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Real, inflation-adjusted wages have been growing. https://fred.stlouisfed.org/series/LES1252881600Q https://fred.stlouisfed.org/series/LES1252881600Q If you t

Real, inflation-adjusted wages have been growing. https://fred.stlouisfed.org/series/LES1252881600Q https://fred.stlouisfed.org/series/LES1252881600Q If you think this federal reserve data is false, tell me more about why and how.

trymas 7y ago
I am not OP, but upvote for the source. Just a note: graph does not start from zero, so growth is exaggerated. Current value compared to worst: 360$ (2019) versus 309$ (1981) - 16.5% increase in 38 years. Taking first value of the graph in 1979 of 335$ gives - 7.5% increase in 40 years. IMHO it's abysmal result. I hope this positive trend will continue, because if there will be some kind of downward correction - we will be back in 1979.
lotsofpulp 7y ago
This is the relevant data: https://www.advisorperspectives.com/dshort/updates/2019/11/26/u-s-household-incomes-a-50-year-perspective https://www.advisorperspectives.com/dshort/updates/2019/11/2... Median doesn't tell enough of the story for what most of the population is experiencing.
- icebraining 7y ago
  That doesn't seem adjusted by the household size. Households can be earning less, despite people earning more.
  - lotsofpulp 7y ago
    Possibly, but I can’t find any data that would adjust for household size. Either way, you can see the top two deciles running away with the fruits of the past few decades.
    - icebraining 7y ago
      No, I can't; if the lower income households have been splitting their earnings into a greater number of households, a growth per person would be masked by a drop in total income per household. To use figurative numbers, if a couple earns $30k each, then they split but both get a raise of $20k, the household average drops from $60k to $50k despite the large salary raises.
      - lotsofpulp 7y ago
        If that is true for 80% of the population, then that is similarly a cause for concern. While you are correct that change in household size could be muddying the income numbers, I would say that the difference in behavior between top 20% and bottom 80% must reflect something driving the two apart.
    - mech1234 7y ago
      Average household income is simply average per capita income multiplied by average household size. (This would not be true for median, but I wanted to illustrate how simple it is). Household size has been decreasing over the last 50 years (less people per family unit), and household income is therefore growing more slowly than per capita income. It's still growing though. All this is available from FRED data.
marcosdumay 7y ago
You will find plenty of people that do no accept the US inflation numbers, if I understood it correctly, because it excludes mid-class expenses like housing and education.
- lazerpants 7y ago
  CPI includes both housing and education. If there's any argument to make it is around how they are calculated and the degree to which they are weighted in various inflation calculations.
  - willhslade 7y ago
    CPI doesn't include food or energy, I believe.
  - deleted 7y ago
    [deleted]
- eru 7y ago
  Use the GDP deflator as your measure of inflation to get around those issues. You still have to worry about hedonic adjustments, though.
tenpies 7y ago
> If you think this federal reserve data is false, tell me more about why and how. I don't think it's false, I just don't think it reflects anything realistic. My critique is with how they measure inflation, which is calculated in a way that ignores anything remotely volatile (meaning anything that has its prices adjusted to reflect reality) and was designed by someone who had incentives to make sure inflation was always low. There is no need for me to re-write what is already written so I'll just link Investopedia's summary: https://www.investopedia.com/articles/07/consumerpriceindex.asp https://www.investopedia.com/articles/07/consumerpriceindex.... Alternative measures of inflation put us anywhere from 6% to 8%, which seems to reflect reality much more than the official number. The concern about this is that high inflation is usually met with social unrest, political extremism, and declining standards of living. If inflation truly is understated, we should know because we'll begin seeing these things in the next couple of years. It will metaphorically be a case of bankers and policy makers saying "but inflation is below 2% - you guys should be happy" as a raging mob assembles a guillotine.
- eru 7y ago
  Which alternative measures are you talking about? The GDP deflator is the most solid alternative measure of inflation I am aware of. It uses the whole GDP as the basket https://fred.stlouisfed.org/graph/?g=nNsE https://fred.stlouisfed.org/graph/?g=nNsE and is nowhere near 6%. See also https://en.wikipedia.org/wiki/GDP_deflator https://en.wikipedia.org/wiki/GDP_deflator
NoGravitas 7y ago
Use of the median rather than the mean is extremely misleading here – wage increases have been concentrated in the top 10% of wage earners. A more representative view of the same data is shown here: https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
- pavpanchekha 7y ago
  Median means what the 50th percentile earns; mean is the total earned divided by the number of earners. In right-skewed distributions (like wage data) the median is less than the mean. In other words, your critique is already answered by the parent.
deleted 7y ago
[deleted]
Gil-galad 7y ago
The basket of goods they use to adjust for inflation does not usually include house prices, which have sky-rocketed in the last few decades.
- eru 7y ago
  In those kinds of debates about whether labour is more or less 'exploited' than they used to be, it's easiest to just ignore inflation: Look at the fraction of GDP that goes to labour, capital and land at any point in time. No need to adjust for inflation this way. Or viewed another way: you are adjusting for inflation, but your basket is the entire GDP, which you arbitrarily set to 1.
dangerface 7y ago
https://www.census.gov/library/publications/1971/demo/p60-78.html https://www.census.gov/library/publications/1971/demo/p60-78... Gives the median salary in 1970 as $9,870 accounting for inflation the median salary should be $67,662.84 but currently its $56,516. So median wages have not tracked inflation since 1970. But thats only half the battle the other side of the problem is runaway inflation. https://www.census.gov/const/uspriceann.pdf https://www.census.gov/const/uspriceann.pdf https://www.census.gov/construction/nrs/pdf/uspricemon.pdf https://www.census.gov/construction/nrs/pdf/uspricemon.pdf In 1970 the median for a house is $23,400 accounting for inflation that should be $160,416.45 today, but the median price is $300,000. So the inflation reported by banks is not real. It's important to separate value from $$$ as inflation generates $$$ but does not generate value. A house is a good metric for real inflation, as it is a good store of value, every one needs a house or they will die from exposure so every one values a house, once the house is built the value does not increase. In other words a house built in 1970 has the same value today as it did in 1970, but the price has increased a lot more than the reported inflation or the inflation of wages. Like I said this is fairly simple maths but it adds up for most other stores of value like gold.

