Wednesday, January 21, 2015

Kenneth Thomas — What is Noah thinking?

Noah Smith put up a post Sunday purporting to show that things aren't so bad for the middle class. Then he immediately shows us a chart of median household income. Stop right there. As I have argued before, this is always going to give you a rosier picture than reality. We need to look at individual data, aggregated weekly (because average hours per week have fallen for non-supervisory workers), to know what's going on. 
Because the individual real weekly wage is still below 1972 levels, households have had to compensate by having more incomes and going into debt. They have traded time and debt for current consumption. This is not an improvement in the middle class lifestyle. Commenter Richard Serlin points out that we also need to consider risk as well as average incomes, and he is right. The middle class is less secure than it was in 1972. 
Noah has lots of interesting things to say, and you should check out his blog if you haven't already. But this is an error on his part, and I don't understand what he's thinking.
Middle Class Political Economist
What is Noah thinking?
Kenneth Thomas | Professor and Research Fellow, Center for International Studies, University of Missouri at St. Louis

2 comments:

Ryan Harris said...
This comment has been removed by the author.
Neil Wilson said...

You can always hide the problem in aggregate data.

Low earnings, competition from immigration, low productivity, all disappear with a quick data massage.

I'm getting tired of the curve fitting to a-priori beliefs as well. It's worse than the diet industry.