Subject: Re: Rising expectations (was 5% Unemployment...) Date: Wed, 27 Aug 1997 07:31:38 GMT From: OldNasty@mindspring.com (Grinch) Newsgroups: alt.politics.economics, sci.econ References: 1 , 2 , 3 , 4 George Avery wrote: >Is there really a decline in the median incomes of working males, or is >this just another example of the curse of rising expectations? After >all, twenty years ago, multiple automobiles, multiple televisions, cable >tv, prepackaged meals, etc. weren't considered "necessities." Is it >possible that the perceived drop in income is do the the cost of what >was luxury items but know are considered "necessities," leading to a >decline in the perception of disposable income? Certainly the buying >power of the average paycheck has risen over the last genration when the >purchase of staples is considered. >I can see this effect among my married colleagues. I have coworkers who >are raising a family on a single paycheck, including private schools, >while we have several other married couples in the same paygrade who >insist that both incomes are needed to provide a living wage. Changes in inflation-adjusted average compensation during the 15 years 1981-1996, according to the Bureau of Labor Statistics: All employees, +14% White-collar employees, +21% Blue-collar employees, +5% Data from the BLS Web site at http://stats.bls.gov:80/cgi-bin/dsrv?ec These numbers, and many others available at the same site, do show a widening of the income gap between skilled and unskilled workers, but do *not* show unskilled workers suffering a loss of income. If you also consider the fact that the CPI is a price index rather than a measure of welfare, and that when used as a measure of welfare it probably understates gains by about 1% annually (as determined by the Boskin Commission and many other studies on the subject), then you can add around another 15% to each of the figures given above. Even if you don't accept any Boskin-like adjustment, simply running the CPI back as-is shows that a poverty-level family today, at the 12th-percentile income level, has the same income as a 50th-percentile middle-class family of 40 years ago in the glorious days of Ozzie and Harriet, which some people now consider the American golden era. Make a Boskin adjustment, and today's 12-percentile family has the same income as a middle class family of the 1960s. See economist Paul Krugman's article on this subject in Slate at http://web.mit.edu/krugman/www/ratrace.html The line that is constantly repeated in certain quarters, "wages are declining", is rather disingenuous in that "wages" are defined by the BLS as being "employee compensation *minus* benefits" -- and benefits as a percentage of total compensation have been growing steadily for years. For instance, BLS show that from 1981-1996 the average wage for blue-collar workers indeed did decline by 6% -- but benefits rose by 32%, producing the 5% increase in overall compensation. The creators of the "wages are declining" line, most notably Robert Reich during his tenure as head of the Labor Dept. (and the BLS) know full well that "wages" are substantially less than "compensation" -- but the average person who hears the line and believes it doesn't. For the list of benefits that are not included in "wages" by the BLS, see http://stats.bls.gov:80/ectbens.htm >Michael Hodges wrote: >> Some would consider the fact that the employed percent >> working age population being up is a good thing, while many family >> members >> write me complaining that they have been driven to this outside their >> control, and believe the total family and especially their children >> suffer. >> So, what is positive for some is negative to others. >My very point.---George Avery It is curious that, after 30 years or so of the consensus opinion being that wives should be 'liberated' from the obligatory role of housekeeper and be free to enter the work force on the same terms as men, now that this is becoming a reality it is being denounced in many quarters as a bad thing -- wives are being 'forced' to work. For what it's worth, the data shows that highly-educated couples with one high-earning spouse are *more* likely to have a second spouse working than low-education couples with a low-earning first spouse. From the Census' Current Population Survey: Education level % of dual earners couples College education 76% High school education 55% Didn’t finish high school 24% These numbers can be read as indicating that more wives are going to work largely as a result of new opportunities being available to highly educated women, since if wives were being forced to work out of necessity, you'd expect the figures to be reversed -- with the wives of high-earning husbands staying home with the kids or enjoying their leisure, and the wives of low-earning husbands working in greater numbers. On the other hand, these numbers also can be read as masking financial hardship at the lower income levels. A lot of expenses result from having both spouses work, especially if a family has children -- nannies, day care, housekeeping, etc. -- so wives with low earning power may not be able to afford to go to work even in the case of financial hardship. So read the numbers as you want. One thing that's interesting is that there is a strong demographic tendency for persons of like education levels to marry. This means that more and more high-education, two-high-income couples are forming, and this is *definitely* widening the range of income between the highest earning two-income families and lower-income one-earner (and one-parent) families. Even if the latter are