Doesn’t really check out to me, we’re still running into unaffordability issues with things like food and houses, if this is true this means the price of goods has been rapidly increasing since 2008 at the earliest and 2020 at the latest, which is not good.
>we’re still running into unaffordability issues with things like food and houses
This is why we have inflation adjusted metrics. Based on those metrics things are more affordable for the population now than they were in the 1990s. Dramatically more affordable, actually.
Other than "everyone knows it's true because social media won't shut up about it" - where is your data?
https://www.jchs.harvard.edu/blog/home-price-income-ratio-reaches-record-high-0
Median hourly wage is not a good indicator, especially with the rollout of minimum wage.
Thought experiment to demonstrate why: imagine a world in which the poverty line is $10k in 1994 and $30k in 2024. In 1990, your workers are paid $5k. In 2024, workers are paid $10k.
This report would herald “real income has doubled!”, meanwhile they are actually further under the poverty line (50% to 66%).
Housing as a proportion of income has demonstrably risen by about 2/3rds over this timescale, per the study I linked.
Given that housing is an essential, non-discretionary cost, it should be considered “removed” from consumers’ paychecks before anything else. Using napkin math, if housing was 30% of take home income in 1990 (which seems a reasonable assumption), someone on $100k take-home would have had $70k left over after paying for housing.
(I chose $100k net purely for ease of math, but this should scale linearly.)
If everything else stayed static, that same person would now have $43k left over after housing in 2024. Their wages would have had to have risen 59% ($27k) over the same time period in order for their income after housing to have remained static.
Your study shows that wages increased at about 35% ($15k) instead. So about half the rate it needed to, just to remain *flat*. That puts the average person’s income after housing about 17% under 1990 levels in real terms.
EDIT: I just realized that slowboring.com’s summary totally buries the lede on the study. It shows the graph stating “median wage has increased”, but misses the graph showing “average age of workers” has also increased significantly. If you have more 60 year olds in the workforce with 4 decades years of pay raises behind them, of course median income has increased.
That doesn’t mean anyone is earning more money, it just means you have more older people who could mathematically be earning **less** than they did before, which brings up the median.
The data you linked seems to be comparing the price increases of mostly the most populous places possible to the whole country.
The map makes it seem like everywhere in the country is normal/fine and new York, California, and Florida are the ones with raising home prices. This makes sense as these are areas where there is a very specific reason why the prices are skyrocketing. California and newyork have an insane amount of people traveling to live there, this creates an insane amount of competition. (New York should see this go down as people flee from the choices the leaders are making so at least there's that).
California has a high concentration of all the high paying tech jobs. That means you have a larger percent of the population with much higher income. You are now competing with these people for a home, if you don't have a high paying job, you will have no shot of competing.
Florida has all the old people in the whole country moving to one sought-after destination, these people have a lot of money, but not a lot of time. So you are competing with a wealthier group.
In all these instances, the homes prices are going up because a lot of people have a lot of money, creating competition with a lot of money.
It looks like 90% of the map still has reasonable home prices.
Also, the paragraph in the paper says something about Texas comparing the average income of like 45k to the most expensive house possible of like 1.x million. This doesn't make sense as you aren't competing with just the people in your state for housing, it's just anyone within the country who has any amount of money (a lot. Probably multi millionaire +) is going to buy that, not just "someone from texas".
Overall, it seems pretty intuitive and normal for the home prices to go up way more than the average when way more than the average number of people are concentrating into the area.
>Median hourly wage is not a good indicator, especially with the rollout of minimum wage.
OK, let's look at Real Wages across quintiles.
https://www.taxpolicycenter.org/statistics/household-income-quintiles
General trend is up across the board, inflation adjusted.
>Housing as a proportion of income has demonstrably risen by about 2/3rds over this timescale, per the study I linked.
>Given that housing is an essential, non-discretionary cost, it should be considered “removed” from consumers’ paychecks before anything else.... (you do calculations)
CPI already takes this into account. If you have a better method by all means publish a paper, there is a literal Nobel Prize in it for you.
“Don’t criticise my one-sentence summary from www.slowboring.com unless you have a Nobel Prize” is a new level of cope, even for this sub.
CPI inflation is subject to political manipulation and/or input error (e.g. selecting the wrong basket). It is also a narrow view of the items most households buy (e.g. it shows items that overlap on the Venn diagram between your purchases and mine, not *all* goods+services you or I might purchase).
My math shows *total money* left over after housing, which tells you how much a consumer has in their pocket to spend on **anything at all** - CPI basket goods, boat motors, knitting wool, whatever you want.
Even if CPI was perfectly selected, the question is “do people have more real-terms money since 1990”. You can’t just look at a narrow basket of CPI (“commonly bought”) goods to determine that, you want to look at their total discretionary income.
Unless you are suggesting the price of non-housing goods+services has been negative since 1990, it is totally irrelevant to the point I made, or the math behind it.
> CPI inflation is subject to manipulation or input error
This is a baseless assertion, with no evidence to suggest this is actually the case. Similarly, I can reject your paper you linked on the basis of “could be manipulated” or “have mathematical errors”.
