12 ms·

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 inc

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
    - maxxxxx 8y ago
      I am not an expert but the way I have read about is that they also factor in better quality of items so even if your car costs 10000 more it's not counted as inflation because it's a better car compared to years ago and therefore has more value. I think the same is going on in health care and other areas. And excluding house prices is also a very questionable.
      - manofstick 8y ago
        Yes, it's Hedonic Quality Adjustment [1]. If you follow through the example on the link, you see the negative CPI component, even though a) you can't actually buy the old version anymore - so you can't reap the "real" price benefit and b) the subjective experience ultimately for lots of these things is the same. i.e. a mid-level TV from 40 years ago probably gave the same hedonistic pleasure as one today. Arguably the older one gave more because of less other gadgets! [1] https://www.bls.gov/cpi/quality-adjustment/questions-and-answers.htm https://www.bls.gov/cpi/quality-adjustment/questions-and-ans...
    - frgtpsswrdlame 8y ago
      They are. The BLS puts together a 'market basket' that includes those items. However, it is the proportion that matters. Necessities like rent and healthcare are a larger proportions of expenses for the poor than they are for the middle and upper classes. When the market basket is created it takes consideration of everyone's expenses and so the weighting for healthcare costs say, falls below what it is that poor people spend on average and above what rich people spend on average (as a percent). Because these are a few of the spending categories that are inflating the fastest it is in this way that the CPI understates inflation for the poor and overstates it for the rich.
    - kwillets 8y ago
      Rent is not in the CPI. That's what made Shiller's work useful (comparing housing costs and CPI). Edit: Shiller was wrong (I asked him about this point after a lecture about his work on historical housing prices).
  - spectrum1234 8y ago
    Good point. Of these 3 which are truly free market? Zero.
    - jensv 8y ago
      What do people mean by truly free market? Can you provide an example of one?
- qubax 8y ago
  Anyone know if tuition costs are part of inflation?
- Gibbon1 8y ago
  Recently read someone also making an observation that smoothed statistics are hiding that 'life event' expenses hit all at once and threaten every last bit of accumulated savings. Have a baby and either daycare or one spouse off work for a couple of years. Main bread winner out of work for a year. Sending kids to college. Parents need support or assisted living. Major illness. End of like expenses.
refurb 8y ago
Ummm... since at least the 1980's the number of 2 or more income households has actually fallen from 45% to 40%, not gone up.[1] In terms of hours worked, it's about the same, 44 hours although has been trends down since the early 2000's. [1]http://www.aei.org/publication/update-how-changing-household-composition-household-work-hours-and-retirement-explain-median-household-income/ http://www.aei.org/publication/update-how-changing-household...
- rwcarlsen 8y ago
  That is interesting. I confirmed those numbers looking at the actual census data. The changes you mention are much less pronounced if you remove no-income households from the data though. Perhaps no-income households should be included in the 2 or more stat - since one could make a case for that category being the people who "gave up" because they couldn't keep up with expenses. I wonder what other things might be unaccounted for that could make the data "seem" this way - or perhaps my anecdata is just wrong. Also, the data doesn't go back further than 1980. I wonder what it would show if we had it back to 1970. [Edit] Just another thought - that data does not break down the households into percentiles for total household income. I would expect that the fraction of multi and no income households w.r.t. total households has increased more on the lower income side of the spectrum than the middle/upper end. It also doesn't account for how much each earner brings in - which is related to the weekly hours stat in your source - I'd expect this to be even more influenced by accounting for income quintiles (or quartiles).
  - NeedMoreTea 8y ago
    I wonder if those single income households include maintenance and alimony. The nature of families has changed significantly since the 1970s with more divorce and more children being raised in one parent households. I doubt the single parent receiving money from the estranged parent is counted as a two earner household, even though in some senses it is. Once you add the changing rate of marriage, increase in single person households since the 70s, and the fact that real inflation often varies depending on which income quintile you're in, I don't think enough data is available to let you pick it apart meaningfully. So we're left trading anecdotes or stats with gaps. :) The number of traditionally shaped families, i.e. mum, dad, and 2.2 children has plummeted since the 70s and the number of singles, with or without children has rocketed from both increasing separation and later entry into relationships. I'm in agreement with your main point, that it's far harder for a single earner family to thrive now than in the past. I doubt I can cite that in any sensible way.
watwut 8y ago
Then again, your counterpoint completely ignores amount of household work needed in 1970 versus 2018. Cooking, cleaning, washing dishes and cloth now are incomparable to 1970. Changing diapers is a lot less work now too.
- rwcarlsen 8y ago
