In an essay about a hometown friend of his who recently passed away, Nick Kristof says, "There isn’t a good term for the bundle of pathologies that have afflicted working-class Americans like Bill."
Then, to drive home the point that working-class Americans are in trouble, he adds this:
One gauge of how many Americans are struggling is that average weekly nonsupervisory wages, a metric for blue-collar earnings, were lower in the first half of 2023 than they had been (adjusted for inflation) in the first half of 1969. That’s not a misprint.
It's not a misprint, but it's not right, either. The problem is that Kristof used CPI as his measure of inflation. That's not surprising since it's the most common measure, and I use it myself all the time. But only for recent history and over short periods.
Over longer periods CPI is badly off. Without diving into a bunch of niggling details, the best bet for long periods that go back far into the past is PCE inflation. Here's what blue-collar earnings look like:
Either way, blue-collar workers lost a lot of ground in the Reagan-Bush years. But they've recovered from that, and if you calculate inflation correctly blue collar wages are up 27% since 1969. That's still no great shakes, but it's way different from "lower than 1969."
We know damn well what this is about, NY Times or not. It's the very crowded bandwagon fueled by the narrative that inflation has CRUSHED the working class and THAT'S why Joe Biden has an abysmal popularity rating. See! We are the liberal NY Times and we are not shying away from it, so STOP talking about our liberal bias!
Actually, even if you look at the CPI curve, it shows that blue-collar earnings bottomed out in 1993, right at the beginning of the Bill Clinton presidency, and then started gradually coming up, following a slow but steady upward trend all the way through GW Bush, Obama, and Trump, before taking a big UPWARD jump under . . . [drum roll] . . . Joe Biden!
Also, how is there an assumption that blue-collar wages should grow above inflation? We're not talking about individual wages, which of course should go up as a person's career goes on, but AGGREGATE earnings. There is no reason to expect that the aggregate earnings should go up when adjusted for inflation. In fact, these data give the lie to the widespread bullshit about how the "American Dream is Dead" in blue-collar America because DEMOCRATS have abandoned the middle class. Since the Clinton presidency, blue-collar earnings have steadily OUTPACED inflation.
And yet . . . here we are.
Not exactly my area, but I think the argument for rising blue-collar income is based in rising productivity. If capital investment increases the value of an individual's labor, shouldn't some of that increased value go to the laborer? Or is it more fair to say that all the increased value should be captured by the owner of the invested capital (and the institutions that furnished the capital, of course)? Productivity can also be increased through more effective organization of labor, and the question there would still be the same, I think, except without involving financiers to anywhere near the same degree.
It's the fundamental question-- regardless how labor productivity increases, who should capture the increased value of that labor?
I think you're right about the trends in both measures-- 20 years of decline after the oil crisis of the early 70s, then 30 years of varying degrees of gain.
We generally expect standards of living to rise with time, which requires rising real wages.
Also, how is there an assumption that blue-collar wages should grow above inflation?
Because per capita GDP rises faster than inflation.
Looks like that started more like 1973. And the small re-gain they had at the end of the Ford administration and the beginning of the Carter adminstration didn't make it through the end of the latter.
I disagree, because I think PCE inflation underweights housing.
Here's what's in the two calculations: https://en.wikipedia.org/wiki/Personal_consumption_expenditures_price_index#/media/File:CPI_vs_PCE.jpg
For those at the lower end of the income scale, CPI makes more sense than PCE even over longer timeframes. It puts more weight on housing (which has outpaced measures of PCE inflation, by a lot) and health care (ditto) than PCE does.
housing prices went up even faster. Granted homed are larger and have more amenities, but that didn't make. buying a home easier
Doesn’t the government (BLS) calculate and tabulate real wage statistics? And would they not use the correct inflation number to derive this value? I wonder why Kristof didn’t simply go to the BLS?
1. There is absolutely no reason for any American to use the word “niggling.” Use a thesaurus to find an alternative, like “esoteric.” Any word that resembles the N-word just needs to be avoided.
2. Does this include fringe benefits, eg healthcare? Cause although that is part of remuneration, regular workers don’t perceive that they got a raise every time their health coverage premiums increased but their employer paid for some/all of the increase. It’s entirely possible remuneration including healthcare increased for workers since 1969 and also workers themselves didn’t see their take home pay increase at all.
You are being WAY over-sensitive about vocabulary.
Yes. For similar reasons people shouldn't say "honk your horn" but "engage your horn."
>"Does this include fringe benefits, eg healthcare?"
