Hello and welcome to the first “Disputo,” or discussion. I will paraphrase a discussion about economics and wage growths from the CNN.com forums (a great place to start discussions and have debates!). Sometimes these discussions are simply places for egos to blow around and racist trolls to inhabit, and occasionally a good discussion comes out of it. This conversation was one of the latter, and provides the basis for the post following this one.
(EDIT: No, I do not get paid by CNN to advertise or debate. I wish I did, but sadly, no)
As sources “Tracto” is using the Social Security Administration Median Wage statistics and I am using, primarily, the BLS income data and the US Census Bureau’s median income data. The reason this is important will become apparent in the discussion, but if you want to review them you can find them here (http://www.ssa.gov/oact/cola/central.html) and here (http://www.davemanuel.com/median-household-income.php) in their easiest form, though I suggest you look at the BLS and USCensus sites themselves to confirm the data, as I did.
The average wage has gone up more than inflation, NOT down. Since the glory days of Clinton, in 1995, wages have gone up very dramatically, despite the false and evidence free claims of many:
Median net compensation: 16,650.16
Average net compensation: 23,700.11
Median net compensation: 26,965.43
Average net compensation: 41,211.36
The claim that wages have stagnated or gone down is factually false. Inflation has cut into some of that, but not enough to stagnate the wages. If the wages had risen in line with inflation (as calculated by westegg, choose your preference), the numbers in 2011 would have been 34,543.37, and 24,267.93.
How about instead we use the US census data and the Bureau of Labor Statistics? There we see that the median wage in 1995 was 33,207 (inflation adj = 49,945) and 2012 = 49,103 (Inflation adjusted = 50,054).
Wages have risen in line with inflation, but some prices have increased more than inflation (especially transport prices) which makes it difficult to keep up. So you are correct and incorrect.
Claiming “prices have increased more than inflation” is absolute nonsense. What do you think inflation is?
Ok clarification: The price of certain goods is far higher than the national average inflation. Those goods are typically the things the everyday person needs, and while the average looks ok, those items are no longer manageable for the average taxpayer. So I can understand why they are worried, even though wages (again, on AVERAGE) have remained about the same.
This is probably a wage gap argument, if you want to skip right to that.
No, I don’t think so. The inflation rate calculation is based on those things that the average person supposedly needs, not everything including luxury items out of reach.There are flaws in the CPI calculation, to be sure, but it isn’t completely out of touch with reality, as you seem to imply. And yes, certainly some things are rising faster than the overall inflation rate.
The wages, again, have NOT remained the same. They have gone way up. This claim just isn’t true. Median wages have unquestionably gone up. What has held people back IS inflation, but it hasn’t stopped their progress entirely. What has outstripped inflation is medical costs, higher education costs, and housing – all things that the government subsidizes the purchase of.
Let me put it in numbers so we can put this issue to rest:
Gasoline was $1.514 as per the US department of energy and the Energy Information Administration in 1995 adjusted for inflation. It is now $3.608. That is a huge rise in price that does not match inflation, and affects everything from transport to food prices (transport plays a role in that).
Median income has risen by $109 total per year for the last 18 years. Compare that to the change in 18 years before that. In 1977 we had a median wage (adjusted for inflation) of $45,884. In 1994 we had a median wage of $48,418. That’s a $2,534 gain, or approximately 23 times as much as it has since 1995 to now.
Ironically enough, we did see a massive increase in wages from 1995 to 2000 (49,945 to 54,841), but we lost that and dipped back down before rising again in 2007 (54,489) before dropping like a stone in the recession. So the original argument stands: in this recession, we have lost most gains in wages over the last 18 years.
You pick some commodities and say they have “risen faster than inflation.” Other things have gone down. LOTS of them. Inflation looks at overall price levels.
The non-inflation adjusted numbers for median wages are not arguable. That median wage you quoted for 1995 is not accurate. You have quoted median household income, NOT median wage. The two are not the same, because household sizes and hours worked have changed.
The SSA numbers are accurate.
Ok, I’ll use median wage, though I think income is better since many people don’t earn traditional wages. But ok. Let’s lay it out then with a longer study, 1955 to today:
– Minimum wage has increased from 4.39 to 4.97 using the Constant (1996) wage inflation adjusted set by the BLS and DOL. Increase of 13%, or 0.23% a year.
– The SSA website itself claims that the median income before 1962 is unavailable as that is the earliest year they measured it. They use the National Average Wage index, which shows up as $3301.44, which is inflation adjusted $28,283. And this is, as you pointed out, average, not median.
– The SSA puts the current wage at $42,979, a growth of 52%. This translates to 0.9% increase a year since 1955, which is nice in my book, but not nearly as nice as the 275% increase the top 1% received between 1979 and 2007, or about 9.8% a year (CBO report).
– The governmental body that is using median wage, the BLS, states that the median wage in 1955 was $4418, or currently $37848. That’s only a 13.6% increase, or 0.24% a year.
You are falling into another total fallacy, claiming that the top 1% “received” a 275% increase. Nothing could be more false. Different people formed that one percent at each of those points. Most people in the top 1% of income are there for a single year of their lives; they are not a lasting class of people that are somehow unfairly being given other peoples’ money.
Wages have gone up more than inflation has, period.
Now you bring up a good point. Yes, it is entirely possible that those at the top of the income brackets are different people. It’s not very likely to change all that often, which you can check with the Forbes 500 and a myriad other ways, but it does not prove that they are indeed the same folks. But that was never my argument. My argument is that the people protesting this system have a valid concern.
So far you have stuck to a single number, one that I have checked and discovered lacking context. The scope is too small, the numbers do not align with other specifically research organizations, and they are not adjusted for inflation.