  Some things have become more difficult since then too. Free range parenting is very frowned upon - and micro-managing kids takes a lot of time and effort.
  - zip1234 8y ago
    Perhaps more time is spent driving kids to activities, but a counterpoint is that kids have never had more video games or TV than the present.
    - wasdfff 8y ago
      Before kids were staying up late playing video games, they were staying up late with a comic book. I think there’s a fallacy in this notion that technology has changed how much time is spent by a child being productive or not. The medium might have changed, but I expect the mean amount of time goofing off (be it book, radio, tv, video game, or internet) to be constant throughout generations of children and teenagers.
    - ido 8y ago
      We already had more tv and video games than we can handle when i was growing up in the 90s.
  - watwut 8y ago
    That is not needed the way washing cloth and ironing was. Which is why the micromanagement trends are not domain of working classes as much as upper classes. Micromanaged kids don't need parent at home a lot of it is outsourced to schools and clubs. And parent at home wishing to be needed or useful may be contributing to the perceived need for micromanagement (plus those who want women at home for emotional or ideological reasons want to see all that mecessary).
JimboOmega 8y ago
That, to me, is what really seals it all as ridiculous. My parents had the standard of living they had with only my father working and in a fairly normal government job. That as enough to support my mom and 2 children while also saving for retirement. That standard of living now would require both parents working and being rather successful in their white collar careers. Even as a reasonably successful person in an advantaged field (tech), I can't imagine supporting an entire family.
- T2_t2 8y ago
  That needs a citation. If you cut out everything we have they didn't - cable TV, Netflix, computers, internet, cafes, restaurants, Kindle, better choices in grocery food and alcohol - and ate the sort of cheap food people lived on, things like meatloaf and crappy ingredient dishes, I reckon it would be entirely possible. The only thing that is prohibitively expensive today vs 1980 is housing. The reasons for that are multiple, but mostly NIMBYism.
  - charlieflowers 8y ago
    Education? Tuition bubble? Healthcare?
  - beat 8y ago
    A quick look at education numbers finds that, since 1988, the cost of private four year college has doubled (in inflation-adjusted dollars), and the cost of state four year college has tripled. Again in constant dollars, health care has seen a more than fivefold increase since 1970, from under $2000 to over $10,000 per capita. Constant dollars, mind you. Health care and education costs are more or less fixed and unavoidable. They're more like fees than taxes, flat no matter the income.
    - TuringNYC 8y ago
      >> Health care and education costs are more or less fixed and unavoidable. They're more like fees than taxes, flat no matter the income. Flat if you are lucky enough to be healthy. Enormous once you actually have an issue, like a complicated pregnancy, or something that requires an MRI.
Joeri 8y ago
The biggest manipulation is they divide household income by the square of household size, which makes the bigger families of the 60’s seem to earn a lot less than they did. The whole thing is based on two studies funded by the same institute based on the same biased dataset, and diving into how they get their numbers is enlightening.
- quickthrower2 8y ago
  Statistics people love squaring stuff! Why are they squaring the household size?
  - manicdee 8y ago
    Because it makes the later salary per household look better.
  - darpa_escapee 8y ago
    Squaring explodes differences.
- burlesona 8y ago
  Ugh, which may be completely missing the causality. I’d argue that many people are having fewer kids (smaller households) soecifically because raising them has become so expensive.
alehul 8y ago
Wouldn't this be addressed by the fact that, as you said, we now have a new standard of multi-income households? If everyone in America was in a single-income household, and then we all became, for instance, two-income households, wouldn't it make sense for individual incomes to drop by half?
- thrmsforbfast 8y ago
  Only if GDP remained constant. Inflation-adjusted GDP increase from ~5 trillion in the 70's to ~18 trillion today. Much larger than 2x, and not every household is dual-income.
  - ryanwaggoner 8y ago
    Wouldn’t you want to adjust this for household growth too? Not saying it wouldn’t be larger than 2x, but population has grown and households I believe are growing even faster, so maybe it’s actually closer to 2x?
- gowld 8y ago
  Two-income households caused wages to drop due to labor oversupply.
  - alehul 8y ago
    Yes, exactly, and that shouldn't be a factor in the argument that wages are decreasing because the rich are capturing all economic gains. Looking at household income can (very roughly) remove that from factoring into the data.
ddebernardy 8y ago
Another problem is that discretionary spending as a percent of household expenses went down over the same period. Households are much less financially secure than they used to be as a result. In the 1970s, a single income household could more or less make ends meet when the primary bread winner couldn't work. The other spouse would find a job, the household would consume however much less, and life continued. Nowadays, it's not unheard of for non-discretionary spending (mortgage or rent, other loans, taxes, health insurance, etc.) to constitute over half of a household's spending. If either of the two spouses can't work, things can rapidly go to hell.

