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I know you know the definition of real wages, and it's nothing to do with what you said -- it's wages indexed by BLS inflation numbers. http://en.wikipedia.org

by jbooth 16y ago

I know you know the definition of real wages, and it's nothing to do with what you said -- it's wages indexed by BLS inflation numbers. http://en.wikipedia.org/wiki/File:United_States_Income_Distribution_1967-2003.svg http://en.wikipedia.org/wiki/File:United_States_Income_Distr... I overspoke. They've stagnated for the bottom 4 quintiles since the early 80s, and declined since 2000. For future trends, I'd extrapolate from the current U-3 and more importantly U-6 figures (they don't look good).

yummyfajitas 16y ago
In general, the definition of economic concepts does not include references to specific government agencies. Are "real wages" not a meaningful concept in Mexico, beyond the reach of the BLS? If you look at the definition of inflation (keep track of units!), you can immediately see that wages indexed by inflation == amount of stuff you can buy. As for BLS inflation numbers, I agree that by that specific measurement, real wages appear to have stagnated. On the other hand, people today have more stuff than they did in the 80's. That suggests the BLS inflation numbers might not mean what you think they mean. (It's actually pretty clear why they don't quite match up if you look closely at the methodology of the BLS. The basket of goods used to compute inflation today is larger than the basket of goods in 1980. A proper measure of inflation would take a fixed basket of goods at t[0] and measure the cost of the same basket of goods at t[1]. But that would require different inflation measures based on the starting year. This would be too complicated to give to politicians, so the BLS doesn't bother. )
- jbooth 16y ago
  Ok, so let's throw out the BLS inflation numbers even though they're the standard for basically everyone in academia and industry because you don't like what they say in this case? What's the alternative? I wasn't talking about Mexico, I'd defer to the canonical inflation figure for there if I were. If you want to kibbitz about the basket of goods, fine.. but that conversation's gonna go right to "fix our egregiously broken healthcare system".
  - yummyfajitas 16y ago
    The BLS numbers are not as good as you seem to think, and many people are aware of their flaws. For example, the Boskin Commission (in 1996) concluded that inflation was overstated by about 1.3%/year (up to 1996, which includes about 16 years of the period you are interested in). http://en.wikipedia.org/wiki/Boskin_Commission http://en.wikipedia.org/wiki/Boskin_Commission Regardless of your argumentum ad populum, do you disagree with my claim that a correct measure of inflation should not use an expanding basket of goods? If so, please explain why we should care about this quantity: BLS-adjusted wage = (nominal wage) x (cost of smaller basket A in 1980) / (cost of bigger basket B in 2010)
    - jbooth 16y ago
      So did you cancel your subscription to the Economist and the WSJ? Because they cite the BLS inflation numbers all the time, like multiple times per week.
      - lotharbot 16y ago
        BLS inflation numbers get cited all the time. That doesn't mean they actually show what [random pundit X] thinks they show. In particular, they don't support the claim that people have less purchasing power now than they did 30 years ago. They don't directly measure purchasing power; "real wages" is a misnomer, and a decrease in "real wages" doesn't necessarily correspond to "starving" the consumers as you claimed in an ancestor post. When asked to directly measure purchasing power, why do you instead go for the "appeal to authority" regarding an indirect and clearly flawed method? Why not try to actually directly answer the question at hand: name one good or service that is less available now than it was 20-30 years ago, thereby establishing an actual decrease in purchasing power for the consumers you claim are being "starved".
        jbooth 16y ago
        Look, if it's the BLS with their 70 year history vs yummyfajita's basket of goods he'll throw together to try and prove the point, I'll stick with the BLS. Nothing against Mr. fajitas, he's a smart guy. But I could throw together an index that was heavy on healthcare and gasoline costs, maybe factor in average debt level and show the opposite.
- krschultz 16y ago
  So does housing(0)=a cave? We've been improving ever since. I understand your point that for a buck we get more today than previously, but really what is happening is that the wages for the bulk of people are stagnant or shrinking relative to the measure of inflation (which over 20 years really hasn't changed that dramatically, especially when it ignores gas prices which have gone up 300% in nominal dollars in 15 years) while the tippy top are seeing their wages grow relative to that same measure of inflation. You are argueing the point on "real wages", which I see you point, but really the problem is that "real wages" are increasing very quickly for a tiny fraction of people, and not for everyone else. How you actually define real wages doesn't matter so long as it is the same for both groups you are comparing.
  - yummyfajitas 16y ago
    Yes. The fact that a suburban house with electricity, running water, heating and assorted other amenities costs more than a cave with a firepit is not inflation. Similarly, it's also not inflation for cheese fries to cost more than french fries. How you actually define real wages doesn't matter so long as it is the same for both groups you are comparing. This is true only if you want to make a relative comparison. I wasn't making a comparison at all, I was simply pointing out that everyone in the US, in every decile, has a lot more today than they did in 1980.
  - CWuestefeld 16y ago
    really the problem is that "real wages" are increasing very quickly for a tiny fraction of people, and not for everyone else Mr. Fajitas's distinction is important. Without it, the picture being drawn is one of a declining middle class; a trend that, if continued, will see us all digging in the dirt just to live. But this is woefully incorrect. We're all better off. The middle class has much more goods and leisure time. Even the poor have more. Really, I have trouble seeing the problem here. As far as I can tell, the real objection is simply that the rich are getting richer at a faster rate than everyone else. And that seems like nothing but simple envy.
    - rue 16y ago
      It implies that there is a disparity in effort vs. reward, which to many seems unfair (not to mention the truly rich have no need nor use for all their money). It is not that rich people do not deserve riches (well, some don't). It is that the rest of the people do not deserve any less.

