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Real wages haven't increased since 1970. We only feel richer because: * Most households have two wage earners now. * We use lines of credit to borrow for dis

Real wages haven't increased since 1970. We only feel richer because: * Most households have two wage earners now. * We use lines of credit to borrow for discretionary purchases, we lease cars, pay by subscription for things more. * We have more gadgets. (Note that this has been proven to make people any happier.)

focusgroup0 8y ago
Another factor: The Immigration Act of 1965 significantly increased the amount of labor immigrating to the country https://en.wikipedia.org/wiki/Immigration_and_Nationality_Act_of_1965 https://en.wikipedia.org/wiki/Immigration_and_Nationality_Ac...
- WhompingWindows 8y ago
  How does this lead to wage stagnation? You've stated a potential piece of evidence but provided no reasoning to link to your (implicit) claim that immigration leads to stagnant wages. If that's not your claim, feel free to fill out the details. Arguments have CER - claim, evidence, reasoning. Your comment was missing two.
  - deogeo 8y ago
    It's pretty obvious he meant that wages were suppressed due to supply and demand, where the immigration act increased the supply of labor. If you'd like proof of the act doing just that: https://www.migrationpolicy.org/programs/data-hub/charts/immigrant-population-over-time https://www.migrationpolicy.org/programs/data-hub/charts/imm...
    - repsilat 8y ago
      Is that obvious that's what they meant? I understood it to mean that immigrants tend to earn less (I don't have this data myself), and could drag the average down. In that case the overall average real wage could stagnate while the average real wage of every cohort increased.
      - fastball 8y ago
        I don't think people need to spell out supply and demand every time they indicate that increasing the supply of something brings down prices. In other words: yes, it is obvious.
        Symmetry 8y ago
        The thing is, though, that while immigrants increase the supply of labor they're also consumers who increase the demand for labor. That's why you don't tend to see wages go down after exogenous immigration shocks like the Cuban boat lift in Miami. Well, non-English-speaking immigrants do actually tend to depress the wages of resident non-English-speakers somewhat but not the wages of English-speakers.
        will_brown 8y ago
        >The thing is, though, that while immigrants increase the supply of labor they're also consumers who increase the demand for labor. Unless there is an increase in productivity, which if you read the article, would be apparent. That is increase the labor supply while simultaneously increasing labor productivity and you will see a real drop in demand for laborers which is naturally going to result in a stagnation of wages. That is the extra demand created by the wave of low wage immigrants is more than made up with the increases in productivity in that same time period. Now you have a macro economy much more efficient at concentrating wealth.
      - DataWorker 8y ago
        How much immigrants are paid is primarily a function of how many immigrants are in the labor pool. They tend to earn less because there’s a virtually unlimited supply of poor people who want to immigrate. Supply and demand impacts markets for labor, that’s just basic economics.
- gregwtmtno 8y ago
  I never understood this argument. More people in the country obviously leads to more labor supply but also more labor demand.
  - deogeo 8y ago
    The extra supply is balanced by the extra demand only if exports are zero. I.e. demand for Apple devices won't increase by 10% if the US population grows by 10%. And of course making 10% more rarely requires 10% more workers - you need more on the assembly line, but not more to design the items.
    - gregwtmtno 8y ago
      Those are points I hadn't considered, but what in the US, net exports are negative. Wouldn't that imply the converse effect to what you're describing?
      - deogeo 8y ago
        It wouldn't. Say someone in the US buys something made in China - how does that increase demand for labor in the US? There's some marginal US labor required for the last part of the transport, but that's it.
        pas 8y ago
        Though thanks to the bigger market the prices can actually decrease, so living standards could increase, even if wages haven't.
        thfuran 8y ago
        Only if they wouldn't have bought it if they hadn't moved to the US.
        ultraluminous 8y ago
        Thee last part of the transport is not marginal in the real world. Increased local consumption drives transport, retail, marketing, etc. etc. Real life economic modeling is not a simple supply/demand, widgets made/sold chart.
- moorhosj 8y ago
