Did real incomes drop significantly since the 1950s?

Question

From what I heard, in 1950s America, you didn't have to go to college to support a large family and a stay-at-home wife. People could buy houses easily, drove giant cars and didn't worry about gas prices.

Did real incomes drop significantly since then? What was the cause?

(My college history professor had this pet theory that America gobbled up almost all the world's gold reserves during WW2, and that was what caused its post-war economic boom. Not sure if that is true, but perhaps this effect went away?)

As a counter-point, most Americans in the '50s lived in what today would be considered very small houses and had only 1 car per household. Also, with respect to large families, most did not eat out, instead eating home cooked meals which are more economical, eating out was maybe a once a month treat. — Glen Yates, Aug 17 '20 at 18:34
There was definitely a boom we're paying off today (not just in the US) related to demographics. Any large change in population trends means trouble for the next few generations - and that's where the US is today (thanks to wildly above average population trends for a while) or Russia is (thanks to the reverse, a brutal demographic toll thanks to WW2 and socialism). I doubt gold reserves in particular have anything to do with anything, though; especially given that the US dollar became the new "gold standard" (what a great idea that was). — Luaan, Aug 18 '20 at 11:39
Everyone's bringing up quality-of-life improvements from technological advancement. However, only a small portion of your income is spent on electronics, etc. — MWB, Aug 18 '20 at 12:13
@MaxB technological advancement is much, MUCH more than electronics. Todays houses are warm in the winter, and cool in the summer. Showers are hot and near infinite, cloth is soft and fine. Chairs support your back in a dozen new ways, shoes and clothes are fitted to a never before seen level. Power is stable, medical treatment is plentiful. There are too many entertainment options for any one human being to enjoy. Food is incredibly varied, available from all over to globe. Limitless information is at your fingertips. Technology improved our lives in a myriad ways beyond 'electronics'. — Torque, Aug 18 '20 at 14:05
@Torque AC systems (and whatever else you are talking about) don't cost that much today. Another example: New drugs invented: 90% garbage or inexpensive generics: https://ethics.harvard.edu/blog/risky-drugs-why-fda-cannot-be-trusted I'm not arguing that tech progress is useless, just that only a small portion of your income is spent consuming its fruits. — MWB, Aug 18 '20 at 14:15
@MaxB but maybe in part you spend less money on consuming its fruits because it changed the prices of the products or the way they can be obtained (for instance some people spend no money at all on procuring thousands of books online even though these books are very helpful to them). — , Aug 19 '20 at 12:42
You said "family" so your question is about households; not earners. See my statistic in the comment below about LFPR for women in 1960, which is close enough to the 1950s. If some households went from 1 earner to 2, then the effect is that average household income increased. With transfers, single parent families become more feasible so that effect would decrease average household income. Both effects probably happened. — H2ONaCl, Sep 03 '20 at 04:06

1muflon1 · Answer 1 · 2021-02-09T01:11:20.957

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Most of the US real earnings data which go only as far as mid 60s. According to the statista data presented in this article by world economic forum the evolution of real hourly earnings in the US for production and non-supervisory workers looked like this:

If we extrapolate to 50s then the real earnings are now higher overall. However, this being said the real wages first peaked in the 70s at $\\\$23.24$ then fallen to about $\\\$20$ and recently in 2019 they finally again reached the previous peak from the 70s. Hence, we cannot really say they dropped significantly but rather they tended to stagnate.

There is no single agreed upon explanation for this. Some authors argue this is due to technological change and decline in demand for low skill workers (see Fernandez 2001), other arguments include declining union membership (see David, Katz, and Kearney. 2006), or international competition (see here). Others argue that CPI overstates inflation and that this can be also due to increase in non-monetary benefits such as health insurance (see here). A good explainer is also provided by this brookings article.

