -> House worth $130k, still owe $175k. So net worth is -$45k. (This is not yet accounting for toxic assets in which you could assume the house not to be sellable and the owner thus a full $175k in debt). Owner defaults, net worth is now $0. A mathematical net worth increase of $45k, even though most people would agree this is a bad thing.
  - eyeinthepyramid 8y ago
    except, of course, for all the retirement funds that disappeared.
  - wahern 8y ago
    A home mortgage is secured by the home and is usually non-recourse. Your personal net worth can never go negative because of the mortgage liability. It's all upside as far as the homeowner is concerned, or at least loss is limited to your initial down payment. The price for this is the interest rate you pay, which has factored into it a risk premium; and if you don't make the industry standard 20% down payment you literally pay for additional mortgage insurance. A secured, non-recourse loan is not a personal liability. In terms of accounting, it's its own thing, like a limited liability company. That's how you need to think of it. For better or worse there's no place in a cut-throat capitalist society for people who can't wrap their heads around that.
Floegipoky 8y ago
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.
- metalchianti 8y ago
  I bet that compound earnings are the main contributor here. It's much easier to save more money because you're wealthy and have more money. Across generations this effect is massive.
  - marricks 8y ago
    That will certainly be compounded by the demise of the estate tax. That said it’s not like intergenerational wealth is a new thing, wouldn’t that be the case way before the 70s? It seems the trickle down economics approach taken since the 70s from both Democrats and Republicans hasn’t really helped anyone but the rich.
    - metalchianti 8y ago
      The same inter-generational wealth logic would apply pre-1970s. I think that 1970 is used as a starting point because that's also when real wages started dropping relative to production output. I'm don't think it's fair to blame US politics. I bet this is a universal phenomenon.
      - marricks 8y ago
        Your argument is wealthy inequality has been rising universally since the birth of the USA? It’s not hard to find a chart and it was OK and exploded since the 70s, perhaps coincidentally with trickle down economics and neoliberalism. https://static-ssl.businessinsider.com/image/54610db56da811360c3cf8af-960-720/the-swings-in-inequality-over-the-twentieth-century-are-even-more-dramatic-when-looking-at-wealth-rather-than-income.jpg https://static-ssl.businessinsider.com/image/54610db56da8113...
TulliusCicero 8y ago
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. 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. 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.
- ergothus 8y ago
  > the identities of "those who are rich" are not completely stable. And yet, for the US at least, it's become more stable than it was.
- NickM 8y ago
  The whole thing he is explaining is just regression to the mean. The author directly addresses this further down in the article. Regression to the mean is a possible explanation of the numbers he cites, but it doesn't refute the main point he's making, which is that some numbers suggest poor people capture more of the gains from economic growth than is widely thought.
  - moorhosj 8y ago
    “Widely thought” based on what? This seems like the building of a straw man.
  - TulliusCicero 8y ago
    It's not just a possible explanation, it's the most obvious one. It's a well understood phenomenon that results in exactly what he's discussing here. > some numbers suggest poor people capture more of the gains from economic growth than is widely thought. Some individual poor persons will, yes. "The poor", as a class, will not.
SrslyJosh 8y ago
"Some studies leave out important components of compensation such as fringe benefits which have become increasingly important in recent years." And why are those fringe benefits increasingly important, eh?
- komali2 8y ago
  And what kind of fringe benefits are minimum wage earners pulling? I hear Starbucks gives health insurance, for example, anyone else?
  - maxxxxx 8y ago
    My company gives only nominal raises each year but we get bagels and donuts once a week.
    - komali2 8y ago
      Hah well, I guess that'd be pretty fringe, especially if you're on keto / don't eat sweets / can't eat gluten or whatever.
gimmeDatCheddar 8y ago
This fantastic news will fall on willfully-deaf ears. The pundits and slacktivists who are far left or even outright Marxists don't actually want there to be progress for the poor or mobility across classes. What they really want is to divide people and ultimately eliminate classes and wealth entirely, with the goal being the destabilization of the west and the freedoms we all enjoy.
TheBeardKing 8y ago
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. 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? Bottom line - if the economy can't support a living wage for the working class, it's not doing all that great. [1] https://cdn-images-1.medium.com/max/2000/1*Z5rBoco1CtNVHYZdhWn4QQ.jpeg https://cdn-images-1.medium.com/max/2000/1*Z5rBoco1CtNVHYZdh...
- JAlexoid 8y ago
  Well... To be fair - people that use this inaccurate measure dig their own grave. It's not a good metric, by far.
- rconti 8y ago
  even worse; absolute household income gains over time, not accounting for the increase in person-hours worked outside of the home, nor the corresponding increases in yard work, housekeeping, child care, meal preparation costs....
- pwaivers 8y ago
  > 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. Well this is an important part of his argument. The people's wages are not stagnant, but rather they went up an 30K (including inflation). That fact this their wages went up is not trivial.
  - scarmig 8y ago
    Not to the overall structure of the economy. Imagine this: at one high school, there's a 80% literacy rate in the 2008 class. Then it drops to a 60% rate for the 2018 class. Even if the 2008 cohort may now have a 90% literacy rate, that doesn't change the fact that the school is declining in literacy, and trying to argue otherwise verges on duplicitous.
roymurdock 8y ago
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. 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. 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.) 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%. 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. Also, the poor in 2014 were actually worse off 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. 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. I think if he looked at studies that include wealth and net worth panel data, not just income, that account for assets such as homes, the results would be much much different.