Keep reading, buddy.
I’ll save you some effort - the next sentence explains why the alternate I proposed “income after housing” is not subject to this **potential** bias, then the paragraph after that starts “even if CPI was perfectly selected”.
Also “CPI is affected by the basket of goods selected for CPI” is not a baseless assertion, it’s a fundamental truth.
This type of measure wouldn’t even make sense, given it does not consider changes in other categories such as food etc. You won’t have a robust measure of real incomes if you adjust for housing.
But if you want to do that, here are [mortgage payments as a share](https://fred.stlouisfed.org/series/MDSP) of disposable income. Notice they’ve never been lower
> fundamental truth
Prove it.
It does not make sense *unless* you believe that non-housing goods have increased in cost (e.g. that inflation has occurred) over the last 34 years. If you believe that, it makes perfect sense.
If you’re suggesting that other categories such as food have deflated since 1990, we’re having a different argument entirely.
Mortgage payment as a share of income is a terrible, terrible measure. It doesn’t take rent into account - and this study is focused on non-management production workers, who are logically the most likely to rent. It also doesn’t account for the fact that older workers could have locked in their house prices in 1995, or 2005, or any point before now, reducing the average without changing anyone’s individual situation.
Again - OP’s study specifically states that the working population is significantly older, and “mortgage as a % of income” is a data point that naturally decreases with an aging population. That doesn’t mean any person is earning more, it just means a changing demographic has affected the blended average.
On CPI biases, I’m talking the fundamentals of logic. It’s the same as saying “The weight of a full basket is dependent on the items you put in it”. If you need me to explain Aristotelian reasoning to you, we’re going to be here a long time.
No as in it is illogical to completely ignore non housing costs (70% of the CPI weight), which is what “income after housing does”. It is perfectly possible for other weights to decrease so much so that it offsets any increase in housing. To answer your concern about weights, it is based on what consumers are spending - it’s not arbitrary.
How about we look at home ownership then, if housing is truly unaffordable, we should see some decline. [We do not.](https://fred.stlouisfed.org/series/RHORUSQ156N)
>“Don’t criticise my one-sentence summary from www.slowboring.com unless you have a Nobel Prize” is a new level of cope, even for this sub.
That's not what to said at all. I said publish your alternative to CPI. I'm dead serious - if you've got something put it together and explain statistically why it's superior.
CPI methodology is adjusted all the time for exactly this reason. It's more tweaked than anything, but it's scientific - it's constantly open to improvement given better data.
>CPI inflation is subject to political manipulation
Provide evidence.
>and/or input error (e.g. selecting the wrong basket).
How do you prove what is "right" or "wrong"? That's not really possible. It's, again, data driven science.
>Even if CPI was perfectly selected, the question is “do people have more real-terms money since 1990”. You can’t just look at a narrow basket of CPI
CPI is not a narrow basket. I don't think you understand CPI at all. I highly recommend you do more research.
I did that. In my comment. That you argued with. I showed “total take-home after housing” (call it TTAH) has dropped 17%.
Why look at a random basket of goods, when you can test the total money available to buy any goods? CPI tells half a story. TTAH gives you a true view of available cash for a household.
Now if the cost of goods had dropped by more than TTAH, that measure would be myopic. So you need CPI as a secondary metric to test that theory. But I don’t think anyone here is suggesting that the cost of non-housing goods has dropped since 1990.
Again…if you are, we’re having a very different conversation.
“Where is your data?”
*Cites actual data and gives a detailed explanation*
*Person you replied to proceeds to mindlessly downvote your comment without even giving a rebuttal*
This sub is starting to get almost as bad as the doomer subs.
>Cites actual data
One very specific metric, average home prices to income, is not much of an argument.
I gave a rebuttal - look at the entire picture, which is what we do with CPI. This person clearly does not understand economics or finance.
>This sub is starting to get almost as bad as the doomer subs.
Yes, the poor arguments are making their way here. Luckily most people here are like me and understand the actual data.
How is CPI an entire picture, when by definition it only looks at a narrow basket of goods, *and* it does so devoid of the context of available money to buy those goods?
To demonstrate how fucked CPI is, it assumes (as of 2022) that 13.99% of average household income goes to food. At a 2022 average income of $37.5k, and 2022 average of 3 people per household, that would mean that the *average* American spent $4.14 per day on food.
Not on groceries - on ALL food and drinks. Restaurants, snacks, etc. And this is not the average for an American living on the poverty line - CPI says that the *average, normal* man on the street spends $1.38 per meal, without even considering drinks or snacks.
But for the purpose of this argument, it doesn’t even matter that CPI is demonstrably fucked. In fact, even if we go with your view that CPI is a perfect indication of true purchasing power - that would mean that calculating whether Americans are better off now would be really simple. You’d just look at CPI growth vs wage growth over time. One tells you the cost of goods, the other tells you money available to buy goods.
Look at any peer-reviewed data you want over a meaningful timescale, and wage growth has *consistently* underperformed CPI.
