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Comment by fanzhang | Hacker News Reader

https://fred.stlouisfed.org/series/U6RATE

Looks like we're at nearly an all-time low for the last 25 years as well, no?

You're right.

But, wages haven't improved in the last 40 years for the average person, especially if you compare it to a basket of goods containing the essentials: housing, transportation, medical insurance and education.

This feels like a goalpost move to me

That basket hasn't stayed still, though. Houses are bigger, cars are better, medical procedures are more effective, etc. How much would I have to pay you to convince you to use the average 1979 versions of all of those?

Most people probably already live in places that are older than 40 years.

And there's no automatic reason that doctors and manufacturers should have captured the increased value of their procedures and products.

There's a faulty assumption baked into your comment that most Americans are actually buying/using new things. My apartment building was built in the 1970s, I would happily drive a 1970s muscle car if I could find one at a reasonable price, and in the 1970s you could actually see a doctor without worrying about going bankrupt. Also in the 1970s the building and car would have been new, so I would probably pay you to give me those things today.

> My apartment building was built in the 1970s

Yeah, but in the 70s you'd probably be living in an apartment built in the 1930s. The ones actually built in the 70s were a small minority back then, just like the ones built in the 2010s are a minority today.

I don't think that's true. Remember that there was a massive post-war boom in population and construction starting in the 50s and extending for several decades until the land got used up in cities. Chances are if you were old enough to rent an apartment or buy a house in the 70s, it was built within the last 20 years.

A lot of us live in significantly higher priced 1979 or older housing, which is way more expensive as a percentage of average income as far as monthly payment goes compared to back then.

Similarly with cars, they still got you from a to b in a good enough fashion.

It’s the 80/20 rule, and many people would buy 1979 level items if they were available at 1979 prices.

It also ignores the extreme improvement in the US social safety net since the late 1960s, which is generally ignored in such discussions. That has improved the lives of the bottom 1/3 by a lot, which is not captured at all in the wage growth figures. As one example, it has led to a very large improvement in childhood poverty rates (about a 50% reduction in childhood poverty since the early 1990s):

https://i.imgur.com/OrMwlkT.png

You can also see that wage growth by the bottom half has soared (up four fold since mid 2013), and is now well outpacing wage growth by the top half:

https://i.imgur.com/Mi6mgme.png

Not sure why this is being downvoted. Provided sources and all. Seems like a reasonable comment to me.

I'd love to be able to buy the house my parents bought in the mid-1970s for $35K, it'd be a step up from where I'm at now. It be a good thing if affordable and practical cars like my dad's VW Beetle were more common. And you know, I'd love it if our society had the kind of access to healthcare that we had back in the 1970s. Even in the late 1980s it was possible to graduate from a state college with only a few thousand dollars of debt.

You wouldn't have to pay me to live like that. Though I wouldn't want to go back to the kind of energy infrastructure we had back then.

We made it all illegal, ignoring the fact that not all Americans can afford the fancy stuff. Maybe there was even offense taken that some people would have less-fancy things.

So now our typical building code says you have to pay for copper wires instead of aluminum, you need arc-fault interrupters instead of circuit breakers or simple fuses, you need wired-in alarms in every room, an air conditioner must be installed, balloon construction is prohibited, walls need internal cross bracing, studs must be close together, and on an on. If you can't afford all that, evidently you aren't supposed to have a home.

Likewise, producing the original VW Beetle and selling it would be illegal. You have to have a zillion air bags, all very expensive. You have to have a camera and a screen. You have to have ABS or even traction control. You have to have a catalytic converter. You have to have more than one brake light. The turn signals must be lights. If you can't afford all that, evidently you don't belong on the road.

Purchasing power has stayed stable. Tuition has skyrocketed, medical care cost has increased http://www.mybudget360.com/is-college-worth-it-college-educa..., but technology, apparel, food, and new vehicles have decreased in cost.

> But, wages haven't improved in the last 40 years for the average person

...in the US.

Growing inequality in the US is driven by the fact that capital gains domestically have improved dramatically alongside wage gains abroad, while wage has been essentially stagnant within the US due to globalization / offshoring / outsourcing

The solution, in my humble immigrant opinion, is to train Americans to take on service jobs that cannot be easily automated / performed by cheap labor overseas. But that requires taking an honest look at the country's education system and neither side of the aisle seems to be able to do that without resorting to anger and vitriol

> The solution, in my humble immigrant opinion, is to train Americans to take on service jobs that cannot be easily automated / performed by cheap labor overseas.

It would also require software developers to take an honest look at our industry.

