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The Myth of a Stagnant Middle Class

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Re: The Myth of a Stagnant Middle Class

#61

Post by CleanedStar »

twoodfin wrote: post #35
CleanedStar wrote: post #21

In the early 1970s, WSJ writers could have written an article pointing at how much better the middle class in the US had done over the past 40 years. Now they have to resort to this sophistry. When they admit the average hourly wage of nonsupervisory workers has remained about the same, what that actually means it is lower than it was in the early 1970s, adjusted for inflation. So one point they make is workers are p…

In the early 1970s, WSJ writers could have written an article pointing at how much better the middle class in the US had done over the past 40 years. You really think you'd rather be the median income 25 year old in 1973 vs. 2013? It's not sophistry to point out that today's median 25 year old has massive advantages in health, education, technology and basic quality of life over his 1973 equivalent. The real average…

Massive advantages in education? With higher education requirements, the average worker is now forced - if they want to make the same wage they would have in 1972 - to pay for their own job training, college education etc. That people have to go into debt to get an education to make what they could have without it 40 years ago you're presenting as something positive.

Re: The Myth of a Stagnant Middle Class

#62

Post by roc »

dionidium wrote: post #49
rayiner wrote: post #45

Earlier quoted context omitted.

> Nothing. But the article makes no attempt to address income inequality. Right, because that's a losing argument for him. But that's the concern of "progressives." He's using the classic tactic of pretending that the other side is arguing something different than they are, then attacking that argument. > 1. Has the middle class stagnated over the last n decades? What does "stagnated" mean? Humans think relatively, n…

This is disingenuous. Progressives routinely frame the argument in zero-sum terms, as though 1) there is a pie; 2) the rich have taken a larger share of that pie; and 3) this means that the poor are getting less than they got before. The argument this article makes is that the pie is getting bigger, so everyone's share is bigger. You might still think this is a bad thing, but you should at least understand the argume…

The argument the article makes is that the pie is getting better-tasting. That is, because Bob can derive more enjoyment from a fixed volume of the new pie, it doesn't matter that Bob now takes home a quarter-slice, instead of a third-slice, so long as the net volume of his new quarter is at least as large as his old third.

It argues that Bob is still being rewarded fairly for his continually increasing productivity, even if his net volume is stagnant and his share of the whole pie is falling, simply because the pie is getting better tasting.

Re: The Myth of a Stagnant Middle Class

#63

Post by yummyfajitas »

CleanedStar wrote: post #55
yummyfajitas wrote: post #39

Earlier quoted context omitted.

So one point they make is workers are paying more to their HMOs than ever, so the % of fringe benefits to wages has increased. This is proof against a stagnant middle class? No, the point is that compensation/worker is up, but wages/worker is down, implying that non-wage compensation/worker is up. Then that a one income household can not cut it any more is mentioned. Define "cut it". If "cut it" means "purchase the s…

The thesis of the article is middle class stagnation (the actual truth is, inflation-adjusted hourly wages have fallen since the early 1970s, they have not stagnated). These "increased benefits" are due to skyrocketing health costs which the employer has been paying, not any new fringe benefits. Because employers in the US have been fighting universal healthcare for decades, unlike every other industrialized country.…

Medical treatments invented between 1970 and 2013 are not new fringe benefits?

The skyrocketing health costs pay for fancy new treatments which didn't exist in 1970. CPI includes no hedonic adjustment to health care - it focuses and ignores benefits. (In contrast, some categories such as food and housing attempt to incorporate hedonic adjustments.)

Last Feb I had spine surgery that didn't exist in 1970, guided by a scanner which didn't exist in 1990. This Feb I'm on track to deadlift well over my bodyweight. None of this was free. Suffering back pain in 1970 was. I'm quite happy to pay a bunch of money today for these benefits, happier than I would have been suffering with back pain in 1970. I.e., my real wage went up relative to my hypothetical 1970 self because of health care.

Re: The Myth of a Stagnant Middle Class

#64

Post by dionidium »

roc wrote: post #58
dionidium wrote: post #43

Earlier quoted context omitted.