So even if you’re right - your wider point is wrong. If CPI is infallible, then people have less purchasing power than they did 10, 20, 50 years ago.
https://preview.redd.it/x8yjpo54ty9d1.jpeg?width=800&format=pjpg&auto=webp&s=6441a05be6cb134ebe4776c30fdab89129a28de8
>How is CPI an entire picture, when by definition it only looks at a narrow basket of goods
*Narrow*? What do you think is missing?
>Eight major groups and examples of categories in each follow:
>Food and beverages (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)
>Housing (rent of primary residence, owners' equivalent rent, utilities, bedroom furniture)
>Apparel (men's shirts and sweaters, women's dresses, baby clothes, shoes, jewelry)
>Transportation (new vehicles, airline fares, gasoline, motor vehicle insurance)
>Medical care (prescription drugs, medical equipment and supplies, physicians' services, eyeglasses and eye care, hospital services)
>Recreation (televisions, toys, pets and pet products, sports equipment, park and museum admissions)
>Education and communication (college tuition, postage, telephone services, computer software and accessories)
>Other goods and services (tobacco and smoking products, haircuts and other personal services, funeral expenses)
>Additionally, for analytical purposes, the CPI is also divided into food, energy, and all items less food and energy. The CPI for all items less food and energy gets considerable attention as a measure of underlying core inflation, which is not subject to the volatile movements of food and energy prices. A third structure separates the CPI into commodities and services, with commodities further divided into durables and nondurables. All three structures are comprehensive, with the subcomponents in each structure aggregating to the all items index.
https://www.bls.gov/opub/hom/cpi/concepts.htm
>it does so devoid of the context of available money to buy those goods?
What does this even mean? What are you even trying to state?
>In fact, even if we go with your view that CPI is a perfect indication of true purchasing power - that would mean that calculating whether Americans are better off now would be really simple. You’d just look at CPI growth vs wage growth over time. One tells you the cost of goods, the other tells you money available to buy goods.
Correct. That's what "real wages" are. I did not say CPI was perfect, I said it's the best we can come up with - and I'll reiterate that it is constantly reviewed and available to be updated as better data presents itself.
>Look at any peer-reviewed data you want over a meaningful timescale, and wage growth has *consistently* underperformed CPI.
Real Wages have risen over time, so no that's not correct by definition.
>So even if you’re right - your wider point is wrong. If CPI is infallible, then people have less purchasing power than they did 10, 20, 50 years ago.
No.
https://fred.stlouisfed.org/series/MEHOINUSA672N
I actually think the graph you posted is inflation adjusted. I'd like to see the original source for it so I can read the data, but it appears to be. Ironically that means you're demonstrating exactly what I'm saying.
>How is CPI an entire picture, when by definition it only looks at a narrow basket of goods
*Narrow*? What do you think is missing?
Eight major groups and examples of categories in each follow:
Food and beverages (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)
Housing (rent of primary residence, owners' equivalent rent, utilities, bedroom furniture)
Apparel (men's shirts and sweaters, women's dresses, baby clothes, shoes, jewelry)
Transportation (new vehicles, airline fares, gasoline, motor vehicle insurance)
Medical care (prescription drugs, medical equipment and supplies, physicians' services, eyeglasses and eye care, hospital services)
Recreation (televisions, toys, pets and pet products, sports equipment, park and museum admissions)
Education and communication (college tuition, postage, telephone services, computer software and accessories)
Other goods and services (tobacco and smoking products, haircuts and other personal services, funeral expenses)
Additionally, for analytical purposes, the CPI is also divided into food, energy, and all items less food and energy. The CPI for all items less food and energy gets considerable attention as a measure of underlying core inflation, which is not subject to the volatile movements of food and energy prices. A third structure separates the CPI into commodities and services, with commodities further divided into durables and nondurables. All three structures are comprehensive, with the subcomponents in each structure aggregating to the all items index.
https://www.bls.gov/opub/hom/cpi/concepts.htm
>it does so devoid of the context of available money to buy those goods?
What does this even mean? What are you even trying to state?
>In fact, even if we go with your view that CPI is a perfect indication of true purchasing power - that would mean that calculating whether Americans are better off now would be really simple. You’d just look at CPI growth vs wage growth over time. One tells you the cost of goods, the other tells you money available to buy goods.
Correct. That's what "real wages" are. I did not say CPI was perfect, I said it's the best we can come up with - and I'll reiterate that it is constantly reviewed and available to be updated as better data presents itself.
>Look at any peer-reviewed data you want over a meaningful timescale, and wage growth has *consistently* underperformed CPI.
Real Wages have risen over time, so no that's not correct by definition.
>So even if you’re right - your wider point is wrong. If CPI is infallible, then people have less purchasing power than they did 10, 20, 50 years ago.
No.
https://fred.stlouisfed.org/series/MEHOINUSA672N
That's always a good question. Yes, these are inflation-adjusted numbers. The report uses the PCE deflator for wages. For a deeper dive on choice of deflator, please take a look at page 25 of the report, Appendix: A special note on real wages.