> The solution, in my humble immigrant opinion, is to train Americans to take on service jobs that cannot be easily automated / performed by cheap labor overseas.

What kind of jobs are these?

Trade jobs. Welder, carpenter, plumber, etc.

Do you have reason to think the trades have enough aggregate demand to soak up the entire underemployed population at reasonable wages or is that wishful thinking?

Another question is if this underemployed population could see such great gains by moving to these fields why haven't they already? It may be that they aren't capable of doing these jobs.

Jobs that will pop into existence if we train people for them, I'm sure.

Only if they are willing to accept lower wages which is exactly what we are trying to avoid.

STEM / research jobs and certain niche fields like "high finance" and corporate law. Basically all the things that require a huge investment of time and money to be qualified for... except the education system should make it easier / cheaper for Americans to obtain those credentials versus their counterparts abroad.

Americans should be inventing the machines to replace workers abroad, not competing to be a Foxconn factory worker... This country's biggest competitor is probably Germany, and definitely not China.

Looking at wages is misleading. Total compensation, including benefits, has been going up consistently. Labor’s share of national income has also been pretty consistent. What’s been happening is that the increasing costs of benefits have been wiping out gains in wages. But that’s not a problem with “the economy” as a whole. From the perspective of employers, it makes no difference if an employee costs $1,000 per year because they get a raise or because the cost of health insurance went up.

Now, if education and healthcare is eating up all the gains, that might be a reason to reform those sectors. But there is a big difference between compensation going up but prices increasing quickly in particularly important sectors, and compensation not going up at all. The former is a problem with those sectors. The latter would indicate a structural problem with the economy.

I don't think one can honestly look at employers paying employee's health insurance premium and honestly count that as compensation to the person per se. It's more of a capital expenditure bound to the position in need of being filled by a warm body.

That insurance, in short, is not yours. It is your employer's investment in keeping the occupant of that position a healthy working cog/gear. You just happen to be filling it at the moment.

I really wish we as a society would do a better job at framing these arrangements correctly. You (the employee) never have control of any capital with which to shop around for the best deal. Your employer does. Framing it as belonging to the employee just distorts the picture of what is going where to the point that we can't really say what we're measuring down the road.

> You (the employee) never have control of any capital with which to shop around for the best deal.

You can always choose which career you want to pursue, at least in theory...

That makes no sense. If your employer paid your rent, would that not be compensation to you? After all, you need housing even more than you need health care. Sure, there’s ancillary benefits to the employer from paying your health insurance. But that’s true of your salary as well. Your salary also makes sure you keep showing up for work. From the employer’s perspective it makes no difference. Health insurance premiums spent on you don’t result in a durable capital asset the employer can then use or sell. The only reason employers pay $1,000 in premiums versus $1,000 in salary is that it’s more tax advantaged for the employer (and, now, the ACA makes them do it).

The “distortion” comes from excluding benefits from compensation. It makes it impossible to determine what you’re actually measuring—the share of total income going to employees, or rising costs in one particular sector (that the employer has nothing to do with).

If they only paid my rent in company-owned housing, it would be pretty strange for me to say my employer pays for me house, no strings attached.

But it’s not company owned housing (the premiums they pay to the insurance company is cash out; they don’t get any part of it back as they would if the insurance company were company owned).

And compensation doesn’t have to be “no strings attached” to count as compensation, especially if it is something you were going to buy anyway. With limited exceptions (e.g. live-in nannies), employer-paid housing is taxable as compensation.

There's an element of control that other posters are getting at here. One of the fundamental tenets of a market economy is that consumers get to make decisions on their own behalf when it comes to how they spend their money. If they're not making the decisions, is it actually theirs? There's a pretty big principal-agent problem as soon as you start saying "Well, that money is being spent on your behalf, therefore it's yours." (Ironically, the same problem occurs on the other side of the political aisle with single-payer, government funded health care.)

This is also related to the point you made about possible structural problems with the health care and education industries. Maybe if the consumer could actually choose their health insurer and provider, and there were no exclusive contracts between those two sides of the market, and no barriers to entry for starting a new insurer (and none other than necessary medical licensing of employees for starting a new provider), and providers were required to provide transparent information about pricing and outcomes, healthcare wouldn't be such a clusterfuck of an industry. These are all basic prerequisites for a functioning market, but none of them are present in health care.

What a bizarre comment. Couldn’t you say your salary is also not yours by the same logic? After all, it’s just being paid to the “warm body” in your position rather than “you”.

I read the comment differently and agree with the gp. I'm not allowed to forgo health insurance and take it as cash. I have no agency over the compensation arrangement besides choosing one of a limited amount of options provided to me by my employer.

