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Another Reporter Taken In — Why Now?
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Another Reporter Taken In

Jim Axelrod on CBS starts out with a good story in The Great American Paycheck Squeeze:

“We’re living through one of the worst times for wage growth ever,” said Larry Mishel, an economist with the Economic Policy Institute, a non-partisan, non-profit Washington think tank. “From 2002 to 2007, the hourly compensation of a typical college graduate or a typical high school graduate went up zero – didn’t grow at all.”

“Between 1989 and 2007, before the Great Recession, of all the income growth that was generated, the bottom 90 percent [of Americans] got only 15 percent of it. The upper one percent got 55 percent. And the upper tenth of the upper one percent, the one out of 1,000 households, got about a third of all the income growth.”

But then he had to find someone to offer an opposing view, because all stories have to be “balanced”:

“I call this the ‘gloom and doomers,'” said Georgetown University economist Stephen Rose, who thinks the myth of a middle class squeeze is exactly that, a myth.

“That would imply an economy that we just don’t have. The malls wouldn’t be filled. The people wouldn’t be rushing to spend $14 to go to ‘Avatar.’ They wouldn’t have all the wiis, all of the iPods, the iPhones, etcetera, etcetera.”

Rose uses a different set of numbers. He points out that the median income of American workers has been rising steadily, from about $49,000 dollars in 1970 to $62,000 in 2008.

It isn’t in quotes, so I don’t know if Rose told Axelrod that those numbers were the “median”, or Axelrod made the mistake. Those numbers are the “mean”, the average for those years, and, of course, totally irrelevant to the discussion, of who was receiving the money.

The median household income for 1970 in 2007 dollars according to the US Census Bureau was $41,620 and the mean was $47,657. This table only goes to 2007, hence the use of 2007 dollars. In 2007 the median was $50,233 and the mean was $67,609.  [Note that there was probably a decrease because of the GOPrecession in 2008.]

When you have the median and compare the two, they show that the money is flowing up. The median is the point at which half are making more and have are making less. In 1970 the median was around 87% of the mean, but in 2007 it is only 74% of the mean. This supports Mishel’s point that more of the money is going up.

Another point that isn’t addressed is that these are the “household” numbers, and since 1970 the number of multiple earner households has increased significantly, i.e. in 1970 there were still a lot of stay-at-home mothers, and their numbers have decreased dramatically.

As for the “economist” from Georgetown – excuse me, but have you been to a mall lately? Maybe your friends are spending on Wiis and iThings, but mine are more interested in beans and rice.


1 John B. { 02.28.10 at 10:53 pm }

Good catch, Bryan, but — don’t take this wrong — better women than you got there first. Namely, Elizabeth Warren, who eviscerated Stephen Rose’s pseudo-economics in an article about how he ginned up an ‘average household income’ number by excluding younger workers and retired people. She called it a “third grade trick” or something like that. Paul Krugman has dismissed Rose, too, essentially for being a buffoon.

Stephen Rose is a self-appointed leading blowhard of the so-called “Third Way” that claims to be trying to forge a ‘new economics’ but spends most of its time fighting government regulation, deceptively arguing the middle class is better off than they and their bankruptcy lawyers think, the poor have it too good, and rich people need more. Invariably, he articulates a deeply deceptive and factually distorted view of reality, in service to what appears to be an ideological affinity for lassez faire capitalism of the Robber Baron variety.

You will not be surprised to learn that multi-millionaire U.S. Senator Evan Bayh is a one-man fan club of the Third Way. Lie down with blue dogs and you get up with flakes.

2 Bryan { 02.28.10 at 11:38 pm }

I’m not an economist, John, but I am in business, and when people tell me things, or make statements that don’t accord with reality as I know it, I always go for the data.

That median/mean thing is personal me, because I have seen it abused so often. I started out in computing, after the Air Force, in business data processing, doing maintenance programming on the accounting system at a large company. Numbers have specific meanings, and writing programs to find specific numbers for executive reporting was a regular task. The top floor loved statistics, but they were touchy about that median/mean thing and it was a regular rant by the VP for accounting. It was hammered into my department because someone had screwed it up at some point before I got there,

I really hadn’t encountered Rose before, but he was obviously full of it with those numbers. That’s the kind of thing Bernie Madoff did, and he was at least sent to prison. If Rose keeps it up, he’ll end up there, or the Heritage Foundation. 😈