- JAlexoid 8y ago
  He's a fellow at Stanford School of Economics and he's a typical academic... Which is to say, that his articles must be taken independently. His opinions on other issues are not discussed, so it's easy to build a strawman about his other opinions. That also means that we must point out the fact that this article is only a small subset of data, that really tells us only what the data was collected on.
  - mediaobs1 8y ago
JAlexoid 8y ago
Two issues: - 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. - 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. 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. 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.
TangoTrotFox 8y ago
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. 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: - Rich: 0.1% -> 1.8% - Upper Middle Class: 12.9% -> 29.4% - Middle Class: 38.8% -> 32% - Lower Middle Class: 23.9% -> 17.1% - Poor or Near-Poor: 24.3% -> 19.8% 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 incredibly 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. [1] - https://www.urban.org/research/publication/growing-size-and-incomes-upper-middle-class https://www.urban.org/research/publication/growing-size-and-... [2] - https://en.wikipedia.org/wiki/Urban_Institute#Political_stance https://en.wikipedia.org/wiki/Urban_Institute#Political_stan...
- moduspol 8y ago
  > I don't understand the media motivations in choosing to omit these crucial, and greatly encouraging, data when writing on this topic. Surely you do understand them, though, right?
  - amelius 8y ago
    Question: would the numbers change if the media had a different stance? In what direction and by how much?
- refurb 8y ago
perkee 8y ago
> 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 Should probably just burn them for fuel, right? > 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 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? 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.
old-gregg 8y ago
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? This absurd amount is not reflected in a paycheck and one may think "my job pays for it" but that is still your money.
- corey_moncure 8y ago
  This is correct. I dropped my "Affordable" Care Act plan in January when BCBS quoted a monthly principal increase from $696 to over $2200 for the Silver level plan my family of four had been enrolled in. We are young and healthy. $2200 is monthly rent on a luxury condominium in Honolulu. I asked the agent on the phone if he had children, and if he could afford such a plan. He replied that he could not.
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  - shard972 8y ago
    Well thats just going to make health insurance more expensive for more people now isn't it? IIRC poor people get subsidised healthcare now so if the middle class workers aren't paying for healthcare... who is?
- JAlexoid 8y ago
  Actually your contribution to the healthcare is reflected in the data that ic collected, as the data is from IRS. So... While your employer may pony up 50% of the cost, you get stuck with the other half on your tax return.
- SketchySeaBeast 8y ago
  So do we see that in other countries without outrageous healthcare premiums? I don't know, but I'm sure there are examples of countries where a company won't be paying for that and causing one's wage to stagnate because of it.
rconti 8y ago
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 household income. I searched the article a few times for a few keywords trying to make sure I hadn't missed anything, but I see no mention of number of wage earners per household. 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. 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. edit2: the Splinter data also appears to be household-level: http://www.davidsplinter.com/Splinter-Mobility_and_Inequality.pdf http://www.davidsplinter.com/Splinter-Mobility_and_Inequalit... 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)." 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.
- kimmeld 8y ago
  From past podcasts he doesn't see the problem with having two people working to get that gain while ignoring the individual stagnating/declining worker pay. That stance is not logical to me, but it seems to fit his view on the world.
  - gameswithgo 8y ago
    Yeah, once two people are working you NEED more income. Often one of the two people working spends their entire paycheck on child care. You may also to speed more on cleaning, home and auto repair, as you will have less time to do those yourself. You may need to spend more on healthcare since there will be less time to work out and cook good meals. You may need to spend more on food as there will be less time to cook good meals. It goes on!
randyrand 8y ago
The income divide increasing int he past few decades is due to globalization. This much is obvious. 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. 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. 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.. 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.
rwcarlsen 8y ago
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 huge 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.
- curun1r 8y ago
  They also likely use inflation statistics that are problematic, at best. When considering consumables, we've had pretty reasonable inflation and people are making more than their parents. But if you were to calculate inflation based on prices for things that don't benefit from advances in our production abilities (commodities, equities, housing, education, health care, etc), we'd be making nowhere near as much as previous generations when adjusted for inflation using that calculation. Affording a car, TV, computer and food to feed ourselves isn't that difficult for many people. It's the life-altering purchases that are slipping farther and farther from the reach of the middle class.
  - maxxxxx 8y ago
    Exactly. Low inflation doesn't help much if your salary increases get eaten up by housing, education hand healthcare. Rent, health care and education should be counted into inflation numbers.
    - onlyrealcuzzo 8y ago
      Wait. Aren't rent, healthcare, AND education all included in the eight components of CPI? Isn't that how the government measures inflation? I think one of the big things left off is housing prices. But I'm pretty sure rent, healthcare, and education are part of it: https://www.bls.gov/cpi/factsheets/medical-care.htm https://www.bls.gov/cpi/factsheets/medical-care.htm http://webapps.dol.gov/dolfaq/go-dol-faq.asp?faqid=94 http://webapps.dol.gov/dolfaq/go-dol-faq.asp?faqid=94
peisistratos 8y ago
> possible overstatement of inflation 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. An odd counterpart to German conservative bankers, who seem more obsessed with low inflation and currency stability.