So, to be clear, you’re saying that because you can’t choose to receive cash instead of insurance that means it’s not “compensation to the person” (to quote the OP)? That’s not an argument that makes sense to me.

You’re not allowed to do that, not because the company wouldn’t gladly negotiate that with you, but because it’s probably illegal under ERISA.

I do not think they are allowed to negotiate away your right to participate in the employer-sponsored plan.

Employees pay for health insurance to attract workers. There are few health care interventions that materially effect someone's ability to do their work that an employee would not pay out of their own pocket.

Employer provided healthcare arose ouf of WWII wage caps as a way of competing for workers. They remain a major part of the compensation package that many workers look at when choicing an employer.

If an employer were to take the extra money they are spending on healthcare and instead pay it in wages, most workers would be (even more) mad at the lowering quality of their insurance coverage (especially considering employers gennerally can get a better deal than individuals).

Not only does the cost of insurance and benefits accrue directly to the employee and absolutely counts as part of total compensation, but so does the employer share of payroll taxes, and even things like health & safety improvements in the workplace like that ergonomic chair you may be sitting in. All of these things redirect parts of the “fully loaded cost” of an employee away from your paycheck, and studying them helps explain why median real paychecks have not grown.

You call out healthcare and education as going up in cost. My understanding is the reason certain industries are becoming "more expensive" (relatively) is because while automation reduces the cost of things like TVs or raw materials, industries like education and medicine still require about the same human ratio of input to output. Ignoring healthcare (which I think has the same problem, but there are way too many other variables), is education getting more expensive or is everything else getting cheaper? If so, will reform actually do anything?

To rebut my own point, I can see restructuring the cost of education even if the cost is roughly the same. You probably wouldn't have AARP talking about student debt for retirees [1]

[1] https://www.aarp.org/money/credit-loans-debt/info-2019/stude...

It’s a lot worse than a lack of productivity improvements.

You might appreciate SlateStarCodex’s article on cost disease.

https://slatestarcodex.com/2017/02/09/considerations-on-cost...

Real (inflation adjust) non-farm compensation (not just wages) has increased by 43% since 1980.[1]

Now, truth be told that a lot of that compensation is just increasing health insurance premiums paid for by employers, but it's inaccurate to say compensation hasn't increased.

[1]https://fred.stlouisfed.org/graph/?id=COMPRNFB,

Of course, if you look at median income, almost all of that increase came 1980-2000: https://fred.stlouisfed.org/series/MEPAINUSA672N

If in 1980 my employer would cover the $30 cost of a doctor's consultation, and today they'll cover the $150 cost of exactly the same consultation, am I better compensated?

Some would say receiving the same thing is not an increase, even if the sticker price is higher.

Came here to say this. It’s unclear that medical care has improved for people as the costs have gone up. If they’ve only gotten more expensive, then in a basket-of-goods analysis, earning power has decreased.

Edit: Just to be clear, obviously techniques and procedures get ever more sophisticated. The question is more specifically whether the average person is seeing an improvement in care that is proportional to the increase in costs. E.g., if office appointment costs have doubled for someone over the past ten years, have they seen a double or greater increase in effectiveness of care? Or is it just more expensive.

Well, age adjusted mortality has gone down by about 1/3 since 1980 and mortality rate for cancer is down about 21%

I think the point is these are separate issues. Compensation is going up - employers are paying more for employee benefits.

The problem is on the medical services side. We're get the same or slightly better medical services for 200-300% the cost.

Economically, that’s simply not the employer’s fault — that the cost of certain employer sponsored benefits has significantly outpaced inflation.

If there are components of compensation which are cheaper to provide now than 30 years ago, receiving the same thing in that case is counted as lower total compensation.

Or to put it another way, if employer share of health benefits stayed exactly the same and employee share took all the hit, and instead, your paycheck increased — leaving total compensation at exactly the same dollar amount — would you consider that as better compensation? Because under that scenario you would be worse off after taxes.

Then 'real' non-farm compensation isn't really inflation-adjusted in a terribly meaningful way, is it? Also, often the premiums aren't paid entirely by employers.

I believe that chart is using the governemnt's CPI to calculate the 'inflation adjusted' part. You can find all sorts of academic criticism of how CPI doesn't accurately reflect inflation (most notably of housing/rent prices), which is now the lion's share of a family's expense in the United States.

I think we have different baskets today, though.

For instance, a 40 year old basket wouldn't have a cell phone or service. (This is a phone, entertainment, takes the place of a set of encyclopedias and maps, a flashlight, camera, etc.) Most families have several of these today.

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