Kling is being disingenuous. In the past, the low wage workers could afford to be the primary earner in a family because costs were smaller relative to income. Yes, now low wage workers are second or third incomes - precisely because it takes two or three low wage incomes in order to pay the current cost structure. There are two or three incomes because it takes two or three incomes to run a household now if you're a low wage worker.

When in the past it only took one. No, they were never prosperous but I have known in my life many men who worked hard, came home with oil stains on their hands or sub burn on their brow, and their wives didn't have to work. They never wore nice clothes except to special occasions or church, but they got along.

Now these same people need two or three incomes to meet the same standard, and most are piling up debt on besides.

For shame that I have lived so long, so that some loathsomely out of touch academic could actually plausibly suggest that these people in the low wage category are working two or three incomes - or keeping two jobs for one person - as some sort of advance in wages rather than the simple fact that they need it to stay afloat.

For shame.

Go here: http://webapp.utexas.edu/blogs/bleiter/archives/001648.html

to see just how disingenuous Kling is.

“...and their wives didn't have to work. They never wore nice clothes except to special occasions or church, but they got along.”

The poor live far better to day than their counterparts of thirty years ago. It is utterly foolish to claim otherwise. Many, though, simply no longer wish to merely get “along.” No, they prefer to enjoy a certain degree of affluence. The wife often works because she prefers wearing nice clothing and driving her own automobile. They probably own at least two TV sets and even walk around carrying cell phones.

Arnold Kling may very well be one of our greatest economic thinkers. I admire him greatly. Kling is essentially a retired entrepreneur who altruistically commits much of his available time to the study of economics. Does he possess a Phd in this field? Yes, but even I won’t hold that against Kling. I find his blog to be enormously valuable and visit it often.

I went to the link above. The writer does about the same to his data as he accuses Kling of doing to his. In fact, he provides no data, but simply criticizes Kling's choices.

No one ever brings all the data to bear in an argument -- he brings forward what he thinks is most relevant. The link above is rather of the "Have you been to Spain?" "I've been to Madrid." "Oh but you haven't been to the real Spain!" school of argument.

I don't want to fisk this bit by bit, but one criticism particularly rankled. Kling takes an example of improved medical care from the 1970's to now, which Leiter treats as argument from mere anecdote. There is a distinction between example and anecdote, and it is exactly this sort of distinction which is necessary for discussion.

And comparative data between rich and poor is not germane, but the absolute level of well-being of the poor.

The bottom quintile of income in America has changed since 1970, and not merely from the natural turnover of workers. There are more immigrants, who presumably do not enter the workforce in the top quintile. Prior to 1970, you could drink yourself into helpless poverty but drugs were uncommon. We now add in the small but cumulative number of people who drug themselves into helplessness each year. There are more graduate students, and these are also part of the bottom quintile -- temporarily. And single parenthood of course drives poverty more than any single factor.

Additionally, houses are larger and apartments have fewer occupants. Living space per person is nearly doubled at all but the very lowest ranges, where the increase is only about 50%. Food is cheaper, but we want more variety, so grocery bills are proportionately about the same. Clothing is cheaper, but even the poor have larger wardrobes, so clothing budgets are proportionally about the same.

Please. I have been working with the mentally ill -- the real innocent poor -- for 30 years, and I know who the poor are and what they've got. As a society we have higher expectations of what everyone "should" have, and even the poor have some of the increase. Whether the poor have "enough," whether they are treated fairly, whether they should have more, are all intersting questions for another day. But apples/apples comparison of native-born full time low wage workers in in 1974 and 2004 (a school custodian, say) reveals that the current model is wealthier by all measures: life expectancy, age of retirement, amount of living space, number of times/week eating out, ease of movement... what would be left?

I also dislike quick accusations of disingenuousness. Words have real meanings, not just a rhetorical value.

“...reveals that the current model is wealthier by all measures: life expectancy, age of retirement, amount of living space, number of times/week eating out, ease of movement... what would be left?”

