Kenneth Thomas of Angry Bear thinks I made an error when I said that things got better for the middle class in the last two decades of the 20th century:
Noah Smith put up a post Sunday purporting to show that things aren’t so bad for the middle class. Then he immediately shows us a chart of median household income. Stop right there. As I have argued before, this is always going to give you a rosier picture than reality. We need to look at individual data, aggregated weekly (because average hours per week have fallen for non-supervisory workers), to know what’s going on.
Because the individual real weekly wage is still below 1972 levels, households have had to compensate by having more incomes and going into debt. They have traded time and debt for current consumption. This is not an improvement in the middle class lifestyle. Commenter Richard Serlin points out that we also need to consider risk as well as average incomes, and he is right. The middle class is less secure than it was in 1972.Well, here's what I have to say to that.
I don't understand the idea that "households have had to" compensate for lower weekly wages (also the choice of weekly over hourly wages continues to mystify me, since long workweeks suck, but OK).
What does "have had to" mean?? They did not have to. They chose to.
If I can choose how much I work, and my wage stays the same, and I work more and my income rises, then I must be better off. Because if I was not better off, then I wouldn't have chosen to work more and earn more income.
So, median real wages in America stayed roughly flat in America in 1980-2000, and people worked more - actually, what happened is that many women stopped being housewives and began working. The obvious conclusion would seem to be that if this choice represented a deterioration in the standard of living, people would not have chosen to do it. In other words, if you can still afford to buy your old bundle back, revealed preference says you like your new bundle more.
Now, of course, there are some counterarguments you could make as to why what looks like a choice was not a choice:
1. The extensive margin - the requirement that women choose between 0 and 40-hour work weeks, with nothing in between - caused an overshoot, where women (and some men) were working more than they'd like, because it was less bad than working less than they'd like.
2. Social preferences - the need to "keep up with the Joneses" - dominate normal preferences, and everyone was running harder just to keep their place in the line.
Neither of these would be persuasive to me, because as regards (1), it seems likely that there is enough leisure/home-production preference heterogeneity that this isn't going to make a huge difference, and as regards (2), who cares, I don't want to make national policy to help people keep up with the Joneses.
But back to the main argument...
Kenneth Thomas is basically saying that the mass entry of American women into the workplace in 1980-2000 represents a real deterioration in the living standards of the average American, despite the fact that it boosted household incomes substantially.
Why did women stampede into the workforce in 1980-2000?
Possibility 1: The decline of discrimination and/or traditional values allowed them to.
Possibility 2: Advances in home production allowed them to.
Possibility 3: Improvements in consumption technology ("toys", as Brad DeLong puts it) motivated women to go earn more money.
Possibility 4: A shift in tastes away from leisure and/or home-produced goods caused them to.
Possibility 5: A global-game-theoretic equilibrium of "keeping up with the Joneses" emerged in which women all went to work because other women did.
Possibility 6: Something, somewhere has been seriously mismeasured.
To me, Possibilities 1-3 sound like good things, real unambiguous improvements. Possibility 4 sounds either good or neutral, but also mysterious and unlikely. Possibility 5 sounds bad (but if that's really what's going on, why are we talking about absolute measures of income in the first place), and Possibility 6 means this whole discussion is a waste.
So I conclude that the mass entry of women into the workforce in 1980-2000, which raised the income of the middle class, was almost certainly a good thing.
Would it have been better if real median hourly wages had risen, even without taking composition effects and technological improvements into consideration? Hell yes, it would have been.
That doesn't mean 1980-2000 was a crappy time for the American middle class.
You should see Elizabeth Warren's work on the collapse of the middle class.