gibblz 8y ago
So the trend disappears when the groups are disaggregated - I'm surprised that the author does not mention Simpson's Paradox: https://en.wikipedia.org/wiki/Simpson%27s_paradox https://en.wikipedia.org/wiki/Simpson%27s_paradox
esotericn 8y ago
The problem with most economic analysis is that adjustments are generally based on arbitrary metrics like PPP or inflation. 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. 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.
- ryandrake 8y ago
  Exactly. I probably earn 2X what my father made, inflation adjusted, when he was my age. Buuuut, I pay 5X what he paid for housing, 20X what he paid for healthcare, ∞X what he paid in student loans, have a commute 6X longer than his, live in a house 75% the size of his (he also had two houses at my age, by the way), work 1.25X his hours and have a crappy 401k rather than a nice defined-benefit pension. Comparing just salary misses the story.
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  - jimbokun 8y ago
    Shouldn't those things be factored into the "inflation adjusted" calculation? (housing, healthcare, student loans...)
    - esotericn 8y ago
      Yes, they should, but they are not, and realistically cannot be. Inflation statistics are almost useless in calculating quality of life for this reason. They calculate an average over a population. An example of why this is silly, is that the average 40 year old both has lower personal inflation _and_ can weather inflation much more readily than the average 20 year old.
picsao 8y ago
No they tinkle down to the poor millionaires via rent.
std_throwawayay 8y ago
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.
jdlyga 8y ago
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.
- trophycase 8y ago
  The surveillance-advertising-entertainment complex will likely keep these forces in check for far longer than you'd expect.
peisistratos 8y ago
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. 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. 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. Although 4 in 10 sons doing worse than their fathers (from the Pew report he cites) is bleak enough.
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alexnewman 8y ago
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.
- conanbatt 8y ago
  Sorry, when did he pointed that out? I don't think that is true at all. In fact, he claims that the worst and most pernicious oppression of the poor is done by the measures and people that claim to do it in their aid.
  - alexnewman 8y ago
    I could point out a few but I’m currently partying. Here’s my favorite and tell me if it is close enough to convince you “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”
    - conanbatt 8y ago
      He continues to say that any attempt to prevent it would be either ineffective or cause the monopoly itself. He gives as examples the regulations of “making a registry with name and address of every tradesman makes it easier for them to congregate” and “the requirement to make a retirement fund makes congregation a necessity”. Praphrasing
      - alexnewman 8y ago
        He also advocated for free education, free clothing. People want to pain adam smith as an extremist, but having read him a couple of ties, he'd be considered a centrist today.
imh 8y ago
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.
skookumchuck 8y ago
It's never been easier or cheaper for anyone to invest in the stock market and capture a share of those gains.
- jimbokun 8y ago
  If you have free cash flow.
  - skookumchuck 8y ago
    The US is not divided into two categories - 1% with everything and 99% who have nothing.
    - ionised 8y ago
      No, but it is filled mostly with people living paycheck to paycheck without any savings.
russroberts613 8y ago
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: https://www.census.gov/data/tables/time-series/demo/income-poverty/historical-income-households.html https://www.census.gov/data/tables/time-series/demo/income-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.
- roymurdock 8y ago
  Thanks for coming on here to weigh in personally. I always appreciate research that adds nuance to a discussion. Do you have any plans to explore wealth concentration in future essays?
- tanderson92 8y ago
  I think it is generally well-understood that individuals more senior in their career have generally higher incomes. So, when it is stated that "the rich" are obtaining wealth gains, it is explicitly looking at structural changes rather than simply an earnings cycle for individuals continuing to be true. Your first sentence is "Adjusted for inflation, the US economy has more than doubled in real terms since 1975" -- but it was the case even in 1975 that there was absolute income mobility as one progressed in their career. So, your argument purports to disprove the relative mobility or inequality arguments of Saez/Piketty but in fact cannot. That is why there is so much pushback on this piece of yours: because it appears to be attacking a strawman unrelated to real inequality in the system.
- thrmsforbfast 8y ago
pierrebai 8y ago
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.
namirez 8y ago
One flaw here, as others have noted, is the number of wage-earners per household. 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?
abvdasker 8y ago
This study is laughable given that dual-earner households are now the norm.
- conanbatt 8y ago
  The author mentions in the comments that dual-earner households went down in comparison to 1978~
- someguydave 8y ago
  They are not more common because marriage has declined greatly.
xupybd 8y ago
>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. 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.
angel_j 8y ago
Using income, instead of wealth, to argue economic trends, is like using weather, instead of climate, to argue global warming.
- someguydave 8y ago
  Sure, weather and climate have no relationship and the author is a simpleton.
yuhong 8y ago
This is one of the reason I dislike the current debt-based economy that relies on extracting more dollars from "consumers".
mindviews 8y ago
>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. 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? 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?
anonunt 8y ago
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? 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. Also looking at social mobility, security to find a job etc. numbers are irrelevant freedoms are relevant. 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. 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. 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. 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 :)?

