The Rich Are Getting Richer and the Poor Are Getting Richer; The Good Old Days Are Now
Steve Horwitz at the Austrian Economists blog has a good post based on Census Bureau data that were recently released on "Living Conditions in the United States, 2005." The chart above (click to enlarge) shows the percentage of all U.S. households owning various household appliances in 1971 and 2005, and the percentage of poor households (below the official poverty line) owning those appliances in 2005. The data show a significant improvement in living standards between 1971 and 2005, as the percentage of households with clothes dryers increased from 44.5% to 81.2%, the percentage of households with dishwashers increased from 18.8% to 64%, and the percent of household with air conditioners increased from 31.8% to 85.7%.Related data from the Department of Energy (based on Census Data) in the chart show that the percentage of households owning two or more vehicles increased from 34.8% in 1970 to 57% in 2000, and has likely increased since then.
What's most impressive though is the comparison of the living standards of households living below the poverty line in 2005 to all U.S. households in 1971. By almost every measure of appliance ownership, poor American households in 2005 had much better living conditions than the average American household in 1971, since poor households in 2005 had much higher ownership rates for basic appliances like clothes dryers, dishwashers, color TVs, and air conditioners than all households did in 1971.
As Steve Horwitz concludes "Life for the average American is better today than 35 years ago, life for poor Americans is much better than it was 35 years ago, and poor Americans today largely live better than the average American did 35 years ago. Hard to square with a narrative of economic stagnation or decline."
The reasons for the significant improvements in living standards for all Americans (at all income levels) include innovation, technology improvements, supply chain efficiencies, increases in productivity and other market-driven efficiencies that drive prices lower and lower year by year, measured in what is most important: our time, and the amount of labor it takes to earn the money to purchase household appliances and other goods and services.
The chart above (click to enlarge) shows retail prices for eleven different household appliances in both 1973 (data here) and 2009 (data here), and the cost of those appliances measured in "hours of work" at the average hourly wage for all industries (BLS data here, $4.12 in 1973 vs. $18.72 today). The charts shows significant reductions in the real cost of basic household appliances between 1973 and today of from -50.7% for a basic kitchen stove (70.4 hours in 1973 vs. 34.7 hours in 2009) to -83.5% for color TVs (97.1 hours in 1973 vs. 16 hours in 2009), and an average reduction in real cost of more than 70% between 1973 and 2009. In other words, to purchase those 11 basic household appliances in 1973 would have taken 551.1 hours of work, 13.8 weeks or 3.4 months working full-time at the average hourly wage in 1973. To purchase those same eleven appliances in 2009 would have only taken 171 hours of work, or 4.3 weeks or 1.1 month. Or the typical worker in 1973 would have had to work from January 1 until the second week of April to earn enough income to purchase those 11 appliances (pre-tax), whereas a worker today would only have to work from January 1 until the first few days of February to earn income for those appliances.Bottom Line: As much as we hear about declines in median income, economic stagnation, the disappearance of the middle class, falling real wages, increasing income inequality, the data tell a much different story: The rich are getting richer and the poor are getting richer.
56 Comments:
The problem is that this is long term thinking which is absolutely prohibited!! Think only of the short term.
Another metric is the size of the House. If one runs the numbers back to 1900 its even more amazing. Recall that at 2% growth over a century wealth goes up 7.24 or so times. Looking at some of the southern ca real estate blogs you see 2 bedroom houses of 900 square feet built in the 1920s which where the standard size then. Or think of a farm house like my grandparents build in 1910, to start with you had an outhouse, some coal stoves, used kerosene lanterns and candles, a hand water pump etc. Today its multiple bathrooms HVAC, running water etc. Or for an even longer perspective see "A world lit only by fire"
It somewhat suprises me that those who have been around for a while don't comment more on this. I can excuse the younger generation but not older folks.
Somebody needs to show this data to the unemployed, that will make them feel much better.
This is Nobel Prize in Economics material.....
except for some possible minor details in more than .000001 % of the population. Rent-A-Center is leasing the appliances, the power company is prevented from electricity cut off until the spring, the credit card companies are charging 29% interest while reducing credit lines and charging $30 plus each for over limit and late fees, and the mortgages/rents are in arrears or are deeply under water while the "owner" renter is incurring substantial "FEE" charges. But who cares about details?
It must be quite gratifying to have a degree in Economics.
The poor are getting richer in capitalist societies. This should be obvious to everyone, except for dipsticks like Chuck, who pine for the glory days of the Union of the Soviet Socialist Republics.