ReplyDeletehttps://www.youtube.com/watch?v=akVL7QY0S8A
http://harvardmagazine.com/2006/01/the-middle-class-on-the-html
"Today the median income for a fully employed male is $41,670 per year (all numbers are inflation-adjusted to 2004 dollars)—nearly $800 less than his counterpart of a generation ago. The only real increase in wages for a family has come from the second paycheck earned by a working mother. With both adults in the workforce full-time, the family’s combined income is $73,770—a whopping 75 percent higher than the median household income in the early 1970s. But the gain in income has an overlooked side effect: family risk has risen as well. Today’s families have budgeted to the limits of their new two-paycheck status. As a result, they have lost the parachute they once had in times of financial setback—a back-up earner (usually Mom) who could go into the workforce if the primary earner got laid off or fell sick. This “added-worker effect” could buttress the safety net offered by unemployment insurance or disability insurance to help families weather bad times. But today, a disruption to family fortunes can no longer be made up with extra income from an otherwise-stay-at-home partner.
Income risk has shifted in other ways as well. Incomes are less dependable today. Layoffs, outsourcing, and other workplace changes have trebled the odds of a significant interruption in a single generation. The shift from one income to two doubled the risks again, as both Mom and Dad face the possibility of unemployment. Of course, with two people in the workforce, the odds of income dropping to zero are lessened. But for families where every penny of both paychecks is already fully committed to mortgage, health insurance, and other payments, the loss of either paycheck can unleash a financial tailspin. ...
"Why are so many moms in the workforce? Surely, some are lured by a great job, but millions more need a paycheck, plain and simple.
It would be convenient to blame the families and say that it is their lust for stuff that has gotten them into this mess...But is this argument true? If families really are blowing their paychecks on designer clothes and restaurant meals, then the household expenditure data should show them spending more on these frivolous items than ever before. But the numbers don’t back up the claim. ...
So where did their money go? It went to the basics. The real increases in family spending are for the items that make a family middle class and keep them safe (housing, health insurance), that educate their children (pre-school and college), and that let them earn a living (transportation, childcare, and taxes). ...
Combine changes in family income and expenses, and the biggest change of all becomes evident—on the risk front. In the early 1970s, if any calamity came along, the family devoted nearly half its income to discretionary spending....But the position today is very different. Fully 75 percent of family income is earmarked for recurrent monthly expenses. Even if they are able to trim around the edges, families are faced with a sobering truth: every one of those expensive items—mortgage, car payments, insurance, childcare—is a fixed cost. ...In other words, today’s family has no margin for error. There is no leeway to cut back if one earner’s hours are cut or if the other gets sick. There is no room in the budget if someone needs to take off work to care for a sick child or an elderly parent. Their basic situation is far riskier than that of their parents a generation earlier. The modern American family is walking a high wire without a net."
But some of this risk seems mostly insurable. Those median numbers include people who get hit with unemployment or medical bills etc. I don't think you can easily insure medical risk, but I do think you can easily insure against unemployment.
DeleteNot that people have bothered to do that, but they could...
How can I easily insure against unemployment? Can I buy such insurance now, or is this some idea for a policy you have?
DeleteSave a little money. Most unemployment spells are short.
DeleteAvg. duration of unemployment, until the Great Recession, never went above 20 weeks. Unemployment benefits are usually around 26 weeks. Save 12 weeks of income on top of that and you'll be fine, unless you're REALLY unlucky.
DeleteMaybe instead of chiding the plebes about how they're under-saving for their inevitable unemployment spells, one should instead wonder why they don't and what that says about their welfare?
Delete> Avg. duration of unemployment, until the Great Recession, never went above 20 weeks. Unemployment benefits are usually around 26 weeks.
DeleteSo, in an environment when your income is already stretched (largely on basics, as mentioned), you should prepare for the historical conditions that existed BEFORE the conditions that exist now? You're usually better than that.
Average duration of unemployment is an invalid measure of the risk from unemployment for the same reason that average lifespan (especially before modern medicine and sanitation, which is the situation in economics IMHO) is a poor measure of the "risk" of remaining alive at a given age: the average is skewed by the inclusion of a lot of atypical short durations. In population those are infant deaths; in employment it's a lot of very short periods of unemployment. If one imagines a snapshot of the unemployed at a given instant, the great majority face more, and often much more, than twenty weeks.