advancing in objective terms, they may see themselves falling back in relative terms. This looks like its going to be a long-term trend now that women are coming out of top colleges and professional schools in equal numbers with men -- highly-educated couples marrying, forming dual high-income families, and moving far up the income scale away from lower education and single earner families. High-education, high income couples also are much less likely than lower-income couples to divorce and suffer the trauma and financial losses that result from divorce. And their children are much more likely to get become highly educated, form dual-earner high-income marriages, etc. One of the more interesting statistics I've seen is that more than 90% of the students at Ivy League universities come from intact two-parent families (biological parents, not remarried ones). The study that examined this found that after accounting for other factors, parental divorce by itself reduces the chance that a child will attend an Ivy League school by 50%. Some demographers are now suggesting that we're moving to a new type of "class" society with class determined by education and marital status: "In fact, stable marriages could be perpetuating the growing division in American society between the haves and have-nots. Marriage, quite simply, is a form of having." -- Frank J. Furstenburg of the University of Pennsylvania in American Demographics, June, 1996 Regards And This: Subject: CPI, Boskin and Poverty (was: Re: Minimum wage and unions) Date: Sat, 27 Sep 1997 01:54:23 -0700 From: Veblen Newsgroups: talk.politics.misc, alt.politics.usa.democrat, alt.society.liberalism, tx.politics, alt.activism, alt.fan.rush-limbaugh, alt.politics.usa.republican, alt.politics.economics, sci.econ kenfran wrote: >See the EPI analysis (HTML file attached) below relating to Boskin and >productivity. As the *liberal* economist Paul Krugman has pointed out repeatedly, EPI damages the credibility of liberals everywhere when it publicizes such tripe as follows, so easily refuted by *any* reference to facts. >Washington, D.C. The Economic Policy Institute (EPI) today released a >preliminary analysis of the final report of the Senate Finance Committee's >Commission on the Consumer Price Index (CPI), chaired by Michael Boskin. >EPI economist Dean Baker prepared the following analysis of >the Boskin Commission report: >Insufficient Research for Definitive Conclusions >Very little research has been conducted into most of the potential sources >of bias in the CPI. The existing research is far too sparse to provide >the basis for definitive conclusions about the size or even the sign >up or down) of any bias in the index taken as a whole.... Right, sure. Let's start with ... "In all countries the usual price index numbers exaggerate the increase in the cost of living and understate the laborer's real reward per unit of work". -- John Maynard Keynes, 1921 Or, more recently, the results of studies on CPI bias conducted during just 1994 - 1996: Author(s) Point estimate Advisory Comm. to Study the CPI (1996) +1.1 Michael Boskin (1995) +1.5 Congressional Budget Office (1994) + .5 Michael R. Darby (1995) +1.5 W. Erwin Diewert (1995) +1.5 Robert J. Gordon (1995) +1.7 Alan Greenspan (1995) +1.0 Zvi Griliches (1995) +1.0 Dale W. Jorgenson (1995) +1.0 Jim Klumpner (1996) + .4 Lebow, Roberts and Stockton (1994) +1.0 Ariel Pakes (1995) + .8 Shapiro and Wilcox (1996) +1.0 Wynne and Sigalla (1994) +1.0 Gee, I guess EPI didn't notice that any of these studies exist. (References to all in the footnotes of the 1996 Annual Report of the Federal Reserve Bank of Dallas. http://www.dallasfed.org/whatsnew/ar_96.html ) >Revised History is Implausible >The Commission's findings lead to conclusions that are extremely >implausible, if not impossible . . . If the Boskin Commission's findings >are extrapolated backward, they imply that most families lived below the >current poverty line as recently as 1960. Guess what. If you use the *non*-Boskinized standard CPI figures you come to the same conclusion about the American population circa 1955. http://www.slate.com/Dismal/96-12-21/Dismal.asp So is saying the same thing for 1960 so ridiculous? Or is EPI's ideologically-motivated denial of the obvious fact of the great growth of wealth in the US what's really ridiculous. >Also, if the Boskin Commission is correct, then the war on poverty was >an incredible success story. Using our current poverty line, the poverty >rate fell from close to 50% in 1960 to approximately 14% at present. And recognizing the fact that the poor of today have more money than the prosperous middle classes of not so long ago might lead people to start thinking that the worst problems of *poverty* aren't really caused by a *lack of money*. Can't start having people thinking that -- although it's what most everyone thought before the 1960s. And in fact it's pretty obvious. Pick your year -- 1950, 1930, 1910. The further back you go using even normal CPI figures, the greater the percentage of the US population was under today's poverty line. About 90% was below the today's poverty line in the Roaring 20s, and going back much further than that virtually 100%. But is the US generally thought of as having been an impoverished nation throughout its history? Looking back in time, do we see the social dysfunctions of poverty -- crime, broken families, illegitimacy -- affecting an ever larger portion of the US population, decade by decade? Nope. Here's a clue for EPI: The war on poverty *has* been a failure, but not because the money incomes of the poor haven't risen.