I understand this argument, but it always seems a little off that workers should feel better off because their health care administrators and doctors are receiving much higher compensation than before. (or relative to peer countries). Really, the working stiff is mostly a pass through in this situation.
Shouldn't Americans also force the nations of Niger, Nigeria and even Chad to change their names?
I think "Syme" would be a better moniker for you to use.
“There is absolutely no reason for any American to use the word ‘niggling.’ Use a thesaurus to find an alternative … Any word that resembles the N-word just needs to be avoided.”
This is an excellent parody of the modern Left. Safetyism just doesn’t get much more obsessed with safety than this.
So thanks for the valuable public service. We need more parodies like this to help highlight and then correct the excesses of the Left, especially if we’re going to beat Trump!
You can’t chink your cabin or wash up afterwards with Spic n Span anymore either. It has gotten ridiculous! Oh well, I guess I’ll just put some doo wop on the stereo and cook up some sour kraut for dinner.
Please disregard the previous post, I was just yanking your chain.
Kevin you know that you have overstated your case.
Both PCE and CPI are models of what inflation has been. Neither is the actual inflation experienced by individuals themselves.
You are arguing that your preferred PCE model most accurately represents the impact.
Others may argue that the CPI more accurately represents the impact.
Or alternatively one can argue that the two models are estimating the impact and providing insight into what the impact and its possible bounds might in fact be..
In which case, perhaps accepting that the actual impact is perhaps between the two models would not be inappropriate.
Good comment.
Inflation adjustments can be useful....but sometimes we end up less informed after the adjustment.
Does PCE take the cost of housing into account?
Because if you're considering people's mood compared to what it was in 1969, any inflation measure that doesn't consider housing is nearly useless.
Housing or shelter is a major part of the indexes, but the computation is not straightforward. There are different ways to measure rents in particular.
I dunno, 27% increase in constant dollars since 1969 sounds pretty terrible to me.
The Census has mean of the middle 5th household income, in 2022 dollars: $8360 vs $74,700, using CPI-U to correct to 2022's dollars. That's not a 27% increase, it's a factor of 8.91 (791% increase). Source: https://www.census.gov/data/tables/time-series/demo/income-poverty/historical-income-households.html
One thing I don't understand: $8360 in 2022 dollars is essentially $1000 in 1969 dollars. But if you're working full time 2000 hours per year, that's $0.50/hour, when minimum wage was $1.30. So, in 1969 there must have been a lot more people either unable to find full time work, or working jobs that didn't pay minimum wage.
Their spreadsheets show both "current" and "2022" dollars. The $8335 was in "current" dollars, aka 1969 dollars, and was listed as $50Kish in 2022 dollars.
Thanks for that -- I was just about to go back and look at the tables again because that median income seemed ridiculously low once I thought about it for a bit.
So, the real increase for the median income was 35%.
FWIW, the top 20% increased by 100%, and the top 5% increased by 137%.
How does the fact that people now have mobile phones and internet access which they didn't in 1969 goes into computing inflation adjustment?
Also all the other improvements that "just happened".
Doesn't make sense to me to do the comaprison without all of these. Inequality measures make more sense.
How does the fact that people now have mobile phones and internet access which they didn't in 1969 goes into computing inflation adjustment?
Basic consumer goods, both durable and non, as well as utilities and communication services (i.e. phones), are included in some way in both CPI and PCE. Household electronics, clothing, and furniture, for example, are way cheaper than they were in the 70s thanks to advances in manufacturing (e.g. automation) and (esp) global trade (= cheaper labor overseas). As others have pointed out, what costs a lot more these days are things like housing, healthcare, and education.
but if you’re going to factor that in we have to talk about quality- eg modern clothing sucks. The shirt I bought at Zara two months ago is already threadbare but the one I bought in high school is still perfect (just tragically out of style)
Trying to take account of changes like that is a corner of the price-index business they call "hedonic adjustment." According to a very short NBER piece, the BLS uses it now for a small proportion of items in the CPI basket and is always trying to refine it. It seems to involves some complex math that's way over my head. https://www.nber.org/digest/20239/correcting-quality-change-when-measuring-inflation
Why 1969? Because it was such a great time for the blue collar workers of America?
In 1973 a strike at Chrysler and another at Caterpillar. The coal strike of 1974. The unemployment rate was twice what it is now.
I don't see why this comparison is worth making in the first place. It isn't like blue collar workers were any happier about the culture wars than they were about the economy then. 1970 saw the hard hat riot in NYC.1968 was the police riot at the Chicago Democratic Convention.
So what gives with 1969?