In the 1979 Sears Christmas Catalog, they advertised their lowest price ever for a 25 inch TV for only $699.95. Of course, that is in 1980 dollars (it was the Christmas 1979 catalog, by the way). That is equivalent to $1,836.32 in 2009 dollars. Wow, that sucks! I just went to the Wal-Mart website and sorted TVs by highest prices to lowest and the highest priced TV was a 52 inch 1080p HDTV which included a Samsung 5.1 Home Theater System and a DVD with HDMI cable bundle for only $1,768.00. Now, who will be the jackass that will say people were better off in 1979 paying more in real terms for the 25 inch piece of crap TV?
Ever heard of income inequality and unequal societies? Show those graphs as well, please.
Somebody called it plutonomy. Good and to be continued? (remember Citigroup's memo of 2005 at
http://jdeanicite.typepad.com/files/6674234-citigroup-oct-16-2005-plutonomy-report-part-1.pdf)
We all know how things ended or where we are know...
I think the naysayers need to be transported back to 1971 and walk around the average American's home. I remember it quite vividly. No dishwasher, no color television (one b and w), no cable tv, a party line telephone, powdered milk, puffed rice cereal, cutting firewood to supplement the heat, etc, etc.
It wasn't a bad life at all, but most Americans live today like they could not have dreamed forty years ago.
But that doesn't fit the liberal mantra of big corporate America keeping the man down.
"The record of history is absolutely crystal clear that there is no alternative way, so far discovered, of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system." - Milton Friedman on Phil Donahue
The "glass half full" people refuse to understand that it's not how many dollars you have, it is the purchasing power of the dollars you own, and the capacity to earn those dollars that is important your personal economic independence.
Thank you for sharing Mr. Horowitz's findings with us.
How many people of any wealth category today would trade places with Louis XIV? He was probably the most powerful man in Europe in his time and the richest? In most respects a modern person has far more than Louis did, all be it not as much relatively. The various posts Mark makes show how much this is true.
There's not only misinformation about the tremendous increases in absolute U.S. living standards, but also about the steep rises in U.S. upward mobility.
Of course, anyone who buys a house at the top of the market will lose, like someone buying the stock market at its peak. However, tens of millions of Americans bought houses before they doubled or tripled, after inflation, and they won, including through extracting trillions of dollars of home equity, spending on home improvements, and living in better homes (even if their nominal values fall to zero).
Many Third World immigrants, who would earn $1 an hour in their home countries, if they could get a job, were able to buy houses, buy new autos, and live much better lives in the U.S. through hard work (many Third World immigrants in the U.S. earn $30,000 to $50,000 a year with overtime).
I have added a post following up on this one of Mark's. You can find it here: http://austrianeconomists.typepad.com/weblog/2009/11/yet-one-more-on-things-getting-better.html
One point I raise there is that Mark's labor time table actually understates the real gains to the poor (and the rich) because it doesn't account for the dramatically better quality of the goods being compared. More at my blog.
Somebody needs to show this data to the unemployed, that will make them feel much better.
Unemployment is not a new problem. In November 1973 the US was entering its longest post-WW2 recession (16 months), with unemployment peaking at 9.0% in 1975 (two months after the recession ended). Another 16-month recession took place in 1981-82, with the UR peaking at 10.8%.
Speaking of which, 1975 seems a better comparison than 1973, for business cycle-timing purposes. But I don't expect the results will be much different (2009 may even look better).
It's amazing how a little perspective reduces leftists, like Chuck and M.G., to whining little girls.
I buy lots of appliances and have observed that the quality has lessened. The differnce between an average and high rated quality appliance has grown as well as the price in the last 10 years.
I have bought several dishwashers and refrigerators in the last five years that lasted just two to three years. The IRS depreciation schedule gives a ten year life.
The average rated appliance does not hold up as well -- probably because of cheaper components (foreign?)
Chuck said...
This is Nobel Prize in Economics material.....
except for some possible minor details in more than .000001 % of the population. Rent-A-Center is leasing the appliances, the power company is prevented from electricity cut off until the spring, the credit card companies are charging 29%...
You act as if people don't have a choice in buying things they can't afford or buying on credit. Well I'm all for the return of debtors prisons so people pay a real price for their irresponsible behavior.
Anyone facing over the limit fees and 29% interest has only themselves to blame for taking out too much debt. If you think those folks are the majority of people in the US, you're hanging out with the wrong crowd.
What about the cost of healthcare?
Cheap goods from China are affordable, and sometimes new technology (cell phones) is actually cheaper than old technology.
There is no doubt households goods are cheaper today--and hey, you can buy good stuff on Craigslist for half-price. I bought a wonderful camera for $100.
Still, real wages are lower than in 1972. Housing and health care need to be figured in.