edited Feb 09 '21 at 01:11

answered Aug 17 '20 at 00:43

1muflon1

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Does "the basket of goods" used here include housing? – MWB Aug 17 '20 at 03:08
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@MaxB yes it includes housing you can see methodology here: https://www.bls.gov/#tables . However, for non-renters the user costs of housing have to be estimated and that’s always problematic but there is also no reason to think that on average it under-reported inflation of housing costs of non-renters. I think when Brian talks about housing he means that the weight CPI gives to housing might not always reflect the share of income that actually goes to housing but these weights are updated regularly so even though this can bias the inflation in some years it is eventually adjusted for – 1muflon1 Aug 17 '20 at 09:41
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@MaxB btw this is just my conjecture but I think that reason why this stagnation might feel like a decline is a result of social pressures people are expected to spend more to 'keep up with the Joneses'. In 50's people were not expected to send all their children to college - now its expected even for people who dont need it, it was also not usual to go on vacation so often, have always new dress, eat outside etc. Moreover, the picture many people have of 50s is also bit rosy and note housewives are not a dead weight they economically contributed to family output significantly in the past. – 1muflon1 Aug 17 '20 at 10:21
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The obvious problem with averages like this is that they hide variance. My intuition is that even among "non-supervisory" roles the span is huge nowadays, larger than it used to be (at least according to various critics on the left side of the political spectrum). In Western Europe commentators sometimes talk about the vanishing middle class - more working people end up living very wealthy lifestyles, at the cost of more and more people ending up working poor. – xLeitix Aug 17 '20 at 13:20
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I'd say that, in the spirit of the question, a fluctuation of +/- 10% amounts practically to "no significant change". – leonbloy Aug 17 '20 at 23:26
The linked article mentions that these figures are average earnings. I think that would be worth including in your answer, with a short explanation on the difference between mean and median, and the widening gap between low and high income earners [citation needed]. – craq Aug 18 '20 at 05:16
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@craq these are averages for production and non-supervisory employees. The widening inequality is primarily driven by the star managers and the like which are not included. The distribution among production and non-supervisory employees is less skewed. Furthermore, even quite a lot of research uses average wages as you can see in the sources that I provided. In addition if you plot all average and median wages you will see that there is no large divergence even as inequality increases so even though median will be bit lower they will vary in virtually same way which is what matters for – 1muflon1 Aug 18 '20 at 08:48
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@craq for this question - in fact the ratio of average to median wages over last 50 years or so changed only by about 5%, this would not qualitatively affect the answer I provided. And this 5% change in ratio is from comparison of all average and median wages even including those star managers so when we look at non-supervisory and production workers there is no reason to think the ratio would change by even the 5% which occurred for all wages, hence this really does not matter in any significant way. – 1muflon1 Aug 18 '20 at 09:06
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@xLeitix You're saying that as if people getting richer makes other people get poorer. The economy is not a zero-sum game (though there are exceptions, certainly). In any case, yeah, this whole thing is rather complicated. Much of the "housewife work" has been replaced through mechanization and automation, as well as the growth of the service sector. It's rather incredible that real wages pretty much didn't change even though so much labor force was freed from house duties! It certainly wouldn't surprise me if real wages dropped by 20-30% and more as women moved to salaried jobs. – Luaan Aug 18 '20 at 11:33
Is there an explanation for that big jump up during the 2008 GFC? I would have expected a downwards movement. – craq Aug 18 '20 at 21:03
@craq wages usually jump up during recessions due to low income people having higher chances of becoming unemployed than higher income people – 1muflon1 Aug 18 '20 at 21:05
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@1muflon1 In that case this data might not be ideal for assessing the real income of American families. It is hard to argue that American families were better off in 2009 than 2007, which is what that graph would suggest. Representative data should include those that have $0 income (or social security) or the hourly wage should be multiplied by average hours worked, or some other measure of unemployment. I also wonder why it didn't happen in any of the other recessions in this chart? – craq Aug 18 '20 at 21:24
@craq sigh... unemployment in USA is overall stable with arguably unemployment being lower in recent decades than any time since 70s (ignoring corona time). If anything factoring unemployment would probably show that instead of stagnation there would be slight increase in living standards. Of course looking at this kind of statistics is not helpful to gauge how welfare changes from year to year 2006-2007 but the question was not whether people were poorer one year versus another but over period of almost 70years over such periods you can safely ignore business cycles – 1muflon1 Aug 18 '20 at 21:27
@craq also the reason why it happened mainly during Great Recession is that in those other recessions unemployment did not spiked that much as during Great Recession (in fact you can see small spikes still there in the graph). Also it’s common procedure in economics to not include people with no wages in wage statistics. More involved study that would control for unemployment would be helpful for getting better picture of how the well being changed from year to year but would not affect big picture. You will also find more involved analysis in peer reviewed papers I attached to my A – 1muflon1 Aug 18 '20 at 21:37
One problem with using hourly wages as the key statistic is that the amount of national income from non-wage sources (pensions, retirement and social security, and public benefits) is much, much higher now than it was in 1964. This is a similar problem to the "household income" statistic below - a vast amount of income now flows to retired adults in single-person households, and that income is totally absent from wage figures and brings down the household income average. – tbrookside Aug 18 '20 at 22:18
@tbrookside the question was about income. Benefits are welfare transfers not incomes. Redistribution of income definitely plays a role but its not what the question was about. – 1muflon1 Aug 18 '20 at 22:21
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LFPR, labor force participation rate, for women was 42% in 1960 and 77% in 1997. This is a major reason for the small increase in real hourly earnings production nonsupervisory. – H2ONaCl Sep 02 '20 at 20:31
Addendum: My LFPR statistic is prime age which means 25 to 54. – H2ONaCl Sep 02 '20 at 20:59
@1muflon1 Does your data takes in consideration housing costs? Also, how is it possible that during a recession near the 2000's, the real wage went up? – An old man in the sea. Feb 09 '21 at 00:55
@Anoldmaninthesea. There was deflation in the US in 2009 which would automatically increase all real wages while nominal wages would stay put. Also you can see that the increase really happened mainly as the US was already leaving recession - I would have to investigate it further. Also yes that deflator includes housing (at least as far as I can see it’s mentioned in metadata but I did not read it from cover to cover) you can see all items it includes in BLS database https://www.bls.gov/cpi/data.htm – 1muflon1 Feb 09 '21 at 01:08
I think it's important to state what our expectations for wage growth are to frame the question and discussion. Between 1980 and 2019 US labor productivity has increased by about 80%. Whether real wages have risen somewhat (or even dropped) doesn't address the real question of why wages have not risen much more significantly. Theory suggests that they should have risen in line with productivity. – BrsG Jul 04 '21 at 10:19
@BrsG sure but that is not the question asked and as this is Q&A site one should address the question asked not questions that one might believe are better questions – 1muflon1 Jul 04 '21 at 10:51

