24 Pilot as filmed in 1994. As Don Boudreaux notes, its not just funny, but also something of a challenge to the notion that middle class incomes have gone nowhere for the last ten years.
Copyright © 2009 by The Atlantic Monthly Group. All rights reserved.
Middle class incomes have gone nowhere in the last ten years, as reams of economic data show. Technology, however, has not, as the clip cleverly illustrates. (Does anybody use AOL anymore?) The fact that people these days are laying out money in order to have broadband connections and mobile phones says nothing about their ability to afford these things.
The "notion" that middle class incomes have gone nowhere is borne out by actual, inflation-adjusted numbers. Whether the provable stagnation of real incomes has been accompanied by a (hard to prove) stagnation of living standards or purchasing power is a "notion" one could argue.
I happen to agree that middle class living standards and/or purchasing power has improved in the last ten years, but my individual situation has changed so dramatically that my view of the situation may be skewed.
"but also something of a challenge to the notion that middle class incomes have gone nowhere for the last ten years."
"The econoblogger delivers her opinions on economics, business, and other moral hazards"
such antics
"The "notion" that middle class incomes have gone nowhere is borne out by actual, inflation-adjusted numbers"
Unfortunately, official inflation numbers overstate the true cost of inflation.
Adjusting for inflation, if middle class income increased noticeably enough to finally cause those who lament its "stagnation" to take notice, would they not then say, as they did in the 80's, "Jiminy Cricket! The gap between rich and poor has widened, and the middle class have disappeared!!!" Suddenly, when the middle class "return", or rather when upward mobility slows, once again ... "Oh Lord, middle class incomes are going nowhere!"
GENIUS!!!
I'm sooooooo old!!!!! In 1994 I was a senior in high school - I now remember the old days.
Ahhhhhhhhhh!!!!
It would be a fairer assessment of income if we saw Jack Bauer gas up his car, pay his property tax bill, pay for a medical procedure, or try to get a child admitted to a selective school which he then has to pay for.
The "notion" that middle class incomes have gone nowhere is borne out by actual, inflation-adjusted numbers.
The point is that 'inflation-adjust numbers' fail to capture much of what's of interesting about the difference between a 1994 income and a 2008 income. There are a lot of things that we use frequently, every day that could not be had at any price in 1994. Some of these things are 'just' for entertainment (iPods, DVD players), but others are (now) basic enabling tools for many professions (including my own and including that of our host here).
How do you figure that all that into 'constant dollars'? There's really not right answer. How do you factor in, for example, the fact that in the period of 1994-2001, we have a few hundred family photographs in shoeboxes, whereas between 2001 and 2008 we have at least 10 times as many digital images?
Sure, they'd bore you to death, but they don't bore us. And the value put on this change has to be pretty high, since that's about the first thing you'd haul out of the house in case of fire after all the people were safe.
Or just how do you factor the value of not getting lost while driving? Or having a cell-phone for emergencies or to co-ordinate with friends and family?
Bottom line -- if you have exactly the same income now as in 1994 (adjusted for inflation in the usual fashion), you're still much richer now.
According to Census data the real income of the middle quintile of families has increased by about 10% from 1994 to 2005. That is under 1% per year, but it is still better then the long term trend since 1975 of about 0.7% growth.
But to place the type of thing in this video in the proper context everything in that video about e-mail and cell phones probably amounts to under 1% of the baskets of goods and services the typical middle class family purchases.
It looks like another example of Don Boudreaux creating another strawman to attack.
If in a period of roughly trend or above trend real gdp growth (about 3%) why does Don think that middle class real income growth of under one-third of real GDP growth is such a great deal. Compared to the much higher growth rate of the real income of the top two family income quintiles it certainly looks like stagnation to me. Of course if you ask Don what was the real income growth of the various family income quintiles was he probably would not know. After all this is the same PhD economist who wrote an entire newspaper article about how the CPI did not capture the quality improvements in autos -- he was completely ignorant of the point that the auto component of the CPI has been quality adjusted for decades.
Slocum:
My post was six lines long--did you somehow miss that I agree with the "bottom line" point (albeit with a caveat that maybe I'm out of touch due to my circumstances)?
Anyway, I presume when MM (or anyone who knows anything about econ) uses "income" re individuals she means income in a commonly-understood sense--not standard of living or purchasing power, but income. Look at the linked-to post:
For those who believe that America's middle-class has been economically stagnant, this short video gives you some reasons to doubt the stagnation hypothesis.