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
  - maxxxxx 8y ago
    I am not an expert but the way I have read about is that they also factor in better quality of items so even if your car costs 10000 more it's not counted as inflation because it's a better car compared to years ago and therefore has more value. I think the same is going on in health care and other areas. And excluding house prices is also a very questionable.
    - manofstick 8y ago
      Yes, it's Hedonic Quality Adjustment [1]. If you follow through the example on the link, you see the negative CPI component, even though a) you can't actually buy the old version anymore - so you can't reap the "real" price benefit and b) the subjective experience ultimately for lots of these things is the same. i.e. a mid-level TV from 40 years ago probably gave the same hedonistic pleasure as one today. Arguably the older one gave more because of less other gadgets! [1] https://www.bls.gov/cpi/quality-adjustment/questions-and-answers.htm https://www.bls.gov/cpi/quality-adjustment/questions-and-ans...
  - frgtpsswrdlame 8y ago
    They are. The BLS puts together a 'market basket' that includes those items. However, it is the proportion that matters. Necessities like rent and healthcare are a larger proportions of expenses for the poor than they are for the middle and upper classes. When the market basket is created it takes consideration of everyone's expenses and so the weighting for healthcare costs say, falls below what it is that poor people spend on average and above what rich people spend on average (as a percent). Because these are a few of the spending categories that are inflating the fastest it is in this way that the CPI understates inflation for the poor and overstates it for the rich.
  - kwillets 8y ago
    Rent is not in the CPI. That's what made Shiller's work useful (comparing housing costs and CPI). Edit: Shiller was wrong (I asked him about this point after a lecture about his work on historical housing prices).
- spectrum1234 8y ago
  Good point. Of these 3 which are truly free market? Zero.
  - jensv 8y ago
    What do people mean by truly free market? Can you provide an example of one?
qubax 8y ago
Anyone know if tuition costs are part of inflation?
Gibbon1 8y ago
Recently read someone also making an observation that smoothed statistics are hiding that 'life event' expenses hit all at once and threaten every last bit of accumulated savings. Have a baby and either daycare or one spouse off work for a couple of years. Main bread winner out of work for a year. Sending kids to college. Parents need support or assisted living. Major illness. End of like expenses.

refurb 8y ago

Ummm... since at least the 1980's the number of 2 or more income households has actually fallen from 45% to 40%, not gone up.[1] In terms of hours worked, it's about the same, 44 hours although has been trends down since the early 2000's. [1]http://www.aei.org/publication/update-how-changing-household-composition-household-work-hours-and-retirement-explain-median-household-income/ http://www.aei.org/publication/update-how-changing-household...

rwcarlsen 8y ago
That is interesting. I confirmed those numbers looking at the actual census data. The changes you mention are much less pronounced if you remove no-income households from the data though. Perhaps no-income households should be included in the 2 or more stat - since one could make a case for that category being the people who "gave up" because they couldn't keep up with expenses. I wonder what other things might be unaccounted for that could make the data "seem" this way - or perhaps my anecdata is just wrong. Also, the data doesn't go back further than 1980. I wonder what it would show if we had it back to 1970. [Edit] Just another thought - that data does not break down the households into percentiles for total household income. I would expect that the fraction of multi and no income households w.r.t. total households has increased more on the lower income side of the spectrum than the middle/upper end. It also doesn't account for how much each earner brings in - which is related to the weekly hours stat in your source - I'd expect this to be even more influenced by accounting for income quintiles (or quartiles).
- NeedMoreTea 8y ago
  I wonder if those single income households include maintenance and alimony. The nature of families has changed significantly since the 1970s with more divorce and more children being raised in one parent households. I doubt the single parent receiving money from the estranged parent is counted as a two earner household, even though in some senses it is. Once you add the changing rate of marriage, increase in single person households since the 70s, and the fact that real inflation often varies depending on which income quintile you're in, I don't think enough data is available to let you pick it apart meaningfully. So we're left trading anecdotes or stats with gaps. :) The number of traditionally shaped families, i.e. mum, dad, and 2.2 children has plummeted since the 70s and the number of singles, with or without children has rocketed from both increasing separation and later entry into relationships. I'm in agreement with your main point, that it's far harder for a single earner family to thrive now than in the past. I doubt I can cite that in any sensible way.

watwut 8y ago

Then again, your counterpoint completely ignores amount of household work needed in 1970 versus 2018. Cooking, cleaning, washing dishes and cloth now are incomparable to 1970. Changing diapers is a lot less work now too.

