Subject: Myths of the Rich & Poor Date: Sun, 21 Feb 1999 14:39:00 -0500 From: Edward Flaherty Newsgroups: sci.econ, alt.politics.economics Michael Cox of the Dallas Fed and journalist Richard Alm have written a new book, _Myths of the Rich & Poor_, that questions the accuracy of a widespread belief that living standards in the U.S. have fallen since the early 70s. This belief, they argue, is not only wrong, it is spectacularly wrong. They concede first that the real wage has fallen since its peak in 1973. But they counter-argue that wages have become a smaller component of total labor compensation. Other measures that capture more of the income going to labor have shown an increase, not a decrease, since 1973. Specifically, total compensation and per capita disposable personal income have increase, albeit they have not grown as fast as they did prior to 1973. But the approach Cox and Alm emphasize in their book is consumption. They present mountains of data showing that consumption for the typical family has increased in both quantity and quality since the Nixon era. Here are some interesting statistics they compiled. All $ figures they quote are in 1997 dollars. In 1970 the average size of new home was 1,500 square feet; in 1995 it was 2,150. The percentage of new homes with central H&A was 34% in 1970, 81% today. Homes lacking a telephone: 13.0% then, 6.3% now. Households with no vehicle: 20.4% then, 7.9% now. Households with 2 or more vehicles: 29.3% then, 61.9% now. Households with a computer: 0% then, 41% now. Households with color TV: 34% then, 97.9% now. Households with cable TV: 6.3% then, 63.4% now. Households with CD player: 0% then, 49% now. Households with VCR: 0% then, 89% now. Households with answering machine: 0% then, 65% now. Households with clothes washer: 62.1% then, 83.2% now. Households with clothes dryer: 44.6% then, 75.0% now. Annual visits to the doctor: 4.6 then, 6.1 now. And they show many, many other similar statistics showing the growth of consumer goods. Some would argue that this was only possible by households going into deeper debt than ever. Yet, median household net worth was $27,938 then, $59,398 now, so that explanation is not correct. Yes, households have more total debt, but as a percent of their assets, it's no larger than it was in the early seventies. Some would argue the improvements in consumption patters were enabled only by spouses working longer hours. This isn't true, either. In 1973 the average workweek was 36.9 hours; today it is 34.4. People have more paid vacation days now (10.5) than in 1973 (8.0). The number of hours worked per year has fallen from 1,743 to 1,570. These developments have left a lot more time for leisure. Per capita spending on recreation was $501 in 1970, but was $1,650 in 1995. The percentage of Americans playing a wide variety of sports has also risen sharply. Personally, I find the data to be hard, statistical evidence living standards have improved. But just to be sure, let me ask myself: Would I rather be living in 1970 or 1999? I'll take the now, thank you. -- Edward Flaherty School of Business & Economics College of Charleston flahertye@cofc.edu Office phone: (843) 953-7166 Fax: (843) 953-5697 Web site: http://www.cofc.edu/~flaherty/index.html