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Yeah real wages are the same as they were 4 years ago. At the same time real returns from the stock market are up 10%. [1] And this isn't an isolated event. Sin

Yeah real wages are the same as they were 4 years ago. At the same time real returns from the stock market are up 10%. [1] And this isn't an isolated event. Since 1979 (not cherrypicking, that's the first date of the FRED table you linked) real wages are up 10%, and real returns from the stock market are up 3200%. There's something just not quite right about these things. Imagine telling somebody in 1979 that, with the current system, in 50 years they'd be earning 10% more but the stock market would be up 3200% more! Nobody would accept this (well unless they had a ton of money to dump into the markets), but with inflation and everybody thinking "wow I'm earning thousands more than last year - think of where I'll be in 20 years!", all of this is made invisible. [1] - https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp https://www.investopedia.com/ask/answers/042415/what-average...

gruez 2y ago
>At the same time real returns from the stock market are up 10%. [1] And this isn't an isolated event. Since 1979 (not cherrypicking, that's the first date of the FRED table you linked) real wages are up 10%, and real returns from the stock market are up 3200%. This comparison makes no sense. Wages describe a flow of money. Stock prices describe a lump sum amount of money. They're not comparable. >Imagine telling somebody in 1979 that, with the current system, in 50 years they'd be earning 10% more but the stock market would be up 3200% more! This would basically always be the case unless you have runaway inflation. Any sort of investment is subject to compound interest. Even if labor and capital both grew at 10%, capital would outpace labor because it has compound returns. It might be tempting to add compound returns to labor as well, but that'd just be hyperinflation.
- somenameforme 2y ago
  The 3200% is not a compound return calculation - it's simple the value of the real growth in value of the market, which is roughly proportional to the growth in earnings of those companies - things like PE earnings have become stupid in modern funny money times, but it still a reasonable ballpark. A compounding investment from 1979, under any strategy, would be worth way more than 3200% today.

gruez 2y ago

>At the same time real returns from the stock market are up 10%. [1] And this isn't an isolated event. Since 1979 (not cherrypicking, that's the first date of the FRED table you linked) real wages are up 10%, and real returns from the stock market are up 3200%. This comparison makes no sense. Wages describe a flow of money. Stock prices describe a lump sum amount of money. They're not comparable. >Imagine telling somebody in 1979 that, with the current system, in 50 years they'd be earning 10% more but the stock market would be up 3200% more! This would basically always be the case unless you have runaway inflation. Any sort of investment is subject to compound interest. Even if labor and capital both grew at 10%, capital would outpace labor because it has compound returns. It might be tempting to add compound returns to labor as well, but that'd just be hyperinflation.

somenameforme 2y ago
The 3200% is not a compound return calculation - it's simple the value of the real growth in value of the market, which is roughly proportional to the growth in earnings of those companies - things like PE earnings have become stupid in modern funny money times, but it still a reasonable ballpark. A compounding investment from 1979, under any strategy, would be worth way more than 3200% today.