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.