Sunday, August 24, 2014

Doug Short — Measuring Real Wages: "Lies, Damn Lies, and Statistics"

Earlier this week I updated my commentary on Five Decades of Middle Class Wages, an analysis of Real Average Hourly Earnings of Production and Nonsupervisory Employees. During the 21st century and especially since the end of the Great Recession, wages have clearly been stagnant. 
But, as Mark Twain famously remarked, "there are three kinds of lies: lies, damned lies, and statistics." 
I was, therefore, not surprised when a reader sent me a link to a blog article entitled "Real Wage Stagnation Is a Bit of a Myth." Seriously! The article featured a chart that included the very same earnings data series that I had used, but it came to quite the opposite conclusion:
"Contrary to popular belief, wages have been rising a bit faster than prices. In other words, real wages haven’t stagnated as widely believed, but have been moving higher, albeit at a slow pace."
All it takes is a simple statistical manipulation to paint a smiley face on the real wage data. And what is that? Choose a tame deflator for your inflation adjustment.…
Measuring Real Wages: "Lies, Damn Lies, and Statistics"
Doug Short


Anonymous said...

Aren't yearly wages more important than hourly wages? If machines are labor saving devices, why not return to 20 hour work weeks, like our ancestors had?

Roger Erickson said...

Bingo, Bill,

It's about dominance & subjugation, as a random, persistent habit ... with no aggregate goal in mind

The real kicker here is that the vast majority of both Innocent Frauds and Control Frauds are nowhere near bright enough to sense the aggregate outcome of their personal compulsions.

They're just random agents following random actions - sans aggregate feedback.

Group intelligence is always held in the BODY OF PUBLIC DISCOURSE. We have to generate an adequate amount, before we can tune and leverage it.

That's what Walter Shewhart called the "Cost of Coordination."

It really does come down to saving frauds from themselves. And saving our nation along the way.