The cost of college education in California has shot through the roof--U was lucky, I got into UC back in 1973, and paid a few hundred dollars per quarter. Now, I think UC students are looking at $12k a year and more.
Housing health care and education are rather basic, and not captured by this chart.
That is why anecdotal information, such as this chart, needs to be taken with a grain of salt. The Bureau of Labor Statistics and Census Bureau provide much richer data from which to draw conclusions.
The right-wing has sound arguments to make, and should make them--not stoop to cheap cherry-picking to make a Reaganesque case. Dr Perry beittles himself with this presentation.
It would be nice if the right-wing stood up and blasted farm subsidies, or rural telephone subsidies, or queried how on earth it takes $1 million a year to field a US soldier.
How will we ever prevail in a long-term war (the only kind we ever get into any more) if the enemy can field soldiers for $3k a year each and we spend 333 times that? Our enemies must be laughing. Just draw us in and wait it out.
Dr. Perry must know better than these insincere arguments he makes, drawing on anecdotal information.
I thought University of Michigan was a serious accredited university. These is what passes for scholarship?
Who needs an automatic lemon sqeezer, anyway?
Benny, It's not ok to attack the host of this blog. State your opinion; state evidence; present counter arguments; agree; disagree but no need to attack the esteemed and hard working host. Abide
While Benny would do best to refrain from personal attacks on the host, he does raise valid points in asserting that real wages are lower today than in 1972; and while cheaper consumer products are a plus today, many communities throughout the country have paid a high price by seeing their manufacturing base - an essential to providing a center for jobs, income and purpose to communities - ravaged in the process, and have thus seen their communities, schools, tax base and basic services get ripped in the process. Buying cheap toasters or laptops from Wal-Mart is nice, but the many people who've lost income to buy essentials such as health care doesn't make up for it (and no, retail health clinics are not going to help much in the area of critical surgery) - this is evidenced by the towns that have lost textile mills.
I like to use the Shegoygan area, home of Kohler, in my home state of Wisconsin as an example as to why having a manufacturing base is good. Kohler is privately owned by the Kohler family (worth billions), and in the Shegoygan area, you have an employer that provides good paying jobs ($20+ an hour) with good benefits to thousands of workers. The area has a solid middle class and low poverty; the area is a throwback to communities of the 60's. Now what do people think would happen if the Kohlers outsourced these jobs to China? The result for Shegoygan would be devastating while the Kohlers get richer, with a degradation in schools, basic services, a rise in poverty, roads deteriorating and a loss in population. Thankfully, that's not been the case and hopefully it never does. Again, the Kohlers are billionaires and nobody should have a problem with this, but nobody should also have a problem with the middle class earning a decent living and enjoying a comfortable living as well.
While it's nice that we can buy cheap jeans and coffee makers today, remember, the 1920's was also a time when many people purchased fantastic volumes of consumer goods (cars, radios), but lacked basic necessities such as adequate housing and plumbing.
Edward Gibbons didn't seem to think Rome's outsourcing was good for the empire.
Left-wing dingbats seem to only focus on real wages while ignoring all the other benefits (including health care) that an employee receives to make up one’s total real compensation. The total real compensation an employee receives from an employer has had a long-term steady increase and is much higher today than it was in 1972. So, it is certainly not true that employees are worse off today than they were 40 years ago. Employees are in fact better off receiving more in total compensation than ever before. It is just that a greater share of the total compensation is in the form of benefits rather than take home salary. Since the left has this fetish for only take home pay instead of the more relevant total compensation, then they should oppose the Obama’s move towards socialized medicine, which will increase health costs shifting the share of total compensation toward benefits and further reducing real wages.
Cole’s other part about the his willingness to dismantle the part of the welfare state that he doesn’t like (farm subsidies, the military), while keeping the rest of the welfare state intact is, well, laughable! The part where he seemingly cannot understand why we spend so much money equipping and protecting our soldiers in the field rather than sending them out like lambs for the slaughter is a rather disturbing perspective.
Now I understand who is inspiring Berlusconi's political economy. Once he said that Italians need to optimist because they live comfortably as they all have cellular phone and are house owners. Then one of his ministers said that during this financial crisis public administration employees and pensioners are becoming richer because of deflation. It's a pity that some economists support this kind of views with "biased" studies. It's not by chance that US and Italy show a similar level of income inequality and constant growth of it in the last 10 years. Ever thought that improved living standard in US is based on debt and cheaper imports?
It's not by chance that US and Italy show a similar level of income inequality and constant growth of it in the last 10 years.
Really?