329 points by josephpmay 8y ago

This reads like research sponsored by a tobacco company showing that cigarettes are actually not that harmful. 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! 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.

Hoasi 8y ago
> Since the dawn of the surplus, there have always been a handful of kings and many serfs, and there probably always will be. One thing is different though: the thralls of today possess costly devices that simultaneously entertain and surveil them, among other things. Past kings would never even have dreamed about that.
- resu_nimda 8y ago
  I think it's largely irrelevant. Do the kings of today have a harder or easier time maintaining the status quo? I think most changes and fluctuations there are more attributable to chance (i.e. mechanisms we don't understand) than our conscious efforts. The same devices that surveil can also empower, in the end it could be a wash. We change the world around us but I'm convinced there's a certain homeostasis to our social and cultural experience, at core we're having the same conversations and dealing with issues analogous to the ones they had 3000 years ago.
- wasdfff 8y ago
  Past kings would have banned just possessing any inflammatory information. If Wikipedia was around 800 years ago and you, a serf, were caught using it, the king of England would have cut your head off in the city center, and the public would cheer and celebrate your death.

dreamdu5t 8y ago

TLDR Not so simple. 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. 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. From the article: “As in the other panel studies, when you follow the same people, the biggest gains go to the poorest people. “

irq11 8y ago
That is not the TLDR. The post is about cross-cohort vs. same-cohort comparisons. The argument is that if you follow the same people over time, the poor make the biggest percentage gains. Nothing in this is about inflation or prices of consumer goods. And in fact, inflation metrics take that into account.
- rconti 8y ago
  the beginning of the piece implies that inflation measures will be covered, but they're not. I thought TL;DR was supposed to be FOR people who didn't read it, not FROM people who didn't read it.
rfugger 8y ago
If wages are stagnant with respect to the consumer price index, they are not capturing productivity gains, because the CPI accounts for lower prices on goods.
- michaelmrose 8y ago
  While health insurance captures an increasing share of the stagnant income.
  - deleted 8y ago
    [deleted]
8y ago

kazinator 8y ago

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. 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 per capita.