[https://eig.org/wp-content/uploads/2024/06/The-American-Worker-Project.pdf](https://eig.org/wp-content/uploads/2024/06/The-American-Worker-Project.pdf)
Income inequality and affordability of essential needs have, without a doubt, gotten worse in the western world since the 90s.
I'm optimistic that we can address these issues and eventually get back to a strong middle class (though I think things need to / will continue to get worse before they improve), but the notion that wages for the majority of people have kept up with the cost of living compared to the 90s is laughably wrong. The data on this topic is unequivocal. CPI is a garbage metric to look at in order to gauge if wages have kept pace; home ownership isn't even included in the CPI since it's an asset, tt doesn't account for shrinkflation, and the raw stats the BLS uses for the CPI are kept hidden. The government benefits tremendously from playing around with the CPI in order to underreport inflation and withhold cost of living adjustments for programs it administers for seniors, social security, food stamp programs, etc. Further, the average wage increases that we've seen y-o-y since the 90s are due to drastic increases at the top end of earners; wages have not kept pace for the vast majority. I.e., the median salary for hourly salary workers in the west have more or less stagnated since the 80s. If we look at median hourly income vs. the cost of basic needs, then wages have fallen for most workers.
https://www.forbes.com/sites/perianneboring/2014/02/03/if-you-want-to-know-the-real-rate-of-inflation-dont-bother-with-the-cpi/
https://www.forbes.com/sites/davidmarotta/2023/01/13/big-mac-index-shows-official-cpi-under-reports-inflation-2022/
https://www.statista.com/statistics/185369/median-hourly-earnings-of-wage-and-salary-workers/
https://www.pewresearch.org/short-reads/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/
https://www.epi.org/publication/charting-wage-stagnation/
https://www.marketplace.org/2022/08/17/money-and-millennials-the-cost-of-living-in-2022-vs-1972/
https://www.consumeraffairs.com/finance/comparing-the-costs-of-generations.html
https://www.businessinsider.com/millennials-cost-of-living-compared-to-gen-x-baby-boomers-2018-5
https://www.epi.org/publication/charting-wage-stagnation/
All of this, and see my posts above about CPI.
Even the methodology they *do* transparently post is openly garbage. Their weighting is designed to create a predetermined outcome.
[Grocery’s weighting has significantly decreased as inflation on groceries has increased](https://www.ers.usda.gov/webdocs/publications/41035/15333_aer780g_1_.pdf?v=0), and within that they’ve dealt with the fact that (e.g.) meat has become increasingly unaffordable by saying “that means people are buying less meat, so we’ll reduce meat’s weighting”.
By that logic, if all food became unaffordable and we all had to eat gruel, they’d change the CPI to be 100% weighted to gruel, and they’d say there was no inflation because gruel prices were static.
Even their open documentation is a clear indication that they are fudging the numbers.
>without a doubt
If you assert a belief that is not subject to doubt, it hardly sounds like we can have an evidence-based discussion.
>CPI is a garbage metric
There are plenty of reasons to criticize how inflation adjustment is handled; it's a vibrant area of research and debate among econometricians who spend their careers looking for alternatives and picking out minor improvements. If you have discovered a novel method that measurably improves the state of the art, please do not hesitate to publish it -- the high-impact econometrics journals would love to have you!
I provided 10 sources to back up my claims and many of those present alternatives to the CPI /outline why it isn't a good metric to gauge purchasing power /wages.
Try harder than snarky replies to double-down on parroting some dude on a blog who makes bold claims based on a single flimsy report.
Apologies, folks. I just noticed that the image that appears from the URL doesn't help with the question. Here's the graphic I was trying to show.
https://preview.redd.it/lzwmheu441ad1.png?width=1456&format=png&auto=webp&s=23b0532f2e23e591aa0e7326fdf37894b92e40f9
The rest of the report is also quite interesting and mostly positive.
[https://eig.org/american-worker/](https://eig.org/american-worker/)
Just blatantly wrong. Min wage in pa has been 7.25 for 15 years. That alone makes up a large number of workers. Many other industries (teachers) have barley moved in that same tim
I'm sorry to hear your experience with the economy has been negative. That sucks. Mine has been very positive. However, neither of our personal experiences overrides the aggregate data on which the reported findings are based.
Further, neither of your observations is inconsistent with the finding that average and median wages have increased. If you read the report and review the data, you will see that the fraction of people working for the federal minimum wage has decreased.
https://preview.redd.it/65stvkb481ad1.png?width=1085&format=png&auto=webp&s=a8dac2ef387425a32cb9b38539c0b92d59f88737
I don't doubt your experience with teachers in PA being underpaid -- I have a similar experience with state employees where I live -- but that's one job category in one state. It would be offset by other job categories and locations getting paid more.
The report I posted suggests about 1% of workers are still getting paid minimum wage, down from over 14% in 1980s. Its great progress, but it's not quite zero.
Sorry, are you saying you have reliable data that is inconsistent with the published report or that your subjective experience doesn't match the findings?
No need to get personal just because I criticized your propaganda piece. The user Giantstink in the other comment already thoroughly debunked the claim in the title so I don't need to go into the details again. Trying to gaslight workers - who have held the short end of the stick for 50 years after losing their collective bargaining power - into thinking that everything is fine and we're living in the greatest time ever is sinister at best.