  Women also doubled their laborforce participation rate from 30% to 60%. https://ourworldindata.org/uploads/2017/08/Labor-Force-Participation-of-women-in-the-US-1955-2005.png https://ourworldindata.org/uploads/2017/08/Labor-Force-Parti...
- ebog 8y ago
  This is a prime example of the Lump of Labor fallacy. https://en.wikipedia.org/wiki/Lump_of_labour_fallacy https://en.wikipedia.org/wiki/Lump_of_labour_fallacy Our best studies have shown immigration increases overall welfare. The Mariel Boatlift studies are a good example of this: https://www.jstor.org/stable/2523702?seq=1#page_scan_tab_contents https://www.jstor.org/stable/2523702?seq=1#page_scan_tab_con...
LeifCarrotson 8y ago
> Note that this has been proven to make people any happier. s/Note/Not/? Or are you missing a "not" somewhere else?
- gerbilly 8y ago
  Sorry yes, you are right, I had a typo in there. I was trying to say that more gadgets have NOT been proven to make anyone happier.
deleted 8y ago
[deleted]
michaelbuckbee 8y ago
There's a real split in goods and service prices where certain classes of goods have risen incredibly (Healthcare and College) and others have fallen (computers and TVs). Check out this chart to get a sense of it: http://www.aei.org/publication/chart-of-the-day-or-century/ http://www.aei.org/publication/chart-of-the-day-or-century/
iooi 8y ago
This is false. [1] Real income has doubled since 1970 for individuals. I'm not sure why so many people seem to think that, I'm constantly having to reply to posts like this on HN and Reddit with real data but a lot of people just go along with it even though the people that post these claims never substantiate it with data. I think there must be a psychological factor that makes people feel good about how our generation has it so hard? I would truly appreciate if someone could explain why. https://www.census.gov/data/tables/time-series/demo/income-poverty/historical-income-people.html https://www.census.gov/data/tables/time-series/demo/income-p...
- rexpop 8y ago
  Beware the Flaw of Averages, my son: https://aneconomicsense.files.wordpress.com/2015/02/going-from-gdp-per-capita-to-median-wage-1947-to-2013142.png https://aneconomicsense.files.wordpress.com/2015/02/going-fr...
  - deogeo 8y ago
    Especially relevant here, since if all the income went to a single person, and everyone else was reduced to living under bridges, the average wage would stay the same.
- greeneggs 8y ago
  Maybe you would have more luck if you cited better sources. I clicked on your link and just got a page of dozens of Excel files. Which one are you referring to? On P7, it says median income in 2017 was $31,786. In 1974 (as far back as the data goes), median income in 2017 dollars was $23,984. That's only a 32.5% increase, not 100% like you claim.
  - lucozade 8y ago
    I believe they were using p1 which has the more general data. 2017 per capita income was 34,489 1970 per capita was 17,948 in 2017 dollars.
MCsh4rk 8y ago
Well, there's been a constant inflation which shows a significant increase in wealth. If someone was earning 500$/month in 1970 for some job and is making 1500$ today for the same job, that person's salary potentially increased 3 times. It probably isn't really be technically the case, but there is definitely some of that which makes us feel richer (because we are).
Theodores 8y ago
We also have bullshit jobs. Take a look around you and see the proliferation of pointless jobs. In the office there are plenty of them, within the world of internet development there are plenty of them. Out in town there are plenty of them. You can feel richer just because your job adds to the bottom line instead of costing the bottom line, you are therefore not with a bullshit job, therefore you feel richer than that temp who muddles through data that really needs just one SQL query to make proper sense of. For a reality check it sometimes helps to think how you used to live in the past. Maybe you spent $$$ on a hobby every week, had a fleet of vehicles, went on holidays, had spare rooms in your house. Or maybe you had friends that had all these things and worked a job where they were back home by six every day. https://theanarchistlibrary.org/library/david-graeber-bullshit-jobs.pdf https://theanarchistlibrary.org/library/david-graeber-bullsh...
ebog 8y ago
This is probably a better explanation for how wages have grown. The biggest problem is healthcare costs have grown too. https://www.minneapolisfed.org/publications/the-region/where-has-all-the-income-gone https://www.minneapolisfed.org/publications/the-region/where...
bko 8y ago
