Does changing household size resurrect American economic performance?

by on September 18, 2013 at 6:50 am in Data Source, Economics | Permalink

Persons per family household:

1990: 3.22

2000: 3.24

2010: 3.24

Not so much change, and if you look you will see there is also not so much change for non-family households.  The Census pdf is here.  I have covered this ground before, but the myth of “changing household size means economic progress has been just fine” dies hard.

By the way, the average number of people in a household categorized as “living alone” has remained strictly constant at one.

All of this is referring back to yesterday’s discussion, and I thank Paul for the reminder.  Also from the MR comments, Ricardo writes:

…you can find median income numbers broken down by size and type of household over time precisely to distinguish single 19-year-olds from married couples with children. They do not change the underlying story much at all. See:

http://www.census.gov/hhes/www/income/data/historical/household/http://www.census.gov/hhes/www/income/data/historical/families/http://www.census.gov/hhes/www/income/data/historical/people/

What happens in these debates is that some people simply cannot bear the thought that incomes for a large percentage of Americans are stagnant and so try to introduce all sorts of red herrings into the discussion without actually doing the basic research required to see that the stagnationists are basically correct on just about any relevant measure you care to use. To pick one example, let’s look at white married-couple families to move past any concerns about single moms or poor, non-white immigrants skewing the results downward. You can find this in Census Table F-7. You will note that white married-couple families where the wife does not work have experienced almost complete stagnation in real income. Real income among this group was slightly higher in the 1970s than it was in 2007 (the peak over the past 10 years). I challenge you to look at any number of measures and you will see that the gains made in overall family or household income are almost entirely due to more women entering the labor force and earning only slightly higher wages. If you focus solely on per capita income, you miss the fact that people may be marrying less and having fewer children as a consequence of the stagnation in male wages and the need many women feel to work longer hours.

Guy S writes:

Household composition adjusted data from the Census Bureau can be found on pgs 16-17 in this document: http://www.census.gov/newsroom/releases/pdf/20130917_ip_slides_with_plotpoints.pdf

This has been a total wipeout of income potential for the lowest quintile households in the US.

Here is Russ Roberts, with a possibly more optimistic perspective on the comparison with 1989.  You also might want to read this post by Kebko.

RADICAL BLOGGER September 18, 2013 at 7:59 am

The civil rights act/movement is probably the major factor in this degradation of the american quality of life/loss of income/lack of income growth. Americans have had to work more to get the same returns as they did in the 50s, 60s, 70s. Why?

Lack of control over the government by the largest bloc in america, the white majority bloc. If there is no relatively united majority bloc that can control a nation, then the corporations and rich political donors are better able to control the government. In other words, Capital controls the government in that case. And when Capital controls the govt, it will use that power to give Capital the edge, give Capital more power and give the workers less.

Note: Capital may be defined as a loose aggregation of entities that have lots of money: rich investors, large corporations, and the tools of Capital: large nonprofit foundations and think tanks, major corporate media organizations. etc.

Capital wants more profits, more profits for investors and corporations. Pretty simple. What helps increase profits? Lower wages. More market access. More consumers.

Hypothesis: feminism and civil rights (racial desegregation, etc) are tools created and used by Capital to increase the supply of labor and drop wages. This increase in the supply of labor was a major factor in the lack of wage growth since the 70s and early 80s when the effects of civil rights and associated judicial decisions (disparate impact etc) really began to take place. Res ipsa loquitur. The thing speaks for itself. Look at the charts. Wages dropped as civil rights laws were enacted and took effect over the next couple of decades.

Now, let us turn our attention to control of the government. When Capital has more control of the government, it uses that control to better position itself to make more profits. Worker rights and protections are decreased. Ability to use cheap overseas labor to manufacture goods for sale in relatively high wage western nations is increased. Civil rights laws are enacted in order to increase the supply of labor. Likewise, immigration laws and enforcement are manipulated by Capital to increase labor supply and drop wages.

Now let us turn to the more difficult to understand concept: unity of the populace. In general, when speaking of western nations (ones where the populace is mostly white), as population unity increases, democracy increases, causing the majority bloc to have more control, and Capital to have less control. This brings up the quality of life–people work less hours to get more. Less for more. That’s a Good Thing, right? When the people have more control, they use that control to increase wages by depressing supply. They give themselves lots of time off, universal healthcare, cheap education.

When Capital has control, they extort the populace for healthcare, education, give little time off. More is given by the populace for less returns.

More profit for Capital!

Now, what other factors might increase unity of the population? Racial and cultural homogenity. As homogeneity increases, the populace is better able to elect and hold accountable politicians. Why? Homogeneity leads to a higher degree of shared interests. More shared interests, more united, better able to control their own government.