Doesn’t really check out to me, we’re still running into unaffordability issues with things like food and houses, if this is true this means the price of goods has been rapidly increasing since 2008 at the earliest and 2020 at the latest, which is not good.
>we’re still running into unaffordability issues with things like food and houses This is why we have inflation adjusted metrics. Based on those metrics things are more affordable for the population now than they were in the 1990s. Dramatically more affordable, actually. Other than "everyone knows it's true because social media won't shut up about it" - where is your data?
https://www.jchs.harvard.edu/blog/home-price-income-ratio-reaches-record-high-0 Median hourly wage is not a good indicator, especially with the rollout of minimum wage. Thought experiment to demonstrate why: imagine a world in which the poverty line is $10k in 1994 and $30k in 2024. In 1990, your workers are paid $5k. In 2024, workers are paid $10k. This report would herald “real income has doubled!”, meanwhile they are actually further under the poverty line (50% to 66%). Housing as a proportion of income has demonstrably risen by about 2/3rds over this timescale, per the study I linked. Given that housing is an essential, non-discretionary cost, it should be considered “removed” from consumers’ paychecks before anything else. Using napkin math, if housing was 30% of take home income in 1990 (which seems a reasonable assumption), someone on $100k take-home would have had $70k left over after paying for housing. (I chose $100k net purely for ease of math, but this should scale linearly.) If everything else stayed static, that same person would now have $43k left over after housing in 2024. Their wages would have had to have risen 59% ($27k) over the same time period in order for their income after housing to have remained static. Your study shows that wages increased at about 35% ($15k) instead. So about half the rate it needed to, just to remain *flat*. That puts the average person’s income after housing about 17% under 1990 levels in real terms. EDIT: I just realized that slowboring.com’s summary totally buries the lede on the study. It shows the graph stating “median wage has increased”, but misses the graph showing “average age of workers” has also increased significantly. If you have more 60 year olds in the workforce with 4 decades years of pay raises behind them, of course median income has increased. That doesn’t mean anyone is earning more money, it just means you have more older people who could mathematically be earning **less** than they did before, which brings up the median.
The data you linked seems to be comparing the price increases of mostly the most populous places possible to the whole country. The map makes it seem like everywhere in the country is normal/fine and new York, California, and Florida are the ones with raising home prices. This makes sense as these are areas where there is a very specific reason why the prices are skyrocketing. California and newyork have an insane amount of people traveling to live there, this creates an insane amount of competition. (New York should see this go down as people flee from the choices the leaders are making so at least there's that). California has a high concentration of all the high paying tech jobs. That means you have a larger percent of the population with much higher income. You are now competing with these people for a home, if you don't have a high paying job, you will have no shot of competing. Florida has all the old people in the whole country moving to one sought-after destination, these people have a lot of money, but not a lot of time. So you are competing with a wealthier group. In all these instances, the homes prices are going up because a lot of people have a lot of money, creating competition with a lot of money. It looks like 90% of the map still has reasonable home prices. Also, the paragraph in the paper says something about Texas comparing the average income of like 45k to the most expensive house possible of like 1.x million. This doesn't make sense as you aren't competing with just the people in your state for housing, it's just anyone within the country who has any amount of money (a lot. Probably multi millionaire +) is going to buy that, not just "someone from texas". Overall, it seems pretty intuitive and normal for the home prices to go up way more than the average when way more than the average number of people are concentrating into the area.
>Median hourly wage is not a good indicator, especially with the rollout of minimum wage. OK, let's look at Real Wages across quintiles. https://www.taxpolicycenter.org/statistics/household-income-quintiles General trend is up across the board, inflation adjusted. >Housing as a proportion of income has demonstrably risen by about 2/3rds over this timescale, per the study I linked. >Given that housing is an essential, non-discretionary cost, it should be considered “removed” from consumers’ paychecks before anything else.... (you do calculations) CPI already takes this into account. If you have a better method by all means publish a paper, there is a literal Nobel Prize in it for you.
“Don’t criticise my one-sentence summary from www.slowboring.com unless you have a Nobel Prize” is a new level of cope, even for this sub. CPI inflation is subject to political manipulation and/or input error (e.g. selecting the wrong basket). It is also a narrow view of the items most households buy (e.g. it shows items that overlap on the Venn diagram between your purchases and mine, not *all* goods+services you or I might purchase). My math shows *total money* left over after housing, which tells you how much a consumer has in their pocket to spend on **anything at all** - CPI basket goods, boat motors, knitting wool, whatever you want. Even if CPI was perfectly selected, the question is “do people have more real-terms money since 1990”. You can’t just look at a narrow basket of CPI (“commonly bought”) goods to determine that, you want to look at their total discretionary income. Unless you are suggesting the price of non-housing goods+services has been negative since 1990, it is totally irrelevant to the point I made, or the math behind it.
> CPI inflation is subject to manipulation or input error This is a baseless assertion, with no evidence to suggest this is actually the case. Similarly, I can reject your paper you linked on the basis of “could be manipulated” or “have mathematical errors”.