by jbooth 16y ago

yummyfajitas 16y ago

In general, the definition of economic concepts does not include references to specific government agencies. Are "real wages" not a meaningful concept in Mexico, beyond the reach of the BLS? If you look at the definition of inflation (keep track of units!), you can immediately see that wages indexed by inflation == amount of stuff you can buy. As for BLS inflation numbers, I agree that by that specific measurement, real wages appear to have stagnated. On the other hand, people today have more stuff than they did in the 80's. That suggests the BLS inflation numbers might not mean what you think they mean. (It's actually pretty clear why they don't quite match up if you look closely at the methodology of the BLS. The basket of goods used to compute inflation today is larger than the basket of goods in 1980. A proper measure of inflation would take a fixed basket of goods at t[0] and measure the cost of the same basket of goods at t[1]. But that would require different inflation measures based on the starting year. This would be too complicated to give to politicians, so the BLS doesn't bother. )

jbooth 16y ago
Ok, so let's throw out the BLS inflation numbers even though they're the standard for basically everyone in academia and industry because you don't like what they say in this case? What's the alternative? I wasn't talking about Mexico, I'd defer to the canonical inflation figure for there if I were. If you want to kibbitz about the basket of goods, fine.. but that conversation's gonna go right to "fix our egregiously broken healthcare system".
- yummyfajitas 16y ago
  The BLS numbers are not as good as you seem to think, and many people are aware of their flaws. For example, the Boskin Commission (in 1996) concluded that inflation was overstated by about 1.3%/year (up to 1996, which includes about 16 years of the period you are interested in). http://en.wikipedia.org/wiki/Boskin_Commission http://en.wikipedia.org/wiki/Boskin_Commission Regardless of your argumentum ad populum, do you disagree with my claim that a correct measure of inflation should not use an expanding basket of goods? If so, please explain why we should care about this quantity: BLS-adjusted wage = (nominal wage) x (cost of smaller basket A in 1980) / (cost of bigger basket B in 2010)
  - jbooth 16y ago
    So did you cancel your subscription to the Economist and the WSJ? Because they cite the BLS inflation numbers all the time, like multiple times per week.
    - lotharbot 16y ago
      BLS inflation numbers get cited all the time. That doesn't mean they actually show what [random pundit X] thinks they show. In particular, they don't support the claim that people have less purchasing power now than they did 30 years ago. They don't directly measure purchasing power; "real wages" is a misnomer, and a decrease in "real wages" doesn't necessarily correspond to "starving" the consumers as you claimed in an ancestor post. When asked to directly measure purchasing power, why do you instead go for the "appeal to authority" regarding an indirect and clearly flawed method? Why not try to actually directly answer the question at hand: name one good or service that is less available now than it was 20-30 years ago, thereby establishing an actual decrease in purchasing power for the consumers you claim are being "starved".
      - jbooth 16y ago
        Look, if it's the BLS with their 70 year history vs yummyfajita's basket of goods he'll throw together to try and prove the point, I'll stick with the BLS. Nothing against Mr. fajitas, he's a smart guy. But I could throw together an index that was heavy on healthcare and gasoline costs, maybe factor in average debt level and show the opposite.
krschultz 16y ago
So does housing(0)=a cave? We've been improving ever since. I understand your point that for a buck we get more today than previously, but really what is happening is that the wages for the bulk of people are stagnant or shrinking relative to the measure of inflation (which over 20 years really hasn't changed that dramatically, especially when it ignores gas prices which have gone up 300% in nominal dollars in 15 years) while the tippy top are seeing their wages grow relative to that same measure of inflation. You are argueing the point on "real wages", which I see you point, but really the problem is that "real wages" are increasing very quickly for a tiny fraction of people, and not for everyone else. How you actually define real wages doesn't matter so long as it is the same for both groups you are comparing.
- yummyfajitas 16y ago
  Yes. The fact that a suburban house with electricity, running water, heating and assorted other amenities costs more than a cave with a firepit is not inflation. Similarly, it's also not inflation for cheese fries to cost more than french fries. How you actually define real wages doesn't matter so long as it is the same for both groups you are comparing. This is true only if you want to make a relative comparison. I wasn't making a comparison at all, I was simply pointing out that everyone in the US, in every decile, has a lot more today than they did in 1980.
- CWuestefeld 16y ago
  really the problem is that "real wages" are increasing very quickly for a tiny fraction of people, and not for everyone else Mr. Fajitas's distinction is important. Without it, the picture being drawn is one of a declining middle class; a trend that, if continued, will see us all digging in the dirt just to live. But this is woefully incorrect. We're all better off. The middle class has much more goods and leisure time. Even the poor have more. Really, I have trouble seeing the problem here. As far as I can tell, the real objection is simply that the rich are getting richer at a faster rate than everyone else. And that seems like nothing but simple envy.
  - rue 16y ago
    It implies that there is a disparity in effort vs. reward, which to many seems unfair (not to mention the truly rich have no need nor use for all their money). It is not that rich people do not deserve riches (well, some don't). It is that the rest of the people do not deserve any less.