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Wages have been a lagging indicator for almost 50 years now. Anyone who portends that wages drive inflation is not worth listening to. Wages have not kept up, t

Wages have been a lagging indicator for almost 50 years now. Anyone who portends that wages drive inflation is not worth listening to. Wages have not kept up, today, nor will they tomorrow.

sokoloff 3y ago
Wages have somewhat more than kept up with inflation. 1955-2017: https://www.statista.com/chart/18418/real-mean-and-median-family-income-in-the-us/ https://www.statista.com/chart/18418/real-mean-and-median-fa... 1984-2021: https://fred.stlouisfed.org/series/MEHOINUSA672N https://fred.stlouisfed.org/series/MEHOINUSA672N (I couldn't find a single series that ran 1950s through 2021/2022, so had to use two above.)
- IanKerr 3y ago
  Those charts show wages growing at an annualized rate of 1.5% at best. Any years with inflation greater than 1.5% were effectively years of wage LOSS, rather than growth. Most of those years had inflation greater than 1.5%. Edit: this math is bad, see sokoloff's comment below.
  - Supermancho 3y ago
    QED
  - wizofaus 3y ago
    Doesn't the "adjusted dollars" mean the numbers are already adjusted for inflation? Pretty sure the median wage in 1984 was a lot less than 56K in 1984 dollars.
  - sokoloff 3y ago
    Those charts show real wages, not nominal wages. "Real" in economics means "after taking inflation into account". https://www.investopedia.com/terms/r/real-value.asp https://www.investopedia.com/terms/r/real-value.asp A year showing any growth in real terms is a nominal growth that is higher than inflation.
    - IanKerr 3y ago
      Fair enough. There still seems to be a disconnect though, as the cost of various goods, such as housing, have far exceeded inflation. Are there any charts that try to track wages against a basket of goods?
      - rank0 3y ago
        That's what the CPI is and the real wage growth charts are exactly what you're asking for. That being said, there's definitely a disconnect. The CPI metric is constantly changing, and is such a broad economic indicator that many people's experiences will not "feel" like what the federal data suggests. The root of the growing wealth gap is the massive deficit we've been running. Especially since the GFC, the strategy has been to rack up a bunch of debt and inflate that debt away. This inflates the value of financial assets, property, and commodities...none of which is owned by the average joe whose cash savings gets destroyed in the interim.
        sokoloff 3y ago
        I agree with everything you say except for one point: > none of which is owned by the average joe About 66% of US households "own" a home (often with a fixed-rate mortgage, which makes rising inflation doubly good for those homeowners) and 58% of homes are owner-occupied. The median Joe is a homeowner, not a renter.
        rank0 3y ago
        Yeah you’re right thanks for the correction. I’d rephrase to say among those three categories cumulatively most Americans own very little.
ekianjo 3y ago
This all started when the dollar stopped being indexed on gold
- slikrick 3y ago
  okay, now explain how those things are in any way related to what's going on
  - ekianjo 3y ago
    going downhill does not stop
- CuriousCosmic 3y ago
  Not really. The divergence only became meaningful in the 80s which corresponds closer to Reagan's economic reforms and the massive chilling effect on unions that occurred in that period (ex: the 1981 PATCO strike and Reagan's subsequent retaliation).
- jedberg 3y ago
  We had inflation before the 1970s.
  - WalterBright 3y ago
    The divergence happened in 1914, starting the very next year. That divergence reached 2:1 around 1929, and (as always happens when currency is inflated while being pegged to something else) a massive correction occurred (the banks collapsed). The response by FDR was to make it illegal to trade dollars for gold. Then for decades there was the absurd fiction that the dollar was pegged to gold, but of course nobody was allowed to make such a transaction. This continued until the 1970s when that ersatz pegging was repealed.

Wages have been a lagging indicator for almost 50 years now. Anyone who portends that wages drive inflation is not worth listening to. Wages have not kept up, today, nor will they tomorrow.

sokoloff 3y ago

Wages have somewhat more than kept up with inflation. 1955-2017: https://www.statista.com/chart/18418/real-mean-and-median-family-income-in-the-us/ https://www.statista.com/chart/18418/real-mean-and-median-fa... 1984-2021: https://fred.stlouisfed.org/series/MEHOINUSA672N https://fred.stlouisfed.org/series/MEHOINUSA672N (I couldn't find a single series that ran 1950s through 2021/2022, so had to use two above.)

IanKerr 3y ago
Those charts show wages growing at an annualized rate of 1.5% at best. Any years with inflation greater than 1.5% were effectively years of wage LOSS, rather than growth. Most of those years had inflation greater than 1.5%. Edit: this math is bad, see sokoloff's comment below.
- Supermancho 3y ago
  QED
- wizofaus 3y ago
  Doesn't the "adjusted dollars" mean the numbers are already adjusted for inflation? Pretty sure the median wage in 1984 was a lot less than 56K in 1984 dollars.
- sokoloff 3y ago
  Those charts show real wages, not nominal wages. "Real" in economics means "after taking inflation into account". https://www.investopedia.com/terms/r/real-value.asp https://www.investopedia.com/terms/r/real-value.asp A year showing any growth in real terms is a nominal growth that is higher than inflation.
  - IanKerr 3y ago
    Fair enough. There still seems to be a disconnect though, as the cost of various goods, such as housing, have far exceeded inflation. Are there any charts that try to track wages against a basket of goods?
    - rank0 3y ago
      That's what the CPI is and the real wage growth charts are exactly what you're asking for. That being said, there's definitely a disconnect. The CPI metric is constantly changing, and is such a broad economic indicator that many people's experiences will not "feel" like what the federal data suggests. The root of the growing wealth gap is the massive deficit we've been running. Especially since the GFC, the strategy has been to rack up a bunch of debt and inflate that debt away. This inflates the value of financial assets, property, and commodities...none of which is owned by the average joe whose cash savings gets destroyed in the interim.
      - sokoloff 3y ago
        I agree with everything you say except for one point: > none of which is owned by the average joe About 66% of US households "own" a home (often with a fixed-rate mortgage, which makes rising inflation doubly good for those homeowners) and 58% of homes are owner-occupied. The median Joe is a homeowner, not a renter.
        rank0 3y ago
        Yeah you’re right thanks for the correction. I’d rephrase to say among those three categories cumulatively most Americans own very little.

ekianjo 3y ago

This all started when the dollar stopped being indexed on gold

slikrick 3y ago
okay, now explain how those things are in any way related to what's going on
- ekianjo 3y ago
  going downhill does not stop
CuriousCosmic 3y ago
Not really. The divergence only became meaningful in the 80s which corresponds closer to Reagan's economic reforms and the massive chilling effect on unions that occurred in that period (ex: the 1981 PATCO strike and Reagan's subsequent retaliation).
jedberg 3y ago
We had inflation before the 1970s.
- WalterBright 3y ago
  The divergence happened in 1914, starting the very next year. That divergence reached 2:1 around 1929, and (as always happens when currency is inflated while being pegged to something else) a massive correction occurred (the banks collapsed). The response by FDR was to make it illegal to trade dollars for gold. Then for decades there was the absurd fiction that the dollar was pegged to gold, but of course nobody was allowed to make such a transaction. This continued until the 1970s when that ersatz pegging was repealed.