The empirical data? Iceland, Denmark, Norway, Finland, et al. vs the USA. Extremes. Compare them. The data supports the theory.

Also, the structure of the government in these other western nations vs the USA is a large factor. The large size of the USA, combined with the large size of the federal electoral districts (president, senate, US House)
engenders factions in the voting population. More factions, less unity among the electorate, leading to less ability to control elected representatives. That means more control for Capital.

I could go on. But work beckons.

Sources: FOUNDATIONS AND SOCIAL POLICY: THE MASK OF PLURALISM; TOWARD AN AMERICAN REVOLUTION. The CIA and the Cultural Cold War book review.

No doubt I will be attacked as a troll here. No doubt you will swarm like antibodies to an invading virus. “It’s the Time Cube guy!!1!!”

Do your act. Defend the purity of your tribal ideology. Yawn….

Anonymous coward September 18, 2013 at 8:08 am

Your blog title says “radical centrist”, but you sound like a dyed-in-the-wool commie.

j r September 18, 2013 at 10:08 am

Actually, that mix of white populism and reactionary economics is much more facist than communist. And I mean fascism in the true sense, not in the leftist smear of anything to the right of social democracy.

Anonymous coward September 18, 2013 at 1:39 pm

His railings against Capital are straight out of the Communist Manifesto, no?

j r September 18, 2013 at 3:12 pm

Facism was equally anti-capitalist.

Skip Intro September 18, 2013 at 3:22 pm

My very rough understanding is that many of the post-WWI fascist movements were both anti-capitalist and ethnocentric. It seems to be a pretty complicated relationship, where property rights and markets are supported, but also state control or direction of the economy. Mussolini argued that “supercapitalism” was degrading and consumption-oriented, and banking/finance were suspect.

asdf September 18, 2013 at 3:56 pm

You’d think having socialist in Nazi party name would give it away.

Skip Intro September 18, 2013 at 4:54 pm

“You’d think having socialist in Nazi party name would give it away.”

And you’d make a very real mistake. “National socialism” is mostly unlike “socialism”. In fact, the Nazis closed the German communist party headquarters in February 1933 and began arresting communist party members after the Reichstag fire. In July 1933 the Social Democratic Party (the socialists) were banned as well.

j r September 18, 2013 at 6:05 pm

“In fact, the Nazis closed the German communist party headquarters in February 1933 and began arresting communist party members after the Reichstag fire.”

And Crips shoot at Bloods, so they must be mostly unlike each other.

derek September 18, 2013 at 6:13 pm

And that proves what? Communists and radical leftists are famous for eating their own. Neither communism nor fascism can tolerate dissent or sharing of power, and both have the characteristic of establishing a state with the power and lack of any controls that allows them to murder their opponents. Always for the greater good of course.

One notable difference between the two was the extreme nationalism of fascists. Communism had a more global view. Both killed folks who were different and undesired by the millions.

National socialists didn’t nationalize the means of production, rather by threat set the direction of the means of production. The national in the National Socialists seemed to keep some sense that there was a reality somewhere and things needed to be accomplished; the communists simply murdered without any concern whether they were needed for the project.

And yes, communists were militarized. The fact that Stalin murdered most of the effective military commanders to rid himself of any potential threat wasn’t because of pacifism. Another notion that the communists co-opted, where they were looking for surrender.

Accepting the notion that right wing meant fascist is to accept the definition given by communists. I figure that it is one more lie among the many that they foisted upon our language. Anyone who disagrees with a communist is by their definition a fascist.

RADICAL BLOGGER September 18, 2013 at 6:36 pm

Skip Intro wrote:

“You’d think having socialist in Nazi party name would give it away.”
===
And you’d make a very real mistake. “National socialism” is mostly unlike “socialism”. In fact, the Nazis closed the German communist party headquarters in February 1933 and began arresting communist party members after the Reichstag fire. In July 1933 the Social Democratic Party (the socialists) were
===============

Not to mention that even before they hired Hitler as a low level flunky, Old Money military officers had already concocted a scheme to subvert economic leftism by throwing the working classes the Jews as a scapegoat. They objective was to avoid the wrath of the working class that was aimed to …wait for it…Old Money.

A clue: if Old Money is behind a movement, as it was the Nazis, it aint really a leftist movement.

You see, you CALL a movement “socialist” even when it is against economic Leftism. That is what happened during the nazi reign.

A used car salesman can call a heap a creampuff. That don’t mean it really is .