Now I will attempt again to explain the wage/inflation equation. Using median income, we see $119 dollars increase as adjusted for inflation, or a 0.2 or 0.3% increase in 18 years. That increase is not in line with inflation rate at all. Even using your wage statistics, with your numbers, adjusted for inflation the difference is ($26965.43 – $25083.6) $1881.83, or a 7% increase over 18 years.
Neither of those keeps up with actual optimal inflation rate of 2% a year. In order to provide for a good economic growth, wages shouldn’t just match inflation, their growth should equal approximately the optimal rate of inflation.
The Forbes “400” doesn’t have a thing to do with it. That group is measured by wealth, not income, and even if it were income, it would account for only 400 people out of more than 3 million who form the top 1% of income earners, and more than 1.4 million that file returns. As to it not changing very often, you’re right that it isn’t “very likely” to change all that often, because it is certain that it will do so, each and every year.
You claim that wages have not kept up with inflation, which they have and more. You have claimed that substituting household incomes for wages counts as a valid counter argument.
Average household sizes have been shrinking for years. Total hours worked are less. Wages are NOT household incomes, wages are the amount of money paid per unit of work. A household working 2000 hours at an average of $20 per hour is NOT making a lower wage than a household working a total of 3000 hours at an average of $15 per hour. It is making a higher wage.
You state an explicit growth, over inflation, and then claim that wages haven’t kept up with an “actual optimal inflation rate.” What does that even mean? The actual inflation rate is just that – an actual value. It isn’t fixed, it varies!
In the original post you stated that you had adjusted the 1995 values for inflation, yes. I stated that the SSA numbers had not been adjusted by the SSA, whereas the BLS numbers were adjusted by the BLS. That gives consistency, and tells me a bit about the priorities of the people posting them (as in, one cares about comparison, and one does not). I used that as a statement about the reliability of an organization expressly dedicated to analysis over one that does it on the side, not as a statement to disparage your ability to adjust for inflation.
I think I see where we are getting into trouble here. The optimal rate of growth for an economy has an inflation rate of 2%. We haven’t always kept to that, but it’s been reasonable. Wages adjusted for inflation do show an increase in wages in total, I am not arguing that. However, one measurement for prosperity in a nation is an increase in the wage itself, not just adjusted for inflation.
Many people claim that wages have increased faster than the inflation rate, and by that they do not mean adjusted, they mean better than 2%. Nations with median wages that remain the same are considered to be stagnated, with no growth of its citizens toward more economic prosperity (unless you work with sustained economy theory, but that is not generally in line with capitalistic principles).
In the last 18 years, wages, even by your numbers, have increased by a measly $2697.50, or $149.86 a year. That would seem great until you note that that is a growth of 0.6%. Other nations in this time span have seen their wages improve by legally mandated 1%+ per year. This does not mean we are doing poorly, but we are certainly not focused on the economic prosperity of our middle class.
And that brings me to the final point, one which you keep saying is irrelevant. The entire reason this discussion even occurs is that while median wages have risen by 0.6%, upper wages (and income, again I reiterate that the upper percents do not have wages but income from capital gains, derivatives, and dividends) has risen by 0.9% or more. Go back further in history and you see this effect increase (Since 1970’s, wage has increased 0.6% median and 1.9% high and 0.57% lower wage).
You can’t discuss the numbers without the context. Yes, wages have risen even adjusted for inflation, but they have not risen faster than inflation rate. It has not been a dramatic increase, and it is not competitive with other nations. There is an imbalance in the increase of prosperity which is well documented as an income inequality issue, one that is the basis for this entire discussion.
Your claim that the inflation adjustment has to be done by the same parties that do the data gathering is specious. It’s a circumstantial ad hom argument. You won’t get a substantially different answer.
Real wages/compensation have unquestionably risen. Household incomes arguably have not, but wages most certainly have, and this is an absolutely key point to comprehend.
What incomes haven’t done is rise fast enough to satisfy the expectations of many, who see the earnings of others, who earn more than them, as being their rightful property, somehow “stolen” from them, and “unfair.” People who hold this position – that incomes haven’t risen enough to be “fair,” then falsely claim that those incomes haven’t risen at all, or have fallen, with zero evidence to back this up.
If you want to say that is isn’t “fair” that some people are earning too much more than others, then by all means say that. If people would just say what they really mean, they wouldn’t have to rely on fallacies and distractions, and do things like challenge sources with circumstantial ad hominem arguments.
I’m sorry if you feel I am trying to distort your argument; that was never the intention. There are two items in play that I believe you are glossing over, and that is why I replied in the first place.
The first is your claim that wages have risen dramatically, and as such we should not whine about it. I saw that wages had not risen all that much, and tried to show you why that statement was in error. I’m not sure if you are still holding to that, but the reality is wages have barely risen faster than inflation.
The second is that we really do have a wage inequality problem, and this is a recent thing. Before 1970 we had wage growth for every strata of earners, and that growth was similar (not the amount, the growth). After 1970 it began to split into three branches, with the upper wages keeping their growth from before and the lower two slowing to a crawl. This has kept up even to today, so that we see a change in growth that is not only unequal in perspective but quite simply not equal in reality.
I am not advocating that everyone get paid the same for different work. I am however stating that the record shows an unequal growth in wages. That is why people are upset, not because they don’t make as much but because their wages will not grow as much as someone who already has a lot. That is the key point you must understand.
My position has always been:
– Wage increases since 1995 have not been dramatic, they have been sub-par.
– Wage GROWTH is unequal, and it doesn’t have to be so nor is it proper in a sustainable model for it to be so.
After this it devolved into insults, unfortunately. Still, a good source and motivator for research, the result of which you can see in the following post. Hope you enjoyed this experimental post!