[The Lizard of Oz]

(09-30-2014 08:55 AM)Sp5 Wrote:  

The USA had an unprecedented run of broad-based prosperity growth from 1950 until about 1980, in which workers and owners both received a share of productivity growth in the economy. Since then, ordinary people have become debt slaves to mortgages to bubble-inflated real estate and credit card, while wages have not grown.

This is a misleading plot in a couple of different ways.

First, in the decades following 1970 women have entered the labor force in ever greater numbers, almost doubling its total size. When the supply of a commodity (in this case, labor) grows, the price will decrease. That has put downward pressure on hourly wages (meaning, the price of labor per unit time). The fact that hourly wages have been roughly flat in inflation-adjusted terms while the size of the labor force has increased dramatically actually shows that the wealth generated by our ever-growing productivity has, in fact, flowed back to wage-earners -- it's just that there are more of them now.

Second, looking at household incomes over these decades is misleading in another way, because the size of the average household has shrunk -- there are many more single person "households" now than there were in the past. So again, it's an unfair comparison because the same wealth per household (in inflation adjusted terms) really means more wealth per person.

Here is a plot of something that adjusts for both of these variables, real (meaning inflation adjusted) personal disposable income per capita. It looks like this:



As you see, no indication of a pause after 1980, just steady growth punctuated by occasional recessions. You can also see that, despite the frequent comparisons, the most recent recession is nothing like the Great Depression.

In pointing all this out, I care less about making a particular ideological point, than about showing, once again, that looking at a plot of a particular quantity can be very misleading and can lead to unjustified conclusions if you don't think carefully about whether this quantity makes sense as an indicator, and about possible alternative explanations for why it might be changing.