5 ms·

Note: I heard this story around 2015-2016. https://news.ycombinator.com/item?id=9371854 https://news.ycombinator.com/item?id=9371854 I'm not sure which is more

Note: I heard this story around 2015-2016. https://news.ycombinator.com/item?id=9371854 https://news.ycombinator.com/item?id=9371854 I'm not sure which is more applicable: 1. Hurray, decency. 2. Shouldn't getting excited about what would've been middle-class income 70 years ago be a sign how far workers' pay has fallen?

travbrack 7y ago
Huh? Inflation calculator says 70k in 1950 is worth 754k today. Edit: I did the calculation backwards. Thanks to everyone who pointed that out.
- zelphirkalt 7y ago
  You have it the wrong way around. You should calculate what historical wage would be 70k today. GP is probably also relating to what you can buy using 70k.
- opan 7y ago
  Wouldn't you instead want to see what 70k today is equivalent to back then, then check how that pay compares to the average?
- eru 7y ago
  I think you'd need to do the opposite: take 70k today, and figure out what the inflation calculator suggests about it's value in 1950 dollars. Just using your numbers, that would be about 6.5k. Now compare with median annual incomes in 1950. Asking Google about '1950 median american income' gives 'Average family income in 1950 was $3,300.' Not quite what I wanted to know, but close enough. (We are looking at per worker income, and would probably be more interested in median than average.)
  - mzi 7y ago
    I found this link[0] that tells us that the median income - adjusted for inflation - seems to be rising since 1967. https://www.davemanuel.com/median-household-income.php https://www.davemanuel.com/median-household-income.php
    - nbp160130 7y ago
      This is measuring household income, not individual income. Real household income isn't increasing because wages are rising, it's increasing because more people in a household are working.
      - eru 7y ago
        On the other hand, household sizes have decreased. (Though not sure about workers per household.) > [...] it's increasing because more people in a household are working. More people are working outside the house and participating in the market economy. Women worked before, domestic chores don't show up in these statistics. Presumably they produce a lot more working outside the house: to estimate a monetary value of what they did before compare with the prevailing wages for nannies and housekeepers.
- primitivesuave 7y ago
  By the other interpretation of $6500 dollars in 1950 (roughly equivalent to 70k today), it would be much higher than the average family income of 1950 of $3,300 and put you in the top 10-20% of earners, which is probably not as far as 70k gets you today.
  - eru 7y ago
    Of course, fewer people were middle class back then.. But yeah, the original comment we are replying to doesn't have much going for it.
  - bencoder 7y ago
    The true inflation rate is probably a lot higher than CPI which is what most calculators use. Somewhere between 7-13% [0] (for example) [0] https://www.businessinsider.com/if-people-knew-the-actual-inflation-rate-it-would-crash-the-economy-2016-8?r=US&IR=T https://www.businessinsider.com/if-people-knew-the-actual-in...
    - eru 7y ago
      Serious economists mostly suspect that the CPI overstates inflation. See eg https://www.schroders.com/en/sysglobalassets/digital/insights/pdfs/2016/ih5_is-inflation-overstated.pdf https://www.schroders.com/en/sysglobalassets/digital/insight... or do some Google searches. In any case, I agree that inflation (or more precisely, the price level) is a finicky statistic to agree on. So if you are making an argument, it's better if you can avoid inflation. Eg people like to argue whether median real income has stagnated or not. And that crucially hinges on inflation. But what they actually want to talk about seems to be whether workers get 'exploited' more. So we can instead look at the labour share of GDP over time. No inflation adjustment necessary. The article you linked to is somewhat hilarious. It suggests eg China is cooperating with the US in massaging American inflation numbers. (See point 2 in their list.)
  - luckylion 7y ago
    Comparing family income 1950 with a single income in 2020 though. Have two incomes of that size in a family, and you'll be at 140k, which will put you in in that range.
- deleted 7y ago
  [deleted]
eru 7y ago
Where do you get that 'middle-class income' from? The standard of living that 70k USD buys today is vastly better than what the median income bought in 1950. (Of course, Seattle is rather expensive. The 70k USD would go much further in a city that didn't restrict residential construction so much.)
- TomMckenny 7y ago
  You can not even buy a house built on the 1950s on 70k a year. And while most quality claims (which usually lack actual numbers) certainly look subjective, the quality of a dirt lot or vial of insulin has obviously not changed while their adjusted inflation price has sky rocketed. At any rate, the claim that "stuff" is more expensive because it is better implies that decades of technical improvements have resulted in no efficiency gains. At best, it implies the value per man hour has essentially remained flat. And since the option of buying lower priced versions of items has dispersed, we can never know if the higher quality item is fairly priced.
  - eru 7y ago
    Dirt has become enormously more expensive. The more dignified term to use here is 'land prices have increased.' One could argue that the quality of the dirt has improved a lot; or at least the quality of its location. The US in 2020 is a much richer place than the US in 1950; so we'd expect land to cost more. (But in addition, there are those restrictions on housing supply that I already mentioned.) You are right about insulin probably not having gotten much better. There's a few other goods like that as well. Some of those problems are self-inflicted. Eg education is much more costly these days, too. Who claimed that stuff is more expensive because it's better? Taking hedonic adjustments into account when producing inflation numbers is the proper thing to do. Productivity improvements would then show up by decreases in the price level measured like that. We can see that for eg computers. A good enough desktop computer today costs less in nominal dollars than in the early 90s, despite being enormously more powerful. Yes, you are right that we can not buy many of the crappier things any more. That's partially down to regulation, but also down to there just not being enough demand for lots of crappy stuff to keep production at scale running. So that makes calculating the price level harder. The usual work-around is to only look at adjustments from one year to the next, and chain them. Another workaround is to go with the Big Mac index. (https://en.wikipedia.org/wiki/Big_Mac_Index https://en.wikipedia.org/wiki/Big_Mac_Index) That index is a bit of a joke, since it just measure the price of a Big Mac. But it's surprisingly useful for what it is.