GiT September 18, 2013 at 8:30 pm

One way to divine how to categorize a party is to see who its voters are. The NSDAP’s electoral constituency was drawn primarily from right parties in Germany, not left parties. KPD and SPD members didn’t often switch to the NSDAP.

asdf September 18, 2013 at 9:13 pm

Did any of you read about Nazi economic policy? It was communism is every way but official state ownership. They told companies what to make, how much to make, where to invest, how much profit they should keep, what wages would be, who to hire, etc. It was an extremely planned economy, not all that different then what the Soviets were doing. Do you think its capitalist because I few people got rich off it? A few people in the USSR effectively “got rich” too.

GiT September 19, 2013 at 12:50 am

There’s nothing essentially communist about centralized planning and state direction of the economy. It’s may very well be essentially illiberal, but liberal doesn’t just have a simple antonym that’s part of a Manichean pair which conveniently maps onto the Cold War.

JWatts September 19, 2013 at 11:03 am

There’s nothing essentially communist about centralized planning and state direction of the economy.

That’s a rather desperate argument to theory, since in the real world a primary distinguishing characteristic of Communist countries were centralized planning and state direction of the economy.

GiT September 19, 2013 at 2:02 pm

Except it wasn’t a primary “distinguishing” characteristic. Fascist and authoritarian governments also had such planning as a primary characteristic. Being a primary characteristic doesn’t make something a primary distinguishing characteristic.

GiT September 19, 2013 at 2:07 pm

I mean this is some seriously dumb logic here. It’s like saying one of the primary characteristics of a zebra is its stripes, therefore this striped bass is a zebra. Sorry chum, you can’t distinguish bass and zebras on the basis of their stripes, and you can’t distinguish communist governments from other authoritarian governments on the basis of the high degree of control exercised over the economy.

david September 18, 2013 at 10:17 am

A dyed-in-the-wool commie railing against feminism and civil rights? There’s a reason the old Soviet barb “but you lynch negroes” was an actual thing, you know.

Anonymous coward September 18, 2013 at 1:38 pm

I don’t remember much civil rights in the USSR, and women were profitably employed in laying roads and making rail beds. “But you lynch negroes” was a standard Soviet propaganda repartee to any hint of critisism of the lack of civil rights etc. in the Soviet Union. Even before the war, USSR disposed of several thousand times more citizens in labor camps, Cheka prisons and starved villages than were ever negroes lynched in the US, so the “barb” rings pretty hollow.

TMC September 18, 2013 at 12:28 pm

Can’t be a commie, nor even a liberal.
Giveaway: “work beckons”

Brandon September 20, 2013 at 7:52 am

Nah, the giveaway was the white populism and disdain for the civil rights movement.

RADICAL BLOGGER September 18, 2013 at 6:25 pm

swarm, antibodies, swarm!

It’s fascinating to see the bio-mechanical process at work in these politically related online forums. The habitues of these political forums, be they liberal, conservative, or libertarian, all act pretty much the same: as antibodies that attack invaders, they operate off of word associations, pavlovianesquely searching their data banks for the correct propaganda phrases to output depending on what political tribe they believe that the invader fits into. Much like an immune system will send antibodies at viral invaders, trying to match the structure of the invader with the structure of an antibody.
If you look at the replies to my post you can see that these commentors are members of the conservative tribe. Oh, they may call themselves libertarians or whatever. But their distinguishing characteristic is the use of the epithet ‘commie.’

Capital has programmed these poor creatures. Domesticated them.

The progression that occurs when I write my ideas on american-oriented political forums is usually pretty much the same. If it is a liberal forum (for Democrats), and I say that Capital is the enemy of Labor, they agree. But if I say that immigration, diversity, multiculturalism is bad for the white majority they call me a racist. If I combine capital vs labor and anti-diversity ideas, they call me a nazi/fascist.

When I put on conservative forums (GOP) and say that immigration/multiculti is bad, they usually agree. If I say that the struggle is Capital vs Labor, they call me a commie, and if I combine both ideas, well, it’s back to being called a nazi and a fascist.

As if the very idea of combining the idea of Capital vs Labor and anti-immigration/anti-multiculti is tantamount to saying I want to start slaughtering people en masse.

Well, anyway, these poor creatures are like zombie insects parasitized by some parasite wasp. Their program is run by Capital. With either side, Capital win: if the Dems are in power, Capital wins with mass immigration and factionalization of the populace via diversity laws. If the GOP wins, taxes on the rich drop and the welfare state is weakened so that Capital can more easily exploit the populace.

Run your programs, Bots, meat puppets. Do your thing. Or rather, Capital’s thing.

Willem of Occam September 20, 2013 at 11:19 am

Perhaps you’re just a racist and fascist.

