Saturday, January 26, 2008

On Inflation and Real Wage Stagnation

When someone tells you that real wages have stagnated, or declined, or failed to keep up with inflation, what does that mean? I thought it meant that a worker in year X could purchase more with his take-home pay than a similarly employed worker presently. I've become convinced though that inflation might not mean what we think it means.

They tell me for instance that 50 cents spent in 1980 would get you the same amount of goods and services as a dollar spent in 2000. Okay, so an iPhone costs $400 today, which means that our mid-80's counterparts were shelling out about $200 right? Small price to pay for being able to listen to Air Supply albums on your phone! Now let's go back to the chart and figure out what the Greatest Generation was paying for their MRIs in 1950...

I heard John Edwards talking about how many of us Americans have been "left behind" by economic growth in the last few decades. I think I might be one of those Americans, but I can't seem to find any data on what a developer of rich internet applications earned in 1980. Can anybody help me out?

Okay, so the CPI isn't measuring exactly what we seem to think it's measuring, is it? I think it was Locke that said something about paupers in London living better lives than the kings of savages. Maybe he was on to something. The Crown Jewels of London couldn't buy a transistor in 1900, and there was never a Roman Emperor who could muster the wealth to purchase a single coach-class plane ticket from Rome to Gaul.

Yes, this is a "rising tide floats all boats" argument. It's a "smaller piece of a bigger pie" argument. It's a "apology for economic inequality" argument. But is it a bad argument?

4 comments:

Jim Apple said...

Edwards is talking about people, not job descriptions that are left behind.

The impoverished don't benefit from iPhones.

If the rising tide makes it easy for everyone who is middle-class (or richer) to get iPhones, then it seems unfair to many that the poor can't get decent schooling or health care.

Me said...

Edwards is talking about people, not job descriptions that are left behind.

Doesn't the fact that my job description now exists as a possibility for non-college educated types help people? I work with a guy that did one year of college at some small school in the South, hitch-hiked to LA, worked a while as a stand-up comic, and ended up as a web-dev. Isn't he left behind if he isn't filling the job description that Google, Yahoo, et al. created in the last decade?

The impoverished don't benefit from iPhones.

If the rising tide makes it easy for everyone who is middle-class (or richer) to get iPhones, then it seems unfair to many that the poor can't get decent schooling or health care.


But isn't the high-tech economy that makes iPhones the same as the one that drives healthcare innovation? Also, do we have any data on whether or not the impoverished have been left behind wrt healthcare? Medicaid covers inhalers and blood pressure meds, but it couldn't cover them if they hadn't been invented, could it?

Jim Apple said...

I'm leaving the job description story behind, because I think we're talking at cross-purposes. To some extent, new technological jobs help the poor.

Yes, medical technology helps the poor, but only if they have access to it. If we could sacrifice some multi-billion dollar technology that extends the life of they very sick by a few months and turn it into a public program that provides affordable care for the poor, extending many lives many years, I would make that trade.

Me said...

Yes, medical technology helps the poor, but only if they have access to it. If we could sacrifice some multi-billion dollar technology that extends the life of they very sick by a few months and turn it into a public program that provides affordable care for the poor, extending many lives many years, I would make that trade.

Aren't the rich functioning as early adopters of a lot of the goods and services that ARE later available for cheaper? Don't most of the single-payer systems in the world bank on this effect, buying a generation behind and benefiting from the hidden subsidy our early adopters? Is the problem here really that we're spending too much on, e.g., chemo and not enough on, e.g., flu shots?

I'd be interested in seeing some data on where healthcare dollars are going: prescriptions vs personnel vs non-rx supplies vs technology vs other overhead, etc. Where are we bottle-necking? Throwing more money at the problem won't invent smaller, cheaper MRI machines, but it might get us more doctors or operating tables...