Moron--Err, That Is, More On--Krugman's Slicing and Dicing--Updates!I put up a post on Krugman's
latest column over
at Lifelike. I'd like to examine Krugman's central point a little:
Working families have seen little if any progress over the past 30 years. Adjusted for inflation, the income of the median family doubled between 1947 and 1973. But it rose only 22 percent from 1973 to 2003, and much of that gain was the result of wives' entering the paid labor force or working longer hours, not rising wages.Now there are a lot of factors that have affected median household income, not just wives entering the workforce or working longer hours. How about the vast increase in the number of single-parent households since 1973? Clearly that also mitigates against rising household incomes as well.
But let's ignore those issues for now and focus on median household income. Here are some
tables of historical figures from 1984-2003 from the Census Bureau. I'll summarize as follows:
1984 $22,415
1985 $23,618
1986 $24,897
1987 $25,986
1988 $27,225
1989 $28,906
1990 $29,943
1991 $30,126
1992 $30,636
1993 $31,241
1994 $32,264
1995 $34,076
1996 $35,492
1997 $37,005
1998 $38,885
1999 $40,696
2000 $41,990
2001 $42,228
2002 $42,409
2003 $43,318
Now of course, those are dollars unadjusted for inflation. Fortunately, the same tables also have the historical median household incomes in constant 2003 dollars a little lower:
1984 $37,767
1985 $38,510
1986 $39,868
1987 $40,241
1988 $40,678
1989 $41,411
1990 $40,865
1991 $39,679
1992 $39,364
1993 $39,165
1994 $39,613
1995 $40,845
1996 $41,431
1997 $42,294
1998 $43,825
1999 $44,922
2000 $44,853
2001 $43,882
2002 $43,381
2003 $43,318
You can already see something of a trend there, right? The median household income (MHI) rises and falls with general economic conditions, but over the long haul it rises. Here's a graphic look:
![](//photos1.blogger.com/img/0/2133/400/MedianHouseholdIncome1.jpg)
As you can see, the MHI rose from 1984-1989, declined from 1990-1993, then rose again from 1994-1999 when it started another decline. It's not hard to see where the next few data points are going, either, is it? Looks pretty obvious to me that we've bottomed out again and will see the MHI rising, just as it did in 1994.
Unfortunately I don't have the numbers going all the way back to 1973; if anybody has the data I'd love to see it. But it's not hard to fill in the starting point based on Krugman's column. If inflation-adjusted median household income only rose 22% between 1973 and 2003, then the 1973 figure must have been somewhere around $35,506 ($43,318/1.22). So if we break the 30 year span into roughly 10-year intervals from 1973-1984, 1984-1993, and 1993-2003, we find the following average (non-compounded) growth rates per annum:
1973-1984: 0.51%
1984-1993: 0.41%
1993-2003: 1.06%
Note: Before I get accused of slicing and dicing myself, I did adjust for the fact that 1973-1984 is 11 years, while 1984-1993 is 9 and 1993-2003 is 10 years. If I'd had 1983 MHI in 2003 constant dollars I'd make all three periods exactly equal. I suspect that the 1973-1983 period would be a little lower and the 1983-1993 period would be a little higher. But at any rate, it's not hard to see that MHI has grown faster in the last decade or so than it did for the 20 years prior to that. Of course, that doesn't help Professor Krugman's argument that the middle class is slipping, it demolishes it. Hence the focus on 1973-2003 versus 1947-1973.
Note as well that Krugman is choosing starting and stopping points very carefully. For example, suppose I took the 1989 and 1993 median household incomes and drew a line between them and then encouraged you to speculate as to future results. You'd probably forecast a continuing decline after 1993, right? But we can see that is not what happened. Similarly, if you drew a line between 1993 and 1999, you'd forecast rapidly rising incomes. But the best method of forecasting with a chart like this would be to draw a line between the peaks and another line between the troughs, extend them forward, and say that the future is somewhere between those lines. What Krugman has done is draw a line between a peak (a recession began in 1973) and a trough (2003 appears to be a cyclic low for MHI) and encouraged his readers to assume that the future will follow that line. I'll try to remember to keep an eye on this and see whose projections turn out to be more in line with reality.
Updates:
Tom Maguire
has more on this column.
Jim Glass at the Scrivener
points out that Krugman's 1947-73 comparison takes a trough for median household income (caused by New Deal policies) and draws the line to a peak. So Krugman was dishonest on both ends of the comparison. I'm shocked, shocked I tell you!
Donald Luskin
checks in on the shaping, slicing and selectively presenting data that drew the guffaws from me over at Lifelike.
Mark in Mexico
has some thoughts on those glorious 1960s that Krugman remembers so fondly.
Tim Worstall hits on the
same point from a different angle and notes that the median household size has declined quite a bit since the 1960s.
James at the Chief Brief looks into the
longer hours claim by Krugman and concludes there is no evidence to support it. Of course, I've always told my employers that I refuse to work longer hours; 60 minutes an hour is plenty!
There's a fair amount of heat but not much light in the comments section at
Brad DeLong's. One definite odd thing I found about Krugman's piece was how many lefty bloggers just posted either the whole piece or several paragraphs with virtually no remarks by the blogger himself, as DeLong himself does here.