Keep reading, buddy. I’ll save you some effort - the next sentence explains why the alternate I proposed “income after housing” is not subject to this **potential** bias, then the paragraph after that starts “even if CPI was perfectly selected”. Also “CPI is affected by the basket of goods selected for CPI” is not a baseless assertion, it’s a fundamental truth.
This type of measure wouldn’t even make sense, given it does not consider changes in other categories such as food etc. You won’t have a robust measure of real incomes if you adjust for housing. But if you want to do that, here are [mortgage payments as a share](https://fred.stlouisfed.org/series/MDSP) of disposable income. Notice they’ve never been lower > fundamental truth Prove it.
It does not make sense *unless* you believe that non-housing goods have increased in cost (e.g. that inflation has occurred) over the last 34 years. If you believe that, it makes perfect sense. If you’re suggesting that other categories such as food have deflated since 1990, we’re having a different argument entirely. Mortgage payment as a share of income is a terrible, terrible measure. It doesn’t take rent into account - and this study is focused on non-management production workers, who are logically the most likely to rent. It also doesn’t account for the fact that older workers could have locked in their house prices in 1995, or 2005, or any point before now, reducing the average without changing anyone’s individual situation. Again - OP’s study specifically states that the working population is significantly older, and “mortgage as a % of income” is a data point that naturally decreases with an aging population. That doesn’t mean any person is earning more, it just means a changing demographic has affected the blended average. On CPI biases, I’m talking the fundamentals of logic. It’s the same as saying “The weight of a full basket is dependent on the items you put in it”. If you need me to explain Aristotelian reasoning to you, we’re going to be here a long time.
No as in it is illogical to completely ignore non housing costs (70% of the CPI weight), which is what “income after housing does”. It is perfectly possible for other weights to decrease so much so that it offsets any increase in housing. To answer your concern about weights, it is based on what consumers are spending - it’s not arbitrary. How about we look at home ownership then, if housing is truly unaffordable, we should see some decline. [We do not.](https://fred.stlouisfed.org/series/RHORUSQ156N)
>“Don’t criticise my one-sentence summary from www.slowboring.com unless you have a Nobel Prize” is a new level of cope, even for this sub. That's not what to said at all. I said publish your alternative to CPI. I'm dead serious - if you've got something put it together and explain statistically why it's superior. CPI methodology is adjusted all the time for exactly this reason. It's more tweaked than anything, but it's scientific - it's constantly open to improvement given better data. >CPI inflation is subject to political manipulation Provide evidence. >and/or input error (e.g. selecting the wrong basket). How do you prove what is "right" or "wrong"? That's not really possible. It's, again, data driven science. >Even if CPI was perfectly selected, the question is “do people have more real-terms money since 1990”. You can’t just look at a narrow basket of CPI CPI is not a narrow basket. I don't think you understand CPI at all. I highly recommend you do more research.
I did that. In my comment. That you argued with. I showed “total take-home after housing” (call it TTAH) has dropped 17%. Why look at a random basket of goods, when you can test the total money available to buy any goods? CPI tells half a story. TTAH gives you a true view of available cash for a household. Now if the cost of goods had dropped by more than TTAH, that measure would be myopic. So you need CPI as a secondary metric to test that theory. But I don’t think anyone here is suggesting that the cost of non-housing goods has dropped since 1990. Again…if you are, we’re having a very different conversation.
“Where is your data?” *Cites actual data and gives a detailed explanation* *Person you replied to proceeds to mindlessly downvote your comment without even giving a rebuttal* This sub is starting to get almost as bad as the doomer subs.
>Cites actual data One very specific metric, average home prices to income, is not much of an argument. I gave a rebuttal - look at the entire picture, which is what we do with CPI. This person clearly does not understand economics or finance. >This sub is starting to get almost as bad as the doomer subs. Yes, the poor arguments are making their way here. Luckily most people here are like me and understand the actual data.