Carl September 22, 2013 at 3:53 am

You sound like a 15 year old who has just read An Idiot’s Guide To Marxism.

dearieme September 18, 2013 at 8:02 am

Is there a doctrine that explains why Americans should expect to make more money than comparable workers abroad in perpetuity?

Hoosier September 18, 2013 at 8:12 am

Reality bites?

scineram September 18, 2013 at 8:46 am

Maybe “American Exceptionalism”?

Norman Pfyster September 18, 2013 at 8:56 am

Manifest Destiny.

Rahul September 18, 2013 at 10:25 am

Has real income stagnated only in America; or is this a more general western world phenomenon?

jacobus September 18, 2013 at 10:54 am

If I had to work in New York City, I would expect to make more money than if the company kept me in Dubuque.

Turkey Vulture September 18, 2013 at 11:22 am
tardiff September 18, 2013 at 11:33 am

Higher living expenses. NYC studio apartments cost $3K+. So the salaries need to keep up.

Joseph Ward September 18, 2013 at 11:45 am

I thought it was “American exceptionalism”

Ricardo September 18, 2013 at 11:48 am

Selection effect. Americans are self-selected for ambition. On average, ambition is positively correlated with productivity. On average, productivity is positively correlated with income.

Marian Kechlibar September 19, 2013 at 4:32 am

“Americans are self-selected for ambition.”

How so? Recent migrants maybe, but their children and grandchildren will reverse to the mean, if genetics has something to say about it.

Anonymous coward September 18, 2013 at 8:05 am

If the result holds even for partricular types of households whose composition has not changed much, then for the love of God put this fact in a sentence and say so! Why invite people to point out potential basic holes in your argument when there are in fact no holes to cover up?

Spencer September 18, 2013 at 10:15 am

Read what he wrote, starting here:

To pick one example, let’s look at white married-couple families – See more at: http://marginalrevolution.com/marginalrevolution/2013/09/does-changing-household-size-resurrect-american-economic-performance.html#comments

If this does not meet your request for a type of household that has not changed much please tell us why. If you really want to be picky go to white married-couple families with wife not working.
.

Anonymous coward September 18, 2013 at 1:33 pm

He did — in this post, now that the holes in the charts referenced in the previous one have been pointed out.

anti-Algerian Mormon September 18, 2013 at 9:05 am

There is a filthy multicultural Mormon Algerian posting up in these comments time to clean house!

Brian Donohue September 18, 2013 at 9:20 am

Russ comes off as more level-headed than you here. Yes, times have been tough. Yes, we’re are aware that is some respects we have been living through “The Great Stagnation” for 15 years or more. No one who is questioning what your data mean is disputing that.

As people have pointed out, there are many confounding factors – household size, how what has happened to health care is reflected, transfer payments, composition and quality of consumption basket, taxes.

More fundamentally, percentiles aren’t people. A longitudinal analysis would tell us what has happened to real flesh and blood people. Again, we know the story is not great, but “8.3% drop in median income” is, IMO, a highly misleading, if fun, headline, and you contribute to the spread of disinformation with this.

Russ: “Remember that the Census measures income, not earnings. I’m not sure what’s included but if you go to this earlier Census report you see that are about 5 million fewer people with any earnings in 2012 compared to 2007. I’d like to know what happened to the income or earnings of those two groups—the people who have earnings in both years.”

Here’s some data on earnings from Social Security:

http://www.ssa.gov/OACT/COLA/central.html

I’m not saying this is better, but it is different, and it provides some perspective on what’s going on. Between 1990 (first year) and 2011 real median compensation increased about 10%, a measly 0.5% per year. Over the most recent 5 years (2006-2011), real median compensation increased 3%, or about 0.6% per year. Crummy? Yeah. Set your hair on fire? Nope.

Contemplationist September 18, 2013 at 4:39 pm

I wonder what the effect of IQ/conscientiousness correlation would be here. If the growth in population has come from lower strata Mexican immigration, then it’s possible that Simpson’s Paradox is playing a role here. Every group could be better off but the aggregate could be down.

Brian Donohue September 18, 2013 at 9:28 am

Also, some great stuff from kekbo, as usual.

Jim Nazium September 18, 2013 at 9:29 am

So if we drill down to particular cells in the data – say, white, married single earner households – we find that their real income hasn’t changed much since the 1970s. Is that really a surprise? People with the same education, doing the same amount of work, have the same income?

Nate September 18, 2013 at 9:54 am

Except they aren’t doing the same work. Productivity has increased significantly since the 1970s.

j r September 18, 2013 at 10:10 am

Maybe they are doing the same work on more productive machines and all the gains have gone to the people who build, maintain and finance those machines.

asdf September 18, 2013 at 1:45 pm

The gains from increased capital efficiency have always been split between owners and workers, even when the workers didn’t do much more themselves. I doubt the truck driver “does more” then the horse and buggy driver, but he’s a lot richer. Are you proposing that he should go back to the standard of living he had in the 1700s since its the truck and not him that moves the goods so well?