rwcarlsen 8y ago
Some things have become more difficult since then too. Free range parenting is very frowned upon - and micro-managing kids takes a lot of time and effort.
- zip1234 8y ago
  Perhaps more time is spent driving kids to activities, but a counterpoint is that kids have never had more video games or TV than the present.
  - wasdfff 8y ago
    Before kids were staying up late playing video games, they were staying up late with a comic book. I think there’s a fallacy in this notion that technology has changed how much time is spent by a child being productive or not. The medium might have changed, but I expect the mean amount of time goofing off (be it book, radio, tv, video game, or internet) to be constant throughout generations of children and teenagers.
  - ido 8y ago
    We already had more tv and video games than we can handle when i was growing up in the 90s.
- watwut 8y ago
  That is not needed the way washing cloth and ironing was. Which is why the micromanagement trends are not domain of working classes as much as upper classes. Micromanaged kids don't need parent at home a lot of it is outsourced to schools and clubs. And parent at home wishing to be needed or useful may be contributing to the perceived need for micromanagement (plus those who want women at home for emotional or ideological reasons want to see all that mecessary).

JimboOmega 8y ago

That, to me, is what really seals it all as ridiculous. My parents had the standard of living they had with only my father working and in a fairly normal government job. That as enough to support my mom and 2 children while also saving for retirement. That standard of living now would require both parents working and being rather successful in their white collar careers. Even as a reasonably successful person in an advantaged field (tech), I can't imagine supporting an entire family.

T2_t2 8y ago
That needs a citation. If you cut out everything we have they didn't - cable TV, Netflix, computers, internet, cafes, restaurants, Kindle, better choices in grocery food and alcohol - and ate the sort of cheap food people lived on, things like meatloaf and crappy ingredient dishes, I reckon it would be entirely possible. The only thing that is prohibitively expensive today vs 1980 is housing. The reasons for that are multiple, but mostly NIMBYism.
- charlieflowers 8y ago
  Education? Tuition bubble? Healthcare?
- beat 8y ago
  A quick look at education numbers finds that, since 1988, the cost of private four year college has doubled (in inflation-adjusted dollars), and the cost of state four year college has tripled. Again in constant dollars, health care has seen a more than fivefold increase since 1970, from under $2000 to over $10,000 per capita. Constant dollars, mind you. Health care and education costs are more or less fixed and unavoidable. They're more like fees than taxes, flat no matter the income.
  - TuringNYC 8y ago
    >> Health care and education costs are more or less fixed and unavoidable. They're more like fees than taxes, flat no matter the income. Flat if you are lucky enough to be healthy. Enormous once you actually have an issue, like a complicated pregnancy, or something that requires an MRI.

Joeri 8y ago

The biggest manipulation is they divide household income by the square of household size, which makes the bigger families of the 60’s seem to earn a lot less than they did. The whole thing is based on two studies funded by the same institute based on the same biased dataset, and diving into how they get their numbers is enlightening.

quickthrower2 8y ago
Statistics people love squaring stuff! Why are they squaring the household size?
- manicdee 8y ago
  Because it makes the later salary per household look better.
- darpa_escapee 8y ago
  Squaring explodes differences.
burlesona 8y ago
Ugh, which may be completely missing the causality. I’d argue that many people are having fewer kids (smaller households) soecifically because raising them has become so expensive.

alehul 8y ago

Wouldn't this be addressed by the fact that, as you said, we now have a new standard of multi-income households? If everyone in America was in a single-income household, and then we all became, for instance, two-income households, wouldn't it make sense for individual incomes to drop by half?

thrmsforbfast 8y ago
Only if GDP remained constant. Inflation-adjusted GDP increase from ~5 trillion in the 70's to ~18 trillion today. Much larger than 2x, and not every household is dual-income.
- ryanwaggoner 8y ago
  Wouldn’t you want to adjust this for household growth too? Not saying it wouldn’t be larger than 2x, but population has grown and households I believe are growing even faster, so maybe it’s actually closer to 2x?
gowld 8y ago
Two-income households caused wages to drop due to labor oversupply.
- alehul 8y ago
  Yes, exactly, and that shouldn't be a factor in the argument that wages are decreasing because the rich are capturing all economic gains. Looking at household income can (very roughly) remove that from factoring into the data.

ddebernardy 8y ago

Another problem is that discretionary spending as a percent of household expenses went down over the same period. Households are much less financially secure than they used to be as a result. In the 1970s, a single income household could more or less make ends meet when the primary bread winner couldn't work. The other spouse would find a job, the household would consume however much less, and life continued. Nowadays, it's not unheard of for non-discretionary spending (mortgage or rent, other loans, taxes, health insurance, etc.) to constitute over half of a household's spending. If either of the two spouses can't work, things can rapidly go to hell.