A reader writes:
So I haven't seen the ABC documentary, but Ikenson's selection of per capita income is problematic in all sorts of ways.
First of all, of course, it pays no attention to wealth distribution. It should be a well known fact (although I know it isn't) that inequality has been growing significantly in the last two decades, such that the vast majority of wage growth has been concentrated among top earners, with a pretty steady climb in more wage growth the more wage you were earning before. A per capita average is going to wash all of that out, which is why so many people use a much more stable state, the median household income, to examine wage growth. It's still just one number in an immensely complex economy, but it's much closer at getting at the question.
In that vein, check out this graph, which illustrates a lot more. Note that single earner households have seen their income grow some, but that it's not where the wage growth has really been. (And I would even argue that that growth is probably due to professionals marrying later in life, so in some cases you have more 30-something bachelors like myself throwing our higher earnings into that pool.)
But where the growth really has been is in multi-earner households. So, part of this is the growth of professional opportunities for women, and part of it is simply more women entering the workforce. I've frequently argued that women entering the workforce is on balance a very good thing, but isn't without costs. For one, the domestic work that women used to almost exclusively do, such as cooking, housekeeping, and child care, hasn't gone away. So, while real household income has gone up, so have total household expenses, as "women's work" moved from the informal economy to the formal economy. (And hence where massive amounts of service economy growth has come from.)
While I agree that this is progress, as women are free to pursue professional and entrepreneurial careers while creating jobs allowing for women with lower skill levels needing service work, all of that wage growth is not some kind of magical windfall in the economy. Women are replacing unpaid work with paid work while turning around and paying to have the work they've left behind done.
Take, for instance, a professional mother of two who makes $50k a year but pays $25k a year in child care, plus $15k a year in additional food costs to switch from home cooked meals to prepared food. If we guess that the cost of the base food is the same, we can guess that all $15k of that goes into wages for the food prep, so we now have $90k in aggregate "wage growth" due almost exclusively to a mother entering the work place, but she has only seen $10k in additional earnings.
ABC may be overblowing the "collapse" of American manufacturing and the role of "buy American," but Ikenson's analysis is crap.
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