> * Most households have two wage earners now. Fully 28% of households now have just one person living in them, more than double the rate from 1960 (13%), reports the US Census Bureau. As a result of continued shifts in household types and family dynamics, the average household size is 2.53 this year, down from 3.3 some 50 years ago. Single person households aren’t just restricted to youth. In fact, almost one-third (29%) of adults aged 65 and older live alone. In a fairly dramatic shift, householders aged 65 and older outnumber those under the age of 30 by almost a 2:1 ratio (31 million and 15.8 million, respectively), whereas these householders had been at virtual parity in the late 1970s. (Households are occupied housing units, and householders are the people in whose name the housing units is rented or owned. They must be at least 15 years of age.) * We use lines of credit to borrow for discretionary purchases, we lease cars, pay by subscription for things more. I don't see whats wrong with this. Availability of credit has helped a lot. For instance, mortgages used to have much higher interest rates and shorter term > * We have more gadgets. (Note that this has been proven to make people any happier.) I thought we were talking about wages not happiness. What's the point of wages if you don't have access to goods? https://www.marketingcharts.com/demographics-and-audiences-72625 https://www.marketingcharts.com/demographics-and-audiences-7...
- onlyrealcuzzo 8y ago
  Credit has largely been the best thing to happen in the world. But lower interest rates have not made housing more affordable. Neither have longer terms. Both of these things, in the long run, just make build-able land more expensive -- which keeps the mortgage payment / income ratio pretty constant in the long run. Obviously Real Estate is highly cyclical. So you can look at any two points in time and make conclusions like low interest rates or longer terms are great for affordability. But if you look over the long run, it's just not the case. Land price is a function of interest rates, taxes, lending standards, purchasing power, and speculation -- there are no inputs like with a refrigerator. And land is not a commodity in the same vein as, say, corn. If the demand for corn goes up, people grow more corn. If the demand for land goes up, VERY RARELY do we make more land.
throwawaymath 8y ago
> Note that this has been proven to make people any happier. Requests for citation are a little gauche, but if you tell me something is proven without any evidence you're kind of forcing my hand here. The rest of your comment could probably do with more rigor as well. Can you quantify exactly how many more households have dual earners now? Likewise do you have any numbers pertaining to lease versus purchase statistics between 1970 and 2018?
- jfengel 8y ago
  I think that there's a typo, and it meant to say "not that this has been proven..." Still not a documented assertion, but it's kind of a negative statement that's hard to prove one way or the other. It's believable that we've simply become hedonically accustomed to gadgets that made us happy to get, and would be unhappy to lose, without actually contributing to an overall increase in happiness -- but that's hard to quantify. I'm sure people have tried, and such attempts should be cited, but it doesn't seem unlikely.
- gerbilly 8y ago
  Sorry, I had an unfortunate typo in my comment which inverted the intended meaning. I was trying to say: Not that [gadgets] has been proven to make people any happier. And the support I would be inclined to give for that is the: https://en.wikipedia.org/wiki/Hedonic_treadmill https://en.wikipedia.org/wiki/Hedonic_treadmill By the late 1950s most households had washing machines and gas or electric stoves furnaces and water heaters (the old versions of these were coal or wood fired and required refilling) and most of the drudgery was eliminated from household chores. This did, in my opinion, increased quality of life significantly. However, I'm not sure much was gained in terms of happiness from going from Black and White TVs to 4K televisions with PVRs. Pretty much the same entertainment value could be gotten from a back and white TV as with a hi def set. You could watch the hockey game on either, and the experience was basically the same. As for my claims about real wages not having risen since 1970, other commenters have done a better job of defending that claim. (mbell for example)
opo 8y ago
>...Real wages haven't increased since 1970. From the data from the Fed, this is only partially true if you ignore non-cash compensation: >...A job usually also involves other types of compensation, such as the employer’s contribution to retirement pensions, health and life insurance, paid vacation and other leave, and any taxes the employer pays on these benefits. These benefits are now a substantial part of the cost of an employee, and they appear to be growing. The top graph shows that labor compensation growth is frequently higher than real wage growth. We can make this point more clearly by using index values: In the bottom graph, we set both series at 100 in 1970 and let them run. Real compensation growth is significantly higher: the 60% increase looks much better than the 3% increase for real wages. https://fredblog.stlouisfed.org/2016/09/wages-with-benefits/ https://fredblog.stlouisfed.org/2016/09/wages-with-benefits/