The rise in American inequality has been exaggerated both in magnitude and timing ... This paper shows that a conceptually consistent measure of this growth gap over 1979 to 2007 is only one-tenth of the conventional measure.
Further, the timing of the rise of inequality is often misunderstood. By some measures inequality stopped growing after 2000 and by others inequality has not grown since 1993. This cessation of inequality’s secular rise in 2000 is evident from the growth of Census mean vs. median income, and in the income share of the top one percent of the income distribution. The income share of the 91st to 95th percentile has not increased since 1983, and the income ratio of the 90th to 10th percentile has barely increased since 1986...
Directly supporting our theme of prior exaggeration of the rise of inequality is new research showing that price indexes for the poor rise more slowly than for the rich, causing most empirical measures of inequality to overstate the growth of real income of the rich vs. the poor.
National Bureau of Economic Research, September 2009
It's not that liberals are ignorant, it's just that they know so much that isn't so.
- Ronald Reagan
Movin' Up and Down The Income Quintiles
How much income mobility exists in America? Research consistently affirms that there is substantial upward income mobility in the United States, with the lowest income earners typically showing the strongest results. A Treasury Department study of the 1996–2005 period used IRS income tax data to discern considerable mobility: more than 55% of taxpayers moved to a different income quintile. More than half the people in the lowest fifth of earners moved to a higher quintile over this period (29% to the second, 14% to the third, 10% to the fourth, and 5% to the highest).
Moreover, there is a great deal of movement in and out of the top income groups. The Treasury data show that 57% "of households in the top 1% in 2005 were not there nine years earlier." The rich sometimes get richer, but they get poorer as well. The study also reveals that income mobility has increased, not decreased, during the past twenty years. For example, 47.3% of those in the lowest income quintile in 1987 saw their incomes increase by at least 100% by 1996. That number jumped to 53.5% from 1996 to 2005.
~From "The Politics of Envy" in The Hoover Digest, by Jeffrey Jones and Daniel Heil (HT: NCPA)
Carpe Diem
... many communities throughout the country have paid a high price by seeing their manufacturing base - an essential to providing a center for jobs, income and purpose to communities - ravaged in the process...
Kohler? What about these guys?
Take, for instance, Duferco Farrell Corp., a Swiss-Russian partnership that took over a previously bankrupt U.S. steel plant near Pittsburgh in the 1990s and employed 600 people there.
The new buy American provisions, the company said, are being so broadly interpreted that Duferco Farrell is on the verge of shutting down. Part of an increasingly global supply chain that seeks efficiencies by spreading production among multiple nations, it manufactures coils at its Pennsylvania plant using imported steel slabs that are generally not sold commercially in the United States. The partially foreign production process means the company’s coils do not fit the current definition of made in the USA—a designation that the stimulus law requires for thousands of public works projects across the nation.
In recent weeks, its largest client—a steel pipemaker located one mile down the road—notified Duferco Farrell that it would be canceling orders. Instead, the client is buying from companies with 100 percent U.S. production to meet the new stimulus regulations. Duferco has had to furlough 80 percent of its workforce.
“You need to tell me how inhibiting business between two companies located one mile apart is going to save American jobs,” said Bob Miller, Duferco Farrell’s executive vice president. “I’ve got 600 United Steel Workers out there who are going to lose their jobs because of this. And you tell me this is good for America?”
The Washington Post
Hey, genius. Foreigners don't just sell things here, they make things here, too.
Edward Gibbons didn't seem to think Rome's outsourcing was good for the empire.
As Stephen Manning of the Associated Press acknowledged in a rare "just the facts" story in mid-February, the U.S. "by far remains the world's leading manufacturer," producing goods valued at a record $1.6 trillion in 2007 — nearly double the $811 billion produced a decade earlier. Indeed, the AP writer noted, "For every $1 of value produced in China's factories [in 2007], America generated $2.50." Not bad for a country that doesn't produce anything anymore.
The facts contradict those who insist that freer trade condemns high-wage countries, such as the United States, to suffer net losses of highly productive enterprises. (More such facts on manufacturing in the U.S. can be found here.)
Cafe Hayek
Dr. Perry works at a public university. He has made an open-to-the-public blog. My tax dollars pay him, directly or indirectly. Thus, he draws a salary and pension and health care at public expense--from me, in minute part.
I think I am entitled to take a broadside at him, if he falls below the level of intellectual rigidity I think a professor at a public university should adhere to.
BTW, I have called for reduction of all welfare programs, the left-wing ones (I am dubious about Obamacare) and the right-wing ones, such as the military and ag sectors.
