A two-income family today is poorer than a one-income family was in the 1970s
A two-income family today is poorer than a one-income family was in the 1970s
Posted on June 23, 2012
“On several occasions, I have glibly referred to how it now takes two spouses working to equal the wages of a one-income family of 40 years ago. Unfortunately, that is now an understatement. In fact, Western wages have plummeted so low that a two-income family is now (on average) 15% poorer than a one-income family of 40 years ago.” — Jim Nielson | The Street
This death of the American middle class can be blamed on the Republican Party’s decades-long union busting efforts combined with men like Mitt Romney who run companies like Bain Capital for the purpose of creating wealth for the few, by laying off hundreds of thousands of American workers, who once earned living wages and benefits, who once shared in a company’s productivity and success. For decades now vulture capitalists have downsized and closed American companies, offering only low-wage replacement jobs to some of the workers they laid off, while outsourcing most of the formerly American jobs to countries like China and India. And we can also blame a tax code, won by a lobby of the wealthiest among us, that rewards corporations with deductions and loopholes and subsidies for taking American jobs to other countries, enriching a few while cratering our economy at home.
And the Republican Party tells us the One Percenters need more tax cuts (i.e. they need to hoard even more money?) to ‘create’ a few more jobs — tax cuts that would be paid for, by the way, by cutting programs and services that the rest of us depend on. It’s almost comical when you consider this fact: the average Fortune 500 CEO now makes 380 times more than the average worker, CEO pay has grown more than 127 times faster than worker pay over the last 30 years, and their pay increased last year.
More, to these people, is never enough.
http://underthemountainbunker.com/2012/06/23/a-two-income-family-today-is-poorer-than-a-one-income-family-was-in-the-1970s/
= new reply since forum marked as read
We were never "well-off", but we had a decent place to live, a new car now & then, and vacations from time to time..and I was able to be a stay-at-home Mom until all three were in school all day long.. EIGHT years on one income.
It was not a romp in the park on a sunny afternoon, but we managed comfortably.
Out first son had MAJOR health issues (29 surgeries at Mayo Clinic before he was 8), and our medical coverage was wonderful. We were able to pay our share, and even though it was a great hardship to spend 4-6 weeks in Rochester every January & April, we managed it with NO CREDIT CARDS, and no lingering debt.
Try that now 
2010 workers aren't spending their money in 1970. They have to pay 2010 prices. Even adjusted for inflation, not taking this into accounts amounts to a massive distortion.
That's before we even begin to ponder the justice of incomes standing still while productivity has increased tenfold. 
the inflation adjusted purchasing power of current wages has been essentially flat since 1970, based almost entirely on the higher quality (and lower prices) of consumer goods?
Is that it, in a nut-shell? 
<snip>Regular readers will recognize the chart below on U.S. average wages.
Using the year 2000 as the numerical base from which to "zero" all of the numbers, real wages peaked in 1970 at around $20/hour. Today the average worker makes $8.50/hour -- more than 57% less than in 1970. And since the average wage directly determines the standard of living of our society, we can see that the average standard of living in the U.S. has plummeted by over 57% over a span of 40 years.
There are no "tricks" here. Indeed, all of the tricks are used by our governments. The green line shows average wages, discounted by inflation calculated with the same methodology for all 40 years. Obviously that is the only way in which we can compare any data over time: through applying identical parameters to it each year.
Then we have the blue line: showing wage data discounted with our "official" inflation rate. The problem? The methodology used by our governments to calculate inflation in 1975 was different from the method they used in 1985, which was different than the method they used in 1995, which was different than the method they used in 2005.
Two obvious points flow from this observation. First, it is tautological that the only way in which data can be compared meaningfully is to use a consistent methodology. If the government thinks it has improved upon its inflation methodology, then all it had to do was take all of its old data and re-calculate it with their "improved" methodology. Since 1970 there is this invention called "computers" which makes such calculations rather simple.
This brings us to the second point: the refusal of our governments to adopt a consistent methodology in reporting inflation statistics can only imply a deliberate attempt to deceive, since it is 100% logically/statistically invalid to simply string together disconnected series of data -- and present it as if it represents a consistent picture. More specifically, we can see precisely what lie our government was attempting to get us to believe.
that we don't want to be able to afford new cars, since used cars are so good!
Nevermind the fact that any rational consumer would rather have a new car than used, all other things held constant.