score 22 · Answer 2 · answered Aug 17 '20 at 09:52

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Average standard of living is massively higher today compared to the 1950s, primarly due to technological progress.

Even a cheap low end car today is much better than the big cars of the 1950s, it is orders of magnitude safer, much more comfortable and has a whole bunch of new features that didn't exist back then.

Houses as such haven't changed that much, also afaik the average square footage of a house is much higher today. If you think about the amenities the difference is just as stark. Even an upper class household in the 1950s did not have a microwave or a dish washer and maybe had a small black and white TV which probably cost more than a month worth of wages. Anything electronic in your household either didn't exist back then or was much worse and much more expensive than it is today.

The standard of living an average single non-college educated worker can afford for his/her family today is much higher than what a similar job gave you in the 1950s.

answered Aug 17 '20 at 09:52

quarague

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I just can't imagine an average blue-collar being able to easily support a family of 6 (including his housewife) today. Maybe with government assistance... – MWB Aug 17 '20 at 10:05
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I guess it depends on what exactly constitutes "support". Note that, as pointed out in another comment, contrary to popular belief, women often did contribute to the household income. They may not have worked full-time, and not have had a career, but they certainly may have had jobs. And the children probably, too, had jobs as paperboys, or doing chores for the neighbors. They would have had one car, at most, not two or three. Playing a game wouldn't have cost 600$ for a gaming console, plus hundreds of $s for the games, it would have been "go outside, grab a stick". – Jörg W Mittag Aug 17 '20 at 11:02
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The children wouldn't have been shuttled in an SUV from karate class to band practice to soccer practice to baseball game to the mall for shopping. They wouldn't have eaten take-out or have food delivered, or go out for food. And so on. Without the need of shuttling the kids around, they wouldn't have had a second car, if they even had one at all. They'd have one phone per house, not one phone per person. They'd have one computer per city, not multiple per person. They'd have one vacation a year, if that. Certainly not in another country. – Jörg W Mittag Aug 17 '20 at 11:03
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@JörgWMittag In short, what is considered a "middle class lifestyle" shifted considerably since the 1950s (everywhere in the Western world). in Austria, my parent's families (both from middle class families at the time) barely had a car when they were children - now you aren't really middle class if you don't have a pool and/or a vacation home. My father stopped going to school when he was 16, now this is almost unheard of among middle class families. The first real vacation any of them did was as adults - now people barely survive a year without summer vacation due to COVID-19. – xLeitix Aug 17 '20 at 13:13
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I don't think this is relevant to the question unless you can show that the raise in standard of living directly contributes to an overall raise in cost of living. For a specific example, even though my modern TV is fancier than the small black and white the cost of it is actually less in inflation-adjusted dollars. Some other answers also go into detail (for example, a car is more expensive but maybe it lasts longer or you pay less in maintenance). Anyway, I don't think this is actually an answer to the question without that analysis. – user3067860 Aug 17 '20 at 16:55
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@user3067860 I think you got the point of this answer the wrong way. Because things are today much better than in the 50s, you can now get much better life with the same inflation-adjusted income. So with the same inflation-adjusted income, the "real income", measured in quality of life, is much higher today. – JiK Aug 17 '20 at 17:05
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@JiK It still seems at best tangential to the question of, "How could people afford a house and a large car in the 1950s when similar people can't afford those things today?" Some individual things work out (OK, your little econobox today is probably as good as a luxury car from the 50s, so if you can afford one of those you are at the same standard of living as far as cars go)... But many things don't seem to work out (many people can't afford to buy any house, so it's not like they're paying more for a substantially better one). – user3067860 Aug 17 '20 at 17:21