trymas 7y ago

I am not OP, but upvote for the source. Just a note: graph does not start from zero, so growth is exaggerated. Current value compared to worst: 360$ (2019) versus 309$ (1981) - 16.5% increase in 38 years. Taking first value of the graph in 1979 of 335$ gives - 7.5% increase in 40 years. IMHO it's abysmal result. I hope this positive trend will continue, because if there will be some kind of downward correction - we will be back in 1979.

lotsofpulp 7y ago

This is the relevant data: https://www.advisorperspectives.com/dshort/updates/2019/11/26/u-s-household-incomes-a-50-year-perspective https://www.advisorperspectives.com/dshort/updates/2019/11/2... Median doesn't tell enough of the story for what most of the population is experiencing.

icebraining 7y ago
That doesn't seem adjusted by the household size. Households can be earning less, despite people earning more.
- lotsofpulp 7y ago
  Possibly, but I can’t find any data that would adjust for household size. Either way, you can see the top two deciles running away with the fruits of the past few decades.
  - icebraining 7y ago
    No, I can't; if the lower income households have been splitting their earnings into a greater number of households, a growth per person would be masked by a drop in total income per household. To use figurative numbers, if a couple earns $30k each, then they split but both get a raise of $20k, the household average drops from $60k to $50k despite the large salary raises.
    - lotsofpulp 7y ago
      If that is true for 80% of the population, then that is similarly a cause for concern. While you are correct that change in household size could be muddying the income numbers, I would say that the difference in behavior between top 20% and bottom 80% must reflect something driving the two apart.
  - mech1234 7y ago
    Average household income is simply average per capita income multiplied by average household size. (This would not be true for median, but I wanted to illustrate how simple it is). Household size has been decreasing over the last 50 years (less people per family unit), and household income is therefore growing more slowly than per capita income. It's still growing though. All this is available from FRED data.