Also, it seems to me that the people inventing, building, and maintaining this new efficient capital aren’t the ones getting really rich off it. STEM salaries have been stagnant too. So the explanation can’t just be related to brain power. Ultimately, its about market power. If you’ve got it you can get a great deal for yourself, if you don’t you have to take a shitty deal. This occurs regardless of the overall level of wealth. Overall wealth can skyrocket, but if you have no bargaining power with which to get your piece of the pie you go hungry.

j r September 18, 2013 at 3:00 pm

I’m not proposing anything other than an explanation.

derek September 18, 2013 at 6:20 pm

Have always? I don’t think so. So the automation and market changes in the weaving industry that left the northeast didn’t leave the workers there better off.

The productivity improvements that we are seeing right now has removed the necessity of having any but a few well trained folks involved, and the rest is stuff that hasn’t seen dramatic changes in productivity. Getting the stuff in and out of the automated factory requires truck drivers and train operators, occupations that are subject to speed limits and technological limits that have been constant for decades.

Also if you take the numbers where a manufacturing plant that three decades ago needed 10,000 workers, unionized and well paid. Now that same plant needs 1500, and the 8500 who aren’t working there are getting wages that are substantially lower in service industries. The 1500 still there have seen wage gains, but across the 10,000 there is at best stagnation if not in some circumstances decreases.

John Thacker September 18, 2013 at 10:01 am

People do keep bringing up 1989, because we’ve returned to that point. Of course, we all should know that the period from 1989 to 1999 actually had very good median income performance. From 2000 to 2007 it was close to treading water, and it’s really been 2007 until the present where it’s been terrible.

Spencer September 18, 2013 at 10:24 am

Income is partially a function of age as people mature they typically earn more with the peak around 50 years of age.

Because of this the baby boomer bulge moving through the labor force from the 1970s to the early 2000s should have added one to two percentage points to real income growth even if everything else was held constant.

So in a way the income stagnation bogy is not zero but 1% to 2%.

MIchael Stack September 18, 2013 at 10:26 am

“By the way, the average number of people in a household categorized as “living alone” has remained strictly constant at one.”

Hahahaha – my Dad tells jokes (“jokes”) like that.

BC September 18, 2013 at 11:16 am

Fine, so household size does not explain the discrepancy between the household stats and the individual stats; the difference is due to some other aspect of household composition. The fact remains that individual median income (people over 14-15) steadily increased from 1980 to sometime between 2000 and 2007. (2007 was the peak, but growth between 2000 and 2007 was fairly flat.)

If one fixes the income of every single American — i.e., fixes the impact of Great Stagnation, minimum-wage laws, unionization, deregulation, etc. on their economic well-being — and changes only the way Americans arrange themselves into households, then one will change the household income stats. Thus, to the extent that household income data tells a different story from individual data, those differences are attributable to household composition, if not size then something else.

It may be true that the improvement in individual income was concentrated among women or along some other dimension. But, that would still be a feature of individual income data, not household data. In any event, contra Ricardo, saying that the last 30 years were much better for women than for men is not at all much the same “underlying story” as household income has been stagnant.

mobile September 18, 2013 at 11:26 am

Did I miss the part where the proportion of family households to non-family households has remained constant?

mob_ile September 18, 2013 at 11:48 pm

Yeah, I did. But I think I found it.

JasonL September 18, 2013 at 11:34 am

I find the kebko argument compelling. Disaggregation seems a more useful way of looking at misleading medians. The duration of the decline in male work force participation he highlights was really surprising to me. I thought that was A New Thing.

Ricardo September 18, 2013 at 11:44 am

Quoting the other Ricardo:

“You can find this in Census Table F-7. You will note that white married-couple families where the wife does not work have experienced almost complete stagnation in real income. Real income among this group was slightly higher in the 1970s than it was in 2007 (the peak over the past 10 years).”

Table F-7 only goes back to 1993 (rows 89-109). From 1993 to 2012 the median increased by 8.7%. Not great, but not my definition of “almost complete stagnation” either. I don’t see any numbers from the 1970s in this spreadsheet.

