Why Are We Worse Off?
New wage data indicate what you might have suspected. Average wages are not keeping up with the cost of living. This has given rise to claims that we live in the first sustained period of economic growth that has failed to offer a similarly sustained increase in real wages. Indeed, wages have declined in real terms by 2 percent in the last three years. Let's break down this data a bit. FULL ARTICLE
Comments (8)
iceberg
How can we account for this? Two factors: entrepreneurship and international trade... Imagine what would have happened to the overall CPI were it not for them.
And yet the people who are currently wailing about the declines in real income give these retailers no credit for keeping our living standards from falling lower than they otherwise would have. These stores are a major source of American prosperity, and we need ever more of them.
I think the burden of the hedonic adjustment fall not upon the shoulders of the retailer, but upon the producer who has innovated to bring around better products for a lesser cost, while of course the consumer is the one paying the ultimate price from his reduced pool of savings.
The BLS and their calculated productivity theft as I bloviated here about year ago, is at best a slap in the face to the entreprenuers of the world.
Published: August 28, 2006 10:36 PM
TGGP
An excellent post at CafeHayek on the subject here.
Published: August 29, 2006 7:54 AM
quasibill
Iceberg - nice bloviation. More needs to be said about that angle.
As for that CafeHayek article - Wow. It's nearly as ignorant as the NYT article it criticizes. The comments are even worse, with the cake-taker being "I think CPI overstates inflation." All I can say is, WOW!
Published: August 29, 2006 9:18 AM
Tracy SAboe
The Mises article is dugg here.
http://digg.com/business_finance/Why_Are_We_Worse_Off
Tracy
Published: August 29, 2006 9:21 AM
Bryan Elliott
Could we get a link to the data source for them graphs?
Published: August 29, 2006 2:50 PM
jeffrey
As Lew says in the article, it is the BLS.
Published: August 29, 2006 4:33 PM
Alex MacMillan
Lew seems to be saying a couple of things. First, that the fall in real wage rates may be illusory due to improper price data aggregation. And second, that if, in fact, if the average prices that people face have risen faster than their nominal wage rates, this could be due to the large price increases in various government regulated sectors.
I agree the first possibility may exist, but price increases in the government regulated sectors only mean that the prices of those government controlled goods and services have risen relative to the prices of things like discount store clothing. Whatever inflation has ocurred surely is solely the result of money supply growth, and has nothing to do with inefficiencies of government controlled industries.
Published: August 29, 2006 5:59 PM
TGGP
quasibill, you might also enjoy this previous CafeHayek post "Does the CPI Overstate Inflation?"
Published: August 30, 2006 11:47 AM