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Houses as such haven't changed that much - Are you kidding? Improved insulation, mandatory vapour sealing, wildly superior heating and cooling equipment, heat/energy recovery ventilation, high efficiency windows and doors - even things like soffits and fascia, siding, house wrap, etc, have all had big improvements over the decades... modern homes have so many improvements over mid-century construction. – J... Aug 17 '20 at 18:49
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Yes, even a low-end car is much fancier than it was in the 50s, but even a low-end car is far more expensive than it was, and it doesn't matter how nice it is if you can't afford any at all. You could build a car in 2020 that would be a perfectly useful way of getting from A to B, be more comfortable and more efficient than a 1950s car, and cost 10% to 20% as much as a Kia Rio... but it wouldn't be legal to sell. – hobbs Aug 18 '20 at 04:51
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@JiK A modern TV is certainly better than a small black-and-white CRT. It's hard to compare the utility of those things though, including the opportunity cost - is TV more or less entertaining now? If you watch it more, is that better or worse than whatever you would've been doing if your TV was small and you didn't watch it? And so on. – user253751 Aug 18 '20 at 11:56
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I would summarize it to this: In the 1950s the living standard was not as high as today. Thus it was easier to live with far less money. Also the products where much cheaper, because there were fewer regulations (e.g. you could easily build your own home with your hands). Furthermore, the self-imposed requirements are much higher nowadays. So it is a mixture of living standard in relation to the income and many more changes in this equation (e.g. work is done by machines or by an external service, products can be made cheap, prices changed because everyone wants to live in the urban area ...) – testing Aug 18 '20 at 15:04
@hobbs did you just invent the market for DIY car kits? (or at least, kits for bigger, upgraded electric skateboards that can go 50 km/h) – user253751 Aug 19 '20 at 10:26
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@MaxB I live in a large Amish community in the Midwest, which is an interesting study in comparative economics with the 1950s. They live very VERY well despite averaging 6 or 7 kids per family (I have a neighbor who had 19). However, new families often have struggles buying real estate, which is something that fits in with our intuition regarding the changes that have happened since then (remember, the Government used to give land deeds away). – JVal90 Aug 19 '20 at 15:03
@user253751 no. I haven't invented anything, and I'm talking about a car, not an electric anything, and not a kit. – hobbs Aug 19 '20 at 16:32
@hobbs idk if you're aware of it but cars can be electric, and selling something as a kit often lets you get around the fact it doesn't meet regulations to sell by itself. (the user is building it, so owner-builder rules apply) – user253751 Aug 19 '20 at 16:47
@xLeitix I don't think you are considered 'middle class' still if you have multiple houses today. Maybe 'upper middle class' as a lower level. – TylerH Aug 19 '20 at 18:22
@JVal90 Yes, that's a case of entrenched, generational wealth. – TylerH Aug 19 '20 at 18:23
@TylerH The Amish are not generally wealthy, and certainly not to the extent that they have generational wealth to pass down. Most of them work blue-collar jobs and only have 8th grade educations (again helping the comparison with earlier times). It's true that they are often quite successful in business, but even that is tempered by their religious requirements that they don't let their businesses get too large. I'm not sure where you're getting this idea of "entrenched, generational wealth" out of the Amish. – JVal90 Aug 20 '20 at 19:32
@JVal90 "wealthy" is different from "wealth". If you have a lot of land passed down from generation to generation, that is wealth (of the generational kind), even if you might not have a lot of money in your bank account (or stuffed under your mattress). It's a huge 'part of life' that you don't have to spend money to acquire (see: all the anecdotes of [often] POC who are shocked when realtors suggest they just get their house down payment or mortgage paid for by their family, and similar things). You said it yourself: new families often struggle buying real estate. – TylerH Aug 20 '20 at 22:06