marcosdumay 7y ago

You will find plenty of people that do no accept the US inflation numbers, if I understood it correctly, because it excludes mid-class expenses like housing and education.

lazerpants 7y ago
CPI includes both housing and education. If there's any argument to make it is around how they are calculated and the degree to which they are weighted in various inflation calculations.
- willhslade 7y ago
  CPI doesn't include food or energy, I believe.
- deleted 7y ago
  [deleted]
eru 7y ago
Use the GDP deflator as your measure of inflation to get around those issues. You still have to worry about hedonic adjustments, though.

tenpies 7y ago

> If you think this federal reserve data is false, tell me more about why and how. I don't think it's false, I just don't think it reflects anything realistic. My critique is with how they measure inflation, which is calculated in a way that ignores anything remotely volatile (meaning anything that has its prices adjusted to reflect reality) and was designed by someone who had incentives to make sure inflation was always low. There is no need for me to re-write what is already written so I'll just link Investopedia's summary: https://www.investopedia.com/articles/07/consumerpriceindex.asp https://www.investopedia.com/articles/07/consumerpriceindex.... Alternative measures of inflation put us anywhere from 6% to 8%, which seems to reflect reality much more than the official number. The concern about this is that high inflation is usually met with social unrest, political extremism, and declining standards of living. If inflation truly is understated, we should know because we'll begin seeing these things in the next couple of years. It will metaphorically be a case of bankers and policy makers saying "but inflation is below 2% - you guys should be happy" as a raging mob assembles a guillotine.

eru 7y ago
Which alternative measures are you talking about? The GDP deflator is the most solid alternative measure of inflation I am aware of. It uses the whole GDP as the basket https://fred.stlouisfed.org/graph/?g=nNsE https://fred.stlouisfed.org/graph/?g=nNsE and is nowhere near 6%. See also https://en.wikipedia.org/wiki/GDP_deflator https://en.wikipedia.org/wiki/GDP_deflator

NoGravitas 7y ago

Use of the median rather than the mean is extremely misleading here – wage increases have been concentrated in the top 10% of wage earners. A more representative view of the same data is shown here: https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...

pavpanchekha 7y ago
Median means what the 50th percentile earns; mean is the total earned divided by the number of earners. In right-skewed distributions (like wage data) the median is less than the mean. In other words, your critique is already answered by the parent.

deleted 7y ago

[deleted]

Gil-galad 7y ago

The basket of goods they use to adjust for inflation does not usually include house prices, which have sky-rocketed in the last few decades.

eru 7y ago
In those kinds of debates about whether labour is more or less 'exploited' than they used to be, it's easiest to just ignore inflation: Look at the fraction of GDP that goes to labour, capital and land at any point in time. No need to adjust for inflation this way. Or viewed another way: you are adjusting for inflation, but your basket is the entire GDP, which you arbitrarily set to 1.

dangerface 7y ago

https://www.census.gov/library/publications/1971/demo/p60-78.html https://www.census.gov/library/publications/1971/demo/p60-78... Gives the median salary in 1970 as $9,870 accounting for inflation the median salary should be $67,662.84 but currently its $56,516. So median wages have not tracked inflation since 1970. But thats only half the battle the other side of the problem is runaway inflation. https://www.census.gov/const/uspriceann.pdf https://www.census.gov/const/uspriceann.pdf https://www.census.gov/construction/nrs/pdf/uspricemon.pdf https://www.census.gov/construction/nrs/pdf/uspricemon.pdf In 1970 the median for a house is $23,400 accounting for inflation that should be $160,416.45 today, but the median price is $300,000. So the inflation reported by banks is not real. It's important to separate value from $$$ as inflation generates $$$ but does not generate value. A house is a good metric for real inflation, as it is a good store of value, every one needs a house or they will die from exposure so every one values a house, once the house is built the value does not increase. In other words a house built in 1970 has the same value today as it did in 1970, but the price has increased a lot more than the reported inflation or the inflation of wages. Like I said this is fairly simple maths but it adds up for most other stores of value like gold.