What would be left? The radical egalitarian cares less if poor people live far better today than some thirty years ago. They are simply enraged that we live in a supposedly unequal society. The very fact that intrinsically some people must be wealthier than others is considered upsetting. Those embracing the egalitarian mindset---and I am not even slightly exaggerating--- are happier when all live poorly than when some live more affluently than others. Equality is the number one value to be cherished. Nothing else matters. This a major reason not to elect a Democrat president. A Republican candidate categorically rejects such populist nonsense.

So let me get this straight...

"Given these statistics, what explains the fact that, adjusted for inflation, the pay of the lowest-wage workers has not increased much over the past thirty years?"

"poor Americans are much better off now than during the height of the Great Society."

for that to happen they must be able to buy more with the same amout of money,right?

It should be a easy study comparing the buying power of a typical 1970's family and a typical 2000's family.

"Now these same people need two or three incomes to meet the same standard, and most are piling up debt on besides."

the debt comes from the credit cards.

though if thier buying power has decreased, that would explain the need for additional jobs.

Also, The women's lib movement can't be separated from the trend of two income households.

Generally agree with oldman comments.
Appears to be more intellectual dogmatism from D.Thomson. Economics is not a science. Univs are archaic and for the most part should cut two thirds of the soft programs as well as half the wages/ benefits of staff. There are some models available,largely made up to fit whatever theory. (Just as so many other ologies in univs.,could easily be combined with a few other ology subject areas into one semester or two max.[the same applies for lit and soft subject areas])

Alex, to quote Homer Simpson. "That doesn't matter. You an prove ANYTHING with facts."

Assistant Village Idiot, shouldn't that be that you can prove most anything using the wrong stats.

Sorry, Asst. Village Idiot, but I'm not used to communicating and don't know if I care to discuss with anyone who spent most of their life with mentally ill. Of course, the base level of standard of living went up...but many of us think it peaked and is going down, down, down now. In my view, it's only a matter of time before all U.S. funny money, outsourcing, trade deficits, current account deficits, military spending hit the fan. So much for invisible hand, rational persons, lack of discipline, and their choices, all of which doesn't work except on some paper model.

__________________
It's all one extreme to another in this society as have seen over the years. One ex., double income households caused a large part of the problem (as well as other societal problems). Married women with kids should have only been permitted to work part-time,thereby reducing several societal problems. (with stiff societal penalties and dishonor among his circles to any male who leaves them without decent support)

Why does Kling switch from 1970 to the 19th century?

Very suspicious ...

I can't help but note that several Kling critics seem to miss the point.

We may have two incomes, but we have two cars. Healthcare is expensive, but the word doesn't mean the same thing it did 30 years ago. No one was griping about the cost of a PET scan 30 years ago because there was no such thing. You can't compare PETs and CATs today with xrays in 1970 because they are not remotely the same thing.

Can you really just discount the percent of expenditures on recreation? It would seem that if our needs were really more expensive and the poor were no better off, we would be spending more of our incomes on necessities.

I would ask oldman: How many cars do you have; do you have a microwave oven, cable or satellite TV? I note there is a personal computer with an internet connection, that wouldn't be broadband would it? How about music? How many movies do you either rent or see at the theatre. If you are old enough to require regular medication, try using the medication that was available to you at the same price 30 years ago. Have allergies? As a sufferer myself, I am certain you would be better off if that were the case.

Don't know if you have good vision, but mine sucks. I can get laser eye correction on a payment plan partially covered by insurance.

How about retirement? If you started to participate even very modestly in a defined contribution plan in the golden years of the 70's (presumably right after ERISA passed), you are probably in pretty good shape now. If you didn't contribute at least to an IRA, why not? Many, many low income people contribute to these plans today, and living standards are apparently much worse now than in the past.

I respectfully submit that you are a victim of what would historically be considered absurd expectations that you only have because you are that much better off.

Keeping in line with Kling’s initial piece, no one has thus far added anything to his defense.

No one denies that consumer goods and services are much more abundant today, and consequently cheaper, than in the 1970's. No one denies that because of cheaper goods and services a greater proportion of people are able to afford more than one T.V.

Though I fail to see how this addresses the fact that, adjusted for inflation, relative wages have increased rather meagerly. Further, if one were so inclined to look at executive remuneration over this same period, you’d be surprised to see that it has risen 500%; and, astonishingly, this is an adjusted for inflation figure.