score 15 · Answer 3 · answered Aug 17 '20 at 01:10

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The book “The Two Income Trap” (2003) by Elizabeth Warren (recent Democratic presidential candidate) and Amelia Warren Tyagi discussed this. They looked at spending breakdowns in the 1970s and when they were writing.

One thing to keep in mind is that the mix of spending has changed, as well as the characteristics of products. E.g., modern cars appear to be more expensive, but have longer average lives, which roughly cancels out.

The big difference in spending shares was housing. This is not very well captured in consumer price inflation measures, since the housing mix was changing. This effect can explain what you observed, which is not captured by real wage measures.

answered Aug 17 '20 at 01:10

Brian Romanchuk

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Modern cars are also much safer and far more comfortable. Few people would prefer driving a 1957 car over a modern one, even if it was in top condition: no power steering, no airbags, no cruise control, no AC, an analogue radio, etc. etc. All these improvements are very hard to capture in purchasing power comparisons over time. – Stephan Kolassa Aug 17 '20 at 09:31
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Agreed, but I actually would be happy to delete a lot of the electric frills in post-1970s cars - they are a major source of maintenance issues. However, “lemons” are no longer a concern, which is another hard-to-measure improvement. However, from a spending share perspective, they found that the percentage was largely the same. For houdehold budgeting, that is what matters. – Brian Romanchuk Aug 17 '20 at 12:31
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The cars I have been driving so far have not had any maintenance issues related to the electronics. I may have been lucky. My hunch is that a modern car still needs less maintenance than an older one back then. For budgeting, yes, the share of nominal income is relevant. For "real income", I would not say so. If I spend the same share of my paycheck on cars, but cars have gotten much better, then I would say that my real income in terms of utility has increased. And yes, intertemporal comparisons of utility are hard. – Stephan Kolassa Aug 17 '20 at 12:58
Lemons are no longer a concern? – john doe Aug 17 '20 at 19:05
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Lemons now are nothing compared to the 1970s for North American built automobiles. – Brian Romanchuk Aug 17 '20 at 19:15
As far as comfort: you have not lived till you've sat on a leather bench seat. First factory car with ac was the 1940 Pacard but it was too impractical until the 1950s. – HenryM Aug 18 '20 at 13:18

score 10 · Answer 4 · edited Dec 19 '20 at 15:00

No. One can claim that growth has been disappointing or that inequality has increased. It is however absurd to claim that real incomes have dropped significantly since the 1950s.

