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living standards have improved despite the rich getting richer. Citation needed. Please explain how the living standard in the US can have improved if real wag

by dreww 15y ago

living standards have improved despite the rich getting richer. Citation needed. Please explain how the living standard in the US can have improved if real wages have fallen. Oh wait, the answer is an incredible increase in consumer debt. That seems to be working out. Keep calm and carry on.

yummyfajitas 15y ago
Please explain how the living standard in the US can have improved if real wages have fallen. If by "real wages", you mean "wages adjusted for chained CPI" (this is what most people mean), the answer is because the basket of goods used to compute CPI has become larger. I.e., consider the following scenario. In year 0, there is one good - food. A basket of food costs $100. In year 1, medicine is invented, and the cost of food goes up to $101. Inflation is 1%. The basket of goods is modified to reflect the invention of medicine, and is now comprised of 50% food, 50% medicine. In year 2, the cost of medicine increases 10%, and food decreases by 2%. Chained CPI now reports an inflation rate of 3.45%. Is life worse in year 2 than in year 0? (This is a combined 2-year inflation rate of 4.5%.) Of course not. In year 2, you are paying $99 for a basket of food. In year 0, you are paying $100 for food and Medicine doesn't exist. I have yet to see anyone construct an inflation measurement based on a fixed basket of goods (which is held constant over the years) that shows real wages have gone down.
- dreww 15y ago
  thanks for your response - do you have a link to any data that shows the outcome of holding the basket of goods fixed? i will try to find some as well, just thought you might have some data handy.
gftrhfg 15y ago
"Please explain how the living standard in the US can have improved if real wages have fallen." I cannot believe the ignorance of Ycombinator at times. http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP) http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP) http://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&met_y=ny_gdp_mktp_cd&idim=country:USA&dl=en&hl=en&q=us+gdp http://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&#... Keep calm. Carry on.
- david927 15y ago
  I can't believe it either. Some even believe in the economists' equivalent of a cosmological constant: PPP, which when employed miraculously turns Louisiana into a richer place than Switzerland.
  - deleted 15y ago
    [deleted]
  - gftrhfg 15y ago
    What? Louisiana has a GDP per capita (PPP) of $37K. Switzerland has a GDP per capita (PPP) of $41.6K. http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_... http://en.wikipedia.org/wiki/Comparison_between_U.S._states_and_countries_by_GDP_(PPP) http://en.wikipedia.org/wiki/Comparison_between_U.S._states_... In regards to GDP by PPP: "Comparisons of national wealth are also frequently made on the basis of nominal GDP, which does not reflect differences in the cost of living in different countries (See List of countries by GDP (nominal) per capita). Using a PPP basis is arguably more useful when comparing generalized differences in living standards on the whole between nations because PPP takes into account the relative cost of living and the inflation rates of the countries, rather than using just exchange rates which may distort the real differences in income." http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_...
    - maxxxxx 15y ago
      That's interesting. From my subjective observations while traveling in Louisiana and in Switzerland I'd say people in Switzerland are living much better. Where does all that GDP go?
      - arethuza 15y ago
        I think that just goes to show how silly making comparisons based on a few isolated numbers can be.
lotharbot 15y ago
> "Citation needed" I'm a big fan of the American Housing Survey (from the Census Bureau): http://www.census.gov/hhes/www/housing/ahs/nationaldata.html http://www.census.gov/hhes/www/housing/ahs/nationaldata.html Data from 1970 - 2009, detailing living conditions for Americans as a whole. In recent years, many data tables have a column for Americans below the poverty line. Compare the data for living standards for the poor in 2009 to the overall population in 1973. By any reasonable measure of "living standards" I've been able to come up with, the data shows the poor in 2009 are doing well in comparison to the overall population in 1973.
learc83 15y ago
Look at the amount of time the average American has to work in order to by food. It's much less than it used to be. The only reason it feels like we have less money is because we have more stuff to spend it on.
- JabavuAdams 15y ago
  Look at how long the average American has to work to pay for the housing that is considered socially acceptable.
  - learc83 15y ago
    That just proves my point. Once again, we feel poor because we have so much more stuff to spend money on. Houses in America today are HUGE compared to what was acceptable in the past. A nice house today would have been considered outrageously opulent 40 years ago. This was also primarily caused by a housing bubble. A bubble that was created in part because of government intervention causing increased demand for houses (mortgage interest deduction, low interest rates).

