I read something on Thanksgiving that did not make me thankful. It was in a newsletter that I normally enjoy, Edward Conrad’s “Macro Roundup.” It was the Thanksgiving issue, so I think Dr. Conrad was trying to spread some holiday cheer. Fair enough.
But one of the article’s he summarized from “Economist Writing Every Day” got me a little fired up. That blogger claimed that people who talk about the middle class’s struggle “are usually lacking in data, while strong in anecdotes.” Dr. Conrad summarized the blogger’s look at the data thusly:
2024 … is the highest [high school graduates without a degree’s wages] have ever been in this data series, and likely higher than any point in the past. While many point to about the year 2000 as when troubles for the working class started (this is when manufacturing employment really fell off a cliff, and China joined the WTO in 2001), inflation-adjusted earnings have risen 11% for this group of workers since then. You might say that’s not a lot of growth — and you would be correct! But this group is better off economically than in the year 2000. Every single state had positive real median wage growth from 2001 to 2024. Every single one!
Jeremy Horpedahl in his Blog Economist Writing Every Day
OK. So what’s wrong with this nice happy attempt to avoid having to think about rising inequality? After all, didn’t the blogger look at the data? Yes, just not very closely.
Issue 1: Men’s Slow Wage Growth Suggests the Economy Isn’t Helping the Middle
Lumping together men and women’s wages over long periods of time isn’t a great idea. After all, many women working in 2000 had much of their careers in the 1980s and 1990s when occupational segregation was more common and promotions less common. As we go forward in time, women’s wages tend to grow faster due to both social forces and any improvements in the economy. The growth in men is perhaps more indicative of overall economic performance.
When I look at the data, I also see the roughly 11 percent growth in wages since 2000 trumpeted by the blogger. But, as the figure below shows, that number is just 4 percent for men and 14 percent for women. This suggests that much of the wage growth over this period was generated by women’s improving positions (which is awesome), not the economy spurring growth in the middle (less awesome).
Figure 1. Usual Weekly Wage Growth Indexed to 2000, Full-time Workers with a High School Diploma and No College Ages 25 and Up, in 2024 CPE Indexed Dollars
Still, at least everyone’s wages grew right? Well, not so fast.
Issue 2: 2000 is Arbitrary
I have no idea why someone would choose the year 2000 and claim that this is when trouble started for the middle class. As I write here and here (and in my book), automation that started at least as early as the 1970s has targeted the middle of the earnings distribution. If you do the same exercise going all the way back to 1979 (the first year these data are available), the picture is even less rosy for men and much better for women. The men in this educational grouping saw their wages drop in real terms over this time period. Plus, overall growth was just six percent over this period, much lower than the oddly chosen year 2000. On the other hand, women’s wages increased substantially.
Figure 2. Usual Weekly Wage Growth Indexed to 1979, Full-time Workers with a High School Diploma and No College Ages 25 and Up, in 2024 CPE Indexed Dollars
I don’t know about you, but when half the working population undergoes a four-decade span of negative wage growth, I am curious about it. And I’m even more curious when the overall economy grew a whole lot faster than those wages.
Issue 3: Even 24 Percent Wage Growth, to Use a Technical Term, Sucks
In the offending piece, it was presented as if 11 percent wage growth since 2000 is something for which to be thankful. Sure, it’s really 6 percent since 1979 if you look at the data, but whose counting. Anyway, even 11 percent is terrible. And heck, even women’s relatively impressive growth of 24 percent over that period pales in comparison to GDP Per Capita, which more than doubled. So, the economy grew much more than workers in the middle’s wages. Where did all that money go? To the very top.
Figure 3. Real GDP Per Capita and Usual Weekly Wage Growth Indexed to 1979 in 2024 CPE Indexed Dollars
Source: Adapted from Federal Reserve Economic Data, which used the Current Population Survey.
Rising Inequality is Worth a Look
Whenever I read one of these pieces trying to shine a positive light on this issue, I wonder why? I suspect it’s not really for some evil reason. Instead, I think that folks who present this information think that capitalism works pretty darn well and we shouldn’t go around worrying about the people left behind a bit — after all, they’ve seen growth too.
I disagree. I want to understand why this inequality in growth has happened. I want to know the reason so that I can know if people in the middle could have seen the same growth as those at the top. After all, it would make a huge difference in their quality of life. And, if it turns out it this rising inequality is an unfortunate feature of a system that works pretty darn well, so be it. But, we should all be curious about what’s going on. We shouldn’t use a cursory look at the data to excuse turning the other way.