The Reagan question - are you better off than you were 4 years ago - is a very political one, so I could imagine a lot of pushback by many who feel they aren’t.
Also, there is no decent gauge of cost of living out there. The CPI is supposed to give a rough idea of monetary inflation, but political anger starts when people see their basic spending requirements rise faster than incomes which means taxes, rent, transportation, required insurance & other fees, and basic groceries. John Mauldin called for a CPI index for low wage workers he called the Wal-Mart index, and it was a good idea.
Anyway, I really do appreciate the analysis and charts here. I just felt the need to explain some of the populist anger we see, and express some wishful thinking on something I think the Fed’s economists should measure.
The second method is an interesting explanation for the "vibecession." If real wages within individual industries have dropped, and the vast majority of people have not switched industry...
This is an excellent post. Several points were really interesting:
- The composition adjusted real wages is a great chart and probably helps explain why many people believe correctly that real wages have fallen (for them). Also probably helps explain the degree of labor/union activity, given that those workers are more aligned with the "composition adjusted" series.
- The point around rent vs. household cost and home equity is huge as well
- Cumulative gains by bottom 50% is fascinating - have not seen it graphed in such terms and would be curious what it looks past 2020
This post provides much needed nuance to the discussion and does a good job of explaining the diversity of experience that is ignored by simplistic averages.
Thanks Bear! I am curious about the development post-2020 too—you'd definitely see the fiscal spending contract significantly and real wages rise enough to only-slightly offset it, but as with any distributional data they release it with a pretty long lag so we'll have to wait and see!
Fighting for a Dollar-based minimum wage is a losing game, since $15 in 2020 is not the same $15 in 2023 due to inflation.
Instead the Minimum Wage should be based on real money such as silver, and the demand should be this: 1 oz American Eagle Silver Coin for 1 hour of work.
In the summer of 2020 many people predicted bullwhip effect like after WW2–that means BOTH economic and political changes happen quickly!! Remember “Dewey Defeats Truman”??
Wages are "rising" vs. 2019 in a literal sense, but the amount of increase is 0.8% from 377.06 in January 2019 to 379.11 now. That's as flat as flat can be without being literally flat.
The BLS CPI calculator is saying $1 in January 2019 is $1.22 in October 2023 - so it means presumably that wages have gone up 22.8% over the same period.
Given that GDP growth in this period is 20% or less, it seems clear that the US simply is stagnant economically.
Very well written and researched.
The Reagan question - are you better off than you were 4 years ago - is a very political one, so I could imagine a lot of pushback by many who feel they aren’t.
Also, there is no decent gauge of cost of living out there. The CPI is supposed to give a rough idea of monetary inflation, but political anger starts when people see their basic spending requirements rise faster than incomes which means taxes, rent, transportation, required insurance & other fees, and basic groceries. John Mauldin called for a CPI index for low wage workers he called the Wal-Mart index, and it was a good idea.
Anyway, I really do appreciate the analysis and charts here. I just felt the need to explain some of the populist anger we see, and express some wishful thinking on something I think the Fed’s economists should measure.
The second method is an interesting explanation for the "vibecession." If real wages within individual industries have dropped, and the vast majority of people have not switched industry...
👏
This is an excellent post. Several points were really interesting:
- The composition adjusted real wages is a great chart and probably helps explain why many people believe correctly that real wages have fallen (for them). Also probably helps explain the degree of labor/union activity, given that those workers are more aligned with the "composition adjusted" series.
- The point around rent vs. household cost and home equity is huge as well
- Cumulative gains by bottom 50% is fascinating - have not seen it graphed in such terms and would be curious what it looks past 2020
This post provides much needed nuance to the discussion and does a good job of explaining the diversity of experience that is ignored by simplistic averages.
Great work!
Thanks Bear! I am curious about the development post-2020 too—you'd definitely see the fiscal spending contract significantly and real wages rise enough to only-slightly offset it, but as with any distributional data they release it with a pretty long lag so we'll have to wait and see!
Excellent 🔥
Thanks Nick!
Very helpful and appreciated.
Thanks Ben!
Fighting for a Dollar-based minimum wage is a losing game, since $15 in 2020 is not the same $15 in 2023 due to inflation.
Instead the Minimum Wage should be based on real money such as silver, and the demand should be this: 1 oz American Eagle Silver Coin for 1 hour of work.
In the summer of 2020 many people predicted bullwhip effect like after WW2–that means BOTH economic and political changes happen quickly!! Remember “Dewey Defeats Truman”??
Wages are "rising" vs. 2019 in a literal sense, but the amount of increase is 0.8% from 377.06 in January 2019 to 379.11 now. That's as flat as flat can be without being literally flat.
The BLS CPI calculator is saying $1 in January 2019 is $1.22 in October 2023 - so it means presumably that wages have gone up 22.8% over the same period.
Given that GDP growth in this period is 20% or less, it seems clear that the US simply is stagnant economically.