Joseph Ward September 18, 2013 at 11:53 am

Responding to the slides that Tyler via Guy S. shared:
http://www.census.gov/newsroom/releases/pdf/20130917_ip_slides_with_plotpoints.pdf

Slides 17 and 18 (as marked in the lower right corner) are fascinating looks at how poverty in relationship to age has changed through the years. The poverty rate for those aged 65+ nose dived between 1965 and 1975. That has to be due to Medicare, right? That’s an amazing dive! Also, since Medicare started in 1965, both other age groups (18-64 and under 18) have gone up! Also in slide 18, its amazing to see how closely grouped the different categories of working aged adults were in the 1960′s and how far apart they’ve grown.

bob September 18, 2013 at 11:58 am

Non cash wages really are relevant for income participation. In my own household, we are fortunate enough to have jobs in industries where consulting happens, so one of us can choose to work for cash-only compensation, while the other gets benefits for everyone. The main components? Healthcare, 401k matches and holidays. The last two do not really create that much distortion, but healthcare is very big. Without consulting, the employer who has the best coverage just loses big, as he pays the premiums for everyone, while the other employer has lower participation and gets to keep the money. Some major employers, like Home Depot, go as far as to give you a different price for family coverage if your spouse is working or not, to provide an incentive to pick the other employer’s benefits instead.

Universal healthcare, or all individual care, would remove the distortion, and actually encourage married couples to get two jobs.

Thomas September 18, 2013 at 2:38 pm

Getting rid of the tax-favored treatment for health care would do the same.

Skip Intro September 18, 2013 at 3:26 pm

I’m glad the powers that be don’t delete or censor comments so everyone can see just what a vile creature you are.

Skip Intro September 19, 2013 at 10:52 am

Hypothesis falsified – looks like someone does delete comments after all.

Thomas September 18, 2013 at 12:06 pm

It’s absolutely true that persons per family household are roughly the same over time. And it’s the same for married couples as it is for female-headed households, no spouse present! It’s only the distribution of these households that’s changed, and of course that doesn’t matter at all, because it’s the same number.

I can bear the thought that incomes are stagnant over the near term. For the reasons given by Matthew Yglesias, I have a hard time following Ricardo to his position that white married families where the wife doesn’t work and children are present are worse off, in real terms, than they were not only in 1989, but in 1979.

Benny Lava September 19, 2013 at 8:26 am

Debt != income. You and Matt take notes

Thomas September 20, 2013 at 12:15 am

Consumption.

Z September 18, 2013 at 12:07 pm

How has the debt situation changed in the last four decades? Oh that’s right, it has exploded. Federal spending per person alone, in constant dollars, is triple what it was in the 70′s. States and municipalities have experienced similar growth. That money is not coming only from thin air. That borrowing is just another tax. That which comes from thin air is another tax that appears in purchasing power.

Before the creation of a massive, metastasizing welfare state real income was growing at a steady rate. After implementation of the welfare state, wages stagnated. We all know it is just an amazing coincidence and one cannot possibly have anything to do with the other, but it is interesting nonetheless.

mulp September 19, 2013 at 5:54 am

But the private debt has exploded even faster than public debt.

But hey, thanks to Reagan and his economists. debt is wonderful because you get to consume more than you can afford by a lot which makes you richer.

Before Reagan, private and public debt was like rolling in the mud with hogs – you did it only as long as you had to.

Afterward, you went into debt to become qualified for more and more debt so you could borrow exponentially.

Carl September 22, 2013 at 3:57 am

Yeah, as soon as Reagan and “his economists” took over I marched on down to the local bank and shot up on that sweet, sweet debt. Take that, Ronnie!

Ryan September 18, 2013 at 12:26 pm

Every blogger who embraces the conclusion that (aside from unemployment) households are worse off now than decades ago should be required to state whether they would, as Garrett Jones would say, get in the Delorean and move to 1975 or 1989 or whatever time period was supposedly as good as, or better than, the present. I spend 90% of my day consuming or using items that didn’t exist or were prohibitively expensive as recently as 10 years ago (and certainly 20 or 30 or 40 years ago). I saw Justin Wolfers on Twitter complaining about this income stagnation thing then, within hours, tweeting about how great it is that his computer can crunch datasets with 15 million observations in seconds. What would that have cost in 1989? Even if we were talking about longitudinal data–and we’re not–income time series would tell us little about consumer surplus over time, and ultimately that is how we should be thinking about welfare.