(I’m too lazy, viz. intellectually dishonest, to cite it—so prove me wrong; though I actually think the figure is higher).

If this weren’t so damning, and didn’t alone obviate Kling’s argument, what are we to think of the 14% decline of the middle class?

At this point, the methodology of assessing who exactly is middle class isn’t a quibble that inspires confidence, because Economists choose to raise or lower that bar as they please.

Though, more to the point: Kling seems highly suspect. And if you plan to vote for the Republicans because they ain’t populist, then good luck to Ya sir!

Now, more on the dismal science of economics and Kling’s unseemly argument: http://webapp.utexas.edu/blogs/bleiter/archives/001637.html

You should be advised that this post(Leiter's) is bit rude to Economists in general.

Ah, right on time, the NYT weighs in.

Interesting debate on the "lucky duckies", but I was interested in the comparison of productivity in food production between Japan and the US.
My response is that I would trade greatly lowered productivity not to have the food market here flooded with inedible, unhealthy junk.
I assume that most of the more efficient production occurs in the area of turning foodstuffs into non-food, ala McDonald's.

Are wages in real terms stagnant? No, they obviously are not. If you have lived for a while, you can see that people are more prosperous. The consumption stats bear this out. So, why don't the wage statistics reflect that?

Well, there are differences in quality. A 1970 car is not as good as a 2000 car. Ahouse in 1970 was usually quite a bit smaller than a 2000 house. So a house and a car in 2000 are not the same house and car from thirty years ago.

Also, the statistics (chiefly the CPI) don't factor in substitution very well. If the price rises on a good or service, people will try to buy something else. So, if a given good is being used to determine buying power, it may not mean much if people start buying something else.

Price baskets used to compute the CPI are notoriously hard to calculate. Even so, I think the government could do a better job. I am earning more for less work than my parents did, and my money buys a lot more than it did for them.

“UPDATE: One more reading assignment -- Brad DeLong's latest post on global warming.”

Brad DeLong may soon be burned at the stake for heresy. He and Robert Rubin are deluding themselves that they still have a home within the Democrat Party. Let’s see now, DeLong argues for free trade, nuclear energy, and a common sense approach to the possible threat of global energy. His economic views are now much closer to the Republican Party. Perhaps our Berkeley economics professor might appreciate a Bush/Cheney bumper sticker for his car? I’m sure that this can be arranged.

Pro-growth Democrats are being played for punks by the Kerry campaign. Am I jumping to an invalid conclusion? Well, we know for certain that there is no way whatsoever one can reconcile the differences between the pro-growth and anti-growth Democrats. These people have nothing economically in common with each other. Moreover, if Senator Kerry (who even now continues with his silly American is losing jobs to foreigners rhetoric) somehow wins the election---one of these groups will be immediately marginalized. The odds are strongly against DeLong being among the victors.

Leiter is correct in that an assertion that economics is a science 'like physics' is a science is completely unrealistic.

The modelling performed in physics must be confirmed by repeatable experiments that have the feature of isolating variables.

Economics experiments are only as good as phychology experiments, which is to say that modelling is important and can yield insights, but you must always qualify your predictions because the only experiments available to you are horrifically complex in terms of variables involved. Correspondence of hypothesis to reality is checked becuase people are complicated.

Where I disagree is with the notion that economics is only as useful as 'intuitive' psychology. Experiments in both yield important analyses of how all those variables react, and techniques in cognitive science can tell us quite a bit. Economics may be only as useful as experimental psychology, and it can't provide us with F=d/dt(mv) levels of precision, but I would never suggest that the modelling and predictions of either are useless for that reason.

"Though I fail to see how this addresses the fact that, adjusted for inflation, relative wages have increased rather meagerly. Further, if one were so inclined to look at executive remuneration over this same period, you’d be surprised to see that it has risen 500%; and, astonishingly, this is an adjusted for inflation figure."

I find that it is almost impossible for me to figure out if I'm better off than I was last year by looking at my neighbor's car.