Boudreaux doesn't use "income", because it's not correct. "Economically stagnant" does not mean the same thing as "incomes going nowhere". Perhaps they are reasonable proxies, but I don't agree that they are in this case.
You point out that adjusted income doesn't capture the interesting differences--sure, I agree, but that's not the point. The interesting differences go beyond "income" and using "income" when discussing something more like purchase power or living standards (or something which isn't simply "income") is sloppy shorthand.
Does anyone know if, when people do these comparisons, they use core inflation (excluding food and energy) or overall inflation. Because if it's the former, then the official numbers would dramatically overstate income gains since food and energy prices have risen faster than core inflation.
I find it neither funny, nor a "challenge to the notion that middle class incomes have gone nowhere for the last ten years"
Are you stoned? That's the only explanation I can find to explain the giggling and the attempt to find deeper meaning that clearly isn't there.
Virgule --the real income data uses the CPI-RS.
This includes food and energy, but goes back in time to readjust the historic series to incorporate the changes made as a result of the Boskin Commission.
If we used the definition of inflation operative in 1980, inflation last year would have been about 12%
Inflation is seriously understated by government numbers, and real inflation numbers would show how little GDP growth we've had over the last 2 decades.
Jmo, I was a senior in 1984; if you're old, I'm ancient.
you're seriously asserting we've had little GDP growth over two decades? how old were you at the beginning of those two decades? if so, you'd realize that 88 seems in many ways like visiting some pre-fall communist country compared to today's affluence evident in just about everyone's (and i mean everyone's) waistlines, clothes, gadgets, entertainment options, etc.
liberalrob, you know what they say about still being a socialist at age 40, right? :)
Yeah, I know. I'm not an absolute socialist though; I hope that's come through in my comments.
Odd that a French radical liberal would coin one of the conservative movement's pithy quotes. Or maybe not so odd, conservatives having little creativity by definition :)
you're seriously asserting we've had little GDP growth over two decades? how old were you at the beginning of those two decades? if so, you'd realize that 88 seems in many ways like visiting some pre-fall communist country compared to today's affluence evident in just about everyone's (and i mean everyone's) waistlines, clothes, gadgets, entertainment options, etc.
The parties in question are attempting to score cheap points on a technicality since they know that the underlying assertion stands correct, regardless. MM has previously noted that Americans have largely been consuming their payroll increases in the form of increased benefits (healthcare, mostly). In addition to that, it is worth noting that ongoing growth in Chinese manufacturing has allowed the price of numerous consumer goods to fall greatly while incomes have continued to rise.
Or, as liberalrob might argue, it's all about one's wallet.
I'm not an absolute socialist though
No, inflation adjusted, naturally.
conservatives having little creativity by definition
Oh, we have plenty of creativity, but we have to use it all up thinking up new "code words" so that we can be secretly appeal to racial bigotry in elections. *($%# Bob Herbert keeps blowing our cover.
Or, as liberalrob might argue, it's all about one's wallet.
No, he'd argue it's all about his wallet. That's why the middle class took a 10% income hit this year. Thanks, Nancy Pelosi, so glad we put your party in power.
A common misconception. Being in the majority in Congress != being in power. QED.
My wallet is the only one whose contents I know intimately. So far I have no raise this year either, while inflation surges along with prices. Looks like another year of net economic loss for liberalrob. Thanks, President Bush.
Being in the majority in Congress != being in power.
OK, but without the Freemason membership lists, it's the best approximation we have.
Consider, though: your income (pardon me, middle class income) was higher in 2006 than 2007, yet Bush was in power both years; I don't see how we can escape the conclusion that Pelosi and Reid are out to destroy the middle class.
The habit of defining standard of living largely in terms of consumer electronics and telecomm is a curious one. I don't really consider the time I spend online to be the most valuable time of my life, and I don't consider cell phones to have immeasurably enhanced my social life. I certainly wouldn't go without them now that they're there; you can't, they redefine standard modalities of communication. But exactly how much do I think they're worth? Well, I spend maybe $200 a year on DSL, and maybe $3-400 on mobile calling. So that's one fairly clear indication of how much they're worth to me. In other words, I appear to be willing to spend twice as much for one night's dinner at a good restaurant as I am for a month of broadband connectivity.
This is a flawed analogy in many ways, but preaching that improvements in technology contain vast "hidden value" that isn't measured in their prices seems to partake of many notions which market purists generally eschew as superstition.
The video was hilarious. With all the nerdy, wonky comments here I'm worried about the younger generation. Lighten up people!