pulisse 8y ago
The passage you quote is already talking about real GDP per capita. Aggregate real GDP has more than tripled in that time frame. [1] https://fred.stlouisfed.org/series/A939RX0Q048SBEA https://fred.stlouisfed.org/series/A939RX0Q048SBEA [2] https://fred.stlouisfed.org/series/GDPC1 https://fred.stlouisfed.org/series/GDPC1
eyeinthepyramid 8y ago
GDP per capita has doubled since 1975 in inflation-adjusted dollars according to this: http://www.multpl.com/us-real-gdp-per-capita/table/by-year http://www.multpl.com/us-real-gdp-per-capita/table/by-year
rst 8y ago
And it has increased by well over the ratio; two is substantially greater than 325/200, which is 1.625. What's your point?
- jstanley 8y ago
  2 is less than 25% more than 1.625.
pwaivers 8y ago
I believe the rest of the article is making the same point as you. There are lots of factors at play.

rukittenme 8y ago

I'd like to add to this argument. If Ohio's steel industry grows by 500% who reaps the benefits? Me? The guy writing code in Portland, Oregon? 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. 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. I don't know why anyone should feel entitled to economic growth if they didn't participate in it in any way.

philipov 8y ago
Because many of those people have the experience of participating in economic growth then being denied the benefits, and so when they see it elsewhere, they assume the same thing is happening to those workers as well.
gooseifer 8y ago
The Federal government taxes the steel mill and the tertiary industries that are able to thrive because that steel mill is generating revenue. You directly benefit from countless federal programs and indirectly benefit from even more.
- rukittenme 8y ago
  That's really not the point. Replace Ohio with China or consider what percentage of after tax growth you're entitled to.
- rhacker 8y ago
  It's sad that people still think we benefit from taxes. If people patched their own roads, paid for their own schools, paid for the police, we'd still be far far far richer. Instead we're paying 10-20k PER BOMB. Every time we drop 5 bombs that could have been a freaking decent salary for a local teacher. Instead that money is killing, like 50-100 people. The world has become what it is because of the way we treat other people. People learn from people in power that -that is the way to treat others.

irq11 8y ago

I find it somewhat unsurprising that if you follow individuals over time, you would see that poor people gain more than rich people on a percentage basis. 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.

xhrpost 8y ago
Another issue with just using averages and math: say you're looking at the housing crisis 10 years ago. Math says that the middle class actually had a net gain in wealth because when your house gets foreclosed on, you no longer have all that debt. 2006 -> buy $200k house with $190k mortgage. 2008 -> House worth $130k, still owe $175k. So net worth is -$45k. (This is not yet accounting for toxic assets in which you could assume the house not to be sellable and the owner thus a full $175k in debt). Owner defaults, net worth is now $0. A mathematical net worth increase of $45k, even though most people would agree this is a bad thing.
- eyeinthepyramid 8y ago
  except, of course, for all the retirement funds that disappeared.
- wahern 8y ago
  A home mortgage is secured by the home and is usually non-recourse. Your personal net worth can never go negative because of the mortgage liability. It's all upside as far as the homeowner is concerned, or at least loss is limited to your initial down payment. The price for this is the interest rate you pay, which has factored into it a risk premium; and if you don't make the industry standard 20% down payment you literally pay for additional mortgage insurance. A secured, non-recourse loan is not a personal liability. In terms of accounting, it's its own thing, like a limited liability company. That's how you need to think of it. For better or worse there's no place in a cut-throat capitalist society for people who can't wrap their heads around that.

Floegipoky 8y ago

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.

metalchianti 8y ago
I bet that compound earnings are the main contributor here. It's much easier to save more money because you're wealthy and have more money. Across generations this effect is massive.
- marricks 8y ago
  That will certainly be compounded by the demise of the estate tax. That said it’s not like intergenerational wealth is a new thing, wouldn’t that be the case way before the 70s? It seems the trickle down economics approach taken since the 70s from both Democrats and Republicans hasn’t really helped anyone but the rich.
  - metalchianti 8y ago
    The same inter-generational wealth logic would apply pre-1970s. I think that 1970 is used as a starting point because that's also when real wages started dropping relative to production output. I'm don't think it's fair to blame US politics. I bet this is a universal phenomenon.
    - marricks 8y ago
      Your argument is wealthy inequality has been rising universally since the birth of the USA? It’s not hard to find a chart and it was OK and exploded since the 70s, perhaps coincidentally with trickle down economics and neoliberalism. https://static-ssl.businessinsider.com/image/54610db56da811360c3cf8af-960-720/the-swings-in-inequality-over-the-twentieth-century-are-even-more-dramatic-when-looking-at-wealth-rather-than-income.jpg https://static-ssl.businessinsider.com/image/54610db56da8113...