In 2018 dollars,

Median total money income among all households rose from \$47,085 in 1967 to \$63,179 in 2018.
Median earnings among $\color{blue}{\textrm{male}}$ full-time, year-round workers rose from \$39,941 in 1960 to \$55,291 in 2018.
Median earnings among $\color{red}{\textrm{female}}$ full-time, year-round workers rose from \$24,234 in 1960 to \$45,097 in 2018.

Data and sources for above chart. (Unfortunately, these data do not go back to the 1950s. But assuming the median American was no worse off in 1960 or 1967 than in the 1950s, these data should suffice to prove the point that real incomes are not significantly lower today than in the 1950s.)

P.S. The above data and graph do not take into account an important issue: Inflation may have been consistently overstated over many decades, in which case growth in incomes over the long term will be greatly understated. See e.g.

Boskin and Jorgenson, "Implications of Overstating Inflation for Indexing Government Programs and Understanding Economic Progress"
Brookings, 2018, "Measuring inflation: What's changed over the past 20 years? What hasn't?"

The 'Household Income' approach actually understates income growth, because the average household size has dropped significantly since 1950. When households are statistically re-assembled into units of similar size to 1950 units, the growth is even more dramatic. — tbrookside, Aug 18 '20 at 14:02
@tbrookside: Yup good point. Average household size was 3.33 in 1960 and 2.53 in 2018 (source: Table HH-4 here). — , Aug 18 '20 at 14:33

Gnudiff · Answer 5 · 2020-08-19T10:37:25.810

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While other answers and comments point out that the standard of living has risen, despite the inflation adjusted real incomes staying the same, I don't see anyone mentioning that this standard of living is nowadays usually achieved by a two person income instead of one.

I saw a comment that women in 1950ies still frequently(?) earned money, however, the fact that women participation in workforce has approximately doubled in almost every age group (from ~30% in 1950 to over ~65% in 1998) seems to indicate that for a lot of jobs a single earner household has over time become insufficient.