focusgroup0 8y ago

Another factor: The Immigration Act of 1965 significantly increased the amount of labor immigrating to the country https://en.wikipedia.org/wiki/Immigration_and_Nationality_Act_of_1965 https://en.wikipedia.org/wiki/Immigration_and_Nationality_Ac...

WhompingWindows 8y ago
How does this lead to wage stagnation? You've stated a potential piece of evidence but provided no reasoning to link to your (implicit) claim that immigration leads to stagnant wages. If that's not your claim, feel free to fill out the details. Arguments have CER - claim, evidence, reasoning. Your comment was missing two.
- deogeo 8y ago
  It's pretty obvious he meant that wages were suppressed due to supply and demand, where the immigration act increased the supply of labor. If you'd like proof of the act doing just that: https://www.migrationpolicy.org/programs/data-hub/charts/immigrant-population-over-time https://www.migrationpolicy.org/programs/data-hub/charts/imm...
  - repsilat 8y ago
    Is that obvious that's what they meant? I understood it to mean that immigrants tend to earn less (I don't have this data myself), and could drag the average down. In that case the overall average real wage could stagnate while the average real wage of every cohort increased.
    - fastball 8y ago
      I don't think people need to spell out supply and demand every time they indicate that increasing the supply of something brings down prices. In other words: yes, it is obvious.
      - Symmetry 8y ago
        The thing is, though, that while immigrants increase the supply of labor they're also consumers who increase the demand for labor. That's why you don't tend to see wages go down after exogenous immigration shocks like the Cuban boat lift in Miami. Well, non-English-speaking immigrants do actually tend to depress the wages of resident non-English-speakers somewhat but not the wages of English-speakers.
        will_brown 8y ago
        >The thing is, though, that while immigrants increase the supply of labor they're also consumers who increase the demand for labor. Unless there is an increase in productivity, which if you read the article, would be apparent. That is increase the labor supply while simultaneously increasing labor productivity and you will see a real drop in demand for laborers which is naturally going to result in a stagnation of wages. That is the extra demand created by the wave of low wage immigrants is more than made up with the increases in productivity in that same time period. Now you have a macro economy much more efficient at concentrating wealth.
    - DataWorker 8y ago
      How much immigrants are paid is primarily a function of how many immigrants are in the labor pool. They tend to earn less because there’s a virtually unlimited supply of poor people who want to immigrate. Supply and demand impacts markets for labor, that’s just basic economics.
gregwtmtno 8y ago
I never understood this argument. More people in the country obviously leads to more labor supply but also more labor demand.
- deogeo 8y ago
  The extra supply is balanced by the extra demand only if exports are zero. I.e. demand for Apple devices won't increase by 10% if the US population grows by 10%. And of course making 10% more rarely requires 10% more workers - you need more on the assembly line, but not more to design the items.
  - gregwtmtno 8y ago
    Those are points I hadn't considered, but what in the US, net exports are negative. Wouldn't that imply the converse effect to what you're describing?
    - deogeo 8y ago
      It wouldn't. Say someone in the US buys something made in China - how does that increase demand for labor in the US? There's some marginal US labor required for the last part of the transport, but that's it.
      - pas 8y ago
        Though thanks to the bigger market the prices can actually decrease, so living standards could increase, even if wages haven't.
        thfuran 8y ago
        Only if they wouldn't have bought it if they hadn't moved to the US.
      - ultraluminous 8y ago
        Thee last part of the transport is not marginal in the real world. Increased local consumption drives transport, retail, marketing, etc. etc. Real life economic modeling is not a simple supply/demand, widgets made/sold chart.
moorhosj 8y ago
Women also doubled their laborforce participation rate from 30% to 60%. https://ourworldindata.org/uploads/2017/08/Labor-Force-Participation-of-women-in-the-US-1955-2005.png https://ourworldindata.org/uploads/2017/08/Labor-Force-Parti...
ebog 8y ago
This is a prime example of the Lump of Labor fallacy. https://en.wikipedia.org/wiki/Lump_of_labour_fallacy https://en.wikipedia.org/wiki/Lump_of_labour_fallacy Our best studies have shown immigration increases overall welfare. The Mariel Boatlift studies are a good example of this: https://www.jstor.org/stable/2523702?seq=1#page_scan_tab_contents https://www.jstor.org/stable/2523702?seq=1#page_scan_tab_con...