TulliusCicero 8y ago

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. 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. 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.

ergothus 8y ago
> the identities of "those who are rich" are not completely stable. And yet, for the US at least, it's become more stable than it was.
NickM 8y ago
The whole thing he is explaining is just regression to the mean. The author directly addresses this further down in the article. Regression to the mean is a possible explanation of the numbers he cites, but it doesn't refute the main point he's making, which is that some numbers suggest poor people capture more of the gains from economic growth than is widely thought.
- moorhosj 8y ago
  “Widely thought” based on what? This seems like the building of a straw man.
- TulliusCicero 8y ago
  It's not just a possible explanation, it's the most obvious one. It's a well understood phenomenon that results in exactly what he's discussing here. > some numbers suggest poor people capture more of the gains from economic growth than is widely thought. Some individual poor persons will, yes. "The poor", as a class, will not.

SrslyJosh 8y ago

"Some studies leave out important components of compensation such as fringe benefits which have become increasingly important in recent years." And why are those fringe benefits increasingly important, eh?

komali2 8y ago
And what kind of fringe benefits are minimum wage earners pulling? I hear Starbucks gives health insurance, for example, anyone else?
- maxxxxx 8y ago
  My company gives only nominal raises each year but we get bagels and donuts once a week.
  - komali2 8y ago
    Hah well, I guess that'd be pretty fringe, especially if you're on keto / don't eat sweets / can't eat gluten or whatever.

gimmeDatCheddar 8y ago

This fantastic news will fall on willfully-deaf ears. The pundits and slacktivists who are far left or even outright Marxists don't actually want there to be progress for the poor or mobility across classes. What they really want is to divide people and ultimately eliminate classes and wealth entirely, with the goal being the destabilization of the west and the freedoms we all enjoy.

TheBeardKing 8y ago

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. 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? Bottom line - if the economy can't support a living wage for the working class, it's not doing all that great. [1] https://cdn-images-1.medium.com/max/2000/1*Z5rBoco1CtNVHYZdhWn4QQ.jpeg https://cdn-images-1.medium.com/max/2000/1*Z5rBoco1CtNVHYZdh...

JAlexoid 8y ago
Well... To be fair - people that use this inaccurate measure dig their own grave. It's not a good metric, by far.
rconti 8y ago
even worse; absolute household income gains over time, not accounting for the increase in person-hours worked outside of the home, nor the corresponding increases in yard work, housekeeping, child care, meal preparation costs....
pwaivers 8y ago
> 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. Well this is an important part of his argument. The people's wages are not stagnant, but rather they went up an 30K (including inflation). That fact this their wages went up is not trivial.
- scarmig 8y ago
  Not to the overall structure of the economy. Imagine this: at one high school, there's a 80% literacy rate in the 2008 class. Then it drops to a 60% rate for the 2018 class. Even if the 2008 cohort may now have a 90% literacy rate, that doesn't change the fact that the school is declining in literacy, and trying to argue otherwise verges on duplicitous.

roymurdock 8y ago

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. 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. 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.) 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%. 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. Also, the poor in 2014 were actually worse off 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. 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. I think if he looked at studies that include wealth and net worth panel data, not just income, that account for assets such as homes, the results would be much much different.

JAlexoid 8y ago
He's a fellow at Stanford School of Economics and he's a typical academic... Which is to say, that his articles must be taken independently. His opinions on other issues are not discussed, so it's easy to build a strawman about his other opinions. That also means that we must point out the fact that this article is only a small subset of data, that really tells us only what the data was collected on.
- mediaobs1 8y ago

JAlexoid 8y ago

Two issues: - 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. - 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. 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. 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.

TangoTrotFox 8y ago

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. 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: - Rich: 0.1% -> 1.8% - Upper Middle Class: 12.9% -> 29.4% - Middle Class: 38.8% -> 32% - Lower Middle Class: 23.9% -> 17.1% - Poor or Near-Poor: 24.3% -> 19.8% 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 incredibly 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. [1] - https://www.urban.org/research/publication/growing-size-and-incomes-upper-middle-class https://www.urban.org/research/publication/growing-size-and-... [2] - https://en.wikipedia.org/wiki/Urban_Institute#Political_stance https://en.wikipedia.org/wiki/Urban_Institute#Political_stan...