In this way, government economists have contradicted the clear signals of the market with their own judgment, and all in order to "prove" that shrinking wages aren't so bad. Also, they have changed their mind as to how pollution controls should affect one's perception of inflation, and have therefore made further changes...
Hard to see any level of precision here. It's more politic than "science", that's for certain!
Economists are aware of the perils of over adjusting these factors. That's why you see things like the 1999 decision to change pollution from a quality to a price adjustment. Honestly, considering the large negative externalities of pollution, I don't know why they wouldn't view pollution controls as an increase in quality. Perhaps its because pollution controls are government mandated so it's not like people can choose to buy "lesser quality" cars that don't have them.
As a hypothetical, let's say a man in 1970 makes just enough to buy an average car, an average house, and an average TV. Compare him to a man from 2010 that makes just enough to buy an average car, an average house, and an average TV. You would say, with no quality adjustments, that these men earn the same amount of money. But then why would anybody that isn't absolutely crazy prefer the goods that the 1970 man bought?
I'll note that cars and houses are not hedonically adjusted. The value of the increased quality is estimated the old-fashioned way: by comparing prices to things with the feature to things without the feature.
Regarding substitutions, CPI is meant to capture the change in prices in a basket of representative goods. If people are changing what they're buying then the basket needs to change. Spending habits just don't stay the same over time. For example, people spend more on entertainment now than they did 40 years ago.
The statement "any rational consumer would rather have a new car than used, all other things held constant" is either not true or a banal tautology (depending on what you mean by "all other things"
. I know at current prices I prefer a used car to a new car. If you mean literally all other things held constant than the definition of "rational consumer" requires preferring more wealth to less wealth, so yes a new car is preferable. Personally, in such a situation, I'd take the new car, sell it, and buy a used car.
Measuring prices isn't easy. That's why I trust the data-driven, scientific methods and analysis of the professional, experienced, government employed economists over that of the random internet-based gold seller who was the source of the false claim in the OP. But feel free to maintain that these economists are engaged in a massive government conspiracy to screw regular americans.
If you'd prefer a used car to a new car, for the same price (ALL other things held constant, remember,) for example, you are simply not a rational consumer.
The rest of your post is mere justification for the subjective nature of those figures. You made your initial assertions to this thread with such confidence. Your above post represents MAJOR backpedaling.
"So its 'banal tautology'. Sell the new car and buy a used one. Pocket the $5k."
Is English not your first language? This is the second (and final) time I'll explain the meaning of this straightforward phrase. The price of the new car and the used car is the same in this example. Every time. Please focus.
"And what's to comment on your rental example?"
I didn't make any rental example. Just like you don't make much sense.
"A new and a used car, even of the same price, do not have the same value."
Right. ALL ELSE HELD EQUAL, A NEW CAR IS MORE VALUABLE EACH TIME.
Which is why any fool would choose a new car instead of used one, for the same price (all other variable being held equal though, remember? 
)
EDIT: Edited this for simplicity, since the poster I'm responding to has such a hard time with getting other posters' points (see below, e.g.)
There are a lot of economists who would argue otherwise. But none of us who are old enough to know better need to be convinced. We KNOW.
This material comes from one. Link at the bottom.
________
Consumer Price Index Has Been Reconfigured Since Early-1980s
So As to Understate Inflation versus Common Experience
•CPI no longer measures the cost of maintaining a constant standard of living.
•CPI no longer measures full inflation for out-of-pocket expenditure.
•With the misused cover of academic theory, politicians forced significant underreporting of official inflation, so as to cut annual cost-of-living adjustments to Social Security, etc.
•Use of the CPI to adjust retirement benefits, private income or to set investment goals impairs the ability of retirees, income earners and investors to stay ahead of inflation.
•Understated inflation used in estimating inflation-adjusted growth has created the illusion of recovery in reported GDP.
From:
http://www.shadowstats.com/alternate_data/inflation-charts
these numbers (such as the infamously "volatile" food and fuel categories.)
So that piqued my curiosity as to what is included in the figures you cite...
It helps me stay sane. We all know the Joneses have changed a bit over time. 
It shows a dramatic drop over the 30 years, which reflects far more accurately what we are living through. IIRC, the mode dropped from slightly below the mean to right around $25K.
I usually save links to that sort of thing, but...
arguments, then take on the world. 
Perhaps there's a single common thread in all of this embarrassment, eh?
if we earn less. 
