Does immigration account for relatively stagnant median income?

by  Tyler Cowen in

It's a common claim that increasing immigration accounts for the slowdown in U.S. median income growth.  No, I don't mean the claim that immigrants lower wages.  Even according to George Borjas, that effect isn't large enough to much budge the median and most of it is concentrated on workers without a high school degree.  Rather I am referring to the mere addition of immigrants to the rolls, which itself shifts the median of the distribution.

I don't see that the immigration effect explains much of the data.

1. Look at Dew-Becker and Gordon, p.62.  They consider panel data for hourly compensation, and they still find a stagnant median.  Also see p.78, where they summarize their results that the stagnation extends upward through the 90th percentile of the income distribution.  The U.S. didn't come close to taking in enough immigrants to produce that result.

2. Look at Lane Kenworthy's figures, p.41.  Median income growth for the category "White, non-Hispanic" is only barely better than for the general population.

3. This paper measures the effect of immigration on the Gini coefficient and finds that a given year's worth of immigration has a peak effect on the Gini at four years' time and the effect disappears altogether within six years' time.

4. Researchers who work in this field are well aware of the phenomenon of immigration and generally they do not use it to dismiss the issue of declining median income growth.

I've heard from one reader that the eBook is now available in France, from another that it is in Australia, but Canada will take a little more time.

*Euphemania: Our Love Affair with Euphemisms*

by  Tyler Cowen in

The author is Ralph Keyes and you can buy it here.  Here are three excerpts:

Yesterday's polite euphemism is tomorrow's prissy evasion.  "Cherry" was once considered more respectable than "hymen."  Now, just the opposite is true.  The former is thought to be vulgar, the latter decent.

And:

When the unfortunately named rapeseed oil had trouble competing with products that had nicer names, a Canadian strain low in saturated fat was dubbed Canola (i.e., "Canadian oil") in 1978 and has done rather well since.

And:

It used to be said that "Horses sweat, men perspire, and ladies glow."

Most of all, this book was…interesting.

The elasticity of trust in the Middle East

by  Tyler Cowen in

From a new experimental paper, by Iris Bohnet, Benedikt Hermann, Mohamad Al-Ississ, Andrea Robbett (she is speaking at GMU today), Khalid Al-Yahi, and Richard Zeckauser, here is one bit from the conclusion:

Mechanisms aimed at mitigating the cost of betrayal, such as damages or insurance provision, seem to work better in the United States, and arrangements focusing on preventing the occurrence of betrayal, such as a punishment threat, have greater impact in the Arab Middle East. In our experiments, trust was promoted by decreasing the cost of betrayal in the United States but not in Jordan. Punishment functioned differently. Giving the first mover the option to take revenge at a price should she be betrayed enhanced trust in Saudi Arabia but not in the United States.

Assorted links

by  Tyler Cowen in

1. Google finds it hard to reinvent philanthropy.

2. WSJ coverage of The Great Stagnation; "…in terms of framing the dialogue Tyler Cowen may very well turn out to be this decade’s Thomas Friedman."

3. Can schools teach meta-cognition?

4. Could some British real marginal rates of taxation rise to 70-83 percent?

5. Via Tim Harford, analysis of proposed NHS reforms, and sources for following Egypt.

6. Will high-speed rail worsen traffic in China?

7. Ezra Klein reviews TGS.  And here is Karl Smith.

World Income Inequality

by  Alex Tabarrok in

Here, courtesy of Catherine Rampell of Economix, is a remarkable chart from Branko Milanovic's book The Haves and Have Nots. Along the horizontal axis are within-country income percentiles running from the bottom 5% (1st ventile) to the top 5% (20th ventile). Along the vertical axis are world income percentiles.

Economix-28milanovic-custom1
The graph shows that the bottom 5% of Brazilians are among the poorest people in the world but the top 5% are among the richest. Thus the vertical range of the curve tells us about within-country inequality.

Comparing between countries we see that the poorest 5% of Americans are among the richest people in the world (richer than nearly 70% of other people in the world). The poorest 5% of Americans, for example, are richer than the richest 5% of Indians.

The Kitchen Test

by  Tyler Cowen in

Here is Paul Krugman, noting that innovations for the kitchen have slowed down.  He cites this earlier, mid-90s piece of his on kitchens, which I would have cited had I known about it.  His conclusion:

By any reasonable standard, the change in how America lived between 1918 and 1957 was immensely greater than the change between 1957 and the present.

As Krugman did in the mid-1990s, I now cook in a 1950s kitchen and it suits me fine.  I use the microwave reluctantly and when I first met Natasha, eight years ago, she and Yana thought it noteworthy that I did not know how to use the device at all.  I do not see that my cooking stands at a disadvantage.

Alexander J. Field has a long and very good piece on the evolution of kitchen technology.  He concludes:

Aside from the automatic dishwasher in the 1930s (which achieved significant penetration only beginning in the 1960s), the garbage disposer (introduced in the 1950s, but low penetration until the late 1960s) and the microwave oven in the 1970s, there have been no truly revolutionary kitchen appliances in the last eight decades.

