Chris Naron appears to have read a book:
I noticed you mentioned the fall in real wages again today, and it reminded me of a question I wanted to ask you. Are you familiar with Michael Cox and Rishard Alm’s book Myths of Rich and Poor? Thinking I was ordering something new after reading Thomas Sowell’s article a few weeks ago, I found instead that I had been suckered into a book published in 1999. Oh well.
It is interesting however that here’s a book that attempts to counter exactly what you are saying about the fall in real wages by deconstructing the statistics and reassembling them. Normally, I would take it with a grain of salt–it’s just another partisan GOP attempt to talk up the economy to make “Dear Leader” look good. But this book was written at the height of Clintonian prosperity and by a libertarian (I only assume that given the author’s association with the Cato institute).
At any rate, I would like to get your opinion on their work because much of it reinforces my own intuition about the insufficiency of the real wage stat. To use one of the examples from the book, which would you rather be, a billionaire in 1890 or an average American in 1990? Consider the things you cannot have at any price in 1890 before you choose. (Someone without his Treo…forever…)
They’re confusing the march of technology with real wages. Forget Treos and Macintoshes, how much food can you buy? How much gold? This is just the same sleight of hand that people use to try to claim that there isn’t any inflation either.
Think about it. The number of workers more than doubles. The amount of consumption increases by significantly less than double. I’m assuming that you understand enough of the law of supply and demand that you can figure out what happens to the price. There’s no need to delve into the statistics to prove the concept theoretically, as it happens, the statistics – however nebulous government statistics are – support exactly what theory would predict.
I have no doubt in my mind that you’re right about real wages falling because of women in the work force. But I don’t get your point about buying food. It’s easier to get food now than ever before as evidenced by the fact that poor people tend to be fat. And how does the march of technology not affect standard of living? Is it slight of hand when the truth is that we’re far better off materially now than during the period when real wages were increasing?
The evidence is flawed, given that it doesn’t account for people choosing to eat differently. If the affordability of food was the sole fat factor, then the rich would be fatter than the poor. This isn’t the case, therefore the point doesn’t hold up. Furthermore, the fact that the state and federal governments subsidize the poor’s purchase of their food doesn’t actually make it cheaper. For example, chocolate in the form of a Hershey bar cost 12.3 cents for 1.55 ounces in 1973. The same 1.55 ounces cost 80 cents in 2003. So, you can see, when there’s no technological change to disguise things, the cost of food rose 650 percent while the wage rate fell 16.3 percent.
Did the quality of Hershey’schocolate really improve so much in those thirty years? Is it faster and more efficient? Does it taste 6.5 times better? How would Cox and Alm attempt to explain away that example?
Standard of living and real wages are two entirely separate things. A Turkish harem girl in 1650 had a higher standard of living than a Welsh miner in 1880, but the miner’s wage rate was infinitely higher since the harem girl wasn’t paid for her services. Our standard of living is surely higher than in 1973, but that is based on our advanced technology, not an increase in wages or personal wealth. Suppose, for example, that cheap nuclear fusion is discovered and the government is sudennly able to provide every individual in the country with free pizza, a super-comfortable condo on the beach, flexible robot sex slaves and a 10-foot plasma screen with free video games and movies on demand. Even better, the individual doesn’t have to lift a finger to work for a single day in his life.
Has the individual’s standard of living increased or decreased from today’s norm? And has his wage rate risen or fallen?