"If this weren’t so damning, and didn’t alone obviate Kling’s argument, what are we to think of the 14% decline of the middle class?"

Again, choose the definition of middle class you like. Politicians looking to hand out goodies certainly will. How about, by the same standard, we compare the consumption pattern of the low class of today with that of the middle class 30 years ago? How about, too, we figure out what percent of the people who were poor 30 years ago still are? To what extent are our lowest wages training wages?

Wow, I am compelled to give the devil his due. Brian Leiter is right to rebuke the weird idea that economics is a hard science. As matter of fact, I’ve long contended that economics is a liberal arts discipline. Unfortunately, a number of economists possess an inferiority complex and need to delude themselves that they are similar to mathematicians. Leiter’s essay is so good that I’ve decided to permanently bookmark it. I may not agree with him again for the next ten years---but I do this time around. But what does it have to do with our current discussion? The evidence is still overwhelming that Americans are generally wealthier than their counterparts of thirty years ago by any realistic definition.

"In the 1970's, many of the people at the bottom of the wage scale were heads of households. Today, many low-wage workers are providing second or third incomes to families."

What exactly is this suppose to mean? It sounds dangerously like people aren't paid on the basis of the value of their work, but rather on the perceived value of their person or status in society.

"But apples/apples comparison of native-born full time low wage workers in in 1974 and 2004 (a school custodian, say) reveals that the current model is wealthier by all measures: life expectancy, age of retirement, amount of living space, number of times/week eating out, ease of movement... what would be left?"

I question how you arrive at your conclusion. If, for example, your "school custodian" happens to be an African American male, surely you're aware that life expectancy is far lower than the national average. And, if your custodian is presently middle aged, he/she won't be able to retire with full SS benefits until age 67. Are you further assuming that a custodian could afford a new home? If the custodian is lucky enough to own a home, chances are it is one of the smaller ones built in the 60s or 70s.

“Are you further assuming that a custodian could afford a new home? If the custodian is lucky enough to own a home, chances are it is one of the smaller ones built in the 60s or 70s.”

And what is your point? Inequality is inherently unavodiable. Today’s custodian is still probably better off than they would have been thirty years ago. I don’t recall anyone claiming that we have achieved an utopian paradise. The vast majority of human beings who have ever inhabited this planet wish they were able to purchase “one of the smaller (homes) ones built in the 60s or 70s.”

DT,

Economic inequality to a certain extent can increase the productivity of a society. Too much however creates economic instability. In addition there is always the temptation to divorce merit from economic success. For instance I think journalists get paid way too much for doing far too little.

As for the arguments about whether worker's pay is currently wealthier by past statements, it seems to revolve around picking apart what a standard of living means over time.

As for the "market explanation" I think Kevin Drum skewers them more expertly than I can.
http://www.washingtonmonthly.com/archives/individual/2004_07/004329.php

Apparently not all labor markets are equal when it comes to the hardships of wage-stagnation.

David Thomson would do well to check out the site cited by oldman:

http://www.washingtonmonthly.com/archives/individual/2004_07/004329.php

Interesting stuff.

The Washington Monthly bit poses the question, What is the market explanation for the increase in CEO pay as opposed to that of 'Joe Sixpack'?

The people who pay the CEO are either seeking to maximize shareholder value or not. If so, they apparently believe that paying for a top notch CEO will do that to a greater extent than paying higher wages at the base. If they aren't, what are they doing?

I'm reminded of the infamous Ben and Jerry's CEO search. Apparently the CEO pay of something like 7 times the lowest paid worker just could buy a guy who could keep the company afloat. They are functioning profitably now as a division of Unilever exactly because their corporate structure was a mess. They tried to pay a CEO less on the grounds that CEOs aren't really worth it, and they were nearly run into the ground.

In terms of value to the shareholder, I suspect CEO pay is too high in many cases. If I really feel that is the case, I don't buy that stock. Fund managers pretty much do the same.

Those of you trying to determine if some part of the U.S. population, such as manufacturing workers or college professors, are better or worse off today than 30 years ago might consider turning the question around.