DeleteMoreover, saving twelve weeks of income is very hard for most. One part of Warren's (superb) presentation not quoted is that the most common reason for heavy mortage commitments is the desire to live in a good school district.
Sure, at any given time, a disproportionately large # of the unemployed are the long-term unemployed, just like you spend a disproportionately long time being passed by other cars in a traffic jam, no matter which lane you're in. Think about the statistics.
DeleteI appreciate this post, but it feels like you're just trolling at this point. What's the point of trying to compare 1980 to today? I always took the subtext of Kenneth Thomas et al to be that the decline of the middle class is relative to where it *could* have been. Economists tend to argue that efforts to move income from rich to poor will slow overall growth. But if overall growth at the bottom is backwards anyway, then why not give it a go? Now, maybe I'm putting words in his mouth, and he's just trolling too, but that's what I understand the debate to be about.
ReplyDeleteLook, no one's really suggesting we can or should go back to 1980. Lefties arguing for middle class decline aren't pushing for women to get back to the home. People are arguing that we should tax rich people and give the money to the poor and to public services, right? Why don't we argue about that, instead of debating endlessly whether the glass is half full or empty.
I always took the subtext of Kenneth Thomas et al to be that the decline of the middle class is relative to where it *could* have been. Economists tend to argue that efforts to move income from rich to poor will slow overall growth. But if overall growth at the bottom is backwards anyway, then why not give it a go?
DeleteDear Anonymous, we're talking about pretax income. If you use taxes and transfers to redistribute income, it's not going to change these numbers (actually it will make pretax inequality increase a tad).
I always figured enough transfers would be "pretax". You know, taxes fund a construction project which pays above market wages, stronger union presence to bid up wages. Pretax still includes wages of government employees and contractors, correct? But maybe you're right and the glass is simply 51% full. Like I said, appreciate the post.
DeleteStronger union presence might bid up wages, but how do you get a stronger union presence? Yeah, you can have the government directly employ more people, sure.
DeleteHi Noah,
DeleteI'm not sure I'd agree the picture looks the same after taking into account after tax income and transfer payments given the research recently published by the CBO: http://www.cbo.gov/publication/44604
Naturally, I'm open to your thoughts if you see it diffrently.
Doesn't Figure 9 in that report basically tell the same story I'm telling?
DeleteWhat if you can't choose how much you work? You want 40 hours, but the employer offers 25 take it or leave it. The hours aren't even 3 8-hour days. They are 3 hours in the evening M-F and 5 hours Sat and Sunday. You have to look for another job or two to make ends meet and you qualify for no benefits. You are definitely worse off even if you earn more.
ReplyDeleteWell, you probably aren't the median. You should save that extra income, quit, and find something better.
DeleteWith 2 workers we're talking about a household with each earner at $12.50 an hour - not a great wage. This especially holds if the risk of losing the job is great and you earn no benefits. Some of these jobs force you to work as an independent contractor so you pay all the payroll taxes too.
DeleteBy hypothesis, you don't have a better alternative. Finding something better isn't an option.
And the extra income may go to medical bills and insurance, so no savings for you.
Delete"You should save that extra income, quit, and find something better."
DeleteYou *are* trolling.
Noah, your post is rather disingenuous. Yes, all else being equal, women's decision to enter the workforce was likely a good thing. But Kenneth's point is that when people hear the statement "median household income increased greatly," their assumption is that this is because wages increased greatly. If the gain is simply because households have more employed members, the benefit is far smaller than if wages had increased. Your claim isn't (necessarily) false that things have improved for the average household, but using rising household income as supporting evidence without elaborate qualifications of how the data can be interpreted is highly misleading.
ReplyDeleteYou know, that's not necessarily true. We don't know if the benefit was far smaller. Depending on the reason, the benefit could be much bigger!