LeifCarrotson 8y ago

> Note that this has been proven to make people any happier. s/Note/Not/? Or are you missing a "not" somewhere else?

gerbilly 8y ago
Sorry yes, you are right, I had a typo in there. I was trying to say that more gadgets have NOT been proven to make anyone happier.

deleted 8y ago

[deleted]

michaelbuckbee 8y ago

There's a real split in goods and service prices where certain classes of goods have risen incredibly (Healthcare and College) and others have fallen (computers and TVs). Check out this chart to get a sense of it: http://www.aei.org/publication/chart-of-the-day-or-century/ http://www.aei.org/publication/chart-of-the-day-or-century/

iooi 8y ago

This is false. [1] Real income has doubled since 1970 for individuals. I'm not sure why so many people seem to think that, I'm constantly having to reply to posts like this on HN and Reddit with real data but a lot of people just go along with it even though the people that post these claims never substantiate it with data. I think there must be a psychological factor that makes people feel good about how our generation has it so hard? I would truly appreciate if someone could explain why. https://www.census.gov/data/tables/time-series/demo/income-poverty/historical-income-people.html https://www.census.gov/data/tables/time-series/demo/income-p...

rexpop 8y ago
Beware the Flaw of Averages, my son: https://aneconomicsense.files.wordpress.com/2015/02/going-from-gdp-per-capita-to-median-wage-1947-to-2013142.png https://aneconomicsense.files.wordpress.com/2015/02/going-fr...
- deogeo 8y ago
  Especially relevant here, since if all the income went to a single person, and everyone else was reduced to living under bridges, the average wage would stay the same.
greeneggs 8y ago
Maybe you would have more luck if you cited better sources. I clicked on your link and just got a page of dozens of Excel files. Which one are you referring to? On P7, it says median income in 2017 was $31,786. In 1974 (as far back as the data goes), median income in 2017 dollars was $23,984. That's only a 32.5% increase, not 100% like you claim.
- lucozade 8y ago
  I believe they were using p1 which has the more general data. 2017 per capita income was 34,489 1970 per capita was 17,948 in 2017 dollars.

MCsh4rk 8y ago

Well, there's been a constant inflation which shows a significant increase in wealth. If someone was earning 500$/month in 1970 for some job and is making 1500$ today for the same job, that person's salary potentially increased 3 times. It probably isn't really be technically the case, but there is definitely some of that which makes us feel richer (because we are).

Theodores 8y ago

We also have bullshit jobs. Take a look around you and see the proliferation of pointless jobs. In the office there are plenty of them, within the world of internet development there are plenty of them. Out in town there are plenty of them. You can feel richer just because your job adds to the bottom line instead of costing the bottom line, you are therefore not with a bullshit job, therefore you feel richer than that temp who muddles through data that really needs just one SQL query to make proper sense of. For a reality check it sometimes helps to think how you used to live in the past. Maybe you spent $$$ on a hobby every week, had a fleet of vehicles, went on holidays, had spare rooms in your house. Or maybe you had friends that had all these things and worked a job where they were back home by six every day. https://theanarchistlibrary.org/library/david-graeber-bullshit-jobs.pdf https://theanarchistlibrary.org/library/david-graeber-bullsh...

ebog 8y ago

This is probably a better explanation for how wages have grown. The biggest problem is healthcare costs have grown too. https://www.minneapolisfed.org/publications/the-region/where-has-all-the-income-gone https://www.minneapolisfed.org/publications/the-region/where...

