Friday, February 3, 2012

The Myth of Wage Stagnation

In this video mythbuster Don Boudreau takes former Clinton Labor Secretary Robert Reich to task on his dubious use of statistics while dispeling the common narrative of 'wage stagnation.'

Additionally, on Cafe Hayek, Boudreaux writes:

In this presentation (ppt), I calculate how many hours each non-supervisory worker earning the average nominal hourly wage of such workers had to work in 1975 to buy a variety of ordinary goods, and how many hours each non-supervisory worker earning the average nominal hourly wage of such workers must work in 2011 to buy similar (or, really, in almost every case far superior) or comparable goods.

The dollar figure beside each photo from the 1975 Sears catalog is the 1975 price(s) of that product(s) adjusted, using the CPI, into 2011 dollars. (The photos of the various pages of the 1975 Sears catalog, BTW, were taken with the camera in my iPhone. Just FYI.)

Before starting this PowerPoint presentation, I showed this recent clip from Robert Reich – one of many, many instances of people insisting that ordinary Americans are no better off today (at least materially) than they were since just before the age of alleged laissez faire descended upon us circa 1980.

A video of the Sear's catalog presentation can be found here.


  1. Interesting! As a matter of fact, the Economics Department at Howard Community College in Columbia is showing Reich's youtube "The 7 Biggest Economic Lies" to test whether students critical thinking skills improve. Sadly most students agree with the propositions without questioning the supporting evidence. For example, he says its a lie to say that Medicare is breaking the budget and then goes on to talk about how a government program can drive down costs! Huh? It's sad, but the fact is that economic literacy is close to zero and people will believe just about anything.

  2. Interesting video Grouch! Take nothing at face value without researching numbers thrown.

  3. I would like to comment about the video about inflation. I don't know where in the world this guy is getting his information from. Sure the quailty of some things is much better than it was thirty years ago like TV's or cars they are of much better quality even the internet is really cheap considering what you get in terms of information. I think food has also not increased by all that much over the last thirty years. But what about gas it cost just 35 cents a gallon in the mid 1960's today it cost 10 times as much. Although cars get much better fuel economy today than back in the 1960's so maybe its a draw. But look at houses my parents bought a small brick home brand new in chicago in nineteen fiftyfive for seventeen thousand dollars. They sold their home in nineteen ninetyeight for one hundred twenty thousand dollars it was fortythree years old when they sold it and how many years would you have to work to buy this house in nineteen fifty five about three years and in 1998 four years so you would have to work one year longer in 1998 to buy the same house that was fortythree years old of less quality because of its age. By the way I am dividing the price of the house by ones annual wages so if you made thirty thousand dollars in 1998 that was about average in 1998 it would take four years to earn the value of the house. If you earned five and a half thousand dollars in nineteen fiftyfive that was about the average wage in nineteen fiftyfive it would take three years to earn the value of the house brand new may I add' get it. Also look at the cost of health care today compared to what it was 30 years ago it has increased tremendously and nobody thinks of health care as something enjoyable to spend their money on its a necessary expense like fuel and their have been many advances in healthcare over the last thirty years thats a positive thing but still its not like anyone would say ha lets go out and spend some of are hard earned money on doctors appointments and tests it will really be a lot of fun and worth all the money. I do not think the gentlemen has made a case here at all.