Seriously, Megan's point still stands. You are not the same person you were 14 years ago and the basket of goods and services that you would buy with your income today is not what you'd buy in 1994.
Politics is driven by much shorter term changes in well-being, to use a something other than income. The presidential candidates are not incumbents and whatever happened to people's well-being over the past couple of years happened on the watch of the current Congress.
You can't eat data.
Shorter Jim Linnane: So you say this guy took all your money, and then -- hey! Look over there! Oh, sorry, just lightning bugs. Now, you were saying...? George W. who? I'm sorry, no one here answers to that name.
To put it another way: all of the technological improvements we recognize in that video (by their absence) had already taken place by 2001. It would have looked just as obsolete in the first year of "24" as it does now. And, as everyone recognizes, wages DID improve for all quintiles and all sectors of the US workforce from 1994-2001. So from 1994 to 2001, not only was there a revolutionary improvement in the general level of background communications infrastructure everyone was using, but there was ALSO solid growth in the wages people had available to purchase such technology.
From 2001-2007, wages have been stagnant or fallen for the large majority of the American workforce. Find excuses if you will for the failure to match the performance of the '90s. But don't pretend it's been matched.
Hmm, my wages have over doubled since 1994. My household wealth has increased tenfold at least.
Hint: most people's incomes and household wealth have increased! The people in the lower ranks are not the same people still in the lower ranks when you look again ten or twenty years later.
So, the rich get richer, and so do the poor!
Oh, woe is me, I spend so much more on my benefits! Yes, grumble grumble, my health insurance premiums have increased to $26 per month! Oh, the pain! And I've had two cancers in the past few years. My current year medical bills are $374k July-December; of which I've paid a whole (shock!) $120!!! I should flee to Canada for the free health care! coff coff
my health insurance premiums have increased to $26 per month!
How nice for you. My friend's health insurance premiums for herself and one child have increased to $1800 per month. They are both completely healthy.
Yes, brooksfoe, GW Bush is not on the ballot but his party is, so it is a likely Democratic year if by November people feel poorer than they did in November of 2007.
Iteresting about health care. Most Americans, so far, have health insurance paid by their employer, which was kentuckyliz's point. To get health reform, someone must convince them to either give up what they have or pay more in taxes so that others can have what they have. It is possible to do so, but it will be difficult.
For years, single payer advocates have been saying that a multiple payer system causes a lot of overhead at all levels of the health care system. Thus, it is possible, in theory, that a single payer health care system by wringing out that overhead could cover everyone with neither an increase in anyone's cost nor a significant decrease in providers' incomes. It is harder to make that case when you are layering coverage for the uninsured on to the existing system.
Where would the money come from? Many Democrats advocate some sort of tax on the payrolls of employers who do not cover their workers. What would such a tax do to the ability of those employers to pay their employees a decent wage? What would such a tax do to incentives to outsource work overseas? What would such a tax do to incentives to hire undocumented workers off the books?
Does anyone think about these things?
As a self-employed small businessman, my income took a dramatic turn upward 1994-2001, increased slightly each year 2002-2004, and has been flat and trending downward 2005-2007. Sales have taken a particular downward turn the last four months, as it seems people have less discretionary income to spend on the service I provide. The economy does not feel healthy.
The biggest drag on our family income is health insurance. Even with insurance, our medical bills for prescriptions and a couple of minor surgeries have been thousands of dollars per year the last three years. The money that I had been putting into our IRAs 2000 through 2004 has been going to health care the last three years even though we have insurance. It's a drag on our net worth and standard of living and it's getting worse. And I know a lot of people in even worse shape than we are...our debt load is relatively mild, but several of our friends are way over their heads. We are OK basically, but people who say the economy is doing great or that health coverage isn't an issue that needs to be dealt with really need to get out more.
The cost of gasoline has been a huge problem the last year as well. I have had to curtail business travel during the summer and raise fees for my clients due to the increased cost of gasoline. My wife noted last week while grocery shopping that the cost of milk, bread, and other staples has shot up considerably. Both of the grocery stores we shop at raised the price of staple items including crackers, soup, toothpaste, and toilet paper as much as 10-15% this month compared to the same prices in November.
It feels like stagflation out there.