Things have gotten cheaper for rich people too. One would expect technological progress to make things cheaper over time--what does that have to do with income distribution within the country? Nothing. But the article makes no attempt to address income inequality. These are two different questions: 1. Has the middle class stagnated over the last n decades? 2. Has the middle class improved its share of national income…

The first question is bordering on bad faith. It's nigh-on-tautological that technological advances will ensure that being middle class in 2010 is 'better' than being middle class in 1970. [1] But more air conditioning, computers and even cell phones does not negate the argument that productivity and wage gains have diverged. And how else would one fairly assess, in the aggregate, if workers are being rewarded for th…

I more or less agree with everything you said, which is why I think the really salient question is whether income inequality is actually a driver of technological progress. Everybody loses in a more "fair" but ultimately less prosperous society.

Re: The Myth of a Stagnant Middle Class

#65

Post by twoodfin »

cromwellian wrote: post #52

Over the last thirty years, households have gone from predominantly single bread winner, to dual earner. And at the same time, consumer debt has done up while savings have gone down. Now, if worker compensation was growing significantly faster than inflation, wouldn't we expect the amount of disposable income to be higher, and hence savings and debt to be lower? Why were Americans forced to tap home equity and credit…

Now, if worker compensation was growing significantly faster than inflation, wouldn't we expect the amount of disposable income to be higher, and hence savings and debt to be lower?

Not necessarily. If college education and its financing became more broadly available and increased expected lifetime earnings by more than the cost of the debt to pay for it (+ opportunity cost), you might expect to see many more households with college debt without your expected lower incomes.

We've been living through two decades of historically low rates of interest and inflation. It's possible that had folks in the 1970's seen rates like that, they might have chosen to debt-finance more as well.

Re: The Myth of a Stagnant Middle Class

#66

Post by twoodfin »

CleanedStar wrote: post #61
twoodfin wrote: post #35

Earlier quoted context omitted.

In the early 1970s, WSJ writers could have written an article pointing at how much better the middle class in the US had done over the past 40 years. You really think you'd rather be the median income 25 year old in 1973 vs. 2013? It's not sophistry to point out that today's median 25 year old has massive advantages in health, education, technology and basic quality of life over his 1973 equivalent. The real average…

Massive advantages in education? With higher education requirements, the average worker is now forced - if they want to make the same wage they would have in 1972 - to pay for their own job training, college education etc. That people have to go into debt to get an education to make what they could have without it 40 years ago you're presenting as something positive.

I'm saying the median 25 year old today is more educated than his 1973 counterpart. That has a host of benefits, including qualification for jobs that not only pay more, but are less physically strenuous and more mentally engaging.

Nobody's forced to go to college. They do it (hopefully) because it's a good investment in their own success and happiness. And let's be frank: The government has made sure it's incredibly easy to finance, and if it feels like a huge burden to be there rather than working shifts at a steel mill, you're probably doing it wrong.

Re: The Myth of a Stagnant Middle Class

#67

Post by BenoitEssiambre »

"First, the CPI overestimates inflation by underestimating the value of improvements in product quality and variety"

As others have pointed out this is very debatable. Especially since CPI is corrected for that already. Also consider certain goods have gone down in quality due to being mass produced instead of hand tailored. "Fresh" produce are more available but often old and stale because they come from far away. Inflation is overestimated on these types of items.

"health benefits, pensions, paid leaves and the rest now amount to an average of almost 31% of total compensation for all civilian workers"

Health care is costlier, securing a pension is costlier (due to low investment returns), more paid leaves are probably due to both adults working in a family which is unsustainable in times of family crisis. This is related to:

"Third and most important, the average hourly wage is held down by the great increase of women and immigrants into the workforce over the past three decades"

So let me get this straight, previously a single income was enough to sustain a family of often 5 or more and now you need two incomes for a family of only 3 or 4 and this dude thinks that makes people feel richer?? Also consider that one reason people don't have 5 kids anymore is that they wouldn't be able to afford them and can't take care of them because both parents have to be working.

"spending by households on many of modern life's "basics" fell from 53% of disposable income in 1950 to 44% in 1970 to 32% today." Is that for median households or is this number skewed by including the super rich in the average? I'm suspicious that this isn't specified. Also this is a complex number with lots of caveats. For a single earner family (remember this used to be sufficient), is this still true?

"Before airlines were deregulated, for example, commercial jet travel was a luxury that ordinary Americans seldom enjoyed."

