- By Bill Bonner
Stocks showed little interest in moving either up or down yesterday. So they just sat tight.
As we keep saying, you can get any opinion you want. You can also get any fact you want. Yesterday, our friend, economist Pierre Lemieux challenged our numbers:
Even the notably unreliable data of the Census Bureau on median family income are not that dark. On their unreliable character, see.
All data I know show that, in America, real incomes have grown over the last 40 years. I am sure it is the same in Europe. Some prices have increased, like home prices, relative to other prices, and it is quite certainly more difficult to buy a house now than back then. Most other things are easier to afford, including for the typical worker. This is confirmed by casual observation: look at their cars, their TV sets, their boats, their vacations, their appliances, their restaurants (not to speak of computers)... Look at their children's cars, iPhones, shoes, etc. Indeed, look at their hunting or hiking boots with Tinsulate and Gor-Tex!
You'd think it would be a fairly simple matter to tell whether earnings have gone up. But it's not. You can begin with the raw data. Then, you need to adjust it for inflation...which is where the trouble comes in. How much is a 1975 dollar worth today?
We don't want to mislead readers with faulty statistics, so we put the issue to our research team.
"The data supports us," says Nick Rokke. "Real income [for men] was higher in 1967."
The data from the Census Bureau has a man's income, in 2012 dollars, at about $37,000 in 1967. Today, it is close to $34,000.
We also have the news of lower incomes reported as a 'fact' in the New York Times on October 22, 2012:
The Census Bureau gets it from its Current Population Survey, which amounts to asking to people what they earn. This data is inconsistent with NIPA (National Income and Product Accounts) data, which contains multiple cross checks (total income must be equal to total expenditure and to total value added).
Note also that the Census data do not include in-kind transfers (like food-stamps or Medicaid or employee benefits)...
Just taking the unvarnished numbers, the working stiff in 1975 earned $8,853 (in 2014 dollars). Now, he earns $36,302. Ford introduced its F-150 in 1975. We weren't able to find an exact price, but it appears to have been sold at about $5,000. Today, a SuperCab F-150 sells for about $28,000. The average new house sold for $39,000 in 1975. Today, it is $364,100. In very raw terms, if a man wanted to buy a house and a car in 1975 he had to work just 5 years and one day to pay for them. If he wants a house and a car today, he has to work more than 10 years.
Whoa...this makes it sound like his real income has been cut in half.
Of course, it's never that simple. He gets more house and more car for his money today. Still, the remarkable thing is that we are doing this calculation at all. We shouldn't be wondering about it. It should be obvious that we are all far better off today than we were a half century ago. This should have been the easiest period in human history in which to make financial progress. Never before had there been so many inventors and entrepreneurs. Never before had they so much accumulated science and capital to work with. Never before had there been so many people making things...and so many consumers with money in their pockets to buy them. And never before were there so many earnest lawmakers, Ph.D. economists, curious researchers, diligent policymakers, and non-profit employed do-gooders...millions of people all doing their level best to make us happier, healthier and richer!
Something seems to have gone wrong.
Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.