DeleteFor example, suppose washing machines and dishwashers and dryers and microwaves freed women from having to do many hours of housework, thus allowing them to get jobs, which they enjoyed more and which also allowed them to earn much more money. If that's what happened, the benefit was actually *bigger* than if wages had increased.
I believe the gist of the argument is that before you had one person working for market wage and another person working in non-market home production. If you keep this setup and market real wage increases it is undoubtedly better.
DeleteOn the other hand if you replace house production with market production you have to estimate how large the household production was before and then subtract it from the market wage of new earner to see the change in utility.
But to add sometimes this effect goes the other way in terms of poverty. For instance I am always suspicious of reports of absolute poverty defined as income of less than 1 dollar a day. Surely in such a poor countries there is a lot of household production of food, shelter and services. Which means that poverty in terms of consumption (including consumption of non-market goods) will not be the same as if there is somebody living in New York, working 8 hours a week and earning just $30 a month.
As others have pointed, "decline of the middle class" comparison are often made based off of where it "should" be, if the trend in across-the-board income increases had continued. If virtually nobody was seeing income increases, it would be bad - but it wouldn't draw the ire that the situation does now. What does draw the anger is the sense that a massive increase in top-level income gains has come at the expense of broader income gains in the economy (this is where the EPI folks usually drag out their chart comparing productivity vs wages).
ReplyDeleteMoreover, you can't really dismiss the "Joneses" issue. That's how people determine their living standards - they compare it to their parents, their neighbors, what society "tells them" is the Good Life, and what people richer than them are making. Mom and Dad may have been living in a 900 square foot house with 1 car and 1 television, but they were also well-off in American terms - and had relatively stable work, room for savings, health insurance, and retirement help.
But now? It's a lot harder. The standard for the "good life" has gone up, and the massive income segregation in American neighborhoods (with correspondingly segregated access to good public schools and facilities) has exacerbated this even further by making it very clear whether you're "in or out". A lot of jobs are less stable, although overall job satisfaction still seems to be high. You don't have much savings after trying to achieve the "good life" - instead, you have to go into debt.
On Angry Bear's point about deceptive median income figures, I'd also add that using median figures tends to mask trends that happened in the lower parts of the income spectrum. The median income could stay the same even if the bottom half had precipitous declines in income and job stability. That's why you need to use quintiles/quartiles data - a pity it's harder to find.
What does draw the anger is the sense that a massive increase in top-level income gains has come at the expense of broader income gains in the economy
DeleteBecause if I don't have as much money as I wanted/expected, it must be because some other person took it from me!
I realize many people do think like this, but...
Moreover, you can't really dismiss the "Joneses" issue. That's how people determine their living standards - they compare it to their parents, their neighbors, what society "tells them" is the Good Life, and what people richer than them are making.
Then if median income falls but becomes more uniform throughout communities or friend-groups or families or whatever, we shouldn't care?
Look, I realize inequality is bad, all else equal, but DeLong started this all by talking about absolute income/wealth levels, not relative.
The standard for the "good life" has gone up
I always wonder who determines this standard. MTV? Maybe my humble lifestyle is due to the fact that I don't watch TV.
On Angry Bear's point about deceptive median income figures, I'd also add that using median figures tends to mask trends that happened in the lower parts of the income spectrum. The median income could stay the same even if the bottom half had precipitous declines in income and job stability. That's why you need to use quintiles/quartiles data - a pity it's harder to find.
This is true! The real picture of what's going on is VERY complicated and multifaceted.
"What does draw the anger is the sense that a massive increase in top-level income gains has come at the expense of broader income gains in the economy
DeleteBecause if I don't have as much money as I wanted/expected, it must be because some other person took it from me!
I realize many people do think like this, but..."
But what ? But , you're too smart to think that way , because it isn't true ?
The problem is , it is true. We know that , if anything , US-style inequality is bad for economic growth. There's certainly no good evidence that we've grown faster as we've become more unequal. Let's give the benefit of the doubt to your handlers , and assume that growing inequality has no impact on growth. Now , start with two identical economies , both with levels of inequality that we had in the US in 1980. Economy A grows at the same rate as economy B over the next 30 years , except in economy A all income classes , top to bottom , realize the same growth rate , consistent with the overall economic growth. Economy B grows the way the US has actually grown , with the top 1% income share going from < 10% to > 20%.