moduspol 8y ago
> I don't understand the media motivations in choosing to omit these crucial, and greatly encouraging, data when writing on this topic. Surely you do understand them, though, right?
- amelius 8y ago
  Question: would the numbers change if the media had a different stance? In what direction and by how much?
refurb 8y ago

perkee 8y ago

> 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 Should probably just burn them for fuel, right? > 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 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? 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.

old-gregg 8y ago

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? This absurd amount is not reflected in a paycheck and one may think "my job pays for it" but that is still your money.

corey_moncure 8y ago
This is correct. I dropped my "Affordable" Care Act plan in January when BCBS quoted a monthly principal increase from $696 to over $2200 for the Silver level plan my family of four had been enrolled in. We are young and healthy. $2200 is monthly rent on a luxury condominium in Honolulu. I asked the agent on the phone if he had children, and if he could afford such a plan. He replied that he could not.
- deleted 8y ago
  [deleted]
- shard972 8y ago
  Well thats just going to make health insurance more expensive for more people now isn't it? IIRC poor people get subsidised healthcare now so if the middle class workers aren't paying for healthcare... who is?
JAlexoid 8y ago
Actually your contribution to the healthcare is reflected in the data that ic collected, as the data is from IRS. So... While your employer may pony up 50% of the cost, you get stuck with the other half on your tax return.
SketchySeaBeast 8y ago
So do we see that in other countries without outrageous healthcare premiums? I don't know, but I'm sure there are examples of countries where a company won't be paying for that and causing one's wage to stagnate because of it.

rconti 8y ago

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 household income. I searched the article a few times for a few keywords trying to make sure I hadn't missed anything, but I see no mention of number of wage earners per household. 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. 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. edit2: the Splinter data also appears to be household-level: http://www.davidsplinter.com/Splinter-Mobility_and_Inequality.pdf http://www.davidsplinter.com/Splinter-Mobility_and_Inequalit... 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)." 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.

kimmeld 8y ago
From past podcasts he doesn't see the problem with having two people working to get that gain while ignoring the individual stagnating/declining worker pay. That stance is not logical to me, but it seems to fit his view on the world.
- gameswithgo 8y ago
  Yeah, once two people are working you NEED more income. Often one of the two people working spends their entire paycheck on child care. You may also to speed more on cleaning, home and auto repair, as you will have less time to do those yourself. You may need to spend more on healthcare since there will be less time to work out and cook good meals. You may need to spend more on food as there will be less time to cook good meals. It goes on!

randyrand 8y ago

The income divide increasing int he past few decades is due to globalization. This much is obvious. 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. 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. 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.. 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.

rwcarlsen 8y ago

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 huge 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.

curun1r 8y ago
They also likely use inflation statistics that are problematic, at best. When considering consumables, we've had pretty reasonable inflation and people are making more than their parents. But if you were to calculate inflation based on prices for things that don't benefit from advances in our production abilities (commodities, equities, housing, education, health care, etc), we'd be making nowhere near as much as previous generations when adjusted for inflation using that calculation. Affording a car, TV, computer and food to feed ourselves isn't that difficult for many people. It's the life-altering purchases that are slipping farther and farther from the reach of the middle class.
- maxxxxx 8y ago
  Exactly. Low inflation doesn't help much if your salary increases get eaten up by housing, education hand healthcare. Rent, health care and education should be counted into inflation numbers.
  - onlyrealcuzzo 8y ago
    Wait. Aren't rent, healthcare, AND education all included in the eight components of CPI? Isn't that how the government measures inflation? I think one of the big things left off is housing prices. But I'm pretty sure rent, healthcare, and education are part of it: https://www.bls.gov/cpi/factsheets/medical-care.htm https://www.bls.gov/cpi/factsheets/medical-care.htm http://webapps.dol.gov/dolfaq/go-dol-faq.asp?faqid=94 http://webapps.dol.gov/dolfaq/go-dol-faq.asp?faqid=94

peisistratos 8y ago

> possible overstatement of inflation 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. An odd counterpart to German conservative bankers, who seem more obsessed with low inflation and currency stability.

gibblz 8y ago

So the trend disappears when the groups are disaggregated - I'm surprised that the author does not mention Simpson's Paradox: https://en.wikipedia.org/wiki/Simpson%27s_paradox https://en.wikipedia.org/wiki/Simpson%27s_paradox

esotericn 8y ago

The problem with most economic analysis is that adjustments are generally based on arbitrary metrics like PPP or inflation. 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. 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.