A few other variables might include:
The Devil in in the Details
1. Those appliances are now made in China as opposed to the U.S.
2. Most of those iteams have been financed.
3. A truer indication of middle class could be the per-capita debt to income ratio...
The Devil is in the Details
Tiger, that's why government should cut spending, cut taxes, and print money; to increase assets and goods faster than liabilities and expenses again.
There have been several inquires about the costs of health care and education. Health care is particularly problematic to calculate since there is no "unit of health care" to compare over time. Education is slightly easier, since we have a unit, a year of college. Historical data can be found at collegeboard.com/trends
For 1973-2009, the trend is less encouraging than for appliances. Tuition and Fees for a 4-year, public college increase from $438 to $7,020. That's almost 4 times greater in terms of hours worked (104 to 375). Despite this, the number of adults with college degrees has gone from 12.6% to 29.4%. So there's the half-full perspective.
One more important note about education: the "sticker price" is not actually what most students pay. The College Board also calculates a "net tuition" price (http://tinyurl.com/ykwn682). Unfortunately it only goes back to 1994-95, but here we see that for 4-year public colleges the price has actually fallen over the past 15 years!
To Jermy H lets look at the total price for education for a family to get all children an undergrad degree. I believe that might be a better metric than a cost per year. So that as the cost of education goes up families decide to have fewer children.
Although, this is an unrelated topic, it provides some perspective:
Stalin, Mao And … Ahmadinejad?
Oct 29, 2007
"Here is the reality. Iran has an economy the size of Finland's and an annual defense budget of around $4.8 billion. It has not invaded a country since the late 18th century. The United States has a GDP that is 68 times larger and defense expenditures that are 110 times greater. Israel and every Arab country (except Syria and Iraq) are quietly or actively allied against Iran. And yet we are to believe that Tehran is about to overturn the international system and replace it with an Islamo-fascist order? What planet are we on?"
why don't you happytalkers ever focus on the rise in the cost of a university education, or the rise in the cost of medical insurance (and other insurance), or the rise in property taxes, you know, some of the necessary things, instead of always talking about that friggin microwave oven! ever notice that it takes two to make ends meet these days, when it used to take only one? friggin happy talkers.
Cranky asked, "why don't you happytalkers ever focus on the rise in the cost of a university education?"
I don't agree w/ Dr. Perry on everything, but I can answer this. The rising cost of education is the perfect example of why the political left's ideals do NOT work.
University education costs more b/c the demand is higher, and that demand is based on "feelings" rather than economic principles. Since the 1950's professional educators have encouraged more and more students to go to college. That has caused the price to rise.
Of course this isn't acceptable, so the subsidies to universities (based on taxes) also increased to "keep costs down." That just means that people are paying more for universities to exist, whether they use them or not. It also means even higher costs b/c you have more middlemen involved. It's also known as inflation.
Meanwhile, these students and their parents had the gall to expect an ROI on their tuition payments and deferred income. Thus they all expect "good payin' white collar jobs". That means inflation has risen in response, further increasing tuition costs.
As for some unintended consequences:
We have dumb majors like "leisure studies" being offered. No promise for good pay for these students, but universities are still happy to collect their fees!
Manufacturing in the US has declined because of the low supply and high cost for workers.
At some point (aka now) the Ponzi scheme that the politically left educators have set up is coming due. And as always, they're blaming others.
dr torch, how does your explanation shed light on anything? i am paying for wars (bty wars that have nothing to do with me personally), occupation of foreign lands, for retired firefighters' inflation-indexed pensions (bty for firefighters that retired before I was even born), for retired politicians' pensions, to subsidize higher education, and much more. yes, yes, I am paying for a lot of shit I don't agree with or shit that does not benefit me in any way. so what? I still have to pay for this shit, and so do you. I can't reduce my property tax bill, or my taxes, or my expenses, by claiming these costs are due to some unintended consequence or some feely-feely liberal idiocy from the 60's. I STILL HAVE TO PAY THEM. so, why do happytalkers always focus on that friggin microwave oven that costs a fraction of what it did 10 years ago, and not on the "real expense" of making ends meet? or on the cost of raising a family, including medical care, and tuition? or why it takes two incomes now when it used to take only one?
To partly answer DrTorch as has been pointed out in many posts the US share of manufacturing as a per cent of world manufacturing has been stable since the recovery from WWII was complete.
However what has happened is that the productivity of manufacturing has gone way up (reflected in the prices cited, as cheap machines replaced expensive people) In essence manufacturing is undergoing the same transformation agriculture did 75-125 years ago, when the proportion of population working in ag went way down.
