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Author: Will Wilkinson

Vice President for Research at the Niskanen Center

14 thoughts

  1. Microwaves, DVD’s, and high fructose corn syrup? I’m not sure this is a slam dunk.
    Or, to put it another way, these things don’t win a war on poverty, they win a war on not having microwaves, DVD’s and, let’s be a little less inflammatory and say cheap garbanzo beans.
    I think a better way to scoff at poverty would be to note that it’s a condition dependent on its definition. Even in the 1960’s what they called poverty in the USA was nothing like you could find in, say, Upper Volta. And there’s this “poverty line” that somebody is always dicking with, that seems to be some sort of government estimate of something or other. I’ll bet they factor the microwaves and the DVD’s right into it.
    The poor have always accessed part of the progress. Better offal, better rags, cheaper Sterno if you allow for inflation. You elite analysts are always talking about microwaves and DVD’s man– when it is obvious to any street guy that it was the vinyl tarp that really made it great to be poor.
    And if you think there’s straw men walking around in here, you ought to read that goofy profile in the American.

  2. Broda: “The current statistical interpretation ignores the fact that a poor household today can access goods that, in the 1960s, they could not—microwaves, DVDs—and, more importantly, that the prices of the staples that lower-income households consume have also gone down dramatically.”
    It’s my understanding that all those factors are factored in to the CPI.
    One can of course argue that they’re not *properly* factored in.
    But saying that they’re “ignored” is just…false. Right?

  3. and, more importantly, that the prices of the staples that lower-income households consume have also gone down dramatically.
    Um, what about housing, healthcare, and oil? Since 1970, those three items have gone way up compared to income. They also make a much more sizable portion of the budget than food. Of course if you’re willing to put up with the crime, you can get housing for practically free in the inner cities …
    The argument that the invention of DVD’s makes up for the fact that people now have to go into debt-slavery to buy a house is idiotic. Middle and lower income people are stretched to make ends meet in a way that did not happen in the 1970. Have you ever watched The Corner? Or taken a stroll through South East DC … at night? Denying that the problems of the underclass and work class do not exist is only going to discredit the libtertarians.
    The real argument is that 1) people are in many ways more stretched to meet basic needs than ever 2) the civil war in our inner cities are still killing thousands of people, but that both of these are the fault of eight decades of failed progressive policies.

  4. Devin, “Middle and lower income people are stretched to make ends meet in a way that did not happen in the 1970.” This is false. They show that it is false. Go ahead and read their paper..

  5. Do you have a link to their paper? I didn’t see one in the profile (which was pretty worthless with regard to data).
    Consider three of our recent consumer goods acquisitions:
    – free refrigerator (Freecycle)
    – $7 microwave (garage sale)
    – $29.99 13 in flat screen TV (Goodwill)
    Even if I was below the poverty level, I could likely still afford these things. But would you really expect me to crow about being able to “access part of the progress” when what that means to me is that I get better castoffs from the wealthy while I still struggle with increasingly expensive fmajor expenses such as heating fuel, food and healthcare?
    Need better numbers and data, please!!!

  6. Devin,
    Of course if you’re willing to put up with the crime, you can get housing for practically free in the inner cities …
    And if break down the numbers, you’ll see that that is where almost of all the poverty comes from.

  7. I think this is a very interesting article and I’m inclined to agree with the premise, but as others have said, the data and argument just aren’t here. The one intriguing part of the article is the line about DVDs, etc., but neither Wilkinson nor Broda explains what it is exactly about DVDs that makes poor people’s lives better than they used to be. Are the microwaves encouraging them to eat unhealthy microwave meals instead of learning to cook using cheap staples?
    The tenor of the blog post and the article is that other people are so short-sighted in ignoring the tangible things that really matter. But the blog and article themselves do not discuss what really matters.
    And for a blogger to command readers to “go read their paper” without providing a link is … not the greatest approach.