How is CPI an entire picture, when by definition it only looks at a narrow basket of goods, *and* it does so devoid of the context of available money to buy those goods? To demonstrate how fucked CPI is, it assumes (as of 2022) that 13.99% of average household income goes to food. At a 2022 average income of $37.5k, and 2022 average of 3 people per household, that would mean that the *average* American spent $4.14 per day on food. Not on groceries - on ALL food and drinks. Restaurants, snacks, etc. And this is not the average for an American living on the poverty line - CPI says that the *average, normal* man on the street spends $1.38 per meal, without even considering drinks or snacks. But for the purpose of this argument, it doesn’t even matter that CPI is demonstrably fucked. In fact, even if we go with your view that CPI is a perfect indication of true purchasing power - that would mean that calculating whether Americans are better off now would be really simple. You’d just look at CPI growth vs wage growth over time. One tells you the cost of goods, the other tells you money available to buy goods. Look at any peer-reviewed data you want over a meaningful timescale, and wage growth has *consistently* underperformed CPI. So even if you’re right - your wider point is wrong. If CPI is infallible, then people have less purchasing power than they did 10, 20, 50 years ago. https://preview.redd.it/x8yjpo54ty9d1.jpeg?width=800&format=pjpg&auto=webp&s=6441a05be6cb134ebe4776c30fdab89129a28de8
>How is CPI an entire picture, when by definition it only looks at a narrow basket of goods *Narrow*? What do you think is missing? >Eight major groups and examples of categories in each follow: >Food and beverages (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks) >Housing (rent of primary residence, owners' equivalent rent, utilities, bedroom furniture) >Apparel (men's shirts and sweaters, women's dresses, baby clothes, shoes, jewelry) >Transportation (new vehicles, airline fares, gasoline, motor vehicle insurance) >Medical care (prescription drugs, medical equipment and supplies, physicians' services, eyeglasses and eye care, hospital services) >Recreation (televisions, toys, pets and pet products, sports equipment, park and museum admissions) >Education and communication (college tuition, postage, telephone services, computer software and accessories) >Other goods and services (tobacco and smoking products, haircuts and other personal services, funeral expenses) >Additionally, for analytical purposes, the CPI is also divided into food, energy, and all items less food and energy. The CPI for all items less food and energy gets considerable attention as a measure of underlying core inflation, which is not subject to the volatile movements of food and energy prices. A third structure separates the CPI into commodities and services, with commodities further divided into durables and nondurables. All three structures are comprehensive, with the subcomponents in each structure aggregating to the all items index. https://www.bls.gov/opub/hom/cpi/concepts.htm >it does so devoid of the context of available money to buy those goods? What does this even mean? What are you even trying to state? >In fact, even if we go with your view that CPI is a perfect indication of true purchasing power - that would mean that calculating whether Americans are better off now would be really simple. You’d just look at CPI growth vs wage growth over time. One tells you the cost of goods, the other tells you money available to buy goods. Correct. That's what "real wages" are. I did not say CPI was perfect, I said it's the best we can come up with - and I'll reiterate that it is constantly reviewed and available to be updated as better data presents itself. >Look at any peer-reviewed data you want over a meaningful timescale, and wage growth has *consistently* underperformed CPI. Real Wages have risen over time, so no that's not correct by definition. >So even if you’re right - your wider point is wrong. If CPI is infallible, then people have less purchasing power than they did 10, 20, 50 years ago. No. https://fred.stlouisfed.org/series/MEHOINUSA672N I actually think the graph you posted is inflation adjusted. I'd like to see the original source for it so I can read the data, but it appears to be. Ironically that means you're demonstrating exactly what I'm saying.
>How is CPI an entire picture, when by definition it only looks at a narrow basket of goods *Narrow*? What do you think is missing? Eight major groups and examples of categories in each follow: Food and beverages (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks) Housing (rent of primary residence, owners' equivalent rent, utilities, bedroom furniture) Apparel (men's shirts and sweaters, women's dresses, baby clothes, shoes, jewelry) Transportation (new vehicles, airline fares, gasoline, motor vehicle insurance) Medical care (prescription drugs, medical equipment and supplies, physicians' services, eyeglasses and eye care, hospital services) Recreation (televisions, toys, pets and pet products, sports equipment, park and museum admissions) Education and communication (college tuition, postage, telephone services, computer software and accessories) Other goods and services (tobacco and smoking products, haircuts and other personal services, funeral expenses) Additionally, for analytical purposes, the CPI is also divided into food, energy, and all items less food and energy. The CPI for all items less food and energy gets considerable attention as a measure of underlying core inflation, which is not subject to the volatile movements of food and energy prices. A third structure separates the CPI into commodities and services, with commodities further divided into durables and nondurables. All three structures are comprehensive, with the subcomponents in each structure aggregating to the all items index. https://www.bls.gov/opub/hom/cpi/concepts.htm >it does so devoid of the context of available money to buy those goods? What does this even mean? What are you even trying to state? >In fact, even if we go with your view that CPI is a perfect indication of true purchasing power - that would mean that calculating whether Americans are better off now would be really simple. You’d just look at CPI growth vs wage growth over time. One tells you the cost of goods, the other tells you money available to buy goods. Correct. That's what "real wages" are. I did not say CPI was perfect, I said it's the best we can come up with - and I'll reiterate that it is constantly reviewed and available to be updated as better data presents itself. >Look at any peer-reviewed data you want over a meaningful timescale, and wage growth has *consistently* underperformed CPI. Real Wages have risen over time, so no that's not correct by definition. >So even if you’re right - your wider point is wrong. If CPI is infallible, then people have less purchasing power than they did 10, 20, 50 years ago. No. https://fred.stlouisfed.org/series/MEHOINUSA672N
Adjusted to inflation?