More precisely: is the consumption basket of the typical family in 1989, or whenever, more or less expensive now than it was then? Worse medical care, less safe and comfortable cars with shorter lifespans, 3 channels on (non-HD) antenna TV (instead of access to thousands of movies and films, on demand, for $8/month), long-distance calling rates (for those clunky phones, with no caller ID or call waiting, that are bolted to the wall in your house), and on and on. I have a $100 device that fits in my pocket, accesses the entirety of human knowledge, plays movies and music, and can video call my friends in New Zealand for free. Someone point me to evidence that more than a handful of the things we consumed in the 1980s cost more now than they did then in terms of labor hours; and keep in mind that, even if some things cost more, the fact that everything else is less is offsetting. How is it meaningful at all to compare median income over time and say that we’ve had lost decades (or generations)? This emperor has no clothes. The early retirement extreme people have shown pretty clearly that, if we want, we can live a lifestyle that would have been considered luxurious 30 years ago on a very low wage. Obviously there are nonlinearities at the very, very bottom of the US income distribution and for the unemployed, but anybody making the median income can live in absurd luxury in 2013.

Tyler, would you get in the Delorean? Would Neil Irwin or the other “wonks” who are bemoaning the secular trend in median income? I really doubt it.

asdf September 18, 2013 at 1:54 pm

In 1989 my Dad could afford a house in a safe neighborhood with a good school on a single income. He had health insurance that covered him when he got sick. He was able to go to college for a fraction of the real cost of today. And he did it all without debt.

Compare that to the last contract they signed right before my Dad retired. Most of them commute over an hour to get to the job (my parents could never afford their own house today). They lost their health insurance. There is no way any of them can afford college for their kids. Those that did manage to marry tend to have both parents working to make the same amount in total (no chocolate chip cookies waiting at home after school). And they tend to have a lot more debt to do it all.

Floccina September 18, 2013 at 4:01 pm

In 1989 my Dad could afford a house in a safe neighborhood with a good school on a single income.

Crime is down since 1989 so more people than in 1989 can afford to live in a safe neighborhood. School spending is up so if the schools are not as good it is due to the students. Also afford is a very slippery word.

asdf September 18, 2013 at 9:20 pm

Yes, crime is down from the height of the early 90s crack epidemic (and monstrously up from the 1960s despite this). Throwing millions of people in jail has nothing to do with that of course.

School costing more makes it less affordable…making my point for me.

JWatts September 18, 2013 at 4:43 pm

In 1989 my Dad could afford a house in a safe neighborhood with a good school on a single income.

According to the US Census, the Median house size in 1989 was 1,850 sf, by 2010 the median house had grown to 2,169. It appears as if housing has gotten more affordable in the last 20 years.

KLO September 18, 2013 at 6:02 pm

Two points:

1. What this refers to is newly built single family homes. It excludes existing homes (40% of US housing stock was built before 1970), multifamily dwellings and manufactured homes. Median dwelling size has not changed nearly as much as the size of newly built single family homes.

2. Median lot size for newly built homes has declined significantly in the last 20 years. This suggests shifting preferences rather than increased affluence.

Thomas September 18, 2013 at 7:05 pm

Average household and family size have declined for a long period of time. Homes built for family households of 4 or more before 1970 are quite often not occupied by similar households today.

Median lot size wouldn’t seem to be related to affluence, unless they’re making more land.

Finch September 19, 2013 at 9:34 am

> unless they’re making more land.

They effectively make more land when they make more roads. Fly low over the Boston area sometime. Despite appearing crowded at ground level, there’s huge amounts of undeveloped space.

asdf September 18, 2013 at 9:21 pm

Home is the same size. Land price went up.

nuffer September 18, 2013 at 5:43 pm

You make a valid point and the data seems to be there, especially for males generally. Without the rather steep increase in transfer payments of all sorts I think commenters here would be singing a different tune, but as it stands access to computers (smartphones) by the poor trumps all in the minds of the commentariat.

Steve Sailer September 18, 2013 at 8:31 pm

You know, Moore’s Law doesn’t exist due to the U. of Chicago economics department, so I can’t see why the continuing doubling in computer capabilities should be seen as validation of economic policies pushed by U. of C. economists.

Benny Lava September 19, 2013 at 8:37 am

If I had children I would definitely get in the Delorean. Between health care and education costs it is definitely worse today than 25 years ago. The only thing that is cheaper is entertainment. If that is your sole metric of progress you need to think a little harder.

Colin September 19, 2013 at 9:03 am

I wonder how you would feel if your child had a condition that was treatable now but much less so 25 years ago.

Finch September 19, 2013 at 9:35 am

How common is that?

JWatts September 19, 2013 at 11:39 am

So you would move your family to before median wages stagnated, so that they could get the full effect?

Benny Lava September 20, 2013 at 8:43 am

How is the effect diminished if they started today? Seems like the “full effect” is now.