bko 8y ago

> * Most households have two wage earners now. Fully 28% of households now have just one person living in them, more than double the rate from 1960 (13%), reports the US Census Bureau. As a result of continued shifts in household types and family dynamics, the average household size is 2.53 this year, down from 3.3 some 50 years ago. Single person households aren’t just restricted to youth. In fact, almost one-third (29%) of adults aged 65 and older live alone. In a fairly dramatic shift, householders aged 65 and older outnumber those under the age of 30 by almost a 2:1 ratio (31 million and 15.8 million, respectively), whereas these householders had been at virtual parity in the late 1970s. (Households are occupied housing units, and householders are the people in whose name the housing units is rented or owned. They must be at least 15 years of age.) * We use lines of credit to borrow for discretionary purchases, we lease cars, pay by subscription for things more. I don't see whats wrong with this. Availability of credit has helped a lot. For instance, mortgages used to have much higher interest rates and shorter term > * We have more gadgets. (Note that this has been proven to make people any happier.) I thought we were talking about wages not happiness. What's the point of wages if you don't have access to goods? https://www.marketingcharts.com/demographics-and-audiences-72625 https://www.marketingcharts.com/demographics-and-audiences-7...

onlyrealcuzzo 8y ago
Credit has largely been the best thing to happen in the world. But lower interest rates have not made housing more affordable. Neither have longer terms. Both of these things, in the long run, just make build-able land more expensive -- which keeps the mortgage payment / income ratio pretty constant in the long run. Obviously Real Estate is highly cyclical. So you can look at any two points in time and make conclusions like low interest rates or longer terms are great for affordability. But if you look over the long run, it's just not the case. Land price is a function of interest rates, taxes, lending standards, purchasing power, and speculation -- there are no inputs like with a refrigerator. And land is not a commodity in the same vein as, say, corn. If the demand for corn goes up, people grow more corn. If the demand for land goes up, VERY RARELY do we make more land.

throwawaymath 8y ago

> Note that this has been proven to make people any happier. Requests for citation are a little gauche, but if you tell me something is proven without any evidence you're kind of forcing my hand here. The rest of your comment could probably do with more rigor as well. Can you quantify exactly how many more households have dual earners now? Likewise do you have any numbers pertaining to lease versus purchase statistics between 1970 and 2018?

jfengel 8y ago
I think that there's a typo, and it meant to say "not that this has been proven..." Still not a documented assertion, but it's kind of a negative statement that's hard to prove one way or the other. It's believable that we've simply become hedonically accustomed to gadgets that made us happy to get, and would be unhappy to lose, without actually contributing to an overall increase in happiness -- but that's hard to quantify. I'm sure people have tried, and such attempts should be cited, but it doesn't seem unlikely.
gerbilly 8y ago
Sorry, I had an unfortunate typo in my comment which inverted the intended meaning. I was trying to say: Not that [gadgets] has been proven to make people any happier. And the support I would be inclined to give for that is the: https://en.wikipedia.org/wiki/Hedonic_treadmill https://en.wikipedia.org/wiki/Hedonic_treadmill By the late 1950s most households had washing machines and gas or electric stoves furnaces and water heaters (the old versions of these were coal or wood fired and required refilling) and most of the drudgery was eliminated from household chores. This did, in my opinion, increased quality of life significantly. However, I'm not sure much was gained in terms of happiness from going from Black and White TVs to 4K televisions with PVRs. Pretty much the same entertainment value could be gotten from a back and white TV as with a hi def set. You could watch the hockey game on either, and the experience was basically the same. As for my claims about real wages not having risen since 1970, other commenters have done a better job of defending that claim. (mbell for example)

opo 8y ago

>...Real wages haven't increased since 1970. From the data from the Fed, this is only partially true if you ignore non-cash compensation: >...A job usually also involves other types of compensation, such as the employer’s contribution to retirement pensions, health and life insurance, paid vacation and other leave, and any taxes the employer pays on these benefits. These benefits are now a substantial part of the cost of an employee, and they appear to be growing. The top graph shows that labor compensation growth is frequently higher than real wage growth. We can make this point more clearly by using index values: In the bottom graph, we set both series at 100 in 1970 and let them run. Real compensation growth is significantly higher: the 60% increase looks much better than the 3% increase for real wages. https://fredblog.stlouisfed.org/2016/09/wages-with-benefits/ https://fredblog.stlouisfed.org/2016/09/wages-with-benefits/