edited Aug 19 '20 at 10:37

answered Aug 18 '20 at 08:14

Gnudiff

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No this interpretation assumes that housewives were some sort of dead weight in the household which is incorrect. In economics income=output, in past first most people were not employed so this was much more clearer both men and women just produced some output that household consumed, later during industrialization when employment how we know it today things got obscured - men exchanged their output for wages while women still created output directly for household but even if that output did not qualify as wage it’s still household income. Later during WW2 when it became normalized for – 1muflon1 Aug 18 '20 at 10:35
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women to work and become more emancipated and entering workforce they simply substituted the official employment for their home production. As a consequence saying that there was any time in history where households lived on only one income is incorrect as it ignores underlaying economics. In fact in the past even children significantly participated in home production whereas nowadays they only tend to do a little bit of it (cleaning dishes/mowing lawn) so it could be even argued today even less members of households contribute to household income than previously – 1muflon1 Aug 18 '20 at 10:46
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@1muflon1 while women were usually doing the majority of what amounts to unpaid work at home, is it economically valid to compare that to paid work? the home work hasn't gone anywhere, it still needs to be done. the fact that women, and, nowadays, also men do it after regular work hours just means that they (increasingly both) work more, doesn't it? also, does your comment mean that influx of a large amount of workers (in this case female) in previously mostly male-only workplaces doesn't somehow reduce the push of wages upwards? – Gnudiff Aug 18 '20 at 11:15
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of course it is. Actually even econ 101 textbooks do that. Also by home work I don’t mean just chores for example in past women regularly repaired clothing making it so that one piece of garment was functional for a life time, in past women did much more cooking, nowadays in west people mostly eat out (at least pre corona). Furthermore a lot of food stuff such as marmalade that you today buy ready made was in past produced at home etc. If you look at economic literature I don’t think you can find anyone who would claim that woman’s household work was economically not significant. – 1muflon1 Aug 18 '20 at 11:19
@1muflon1 my pardon, my point is not that it might somehow be economically insignificant, but that much of it still needs to be done despite both persons having a day job. I should probably edit my post to reflect it better. – Gnudiff Aug 18 '20 at 11:19
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i think you still underestimate the fact that the house prod. that still has to be done is structurally different. The marmalade is an excellent example - today to make breakfast toast with marmalade you just assemble the pre made toast and marmalade in past typically this would require more home prod. This holds for many other tasks but in less obvious way. A good account how household production structurally changed is given in Gordon’s ride and fall of American growth the US standard of living since the civil war -even though hous prod. is not the primary focus of the research – 1muflon1 Aug 18 '20 at 11:37
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Another good example would be the advent of dishwashers. Washing dishes is more labor intensive and structurally different then putting them in dishwasher. By buying dishwasher household saves all the wasted labor which is costly but also incurred an expense for procuring and maintaining dishwasher- these expenses will be recorded in statistics while the labor spent washing dishes is not but this obviously does not mean that household without dishwasher has lower expenses in underlaying economic terms. The task of washing dishes still has to be done but in structurally completely different way – 1muflon1 Aug 18 '20 at 11:42
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Furthermore, also you added some more incorrect assertions to your post by saying that "I saw a comment that women in 1950ies still frequently(?) earned money" - if you are referring to my comments I never said that. In economics income is not equal to money you get. Economics is not about money and what amount of money you get may be completely orthogonal on real income. Household labor is obviously non-market so within households family does not pay to each other but any production would still count towards household income thats basic economics. – 1muflon1 Aug 18 '20 at 11:57
I want to upvote this for mentioning that it takes two incomes to achieve the better lifestyle, but I can't as long as it says that it's caused by more workers pushing wages down. – user253751 Aug 18 '20 at 11:58
@1muflon1 it was actually towards Jorg's comment. – Gnudiff Aug 18 '20 at 12:31
What nonsense is this: "One of the obvious reasons would be that the influx of more workers in many fields should be pushing the wages down." ? Did you actually ever studied economics or do you have any economics degree? Studies show that immigration on net actually increases real wages due to the fact that migrants are often complementary to home work force. Some studies find short term negative effects of immigration in some industries but in long run the effect reverses itself and becomes positive- I dont understand how you can post this without doing at least most basic literature review – csilvia Aug 18 '20 at 12:34
@user253751 If the concept that more workers is one of factors affecting wages, and that is a factor that tends to push wages down is wrong, please tell me why and I will happily amend my answer. – Gnudiff Aug 18 '20 at 12:34
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The concept is wrong because you ignore the fact that labor is not homogenous. If two laborers are substitute for each other they might decrease the wage of each other. If they are complimentary they actually boost each others wages. Empirically most migration is complementary as workers who emigrate do so into countries where there is high demand for their work not where there is large supply. You should really educate yourself and at least read some economic textbook or research you can start with Clemens (2011) Economics and Emigration - published in one of the most cited econ journals – csilvia Aug 18 '20 at 12:40