The fact that technology has made air travel's costs more in line with other forms of travel, doesn't make a person richer. Sure it gives that person more options, and some quality of life improvements if he or she chooses these options. However, if a median worker could afford only a few train tickets a year in 1980 he still can't afford many more train or plane tickets today with his dwindling salary.

Re: The Myth of a Stagnant Middle Class

#68

Post by roc »

dionidium wrote: post #64
roc wrote: post #58

Earlier quoted context omitted.

The first question is bordering on bad faith. It's nigh-on-tautological that technological advances will ensure that being middle class in 2010 is 'better' than being middle class in 1970. [1] But more air conditioning, computers and even cell phones does not negate the argument that productivity and wage gains have diverged. And how else would one fairly assess, in the aggregate, if workers are being rewarded for th…

I more or less agree with everything you said, which is why I think the really salient question is whether income inequality is actually a driver of technological progress. Everybody loses in a more "fair" but ultimately less prosperous society.

It's trivially true that an unequal-but-growing economy is better than a more-equal-but-shrinking one. But that's neither here nor there. No-one's advocating radical changes. No-one's saying we should carve up the golden goose because eggs were being 'unfairly' distributed.

It's another hallmark of bad faith arguments to respond to a disagreement-in-degrees as if the other side were advocating extreme positions.

No-one's seizing the means of production here.

Re: The Myth of a Stagnant Middle Class

#69

Post by malyk »

twoodfin wrote: post #57
malyk wrote: post #53

Earlier quoted context omitted.

What about happiness? Hope for the future? Ability to have your spouse raise the kids at home while you earned enough to pay for a house and car? And the idea that life expectancy is what counts is absurd. 79 years of fighting for jobs where you're worked like mad fighting every week to stay out of debt while trying to get your kids some semblance of education in shittier and shittier school systems sure sounds a hel…

I think you are looking at the past with rose-tinted glasses if you think "hope for the future" was on a real win streak in the '70s. (See: Vietnam, Watergate, Arab oil embargo, stagflation...) Also, in the '70s, it wasn't the "spouse" raising the kids at home, it was the wife. The huge increase in available roles for women is another thing not captured by the average real wage (and as the piece points out, probably…

You are definitely correct. My post was a little snarky and written way too quickly to get any real point across.

My real point is that, regardless of whether or not wage stagnation has occurred, the "middle class" is not in a good position. Median household income is $52,000. You can survive on that while raising 2 kids, paying rent or a mortgage, and paying for a car if you are smart about it. But you aren't very well positioned to get ahead and you certainly aren't in a position to have a couple of smartphones, premium cable tv on a big flat screen tv, with the newest computers, etc. like we are taught to aspire to.

Yes, there is more tech, better healthcare, etc., but your money goes a lot less far than it did when you could have a single worker earning enough to afford the "same" (relatively) overall quality of life. It's not a perfect comparison by any means, but saying wage stagnation doesn't exist and therefore we shouldn't care about it seems utterly bizarre when you look at what most of the nation has to live on.

I just can't wrap my head around how anyone can look at this article and especially that horrible infographic that the WSJ published and think anything except how out of touch and frankly stupid people are about the reality of our collective situation.

Re: The Myth of a Stagnant Middle Class

#70

Post by cromwellian »

twoodfin wrote: post #65
cromwellian wrote: post #52

Over the last thirty years, households have gone from predominantly single bread winner, to dual earner. And at the same time, consumer debt has done up while savings have gone down. Now, if worker compensation was growing significantly faster than inflation, wouldn't we expect the amount of disposable income to be higher, and hence savings and debt to be lower? Why were Americans forced to tap home equity and credit…

Now, if worker compensation was growing significantly faster than inflation, wouldn't we expect the amount of disposable income to be higher, and hence savings and debt to be lower? Not necessarily. If college education and its financing became more broadly available and increased expected lifetime earnings by more than the cost of the debt to pay for it (+ opportunity cost), you might expect to see many more househo…

It is true that credit is a lot easier to come by, and given American's trade deficit/capital account surplus, a lot more money across the world is flowing into the US, like crack into a poor neighborhood, obviously increasing borrowing above what it would have been in the 70s. I'm not sure how to square this, it pollutes the data.

It does seem to me however, that given the loss of manufacturing jobs, and the increase in low end retail / service jobs, that there has been downward pressure on wages.

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