Ryan September 19, 2013 at 11:47 am

I assume somebody has studied healthcare inflation, so we should go find the evidence. The common claim that healthcare costs have skyrocketed seems to rely on the fact that healthcare expenditures have gone up, but that says nothing about whether the healthcare bundle available in 1989 has gone up in price. You may have noticed that hospitals look a little bit different from how they did in 1989. I’m open to being persuaded that a constant basket of healthcare costs more now than it did then, but I haven’t seen the evidence. Again, substitution may be the dominant force driving expenditures in this area as in so many others, so we need to dig a bit deeper.

Benny Lava September 20, 2013 at 8:46 am

This was literally 2 seconds of googling and the very first link:
http://prescriptions.blogs.nytimes.com/2010/11/29/steep-rise-in-h-m-o-costs/?_r=0
This suggests to me that your question was mendacious and meant to be a red herring rather than a serious, thoughtful question.

Ryan September 20, 2013 at 11:25 am

Benny Lava–That link doesn’t answer the question. Tracking how much people pay for HMOs over time doesn’t tell us how much the cost of a 1989 basket of healthcare goods and services has changed over time. The basket of services you get by paying for an HMO is not constant over time. Your own article says, “Over the years, H.M.O.’s have changed from a health plan that sharply limited a patient’s choice to one that now offers much more generous coverage than other plans.” So it does not answer my question. It’s like comparing the cost of apples in 1989 to the cost of oranges in 2013. Either you did not read my comment carefully or your response was mendacious and meant to be a red herring rather than a serious, thoughtful response.

Once again: the fact that healthcare expenditures rise over time does not mean that people are worse off with respect to healthcare purchases. There are two ways this can be done:

1. Get a list of the goods and services people consumed in 1989, then track the prices of those goods and services (holding quality constant) over time until now. This would tell us the cost of a 1989 basket of goods in 2013.

2. Or, get a list of the goods and services people consume today, then track the prices of those goods and services (holding quality constant) backward in time to 1989. This would tell us the cost of a 2013 basket of goods in 1989. It might be impossible, since many of the procedures and products in healthcare markets weren’t available in 1989.

JeffT September 18, 2013 at 12:45 pm

I think the first two sentences help us see Tyler’s mistake. He’s pointing to average “family” household size and even tries to throw in living alone. It’s not the average size that is at issue (I’m mean clearly living alone is bound to 1, duh).

The problem is the percentage of people living in the different types of households that might be roughly classified as family, single parents, and living alone. The percentage of people living within single parent households and alone are up. This change is particularly pronounced in the lower quintile. This almost guarantees that median incomes are going to be down.

Jack Crassus September 18, 2013 at 12:49 pm

Income isn’t the only measure of well-being, it’s just the one that’s easiest to measure. The rise of the single-parent household in itself is a measure of declining well-being, even if household income stayed the same.

Richard A. September 18, 2013 at 12:54 pm

If one is concerned about what wage earners are doing, look at wages–not household income which is loaded with noise.

Floccina September 18, 2013 at 4:03 pm

+1

JWatts September 18, 2013 at 4:35 pm

+12, why are we getting confounding the problem by adding in extraneous factors.

John Mansfield September 18, 2013 at 2:16 pm

“If you focus solely on per capita income, you miss the fact that people may be marrying less and having fewer children as a consequence of the stagnation in male wages and the need many women feel to work longer hours.”

So, income is stagnant, but the need to spend has increased?

sam September 19, 2013 at 2:33 am

Umm yes. They keep making more fun sh1t e.g. smartphones and broadband.

Gordon Mohr September 18, 2013 at 9:15 pm

These 3.22/3.24/3.24 numbers seem to be *average* family household size. To really make the “changing size” rationalization “die hard”, shouldn’t someone, somewhere be reporting the size of that *median* household, the one whose top-line income number drives the headlines? (Or more precisely, the two nearest whole-number household-sizes, and their prevalence relative to each other and all households?)

Or even better: what exactly happened to 2-member family (and non-family) household incomes across the comparison periods? 3-member, 4-member? That’d be more revealing, and either put the “changing size” argument about income stagnation into the grave or give it new life.

Also: how many hours are households of each size choosing to work across the comparison periods? If households have stagnant — or even declining — incomes, but also much more voluntary leisure time, our “stagnation” might be only in reductionist financial measurements… but not intangible utils/hedons/fuzzies. (Plenty of what’s new since 1989 is addictive leisure that’s cheap enough for the unemployed: facebooking, netflixing, youtubing, videogaming, and my favorite, arguing with strangers online.) What if the great stagnation is actually the great satiation, because ephemeralization has made most people fat, happy, and sluggish using less measured-output than ever before?

P A September 19, 2013 at 11:21 pm

+1

http://joyworld.ws/blogs/viewstory/28983 October 17, 2013 at 8:59 am

Does changing household size resurrect American economic performance?

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