  8. “And for a blogger to command readers to ‘go read their paper’ without providing a link is … not the greatest approach.”
    Agreed, but still, the second hit on Google for “Christian Broda” is what seems to be the paper in question, and the first is his faculty page where you might be able to surf to the paper, can we stop the complaints about the missing link at your comment (the second complaint about this, out of eight comments), and look at the paper?

  9. Yes, the argument that DVDs and microwaves are cheaper is ancillary to what it really means to be poor. Food, housing, healthcare, heat, and transportation (to jobs, grocery stores, the doctor) are your real, day-to-day problems. But the linked article argues that food and clothing have become cheaper. Healthcare and fuel still seem beyond reach, and China is either a neutral or negative influence in those markets.

  10. Will, I’ve read the paper. Now it’s your turn ;-). The paper makes two claims: 1) poor people spend a higher portion on their income on non-durable goods relative to rich people 2) the price of these goods have risen much less than the overall CPI. Both of these are relative claims. He makes no claim about overall wage stagnation in absolute terms. He makes no claim about absolute levels of poverty going up or down. In figure 7B he shows that even poor households spend more money on services than on non-durable goods. Yet he does not study whether the inflation in services has outpaced income gains. And note that services includes necessities such as housing, car insurance, health care, etc. Also, as far as I can tell, he does not include gasoline in non-durable goods.
    Your use of Broda’s paper to disprove the “wage stagnation” hypothesis is totally unsupported. When you include inflation information on housing, healthcare, etc., the story is quite different. I highly recommend the book The Two Income Trap. I don’t agree with everything Warren says, but she lays out a strong case for income stagnation that is different than the argument you and Broda are attacking.
    To make the case briefly, in 1970 the median home price was $23,000 and in 2004 it was $185,000 (source. Meanwhile, median income for non-hispanic white male ( I’m using white male only as a rudimentary control for immigration and woman entering the workforce) has only risen from $7,011 to $37,373. If you do the math, that means the price of a home has gone from 3.3 times income to 4.9 times income. That’s an enormous difference. If you had a 7% interest rate, 30 year mortgage, the median earner would have gone from paying 26% of income on the mortgage to 40% of income. This means families are more financially insecure and have to work more hours.
    The price of other necessities have also grown much faster than median income since 1970. Overall health care spending has increased by 400% more than median income. Car insurance is up 46%, gasoline 60%, fruit and vegetables 18%, fish 60%, college tuition is up 66%. Taxes are up too. Of course, many goods are down. The price of clothes relative to median income is down 80%, meat is down 20%, furniture is down 50%, car prices are down 55% ( and the quality is much, much better). Plus we have all sorts of new electronic gadgetry – computers, ipods, HDTV’s, all of which are amazingly cheap. And thanks to Napster, Netflix, and Google Books, the price of a lot of information and entertainment has dropped 100%.
    So overall, we are both more stretched in some ways, and wealthier in other ways. We have to work harder to meet our basic needs. But once we meet those needs, we can buy much, much more with our discretionary income. Whether we are better or worse off depends on your personal consumption preferences. If you have to work more hours at your Dilbert-like job to pay the mortgage, and you prefer playing poker with the guys to watching DVD’s, then you are actually much worse off in 2008 than a comparable person in 1970. On the other hand, if you bought your home before prices started rising, and have a job that pays for your health care, then you are much better off in 2008 than 1970.
    Overall, there is a very libertarian message here. The products where the free market is left to do its magic – manufactured goods, retail, entertainment, electronics, clothing – have had declining prices and increasing quality. Within housing, the price of the component where the free market has most control – construction – is down since 1970. On the other hand, the prices of goods where there is a lot of government interference have gone way up – residential property prices ( thanks to zoning laws and artificially low interest rates and down payment requirements), healthcare, education, car insurance. My beef with you Will, is that I wish you stop denying that the problem of a stretched middle class exists, and instead fire back with an attack on the regulatory state that has caused the problem.

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