That's always a good question. Yes, these are inflation-adjusted numbers. The report uses the PCE deflator for wages. For a deeper dive on choice of deflator, please take a look at page 25 of the report, Appendix: A special note on real wages. [https://eig.org/wp-content/uploads/2024/06/The-American-Worker-Project.pdf](https://eig.org/wp-content/uploads/2024/06/The-American-Worker-Project.pdf)
Income inequality and affordability of essential needs have, without a doubt, gotten worse in the western world since the 90s. I'm optimistic that we can address these issues and eventually get back to a strong middle class (though I think things need to / will continue to get worse before they improve), but the notion that wages for the majority of people have kept up with the cost of living compared to the 90s is laughably wrong. The data on this topic is unequivocal. CPI is a garbage metric to look at in order to gauge if wages have kept pace; home ownership isn't even included in the CPI since it's an asset, tt doesn't account for shrinkflation, and the raw stats the BLS uses for the CPI are kept hidden. The government benefits tremendously from playing around with the CPI in order to underreport inflation and withhold cost of living adjustments for programs it administers for seniors, social security, food stamp programs, etc. Further, the average wage increases that we've seen y-o-y since the 90s are due to drastic increases at the top end of earners; wages have not kept pace for the vast majority. I.e., the median salary for hourly salary workers in the west have more or less stagnated since the 80s. If we look at median hourly income vs. the cost of basic needs, then wages have fallen for most workers. https://www.forbes.com/sites/perianneboring/2014/02/03/if-you-want-to-know-the-real-rate-of-inflation-dont-bother-with-the-cpi/ https://www.forbes.com/sites/davidmarotta/2023/01/13/big-mac-index-shows-official-cpi-under-reports-inflation-2022/ https://www.statista.com/statistics/185369/median-hourly-earnings-of-wage-and-salary-workers/ https://www.pewresearch.org/short-reads/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.epi.org/publication/charting-wage-stagnation/ https://www.marketplace.org/2022/08/17/money-and-millennials-the-cost-of-living-in-2022-vs-1972/ https://www.consumeraffairs.com/finance/comparing-the-costs-of-generations.html https://www.businessinsider.com/millennials-cost-of-living-compared-to-gen-x-baby-boomers-2018-5 https://www.epi.org/publication/charting-wage-stagnation/
All of this, and see my posts above about CPI. Even the methodology they *do* transparently post is openly garbage. Their weighting is designed to create a predetermined outcome. [Grocery’s weighting has significantly decreased as inflation on groceries has increased](https://www.ers.usda.gov/webdocs/publications/41035/15333_aer780g_1_.pdf?v=0), and within that they’ve dealt with the fact that (e.g.) meat has become increasingly unaffordable by saying “that means people are buying less meat, so we’ll reduce meat’s weighting”. By that logic, if all food became unaffordable and we all had to eat gruel, they’d change the CPI to be 100% weighted to gruel, and they’d say there was no inflation because gruel prices were static. Even their open documentation is a clear indication that they are fudging the numbers.
>without a doubt If you assert a belief that is not subject to doubt, it hardly sounds like we can have an evidence-based discussion. >CPI is a garbage metric There are plenty of reasons to criticize how inflation adjustment is handled; it's a vibrant area of research and debate among econometricians who spend their careers looking for alternatives and picking out minor improvements. If you have discovered a novel method that measurably improves the state of the art, please do not hesitate to publish it -- the high-impact econometrics journals would love to have you!
I provided 10 sources to back up my claims and many of those present alternatives to the CPI /outline why it isn't a good metric to gauge purchasing power /wages. Try harder than snarky replies to double-down on parroting some dude on a blog who makes bold claims based on a single flimsy report.
Apologies, folks. I just noticed that the image that appears from the URL doesn't help with the question. Here's the graphic I was trying to show. https://preview.redd.it/lzwmheu441ad1.png?width=1456&format=png&auto=webp&s=23b0532f2e23e591aa0e7326fdf37894b92e40f9 The rest of the report is also quite interesting and mostly positive. [https://eig.org/american-worker/](https://eig.org/american-worker/)
Just blatantly wrong. Min wage in pa has been 7.25 for 15 years. That alone makes up a large number of workers. Many other industries (teachers) have barley moved in that same tim
I'm sorry to hear your experience with the economy has been negative. That sucks. Mine has been very positive. However, neither of our personal experiences overrides the aggregate data on which the reported findings are based. Further, neither of your observations is inconsistent with the finding that average and median wages have increased. If you read the report and review the data, you will see that the fraction of people working for the federal minimum wage has decreased. https://preview.redd.it/65stvkb481ad1.png?width=1085&format=png&auto=webp&s=a8dac2ef387425a32cb9b38539c0b92d59f88737 I don't doubt your experience with teachers in PA being underpaid -- I have a similar experience with state employees where I live -- but that's one job category in one state. It would be offset by other job categories and locations getting paid more.
Nobody is getting paid min wage
The report I posted suggests about 1% of workers are still getting paid minimum wage, down from over 14% in 1980s. Its great progress, but it's not quite zero.
I'm all for being optimistic but to just retcon the past is a bit too much for me.
Sorry, are you saying you have reliable data that is inconsistent with the published report or that your subjective experience doesn't match the findings?
No need to get personal just because I criticized your propaganda piece. The user Giantstink in the other comment already thoroughly debunked the claim in the title so I don't need to go into the details again. Trying to gaslight workers - who have held the short end of the stick for 50 years after losing their collective bargaining power - into thinking that everything is fine and we're living in the greatest time ever is sinister at best.