If the 99% in economy B didn't look at the outcomes in economy A and realize that they got the shitty end of the stick , I guess you could say they deserved it , because they must be pretty dumb.
Or pretty brainwashed , from reading too much Noah.
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DeleteBecause if I don't have as much money as I wanted/expected, it must be because some other person took it from me!
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Trickle down says: vote for policies that make corporations more profitable, since that will lead to increasing affluence for the employees.
Reality says: Apple is the most propfitable company in the history of the world, yet they conspired to constrain wage growth for its employees.
So Apple did, in fact, conspire to take money from their employees.
http://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_Litigation
"and as regards (2), who cares, I don't want to make national policy to help people keep up with the Joneses."
ReplyDeleteThis is glib, and you may not like people caring about relative position, but if you care about national welfare, about happiness, you should take it very seriously. It's a huge factor in people's utility and decision making. The evidence? Robert Frank has several books on this you can see. There is just so much that is so improbable to explain without people caring very much about relative position and prestige. Positional externalities are enormous.
As I've said, I had a post on household income statistics over time:
http://richardhserlin.blogspot.com/2014/02/important-points-that-are-rarely-made_2.html
Here's are some points from it you don't discuss:
– "So much less of the income of families' is available. First, a far bigger portion of it must be spent on education – and this is really largely a cost of business, a production input, not income. Families a generation ago used to be able to consume this money. Today, often $15,000/year or more is going to pre-school or day care for the kids that wasn't in 1974. And then there's all of the educational products and assistance, and I won't even get into the skyrocketed college costs, where college wasn't at all the necessity it is today."
– You do mention the loss of the value of what a full-time homemaker provides (which is huge! the child care, the home cooking, cleaning,…), but also, "transportation and other business costs are much higher to support two working spouses".
The number of earners per household has been in long term decline, despite colloquial accounts assuming the opposite. One reason is the huge number of families headed by single mothers and unmarried people in general. Women used to need the income of a man. The empowerment of women, counterintuitively led to the creation of many more low income households. Yet these are households that have more value to their members.
ReplyDeleteThe response that these households and their potential mates are so economically stressed that they fall into suboptimal household formations doesn't hold water. Especially considering that poverty within each household type has declined, yet total poverty and median household incomes remain level, because of changing household composition.
(2) is a misstatement. You mean, if people want to keep up with the Jones, it shouldn't be national policy to stop them. Perhaps it shouldn't, but at the same time, it should be a prime area for taxation as it redirects from necessities to luxuries.
ReplyDelete"Because if I don't have as much money as I wanted/expected, it must be because some other person took it from me!"
ReplyDeleteIf the relation between productivity and income has broken down, while corporate margins and high income pay soar, this is a reasonable thing to think. If these happen at a time when policy seems designed to weaken the bargaining power of lower paid workers (but not higher paid), such as trade policy putting lower paid workers into competition with foreign workers, laws weakening unions, laws strengthening protections for patent and copyright holders, cuts to tax rates on the highest paid, etc., etc., then one might think it's deliberate.
Agreed. Unless Noah has evidence that people (generally, not just rich people) have a preference for inequality, then the most likely explanation for government policies that increase inequality is that people who would benefit from increased inequality have more influence than others.
DeleteOn the other hand, we could just deny that government policy promotes inequality because that makes people who have decent incomes feel better about themselves, like they got what they have because they're simply better than everyone else. This would, of course, require that the people who are simply better than everyone else have gotten even betterer over the last few decades. Since there's no evidence of this, it's probably better if those who believe this avoid engaging in real arguments of it because their supporting evidence is unsurprisingly thin.
