The Question
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Transcript of The Question
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The Question
Has ‘more economic freedom’ helped Americans since the mid-1970s? Or,asked only somewhat differently…
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… was this man a menace to the middle-class?
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• inflation-adjusted, before-tax, money income for the median American household has stagnated since the mid-70s. (Today only about 18% higher.)
• Inflation-adjusted hourly money wages for the median, non-supervisory worker has hardly budged.
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Real Household Income
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In 2012 dollars,average hourly earnings fornon-supervisory workers in1975 were $4.73. In 2012dollars that’s $19.70.
Today, they’re $20.42 – higherby a mere 3.6 percent
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Great Stagnation?
“Median [family] income is the single best measure of how much we are producing new ideas that benefit most of the American population. Yet the picture is depressing.” - Tyler Cowen, The Great Stagnation (2011) p. 14
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Almost all the benefits of economic growth since [the 1970s] have gone to a small number of people at the very top.
—Robert Reich, Financial Times, Jan. 29, 2008
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So is this narrative correct?
Are the policies advocated by Milton Friedman really a menace to the middle-class?
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We could talk about howonly a few of Friedman’spolicy suggestions havebeen put in place….
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… or we could talk about how measures of inflation inadequately account for changes in product quality….
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… or we could talk about how, since the mid-1970s, the per-person size of the median household has fallen by 11 percent…
… or about how much more compensation today is paid in the form of non-wage – or, “fringe” – benefits…
… or about how what happens to a statistical measure, such as an ‘average’ or a ‘median,’ does not necessarily tell us what happens to the individuals whose actions make up the data.
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Average Household Size: Down 24% in 50 Years
1960 3.4 persons1970 3.21976 2.861980 2.81990 2.72000 2.72006 2.562010 2.57
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Per-Household-Person IncomeIn 1976 the average household was2.86 persons, then it fell 10.5 percentby 2006 (to 2.56 persons).
Per-household-person income,therefore, rose not by18% but by 32%.
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Different Respected Ways to Calculate Inflation
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But let’s not.
Let’s look atliving standard fromanother angle…
Purchasing power.
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7.7 hours
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2012
40 minutes
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6.3hours
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2 hours
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1.5 hours
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1 hour
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75 minutes
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50 minutes
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7 hours
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4.4 hours
(So, 11.4hours total)
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5.5 hoursAnd it’s gotwheels!
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9 hours
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4.9 hours
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15.8 hours
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5.4 hours
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13 minutes
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3.8 minutes
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12.6hours
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30minutes
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57hrs.
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52hrs.
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73.4hours
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1 hour, 52 minutes
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44 hours
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11 hours
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8.6 hours
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4.0 hours
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40.2hours
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13.1hours
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93hours
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4 hours
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48.6 hours
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12.2 hours
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2.9 hours
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1.5 minutes
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26.4 hours
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3.9 hours
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12.7 hours
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3.9 hours
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158.6 hours
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17.1 hours
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One final set of data….
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1975
2009
<$15K $15K-25K $25K-35K $35K-50K $50K-75K $75K-100K >$100K
15.8%
13.0% 11.9 11.1 14.1 18.1 11.5 20.1
13.0 12.3 17.3 22.3 11.0 8.4
-2.8 -1.1 -1.2 -3.2 -4.2 +0.5 +11.7
Percent of U.S. Households Earning Incomes inThese Ranges, Constant (2009) dollars