Field makes good fun of the electric can opener and the electric carving knife.

Here is a related Krugman post on the 19th century.

Demand Media, a content mill

by  Tyler Cowen in

Via The Browser, this was an excellent article on one of the companies which manufactures superficial web content to draw interest from Google searches.  Three bits:

On Jan. 25, Demand Media sold 8.9 million shares at $17 each in an initial public offering. The following day, the price rose 35 percent to $22.61, which would give the company a market capitalization of $1.9 billion, greater than New York Times Co.'s (NYT) value of $1.5 billion.

And:

Many analysts now say the best way to gauge a Web company's financial hardiness is to look not at page views or monthly unique visitors but at how much money it can generate from each user. Matthew Shanahan, senior vice-president of strategy for Web consulting firm Scout Analytics, says thriving digital ventures typically have a high ARPU (average revenue per user). Amazon.com (AMZN), for instance, makes on average $189 per unique user. Google (GOOG) takes in around $24. Web publishers, Shanahan says, tend to become reliably profitable at about $10 a user. Demand's average revenue per user currently hovers around $1.60.

And:

Last year, Demand Media executives told Wired magazine that the mechanized assignments generate 4.9 times more revenue than ideas generated by humans.

The company employs 13,000 freelancers.

China “tiger mother” fact of the day?

by  Tyler Cowen in

Under a proposal submitted last Monday by the Civil Affairs Ministry to China’s State Council, adult children would be required by law to regularly visit their elderly parents. If they do not, parents can sue them.

“Before, the courts did not accept this kind of lawsuit,” Wu Ming, a deputy inspector for the ministry, told The Legal Evening News this month. “But from now on, they will have to open up a case.”

It is not obvious that the proposal is going to pass:

“The national delegates are rational enough,” Mr. Jing said.

China, by the way, has the world's third highest elderly suicide rate.  The article is interesting throughout.

Assorted links

by  Tyler Cowen in

1. The most exclusive university in the world?

2. Dating site for sea captains, and the site itself is here (possibly sketchy, one reader tells me).  The captains are here.  Lots of beards, and some strange requests.

3. The bestselling books in France, 2010.

4. Caplan and Wilkinson and the Libertarian challenge.

5. Why grain prices are high for Tunisians.

6. Indie rock and African music.

7. The problem with memoirs.

Median-itis and The Great Stagnation

by  Tyler Cowen in

Here is my NYT column from today, on themes relevant to The Great Stagnation.  I won't rehash this entire discussion, but I would like to focus on this one column excerpt:

From 1947 to 1973 – a period of just 26 years – inflation-adjusted median income in the United States more than doubled. But in the 31 years from 1973 to 2004, it rose only 22 percent. And, over the last decade, it actually declined.

I am noticing that some reviews or commentaries (and here) are citing per capita income growth as a response to my argument.  It is true that per capita income grows at a slower rate post-1973, but my argument is about the slowing down of median income growth and that is a much stronger shift.  The productivity data also tell a glum story.   

CPI bias can change those numbers in absolute terms (see comments from Russ Roberts), but it also changes the pre-1973 median income growth numbers and arguably more so.  The gap remains and TGS refers to the living standard for the average person or household in the United States, not the total amount of innovation, which remains quite high.  They're just not innovations with the same trickle-down or broad-based effects as in an earlier era.

Kindle eBooks are themselves a good example.  It's a real improvement for a lot of us — especially travelers – but even the median reader, much less the median American, doesn't have a Kindle or buy eBooks.  As I argued in The Age of the Infovore, the big gains of late have gone to the extreme information-processors.  

I've seen in the MR comments (and elsewhere) a lot of anecdotal comparison of recent gains vs. earlier gains in technology.  Don't we now have this, don't we now have that, and so on.  Of course.  Median incomes have risen somewhat.  But, when it comes to the average household, the published numbers for median income are adding up and trying to measure those gains and it turns out their recent rate of growth really has declined.  Most serious researchers who work in this area use and accept these numbers as the best available (though they do not in general advocate my causal interpretation; see for instance Mark Thoma or Jacob Hacker).  

If the numbers for median income growth are low we ought to take that seriously, as does Scott Sumner.  We are not cheerleaders per se (BC: "I'm baffled why Tyler would focus on slight declines in American growth when the world just had the best decade ever."  Is it then wrong to focus on any other problems at all?  I also was one of the first people to make the "best decade ever" argument, which I still accept.)  Medians also matter for the political climate, even though the median earner is not exactly the median voter.  Adam Smith's welfare economics was basically that of the median, a point which David Levy has made repeatedly.

I'm also being called a "pessimist" a lot.  Yet in my view our current technological plateau won't last forever.  That's probably more optimistic than the Hacker-Pierson approach, which requires a Progressive revolution in economic policy (unlikely), although it is not more optimistic than denying the relevance of the numbers.

I'll soon blog some remarks on changing household size as another attempt to avoid confronting the facts about slow median income growth.