Also regarding (1), there were (and still are) a decent number of part time jobs, especially for middle class women entering the workforce during this period with kids at home. Full time jobs pay better including benefits (for a variety of reasons, including some fixed costs), but flexible hours are not unusual even at office jobs where most people work 40 hours. So there are forces pushing towards 40 hours (or more), but it's not a strict choice between 0 and 40 hours either.
ReplyDeleteI have to wonder about those people who see women working outside the home as an unmitigated negative. Sure, people prefer leisure to work, but women who stayed at home in the 50's weren't exactly lounging around eating bonbons. Changing from one form of work (that's thankless, menial, repetitive, and uncompensated) to another form of work is unlikely to decrease welfare in the same way that going from leisure to work does, and probably doesn't require the same income to keep welfare constant.
ReplyDeleteOn the other hand, I also would like to think that it's just an oversimplification that economists believe that "welfare=income" is a decent welfare equation. There may be other factors involved, like security (mentioned above), fairness (we all seem to agree that hourly compensation has not kept pace with increases in hourly productivity, and people express a preference for a fair distribution of income), leisure (that may have decreased as women are still expected to do the bulk of the housework, plus the retirement age increased)...
Also too, I wonder about consumption that has gotten substantially more expensive since the 1970's that isn't a choice in the same way that choosing a brand of soft drink is a choice (like health care, education, transportation...) and if that offsets gains in income. Has the utility derived from education kept pace with the cost of education? And health care?
Do you think peak divorce rate might result in more women in the workforce in 1980?
ReplyDeleteWhat about the change from welfare to workfare?
"If I can choose how much I work, and my wage stays the same, and I work more and my income rises, then I must be better off. Because if I was not better off, then I wouldn't have chosen to work more and earn more income.
ReplyDeleteSo, median real wages in America stayed roughly flat in America in 1980-2000, and people worked more - actually, what happened is that many women stopped being housewives and began working. The obvious conclusion would seem to be that if this choice represented a deterioration in the standard of living, people would not have chosen to do it. In other words, if you can still afford to buy your old bundle back, revealed preference says you like your new bundle more."
WOAH. Stop right there and think about it, Noah. This is a poor argument. Anyone can write a long list of major issues with this.
One of the most important ones is that you are disregarding the entire issue of risk. Even with individuals acting rationally, the criteria they are trying to maximise is not present happiness but their discounted expectations of future happiness. Households can be taking on more work than they want as a response to future uncertainty. By working more than they want, they can build up more wealth reserves to insure against future job loss, or straight up to avoid losing their jobs in the first place. Neither of this represents an improvement in welfare, and can in fact be fully consistent with a fall in welfare.
But generally, your argument seems nonsensical: you are basically arguing that on a societal level, any large scale change represents an improvement in welfare. So if all those women all quit their jobs now, that would also be an improvement?
Even with individuals acting rationally, the criteria they are trying to maximise is not present happiness but their discounted expectations of future happiness.
DeleteActually I doubt people maximize happiness at all. But I see what you're trying to say. Yes, the question of risk is important, although some people label income risk "mobility" and call it a good thing. I've thought about how to deal with the question of risk, and not come up with solid conclusions. But it's an important question.
But generally, your argument seems nonsensical: you are basically arguing that on a societal level, any large scale change represents an improvement in welfare.
Not at all, just any large-scale change that A) coincides with a rise in incomes, and B) does not produce any obvious negative externalities. I think the entry of women into the workforce passes that test, and many other social changes do not pass that test.
"I don't want to make national policy to help people keep up with the Joneses."
ReplyDeleteRephrase: I don't want to make national policy to keep, in the beginning, the top 10% from running away with all the economic growth (GET ME MALTHUS), and in the end, to keep the top 1% from running away with all the economic growth (WHAT DID WE HAVE AN INDUSTRIAL REVOLUTION FOR?).
[snip]
If the top 1% income continues to receive all the economic growth, then, by the time the output per person expands 50% (25-30 years?) the top 1% income will “earn” half of a half-larger economy (25% + 50% = 75% of 150%). By the time output per person doubles (typically 40-50 years) the equation will read 25% + 100% out of 200% = 62.5% of a twice-as-large economy.