69
Median wages stopped growing at about the same pace as the economy in the late Seventies. That is why American workers should be rebellious and condemn the political economy.
Bingo.
It gets worse under Republicans than Democrats, but under Democrats those doing worse off catch up too.
The CPI and the PCE are two different calculations of inflation (not different data). The Fed now says it prefers the PCE but that doesn't make it the "correct" one. The inflation numbers that appear in the media are usually based on the CPI, not the the PCE, probably because inflation by the PCE is usually less and not as scary. The CPI is used to correct the poverty levels and Social Security payments. If everybody uses the CPI on a daily basis why shouldn't it be used by Kristof or anyone in a newspaper piece?
Neither one is an absolute measure - judgement is involved in what is included in the "basket" of goods and services that urban consumers are supposed to buy and how things are weighted. The indexes do not really account for quality improvements, so a given "real" or inflation-corrected wage buys a number of things of a capability and quality that weren't available 50 or 60 years ago, such as flat-screen TVs and cell phones.
But what changed about 1973 is the way that economic growth was distributed. Up till then wages kept up with productivity growth or GDP/capita (which is a measure of productivity):
https://www.skeptometrics.org/BLS_B8_Min_Pov.png
Inequality was actually being reduced from the thirties until 1973, when things changed drastically for a number of reasons. Inequality has not increased as fast as it did from the seventies to the nineties, but it is still increasing because most economic growth is going to upper incomes. This is a big change from what happened in all US history.
My diagram uses the CPI. If it is redrawn using the PCE instead, everything is tilted upwards on the right, but this does not change the relationship of wages to GDP growth or productivity, because that is also based on inflation-corrected values. Using a different inflation measure does not change the way that wage earners are getting less of economic growth.
Sometimes Kevin acknowledges the increase in inequality but other times he effectively denies it by insisting that workers are doing "just fine" because real wages are increasing. He typically ignores how much faster wages were increasing before 1973.
This has nothing to do with the comparison between the Trump and Biden administrations. After a blip caused by layoffs in the pandemic, wages are now essentially back on the same approximate trend as they have been on since the 90's, that is slowly upward, whichever measure is used. Wages were not growing faster in the Trump administration.
Here is a diagram of unskilled wages (from the Economic History Project) versus GDP growth since 1789. This shows how things have been very different since the early 70's.
https://www.skeptometrics.org/WageIndex.png
This totally agrees with analysis I've seen elsewhere. One question I have concerns whether wages or household income data captures fringe benefits? At the plant where I worked most of my career, people talked about how benefits increased in the 60s and 70s, then "the great take-back" began. Defined benefit pensions were replaced by 401ks. Company savings programs were abolished. Vacation was cut. The meal allowance for travel ended up being frozen around 1990. The company's 4th of July picnic went away. Even the awards program for meeting safety goals became less generous and eventually disappeared.
Another thing is that the ever increasing cost of health insurance and the ever decreasing percentage paid by the company meant that real take home pay could go down every year even if the gross pay remained the same adjusted for inflation. Now it's true that healthcare today is enormously more effective than in was in 1980. Also, back then, we generally just had a major medical policy. Still, my share of that policy's cost was $3/month then. That's not adjusted for inflation, but it was less than 0.2% of my salary. Now health insurance payments eat up about 10% of my salary. There are plenty of people making less money than me; for them this burden is terrible.
Most people get a lot more from health care. Drugs, surgical procedures and other things have improved. Life expectancy has increased since 1969 although it has turned down in the last few years. Somebody has to pay for these things.
But again there is a pertinent comparison, with other countries, which provide equivalent or better care at much lower total cost, and lower cost to wage-earners.
Yes, as I said, healthcare is enormously more effective today. To your point though, government in the US already spends more per capita on healthcare than the total per capita healthcare spending of any peer country. And, as you implied, calling these our "peers" is a stretch as they do a much better job than we do at things like life expectancy, infant and maternal mortality, etc.
I remember some hearing in DC where a Republican yahoo was demanding that Anthony Fauci explain how the Federal government would pay for Senator Sanders' single payer plan. The answer is that if you get rid of the bureaucracy associated with the present system, pay what the rest of the world pays for drugs, and go after the fraud in our healthcare system, the Federal government probably comes out a few hundred billion/yr ahead.
There are various interests who profit from keeping things the way they are. That is why we can't have anything nice.
The thing is that these truths about the effectiveness of modern healthcare aren't going to persuade most people that they are doing fine financially. They got a raise as large as inflation, but due to health insurance costs rising, their take home pay hasn't kept up.