Stagnant Wages! Really?

A commenter on Cafe Hayek this week lamented about stagnant wages.  While it’s unclear whether the comment was based on fact or the commenter’s gut feel, it did remind me of this passage from Steven Landsburg’s book More Sex is Safer Sex (p. 29).

In the 1930s, we had a Great Depression, when income levels fell back to where they’d been about twenty years earlier.  For a few years, people had to live the way their parents had always lived–and they considered it almost intolerable.  The underlying expectation–that the present is supposed to be better than the past–is a new phenomenon in history.  No eighteenth-century politician would have dreamed of asking “Are you better off than you were four years ago?” because it never would have occurred to anyone that they ought to be better off than they were four years ago.

Rising income is only part of the story.  Not only are we richer than ever before, we also work less and have better-quality products.  One hundred years ago, the average American workweek was over sixty hours, today it’s thirty-five.  One hundred years ago, only 6 percent of manufacturing workers took vacation; today it’s 90 percent.  One hundred years ago, men entered the full-time labor-force in the early teens; today labor-force participation by young teenagers is essentially zero.  One hundred years ago, only 26 percent of male workers retire by age 65; today over 80 percent of 65-year-old males have retired.  One hundred years ago, the average housekeeper spent twelve hours a day on laundry, cooking, cleaning, and sewing; today it’s about three hours.

If wages are stagnant for a little bit, so what?

Don’t get me wrong, I like standard of living improvements as much as the next guy, but I also recognize and am thankful for how good we have it.  Now that we’ve set the bar high for improvements because they have come so consistently during our lifetimes, we’re disappointed when those high expectations are not met.

Oh no! Stagnant wages!  That means we have to live approximately like we lived last year, which happens to be the best standard of living that humans have ever experienced?

Landsburg continues by giving us more specifics about the daily life a hundred years ago.

Here’s a typical laundry day for a housewife in 1900: First she ports the water to the stove, and heats it by burning wood or coal. Then she cleans the clothes by hand, rinses them, wrings them out (either by hand or with a mechanical wringer), then hangs them out to dry and moves on to the oppressive task of ironing, using heavy flatirons that are heated continuously on the stove. The whole process takes about eight-and-a-half hours and she walks over a mile in the process.  We know all of this because the United State government use to hire researchers to follow housewives and record every step they took.

Very well written.  For some reason, I imagine Louis CK’s voice as I read that.

Landsburg didn’t mention that this process wasn’t done very frequently since it was laborious, expensive and there was much other laborious work to get done.  The idea of wearing clothes once and washing would seem insane to those living around 1900.  So now, since it’s much easier and cheaper to wash clothes, we do it more often and that improves our lives by spreading fewer germs and being less smelly.  Such mundane, yet exponential, leaps in quality of our lives are nearly invisible to us.

Update: Another thought occurred to me.  I imagined the folks who recognized how laborious doing laundry was and invented ways to make it easier.  That’s innovation.  With less innovation our standard of living doesn’t advance as quickly.  I wonder if the commenter complaining about stagnant wages realizes that the cause of that, if true, could be stagnant innovation.

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Margins

Small margins fascinate me. They’re all around.

It amazes me that we live in an environment that is really made up of only a small marginal sliver of inhabitable environment when compared with all the space around us.  Move a few thousand feet up or down and we would have a much tougher time surviving.

I attended a local fall festival last weekend.  The festival draws a lot festival goers, but small margins matter.  On the main strips throngs of people roll through and purchase hot dogs, funnel cakes, leather goods, you name it.  But the booths just a few feet off the beaten path might as well have not been there.  That small marginal space was enough to keep the throngs away.

The standard of living we enjoy has only been available for a small marginal sliver of time and it’s truly only available in relatively small marginal spaces.  It’s good that we have folks like comedian Louis CK to remind us of this as he did in his appearance on the Conan O’Brien show where he explained that everything is amazing and nobody’s happy.

I found another healthy dose of a reminder in Steven Landsburg’s book, More Sex Is Safer Sex: The Unconventional Wisdom of Economics (p.27):

Modern humans first appeared about one hundred thousand years ago.  For the next 99,800 years or so, pretty much everyone lived just above the subsistence level–on the modern U.S. equivalent of $400 to $600 per year.  In a few fortunate times and places it was a bit more than that, but almost never more than twice as much.  There were usually tiny nobilities who lived far better indeed, but numerically those nobilities were quite insignificant.  If you’d been born any time before the late eighteenth century, it’s astronomically probable that you’d have lived on the equivalent of under $1,000 a year–just like your parents and your grandparents, and just like your children and your grandchildren.

Then in the late eighteenth century–just a couple hundred years ago, maybe ten generations–something happened.  People started getting richer. And richer and richer still.  Per capita income, at least in the West, began to grow at the unprecedented rate of about three quarters of a percent per year.  A couple of decades later the same thing was happening around the world. Continue reading