It is easy to prove that average per capita GDP has grown, that houses are bigger on average and cars more sophisticated (and vastly more costly to fix). But an equally important part of the answer to whether certain kinds of people are better or worse off is found by asking whether people in that class can reproduce themselves, i.e. bear and raise an equal or greater number of future citizens as safe, productive, educated, and social-capital-rich as themselves.

Thirty years ago, to take a class of people I know a little about, a college professor could socially reproduce himself on one income living in a large-enough house close to his campus. With housing prices near many famous campuses creeping toward the million dollar mark for a family house that cost $35,000 30 years ago, I don't think most faculty (except top doctors and economists) can do what their equivalents in their parents' generation did as a matter of course.

One standard economist answer to this is to say that since there are many more college professors now than in 1970, their price has fallen, so they are relatively poorer and unable, for example, to afford houses near work on one income. True. But that has nothing to do with the question, can this class of people (regardless of number) socially reproduce itself on the same comfortable terms as in 1970?

And in my example I have entirely left out other major externalities that affect quality of life and the conditions of social reproduction, such as congestion, racial or ethnic tensions, quality of public services including schools. But these also play a part in affecting social reproduction. E.g. to socially reproduce the professor might have to use private schools for his kids, which add an economic burden not necessary to his parents, living in days when public schools had standards, were allowed to eject troublemakers, and weren't burdened with down-dumbing p.c. teachers and teaching materials.

First of all Jason you're being disingenuous. No major CEO works for a mere paltry 7x their average worker's pay.

As of 1997, the multiple was more like 300x the average worker pay for major companies, and it has increased since then.

http://www.responsiblewealth.org/press/1999/shareholder_pr.html

Furthermore this pay has often been paid out in outrageous cases of incompetence or misconduct. If all the CEO's were like Bill Gates, Jack Welch, etc. there would be a stronger argument about the "merit" of CEO or upper executive pay.

However these guys often run the company into the ground and get a bonus for it.

http://www.oregonlive.com/business/oregonian/index.ssf?/base/front_page/108643698466190.xml

If the qualification needed to make 300+ times the average worker at a company is to make the company tread water or run it into the ground, then I don't think that the free market is at work at all in these cases.

The fact is that CEO pay has risen many multiples over the past two decades while average worker's pay stays stagnant. Meanwhile people like Kling make up myths like the "disappearing lower class". I hate fools and liars like that. Maybe you think the present economic order is good, or whatever, but the simple fact is that as of 2000 and 2001 even before the most recent recession many households could simply not afford to buy food.

http://www.fhfh.org/hunger.html

When people start talking averages about living space size, consumer electronic goods, etc. but forget that the most fundmantal need of simply being able to eat is being neglected then it truly disgusts me how out of touch or deluded or liars these people are.

There is still lunch-assistance programs in public schools because in some households the kids won't get a meal otherwise. I have nothing but contempt for those who can somehow screen out hungry kids from their utopian vision where somehow they manipulate the numbers to show that no one is poor anymore.

Thare are people are poor and they still struggle to buy food. That's the fact. Hang your numbers on that.

Explain what this hypothesis suggests, please:

...[W]hat explains the fact that, adjusted for inflation, the pay of the lowest-wage workers has not increased much over the past thirty years? ...I suspect that the largest component of the explanation is a shift in the composition of the low-wage work force. In the 1970's, many of the people at the bottom of the wage scale were heads of households. Today, many low-wage workers are providing second or third incomes to families.

So does this mean that: 1) expenses are rising so fast in comparison to incomes that families actually need to have multiple sources of income to support them, instead of the traditional one, or that 2) if low-income families hadn't been so greedy as to bring in more than one source of income, real wages would be higher today?

And lastly, is the fact that wages and household incomes simply don't keep up with expenses even important in the labor-importing economic model that will make us all better off?

Are we now measuring affluence in terms of 1970? In other words, do we use the poor of 1970 to measure the poor of today, compare them on quantitatives like 1970's goods, and then determine that if today > 1970, its good news? Thats kind of like basing the health of the economy on quantities of jobs. (Oh, wait, that *is* the only relevant sign of a good economy.)