Yes there are a large number of essentially useless navel gazing majors particularly the xyz studies ones, but these are typically for the mathematically illiterate student. The big growth area has been health care employment, as we became a more humane society (recall the solution to the disabled used to be to put them away in state schools and homes out of sight out of mind) and because medicine can do a lot more. Yes we spend more but if you look you find that we spend more on vet medicine as well, as pets have become surrogate children. (but much easier to get rid of if they go wrong).
The valid question is how do we avoid going to bread and circuses as the Romans had to provide to keep the urban plebeian class calm?
Cranky,
I believe that the same "happytalkers" who talk about the price of microwave ovens also complain about higher taxes. So they share your concerns, but we can't just complain about taxes all day.
The reason appliances are discussed is that they are a fairly constant "unit" to compare over time (even though a 17" TV today is actually far superior to one in 1973).
Please note that I did discuss education costs about 3 comments above your first inquiry.
i am paying ... I STILL HAVE TO PAY THEM.
You aren't paying for anything!
Newly released data from the IRS clearly debunks the conventional Beltway rhetoric that the "rich" are not paying their fair share of taxes.
Indeed, the IRS data shows that in 2007—the most recent data available—the top 1 percent of taxpayers paid 40.4 percent of the total income taxes collected by the federal government. This is the highest percentage in modern history. By contrast, the top 1 percent paid 24.8 percent of the income tax burden in 1987, the year following the 1986 tax reform act.
Remarkably, the share of the tax burden borne by the top 1 percent now exceeds the share paid by the bottom 95 percent of taxpayers combined. In 2007, the bottom 95 percent paid 39.4 percent of the income tax burden. This is down from the 58 percent of the total income tax burden they paid twenty years ago.
To put this in perspective, the top 1 percent is comprised of just 1.4 million taxpayers and they pay a larger share of the income tax burden now than the bottom 134 million taxpayers combined.
Tax Foundation
As for the war, and "occupation", not having anything to do with you, maybe you need a history lesson:
BBC
You don't pay the taxes and you don't fight the wars - you're a leech.
Here is a chart of the rising costs of tuition and other things not mentioned in the original post, from Measuring Up 2008.
Thanks for the thoughtful responses everyone.
Happytalker called "anonymous" - how do you know I'm not in the top 1%?
Do you have an answer why it takes two incomes to make ends meet when it used to take only one? Look, I don't think we're as well off as we think, and using the cost of a microwave oven as proof that we are is disingenuous when that cost is not taken in context of other expenses, necessary expenses. But why should we think ("The Good Old Days Are Now") that progress in quality of life, for lack of a better term, has been enough? Why haven't we done better?
Cranky,
The reason the graph you link to tells a different story than the tables presented above is that the graph don't focus on a consistent unit for each category.
The price of bandages and aspirin has not gone up. Instead, we are buying new and better medical care. As incomes rise, people reallocate their spending. So less is spent on appliances, more is spent on health care and education.
Also please follow the link I presented above on education (http://tinyurl.com/ykwn682). While the "sticker price" for education has gone up, the actual price students pay has not increased over the time period for which comparable data is available.
Cranky,
I grew up in one of those one-income houses that you are talking about. We made ends meet; however, the ends were not far apart.
We had 1 car, 1 800 sq. ft. house, 2 bedrooms (1 for the parents and 1 for three kids), 1 black and white television that received 4 stations--2 with snow, no air conditioner, 1 washer and no dryer, no dishwasher, and 1 dial phone. If you got very sick, you just died--even the "rich."
We didn't have a lot, but we did have enough to eat. I don't have any doubt even the poor people today have more luxuries than we had then, and we considered ourselves "middle class." I agree that the "good ole days" are now.
OK Walt, I appreciate that we are better off now than we were in 1960, except for the 10% unemployment, which is just a blip, and the decimation of the manufacturing sector, which may not be just a blip.
But, Walt, if I had told you in 1960 of the advancements in technology, sciences, medicine and so on, coming down the pike, would you have expected to find a country in 2009 with 12% of its citizens living below the poverty line, with 30 or 40 million people still with no access to affordable medical care, for example? Would you have expected that we'd need Moms to be out in the workforce to make ends meet? The real question is why aren't we doing better? (Upon reflection, I think that is the question that was burning inside me all along.)
Why aren't we doing better?
(Walt, a personal question, reply not necessary, but could someone like you, in the middle class, have raised their family on one income, like the previous generation did? Could a young Mom and Dad do it today?)
...with 12% of its citizens living below the poverty line, with 30 or 40 million people still with no access to affordable medical care, for example?
Define, "poor".
43% percent of all poor households actually own their own homes. The average home owned by persons classified as poor by the Census Bureau is a three-bedroom house with one-and-a-half baths, a garage, and a porch or patio.