FDRLincoln, Yes, stagflation is what it is. It is pretty scary. The cure for stagflation in the early 1980s was a brutal recession caused by reigning in the money supply. The only way out of the recession after that was huge fiscal deficits relative to the total economy. Hold on tight because here we go again. Politicians didn't have a clue in the 1980s and they don't have a clue now. Carter sealed his doom and practically guaranteed a recession for Reagan by appointing Volker to the Fed. Reagan believed the supply side nonsense that cutting taxes would increase revenues and willy-nilly caused the deficits that cured the recession. Bernanke probably knows that an easy monetary policy, while it may stave of recession, is going to fuel inflation; but is going ahead anyway. The next president is going to have problems that she or he is not aware of now.
It's not just computers and consumer electronics that have improved since the 1980's... The toys my kids have are so much cooler than anything I had when I was a kid. Some of that involves electronics, but a lot of it is just more variety and complexity of non-electronic toys.
The variety of food available at my local non-fancy grocery store is astounding compared to what was available when I was a kid. They even have a whole display of sushi.
As far as medical insurance goes, I just don't see how any reasonable system is going to make it so that people with really expensive medical problems don't have to pay for them. While I don't really want to see someone driven into poverty by a serious (particularly unforseen) medical issue, I also am not exactly interested in taxing people to make sure that people with serious, chronic problems don't suffer ANY economic consequences.
I would love to see health insurance de-coupled from employment so that there would actually be a market for health insurance instead of the system we have now where the consumers are almost entirely insulated from the costs. Solving that problem by insulating the consumers even more from the cost doesn't seem like a good idea.
Earnest Iconoclast:
As far as medical insurance goes, I just don't see how any reasonable system is going to make it so that people with really expensive medical problems don't have to pay for them.
And when they run out of money, they die? How convenient for the rest of us.
Did I say that people should die if they run out of money and can't afford medical care? I don't see where I said that.
It's possible for there to exist a point that lies not at one end or the other of the spectrum. I believe that medical costs should be born by the patient to a large extent. That doesn't mean that I want people who have no money to be tossed out onto the street to die. If I suffer some major catastrophe in my life, I may end up having to spend a lot of money and/or I may end up having to give up other things. I don't see why medical care should not be like this, at least to some extent. I do want to ensure that people get necessary medical care even if they can't afford it.
I am currently paying for ongoing medical treatment. I'm paying private practitioners who charge the market rate for their services. My insurance does cover some of the cost, but I'm still paying quite a bit. I don't expect the government to cover my costs or demand that my providers lower their rate to something more "fair."
Lets see ... a little andecotal evidence for you ...
... in 1999, I was paying $100 to $300 a month for my total phone bill. Today, with my broadband connection and Vonage, I pay less than $100 a month for BOTH phone and Internet access in the bargain.
... the same Internet access that allows my wife to order online much of what we used to have to shop around for, reducing our transportation expenses.
... and when we have to get in the car, we get better gas mileage today, while still keeping the safety of a full-size car.
Gas more expensive? Yes ... thanks to both the sheiks of Araby and the enviro-fundamentalists, who would be more than happy to take us back to a 19th-century future ...
... but thanks is also due to the greedy SOBs who designed more efficient products in areas from appliances to insulation, and kept my utility bills low even as energy costs went up ... that is, until I moved to Long Island and political costs were added to the bill.
As for those of you whose incomes did increase in the last eight years ... can you say:
"Tech bubble"
"9/11"
"The bill for those cushy union jobs in the auto industry finally coming due"
?????
I am a tech-bubble survivor -- and by the grace of the Almighty, mixed in with sense enough to keep my skills marketable, my income steadily went up in the last eight years.
My biggest problem ... and I am sure it is one I share with many now feeling the pinch ... can't be blamed on the President, or Congress, or anyone else: attempts to live a Crown Royal lifestyle on a soda-pop budget.
Maybe if more of us "po folks" listened less to HillBillary and Obama and the Johns ... and listened more to people like Suze Orman and Dave Ramsey ... some (not all -- I'm not that heartless!) wouldn't be so po'?
And we could afford that health insurance, too ... especially if we put a stop to the activities of one of those John's and his trial-lawyer buddies.
Speaking of which ... I must ask those of you who advocate single-payer healthcare ...
... do you consider the Patriot Act an undue infringment on your civil liberties?
... do you believe that it is "your body-your choice!" regarding abortion?
If you have been one of those who have stridently pushed one or both of those positions ... guess what, you can now add "hypocrite" to your resume, for placing the control of your healthcare -- your body -- under such a system has far greater potential for abuse of your civil liberties ... and even life itself ... than John Ashcroft and Mike Huckabee as your President and VP!
Correction:
"As for those of you whose incomes did not increase in the last eight years ..."
PIMF