ryandrake 8y ago
Exactly. I probably earn 2X what my father made, inflation adjusted, when he was my age. Buuuut, I pay 5X what he paid for housing, 20X what he paid for healthcare, ∞X what he paid in student loans, have a commute 6X longer than his, live in a house 75% the size of his (he also had two houses at my age, by the way), work 1.25X his hours and have a crappy 401k rather than a nice defined-benefit pension. Comparing just salary misses the story.
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- jimbokun 8y ago
  Shouldn't those things be factored into the "inflation adjusted" calculation? (housing, healthcare, student loans...)
  - esotericn 8y ago
    Yes, they should, but they are not, and realistically cannot be. Inflation statistics are almost useless in calculating quality of life for this reason. They calculate an average over a population. An example of why this is silly, is that the average 40 year old both has lower personal inflation _and_ can weather inflation much more readily than the average 20 year old.

picsao 8y ago

No they tinkle down to the poor millionaires via rent.

std_throwawayay 8y ago

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.

jdlyga 8y ago

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.

trophycase 8y ago
The surveillance-advertising-entertainment complex will likely keep these forces in check for far longer than you'd expect.

peisistratos 8y ago

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. 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. 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. Although 4 in 10 sons doing worse than their fathers (from the Pew report he cites) is bleak enough.

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alexnewman 8y ago

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.

conanbatt 8y ago
Sorry, when did he pointed that out? I don't think that is true at all. In fact, he claims that the worst and most pernicious oppression of the poor is done by the measures and people that claim to do it in their aid.
- alexnewman 8y ago
  I could point out a few but I’m currently partying. Here’s my favorite and tell me if it is close enough to convince you “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”
  - conanbatt 8y ago
    He continues to say that any attempt to prevent it would be either ineffective or cause the monopoly itself. He gives as examples the regulations of “making a registry with name and address of every tradesman makes it easier for them to congregate” and “the requirement to make a retirement fund makes congregation a necessity”. Praphrasing
    - alexnewman 8y ago
      He also advocated for free education, free clothing. People want to pain adam smith as an extremist, but having read him a couple of ties, he'd be considered a centrist today.

imh 8y ago

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.

skookumchuck 8y ago

It's never been easier or cheaper for anyone to invest in the stock market and capture a share of those gains.

jimbokun 8y ago
If you have free cash flow.
- skookumchuck 8y ago
  The US is not divided into two categories - 1% with everything and 99% who have nothing.
  - ionised 8y ago
    No, but it is filled mostly with people living paycheck to paycheck without any savings.

russroberts613 8y ago

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: https://www.census.gov/data/tables/time-series/demo/income-poverty/historical-income-households.html https://www.census.gov/data/tables/time-series/demo/income-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.

roymurdock 8y ago
Thanks for coming on here to weigh in personally. I always appreciate research that adds nuance to a discussion. Do you have any plans to explore wealth concentration in future essays?
tanderson92 8y ago
I think it is generally well-understood that individuals more senior in their career have generally higher incomes. So, when it is stated that "the rich" are obtaining wealth gains, it is explicitly looking at structural changes rather than simply an earnings cycle for individuals continuing to be true. Your first sentence is "Adjusted for inflation, the US economy has more than doubled in real terms since 1975" -- but it was the case even in 1975 that there was absolute income mobility as one progressed in their career. So, your argument purports to disprove the relative mobility or inequality arguments of Saez/Piketty but in fact cannot. That is why there is so much pushback on this piece of yours: because it appears to be attacking a strawman unrelated to real inequality in the system.
thrmsforbfast 8y ago

pierrebai 8y ago

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.

namirez 8y ago

One flaw here, as others have noted, is the number of wage-earners per household. 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?

abvdasker 8y ago

This study is laughable given that dual-earner households are now the norm.

conanbatt 8y ago
The author mentions in the comments that dual-earner households went down in comparison to 1978~
someguydave 8y ago
They are not more common because marriage has declined greatly.

xupybd 8y ago

>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. 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.

angel_j 8y ago

Using income, instead of wealth, to argue economic trends, is like using weather, instead of climate, to argue global warming.

someguydave 8y ago
Sure, weather and climate have no relationship and the author is a simpleton.

yuhong 8y ago

This is one of the reason I dislike the current debt-based economy that relies on extracting more dollars from "consumers".

mindviews 8y ago

>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. 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? 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?

anonunt 8y ago

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? 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. Also looking at social mobility, security to find a job etc. numbers are irrelevant freedoms are relevant. 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. 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. 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. 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 :)?