[snip]
Be nice if the bottom 50% were not being bled to death: federal minimum wage closing in on $4 an hour lower than 1968 -- DOUBLE the per capita income since. Minimal minimum wage = $15. $15 is the American 45 percentile wage. Would take a big 3.5% of income shift to make the minimum $15. (Last I looked, years agon, $15 was the German 10 percentile wage.
i have to agree with kenneth thomas...my parents generation had a higher standard of living with just the male head of household working (usually in a factory) than my college educated nieces and nephews have now, with both parents working...Reagan busted the unions, forcing women to go to work to maintain the standard of living needed to raise a family...
ReplyDeleteJust gonna throw this one out here.
ReplyDelete"If I can choose how much I work, and my wage stays the same, and I work more and my income rises, then I must be better off."
Have you ever worked in food service or retail? Antecotetally, I worked in kitchens for ten years from high school through grad school. Even in situations where I had good senority, I was still expected to have full avaiability (meaning only one job), and then was often scheduled for over forty hours but then would only get 25 hours. In situations where I did get the hours, it was never at time and a half because wage and hour laws are a farce -- I even tried to call the department of labor to get them to look into things, but that went no where. The thing is the time you have a "fat" paycheck like 300 bucks for a 60 hour week in 2005, you use that to smooth the weeks where you were short like you couldn't work a couple days when you were sick.
Now that I'm middle class, that's not an issue, yay!
On possibility 2: Housework for mothers dropped from 32 hours to 18 hours a week since 1965. Paid work took up most of that free time, and childcare increased a little. Either choosing a messier house or by technological improvements (or getting rich enough that we can all afford "toys" like washer/dryers) this possibility seems to be happening pretty dramatically. (Second time I've cited this study, I feel like a Pew shill)
ReplyDeletehttp://www.pewresearch.org/data-trend/society-and-demographics/parental-time-use/
"So, median real wages in America stayed roughly flat in America in 1980-2000, and people worked more - actually, what happened is that many women stopped being housewives and began working. The obvious conclusion would seem to be that if this choice represented a deterioration in the standard of living, people would not have chosen to do it. In other words, if you can still afford to buy your old bundle back, revealed preference says you like your new bundle more."
ReplyDeleteThis is just wrong. If my income goes down, and to compensate I work more, that doesn't mean I secretly wanted to work more. It just means I prefer my previous income with more work, to a lower income without work. I would still be better off at my previous income, with the original amount of work. Obviously.
But this does not describe the situation that actually happened.
DeleteNoah, the situation is that real weekly wages fell. Just as they started to fall, more women decided they needed to work. This is not a coincidence, and it's just wrong to say they "could have bought their original bundles." Empowerment and exogenous social change might be part of the explanation, but as we know social change is often driven by economic reality.
DeleteBut female labor force participation rose steadily throughout the 50s, 60s, and 70s, and did not accelerate in the 80s and 90s, so I don't believe this story.
DeleteFamilies needed to work more to maintain their income. In a counterfactual world, some would have worked less. Others would have earned more. But all would have been better off.
DeleteRegarding your retort to Anonymous, above: I'm assuming here that whatever it was that enabled women to enter the labor force would still have existed. (I don't think it was labor-saving technology by the 1980s, but that's not relevant.) You're arguing an odd counterfactual in which wages rise but the other enabling factor remains equal.
Your post would have made sense if you'd stopped at the penultimate line. But you didn't, and thus you've lost me completely. It's really very odd.
Or maybe you can interpret this as weekly wages falling because men worked less by choice, and working women took up the slack. In that case I'm completely wrong. Oops.
ReplyDeleteBut if men worked less not by choice but by changes in pay structure, then I'm probably correct, and women were working to bring weekly household wages back to previous levels or trends, or something.
Or you must try to visit this one warwick associates boiler room
ReplyDelete