Nearly three-quarters of poor households own a car; 31% own two or more cars.
Overall, the typical American defined as poor by the government has a car, air conditioning, a refrigerator, a stove, a clothes washer and dryer, and a microwave. He has two color televisions, cable or satellite TV reception, a VCR or DVD player, and a stereo. He is able to obtain medical care. His home is in good repair and is not overcrowded. By his own report, his family is not hungry, and he had sufficient funds in the past year to meet his family's essential needs. While this individual's life is not opulent, it is equally far from the popular images of dire poverty conveyed by the press, liberal activists, and politicians.
Heritage Foundation, 2007
As for wages remaining stagnant, see this Carpe Diem post:
Income PER EARNER Has Actually Risen For All Groups, And Rose Fastest For The Lowest Quintile
US manufacturing is stronger than ever, with US manufacturing output roughly tripling since 1970:
Cafe Hayek
And those "30 or 40 million people without access to affordable medical care", aren't 30 or 40 million:
The Myth of the 46 Million
Nice post, I totally agree. Go free market capitalism!!
http://remove-spyware-please.blogspot.com/
Cranky,
Sure things could be better. I wish they were. I was told in kindergarten that we would have flying cars, too. Although, I'm not really sure what I would do with a flying car.
To answer your question: No, I don't think an unskilled worker today can raise a family comfortably on one income. But that should be a temporary condition until the worker obtains a skill. It's a pay for knowledge world now, and everybody better get some. I have this same discussion a lot with my coworkers and students. You can wish this is not so, but that is not the world we live in now.
I read somewhere that nearly 1 in 4 children in America are on food stamps. Does that come close to being "poor"? My original complaint: happytalkers will say the darndest things.
Walt, what would someone do with a flying car? Well, he could drive it to work and back everyday. Dude, you have no imagination!
Walt, you did point me in the right direction, though. It is about the unskilled worker. It really is about him, and his decline. True.
"Hey, genius. Foreigners don't just sell things here, they make things here, too."
So, "genius," tell me what would happen to Sheboyban if Kohler moved its production out. Would the city have bridges made of gold, roads made of titanium, schools cranking out math geeks; or would their roads be falling apart, their schools in chaos and basic services non-existant - just like any other city that loses its manufacturing base? Would Sheboygan benefit from this ten years down the road, or will the Chinese still have our throats hung in a noose from owning our debt; will they be laughing at our falling currency, our crumbling roads?
I read somewhere that nearly 1 in 4 children in America are on food stamps. Does that come close to being "poor"?
I guess you have to read the whole article:
Nationwide, food stamps reach about two-thirds of those eligible, with rates ranging from an estimated 50 percent in California to 98 percent in Missouri.
... a minor tempest hit Ohio’s Warren County after a woman drove to the food stamp office in a Mercedes-Benz and word spread that she owned a $300,000 home loan-free. Since Ohio ignores the value of houses and cars, she qualified.
New York Times
While I have no problem with helping people who truly need help, the food stamp program is one of the most abused welfare programs in history.
And if things are so dire in states like Mississippi that nearly a third of the population qualifies for food stamps, what does that say for Europe and Japan?
Anonymous, the inconvenient sentence you dot-dot-dotted is this:
Almost 90 percent of beneficiaries nationwide live below the poverty line (about $22,000 a year for a family of four).
Sorry, I can't comment on the chart you linked. I'm not an economist and I'm not sure what it means. Is your point that we are doing well enough? OK.
For the record, I also am against giving food stamps to people that don't need them.
"Somebody needs to show this data to the unemployed, that will make them feel much better"...
How about you anon @ 11/29/2009 12:36 AM?
"While Benny would do best to refrain from personal attacks on the host, he does raise valid points in asserting that real wages are lower today than in 1972"...
By who's REALISTIC standard anon @ 11/29/2009 5:10 PM?
" are becoming richer because of deflation. It's a pity that some economists support this kind of views with "biased" studies"...
O.K. MG, where is YOUR alledgedly unbiased study? Trot it out lad so we can see if you know what you're talking about...
pseudo Benny is as usual, wildly delusional: "Dr. Perry must know better than these insincere arguments he makes, drawing on anecdotal information"...
Cranky whines: "Do you have an answer why it takes two incomes to make ends meet when it used to take only one?"...
It doesn't, it just takes intelligent spending and knowing what one's limits are...
"And if things are so dire in states like Mississippi that nearly a third of the population qualifies for food stamps..."
Yet another socialist, nanny state scam that should've never been instigated in the first place...