by dreww 15y ago

yummyfajitas 15y ago

Please explain how the living standard in the US can have improved if real wages have fallen. If by "real wages", you mean "wages adjusted for chained CPI" (this is what most people mean), the answer is because the basket of goods used to compute CPI has become larger. I.e., consider the following scenario. In year 0, there is one good - food. A basket of food costs $100. In year 1, medicine is invented, and the cost of food goes up to $101. Inflation is 1%. The basket of goods is modified to reflect the invention of medicine, and is now comprised of 50% food, 50% medicine. In year 2, the cost of medicine increases 10%, and food decreases by 2%. Chained CPI now reports an inflation rate of 3.45%. Is life worse in year 2 than in year 0? (This is a combined 2-year inflation rate of 4.5%.) Of course not. In year 2, you are paying $99 for a basket of food. In year 0, you are paying $100 for food and Medicine doesn't exist. I have yet to see anyone construct an inflation measurement based on a fixed basket of goods (which is held constant over the years) that shows real wages have gone down.

dreww 15y ago
thanks for your response - do you have a link to any data that shows the outcome of holding the basket of goods fixed? i will try to find some as well, just thought you might have some data handy.

gftrhfg 15y ago

"Please explain how the living standard in the US can have improved if real wages have fallen." I cannot believe the ignorance of Ycombinator at times. http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP) http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP) http://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&met_y=ny_gdp_mktp_cd&idim=country:USA&dl=en&hl=en&q=us+gdp http://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&#... Keep calm. Carry on.

david927 15y ago
I can't believe it either. Some even believe in the economists' equivalent of a cosmological constant: PPP, which when employed miraculously turns Louisiana into a richer place than Switzerland.
- deleted 15y ago
  [deleted]
- gftrhfg 15y ago
  What? Louisiana has a GDP per capita (PPP) of $37K. Switzerland has a GDP per capita (PPP) of $41.6K. http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_... http://en.wikipedia.org/wiki/Comparison_between_U.S._states_and_countries_by_GDP_(PPP) http://en.wikipedia.org/wiki/Comparison_between_U.S._states_... In regards to GDP by PPP: "Comparisons of national wealth are also frequently made on the basis of nominal GDP, which does not reflect differences in the cost of living in different countries (See List of countries by GDP (nominal) per capita). Using a PPP basis is arguably more useful when comparing generalized differences in living standards on the whole between nations because PPP takes into account the relative cost of living and the inflation rates of the countries, rather than using just exchange rates which may distort the real differences in income." http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_...
  - maxxxxx 15y ago
    That's interesting. From my subjective observations while traveling in Louisiana and in Switzerland I'd say people in Switzerland are living much better. Where does all that GDP go?
    - arethuza 15y ago
      I think that just goes to show how silly making comparisons based on a few isolated numbers can be.

lotharbot 15y ago

> "Citation needed" I'm a big fan of the American Housing Survey (from the Census Bureau): http://www.census.gov/hhes/www/housing/ahs/nationaldata.html http://www.census.gov/hhes/www/housing/ahs/nationaldata.html Data from 1970 - 2009, detailing living conditions for Americans as a whole. In recent years, many data tables have a column for Americans below the poverty line. Compare the data for living standards for the poor in 2009 to the overall population in 1973. By any reasonable measure of "living standards" I've been able to come up with, the data shows the poor in 2009 are doing well in comparison to the overall population in 1973.

learc83 15y ago

Look at the amount of time the average American has to work in order to by food. It's much less than it used to be. The only reason it feels like we have less money is because we have more stuff to spend it on.

JabavuAdams 15y ago
Look at how long the average American has to work to pay for the housing that is considered socially acceptable.
- learc83 15y ago
  That just proves my point. Once again, we feel poor because we have so much more stuff to spend money on. Houses in America today are HUGE compared to what was acceptable in the past. A nice house today would have been considered outrageously opulent 40 years ago. This was also primarily caused by a housing bubble. A bubble that was created in part because of government intervention causing increased demand for houses (mortgage interest deduction, low interest rates).