travbrack 7y ago

Huh? Inflation calculator says 70k in 1950 is worth 754k today. Edit: I did the calculation backwards. Thanks to everyone who pointed that out.

zelphirkalt 7y ago
You have it the wrong way around. You should calculate what historical wage would be 70k today. GP is probably also relating to what you can buy using 70k.
opan 7y ago
Wouldn't you instead want to see what 70k today is equivalent to back then, then check how that pay compares to the average?
eru 7y ago
I think you'd need to do the opposite: take 70k today, and figure out what the inflation calculator suggests about it's value in 1950 dollars. Just using your numbers, that would be about 6.5k. Now compare with median annual incomes in 1950. Asking Google about '1950 median american income' gives 'Average family income in 1950 was $3,300.' Not quite what I wanted to know, but close enough. (We are looking at per worker income, and would probably be more interested in median than average.)
- mzi 7y ago
  I found this link[0] that tells us that the median income - adjusted for inflation - seems to be rising since 1967. https://www.davemanuel.com/median-household-income.php https://www.davemanuel.com/median-household-income.php
  - nbp160130 7y ago
    This is measuring household income, not individual income. Real household income isn't increasing because wages are rising, it's increasing because more people in a household are working.
    - eru 7y ago
      On the other hand, household sizes have decreased. (Though not sure about workers per household.) > [...] it's increasing because more people in a household are working. More people are working outside the house and participating in the market economy. Women worked before, domestic chores don't show up in these statistics. Presumably they produce a lot more working outside the house: to estimate a monetary value of what they did before compare with the prevailing wages for nannies and housekeepers.
primitivesuave 7y ago
By the other interpretation of $6500 dollars in 1950 (roughly equivalent to 70k today), it would be much higher than the average family income of 1950 of $3,300 and put you in the top 10-20% of earners, which is probably not as far as 70k gets you today.
- eru 7y ago
  Of course, fewer people were middle class back then.. But yeah, the original comment we are replying to doesn't have much going for it.
- bencoder 7y ago
  The true inflation rate is probably a lot higher than CPI which is what most calculators use. Somewhere between 7-13% [0] (for example) [0] https://www.businessinsider.com/if-people-knew-the-actual-inflation-rate-it-would-crash-the-economy-2016-8?r=US&IR=T https://www.businessinsider.com/if-people-knew-the-actual-in...
  - eru 7y ago
    Serious economists mostly suspect that the CPI overstates inflation. See eg https://www.schroders.com/en/sysglobalassets/digital/insights/pdfs/2016/ih5_is-inflation-overstated.pdf https://www.schroders.com/en/sysglobalassets/digital/insight... or do some Google searches. In any case, I agree that inflation (or more precisely, the price level) is a finicky statistic to agree on. So if you are making an argument, it's better if you can avoid inflation. Eg people like to argue whether median real income has stagnated or not. And that crucially hinges on inflation. But what they actually want to talk about seems to be whether workers get 'exploited' more. So we can instead look at the labour share of GDP over time. No inflation adjustment necessary. The article you linked to is somewhat hilarious. It suggests eg China is cooperating with the US in massaging American inflation numbers. (See point 2 in their list.)
- luckylion 7y ago
  Comparing family income 1950 with a single income in 2020 though. Have two incomes of that size in a family, and you'll be at 140k, which will put you in in that range.
deleted 7y ago
[deleted]

eru 7y ago

Where do you get that 'middle-class income' from? The standard of living that 70k USD buys today is vastly better than what the median income bought in 1950. (Of course, Seattle is rather expensive. The 70k USD would go much further in a city that didn't restrict residential construction so much.)

TomMckenny 7y ago
You can not even buy a house built on the 1950s on 70k a year. And while most quality claims (which usually lack actual numbers) certainly look subjective, the quality of a dirt lot or vial of insulin has obviously not changed while their adjusted inflation price has sky rocketed. At any rate, the claim that "stuff" is more expensive because it is better implies that decades of technical improvements have resulted in no efficiency gains. At best, it implies the value per man hour has essentially remained flat. And since the option of buying lower priced versions of items has dispersed, we can never know if the higher quality item is fairly priced.
- eru 7y ago
  Dirt has become enormously more expensive. The more dignified term to use here is 'land prices have increased.' One could argue that the quality of the dirt has improved a lot; or at least the quality of its location. The US in 2020 is a much richer place than the US in 1950; so we'd expect land to cost more. (But in addition, there are those restrictions on housing supply that I already mentioned.) You are right about insulin probably not having gotten much better. There's a few other goods like that as well. Some of those problems are self-inflicted. Eg education is much more costly these days, too. Who claimed that stuff is more expensive because it's better? Taking hedonic adjustments into account when producing inflation numbers is the proper thing to do. Productivity improvements would then show up by decreases in the price level measured like that. We can see that for eg computers. A good enough desktop computer today costs less in nominal dollars than in the early 90s, despite being enormously more powerful. Yes, you are right that we can not buy many of the crappier things any more. That's partially down to regulation, but also down to there just not being enough demand for lots of crappy stuff to keep production at scale running. So that makes calculating the price level harder. The usual work-around is to only look at adjustments from one year to the next, and chain them. Another workaround is to go with the Big Mac index. (https://en.wikipedia.org/wiki/Big_Mac_Index https://en.wikipedia.org/wiki/Big_Mac_Index) That index is a bit of a joke, since it just measure the price of a Big Mac. But it's surprisingly useful for what it is.