The Story of Stagnating Wages Was Mostly Wrong. The measures can be misleading. By Michael R. Strain
Excerpt: Much here is driven by the relatively poor performance of wage growth during the 1970s and 1980s. Rather than going back five decades, let’s go back three, and compare wages today with what they were in July 1990, a business-cycle peak. If we start there — and use the same wage series and inflation adjustment as before — we find that wages have grown by 20%. While that is slow compared with the gains enjoyed by the top 1%, it is a significant increase in purchasing power. There are two other arguments for going back three decades rather than five. Making apples-to-apples comparisons of the purchasing power of wages becomes much more difficult the further back you go. How do you compare the price of a car in 2019 with one in 1973, given the significant improvements in automobiles? How do you compare the price of a laptop in 2019 with one in 1973, given that none existed in the 1970s? ... You might argue that what really matters is the flow of resources a household can use for consumption and savings, whether or not those resources come from paid employment. The CBO computes a comprehensive measure of income that includes (but is not limited to) wages, salaries and fringe benefits; capital gains and dividends; Social Security, Medicare and Medicaid benefits; unemployment insurance, food stamps and federal tax payments. Using this measure, median household income grew by 43% between 1990 and 2015 (the last year for which data is available). Households in the bottom 20% saw their incomes increase by 62%.