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@Gnudiff Basically the fact that China has more people than the USA is not one of the reasons China is poorer than the USA. Two USAs wouldn't be poorer than one. They'd just produce twice as much stuff in total. – user253751 Aug 18 '20 at 12:58
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@1muflon1 I'm confused. If "real wages" are the same, but now the unmeasured home-worker is gone, does that not mean that current economic power is weaker by the amount contributed by housewives in the past? That would be lessened by cheaper clothing, dishwashers, etc, but it would still be a large minus on our current economic status – Mars Aug 19 '20 at 03:03
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@csilvia That may be true for immigration, but has it been true for the influx of women into the workplace in the past 50 years? This isn't the first time I've heard that women in the workplace drove men's wages down. A quick google turned up this study which suggests that when women enter a field, wages decrease (for males and females). I've seen (but not studied) similar claims in other countries as well – Mars Aug 19 '20 at 03:10
@csilvia Thank you. Since we are talking specifically about women and the US in the past 50 years, wouldn't it be true that we are not talking about immigrants, who were previously simply not present in the local economy and their arrival would naturally be a net benefit, but rather about people who were significant participants in economy, as 1muflon1 says, and who shifted their contribution towards paid income generating jobs? And wouldn't labour supply and demand be supposed to work there? – Gnudiff Aug 19 '20 at 07:20
@user253751 Are you talking about "poorer" in the sense of GDP/Economics or in the sense of household income? If there appeared twice as much people in the US as there is now, at least in short term I would think that would lead to wage drop due to labour supply and demand, wouldn't it? As women have entered workplace in the whole developed world, it has been a major boost to economies of the countries, however, it doesn't neccessarily mean that these boosts lead to a similar level of bonus for household income. – Gnudiff Aug 19 '20 at 07:26
@Mars no because the whole point is that the production of housewives is now substituted by women actually having job. For example, let’s assume that men would earn $10 per hour and women produced through home production goods and services worth also $10 per hour making total household income $20. Now if the woman would decide that she does not want to be any longer house wife and takes job that also pays $\10 per hour but now she cannot do all the house production the household still has income $20 - just in different form. – 1muflon1 Aug 19 '20 at 08:27
@1muflon1 that seems good in an isolated environment with some infinite outside job pool. however, let's say they both have talent in marketing, and they are not the only couples whare wife decides to have a paying job. now there is more people available for (at least temporarily) the same amount of jobs. wouldn't it be realistic that when wife enters the same job as husband, they both start getting $7.5 for the same kind of job where husband alone could demand $10? I am simplifying of course, but isn't labour supply and demand a thing anymore? – Gnudiff Aug 19 '20 at 09:53
@Gnudiff you are committing the classic lump of labor fallacy which indicates that you don’t have any economic training because this is something that you would know if you would at least took some undergrad econ classes. In fact in the long run the amount of jobs is not fixed and it is well established in economics that more people create more jobs. So your argument here is simply just a classical fallacy that you can read about in any econ 101 textbook. There could only ever be due to this some short run transitory negative effects before labor markets adjust and new long run GE is reached. – 1muflon1 Aug 19 '20 at 10:10
@Gnudiff No, I mean the entire USA gets duplicated. Or even the entire Earth. Imagine that Mars is actually an identical copy of Earth (it even magically gets the same amount of sunlight). Does the fact that Mars has another 8 billion people reduce wages? Nope! – user253751 Aug 19 '20 at 10:29
@1muflon1 Very well. Thank you for your patience. I have deleted the last paragraph, because I might be asserting it for the wrong reasons, despite there being indications that women entering workforce can lead to wage decreasing, as pointed out eg in the study referenced in comments. – Gnudiff Aug 19 '20 at 10:43
@Gnudiff but you have to actually read the whole study not just abstract. Did the study say this is permanent effect or short run transitory effect? I did not look at that particular study but I am extremely skeptical it says the latter and if it does I would double check where it was published - after all you will find 'studies' that will claim vaccines cause autism. Furthermore, this would be a moot point since as data show real wages in 2019 were the same as in 70's the transitory effect could be use to explain the 80s and perhaps 90s – 1muflon1 Aug 19 '20 at 10:54
@1muflon1 I haven't finished reading the study itself, but the abstract describes looking at data for a period from 1960-2010 – Gnudiff Aug 19 '20 at 10:56
@Gnudiff can you give me the name of the study I cannot find it in the deluge of comments – 1muflon1 Aug 19 '20 at 10:57
@1muflon1 https://www.aeaweb.org/conference/2020/preliminary/paper/26zNEQ4i – Gnudiff Aug 19 '20 at 10:59
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@Gnudiff I had a quick look at the study and the study actually 1. shows that there is effect in the short run and medium run but in the 20y period the effect starts to die down so this would indicate that this is transitory not permanent effect even though it is interesting to see that it takes as much as 20y for it to start to die out. 2. the study is actually a conference proceeding - hence its not published yet even though the conference is held by AEA the peer review for conference articles is much weaker. 3. A red flag is that author does not report F-test for 1st stage of their IV – 1muflon1 Aug 19 '20 at 11:12
@1muflon1 Sorry, for some reason I thought that the figures being quoted were per-household, not per-person. Also, thanks for the analysis of the paper i linked--I didn't have time to look at it in depth – Mars Aug 20 '20 at 05:02
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Did real incomes drop significantly since the 1950s?

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