From http://www.bls.gov/ncs/ncswage2008.htm the figure of $18.72 an hour looks to me to be about the median hourly earnings for full-time workers so this is hardly what the poor are earning.
From OECD data – http://stats.oecd.org/Index.aspx?DatasetCode=EAR_MEI – the ratio of the 10th percentile to the median in the USA fell from 52% in 1973 to 48% in 2008. So basically you would have to double the number of hours in the above table to get the equivalent for low-wage workers. The decline in the ratio of the 10th percentile to the median suggests that these figures overstate the rise in purchasing power for the poor by about 10%, important but not not enough to change the fundamental trend
However, most importantly these durable items are only a small part of the total cost of living. Its harder to conveniently find what these items represent as a share of household spending but according to http://papers.ssrn.com/sol3/papers.cfm?abstract_id=708269 for the UK household durables are about 15% of total spending, and unless someone can comp up with alternative estimates I see no reason why the US should be very different.
This implies to me that it is true that these sort of electronic goods have got cheaper which is good for lower income households, but you would need a lot more evidence on trends in the big ticket items – housing, transport and food and health care to reach firm conclusions about trends in the wellbeing of poor households.
I would like to see (if it's out there) a cost of living index charted back to the 50's, and then adjusted for inflation.
But I did stumble on Forbes' The Cost of Living Extremely Well Index, which is a hoot, and worthwhile, I think, especially as it parallels almost exactly the original CD post.
See the 2001 explanation, and the 2007 chart.
"You don't pay the taxes and you don't fight the wars - you're a leech."
Bull shit. Do the rich "pay" payroll taxes (imagine the rich moan if the government merely sucked money out of their coffers)? When a teacher buys an Accord and a six-figure lawyer buys a $60,000 BMW, when both buy groceries, who do you think spends a higher percentage of their income on sales taxes; who do you think spends a higher percentage of their wages on property taxes?
Besides, smart man, what's become of Warren Buffet's $1 million challenge to any CEO who can prove he pays a higher percentage of his income on taxes than his salary - huh?
The crumbling infrastructure - roads, bridges, water pipes and our electrical grid - you enjoy today was largely built decades ago when taxes on the rich were much higher - 70%+ in the '60s, over 90% in the '40s and '50s (even I think that's ridiculous). Do you prefer pot holes in your roads so the affluent can build sport stadiums (at your expense, too!)?
So go ahead, smart man - stick up for the rich and their elaborate paradises while another bridge falls into the river; support Obama's unwinnable war while the Chinese laugh at our crumbling dollar and spiraling health care costs, and Osama bin Laden smiles through it all.
"This disposition to admire, and almost to worship, the rich and powerful is the great and most universal cause of the corruption of our moral sentiments."
- Adam (yes, that) Smith
"As Stephen Manning of the Associated Press acknowledged in a rare "just the facts" story..."
Great. I referred to the author of the Decline and Fall of the Roman Empire - a figure who is still revered to this day by historians for his excellent insight on Ancient Rome's later history - and you pick out some speck of dust who'll be forgotten long into the annals of time.
Yeah, I saw that same article a while back. There's several problems with this. First, final assembling of a product in the country hardly counts as manufacturing. Cateraripllar, for instance, may assemble the heavy equipment sold in this country, but it only relies on a handful of American suppliers to build the parts (much comes from China). Secondly, while America is still dominant in expensive, "high value" goods, its manufacturing is almost non-existent in basic items such as clothing, appliances, etc. Third, the higher production from fewer workers is what helps inflate the statistic. While higher production from few workers in some cases is desires, plus necessary, it shouldn’t come at the expense of too many good-paying jobs loss, and the jobs that replace them (Wal-Mart jobs, etc.) don’t pay nearly as well nor, offer very good benefits. Creative destruction is necessary, but if only the jobs/industries that replace the dead weight benefits society overall. Cell phones and its integrated infrastructure is desires. Wal-Mart jobs replacing high-paying Maytag positions are not.
Now perhaps there's nothing wrong with letting the Chinese build our microwaves, stitch together our clothes, make our computers. But you still have to ship that stuff over here via boat, and that requires substantial oil-based fuels - something that in a few years is going to bitch slap the world with its catastrophic loss in production. The IEA recently completed a study of the world's 800 largest oil fields and realized depletion rates were far worst than originally estimated. Dr Fatih Birol says we will need to bring the equivalent of "four Saudi Arabias" online by 2030 just to keep production flat, we'll need six to need expected demand.
In other words, when oil becomes scarcer, it won't seem like such a good idea after all to have the Chinese make our sweaters and jackets six thousand miles away.
- Daniel
Post a Comment
<< Home