Of course, Kling's figures also ignore that the prices of these fixed-era items have certainly gone down (in fixed-era dollars) over the past 30 years, making them more available to those with the same amount of money. In other words, you could have $100 1970 dollars left over at the end of the month in 1970 and not be able to afford a color TV, but you can have $100 1970 dollars today and afford at least one, because they're cheaper. That's not thanks to any conservative's (or to be fair, liberal's) trickle-down economic policy, but to the natural tendency of goods to decrease in price as they become more commonplace, easier to produce, and outdated.

So in other words, as long as we have industrial progress, the poor are always going to be better off, because the old technologies of thirty years ago will eventually become accessible to them.

(For the record, the poor of today don't have lots of nice clothes, and don't wear their nice clothes everyday, either. If their clothes are of better quality today than they were in 1970, it's because clothes have become cheaper, not because their jobs are better or their net incomes are higher. An out-of-touch academic or out-of-touch businessowner might not realize that.)

Call me crazy, but a more meaningful comparison might be to compare the average owned commodities of the 1970 upper class to the 1970 lower class, and then compare the average owned commodities of the 2004 upper class to the 2004 lower class, and then compare those differences.

But that would be too much to ask from supply-side apologetics...

Apparently the CEO pay of something like 7 times the lowest paid worker just could buy a guy who could keep the company afloat.

OMG, I just figured it out.

We need to flood the market with CEOs.

Then there would be so many CEOs and other executives that supply would outgrow demand, and they'd basically have to beg for jobs.

You know, like the rest of us do.

Typo in my previous post. This: "Apparently the CEO pay of something like 7 times the lowest paid worker just could buy a guy who could keep the company afloat."

Should be this: "Apparently the CEO pay of something like 7 times the lowest paid worker just COULDN'T buy a guy who could keep the company afloat."

The point is that B&J launched a campaign to hire the 'everyman' CEO that would not be paid more than 7X the wages of the lowest paid worker. They couldn't find anyone who would work for that amount, and when they finally hired the cheapest CEO they could find, he ran the company into the ground in one year or so, and now megacorp Unilever owns Ben & Jerry's.

Keith seems to pooh pooh on the improvement of standards as something that is bound to happen as long as we have technological and other advances in efficiency. Correct me if I'm wrong, but isn't that a tacit acknowledgement of the supply side thesis? Where do those technological advances come from?

He suggests a better comparison:

"Call me crazy, but a more meaningful comparison might be to compare the average owned commodities of the 1970 upper class to the 1970 lower class, and then compare the average owned commodities of the 2004 upper class to the 2004 lower class, and then compare those differences."

Only if your sole criteria for improvement is comparison with the Joneses. I personally don't care that I am 2% better off while Warren Buffet is 2000% better off. Part of this is just the mathematics of compounding returns.

Oldman's comments are more serious, that people ARE just as poor as they were 30 years ago. Again we must be clear that these are not the same people, so what he really argues is that the lowest income earners of today are no better off than the lowest income earners 30 years ago. Specifically, he mentions food. I don't know how to say this other than to be blunt. There is a titanic amount of food in this country that is essentially free. How many people in this country are actually hospitalized for starvation?

Use of free food services is not a measure for hunger. Polling people who until recently received money from the government to see if they would still like money from the government is not necessarily telling, either. Factor out all people paying for luxuries like cable TV from the equation.

Take what is left, and compare it to similar statistics 30 years ago. That poverty and hunger exist in America I am not disputing, and neither is Kling. There will always be a lower class by definition. Some people have more children and other expenses than they have the ability to take care of through their own wages. The solution is not to pretend that they are more skilled than they are and inflate their wages accordingly, it is to provide them with charity (my preference) or a government program (the preferences of some others). The good news is that everything: food, clothing, shelter, entertainment is more readily within their grasp for smaller amounts of money now that 30 years ago, so even the poorest of the poor are better off.

"OMG, I just figured it out.

We need to flood the market with CEOs."

Absolutely. If you want to decrease the value of each person capable of running a fortune 500 company in a global market place, all you have to do is 'flood the market' with that kind of person. It should be no problem, right? CEOs don't have any special skill sets or anything, after all ...