There was no golden age to be a worker in America

By Tim Worstall , written on March 17, 2014

From The News Desk

I have no problem with political rhetoric. I'm guilty of it myself often enough. But I do wonder why, especially in this Internet age, people put forward examples that are just so easy for us to go out and disprove.

My example today is drawn from political economist Robert Reich (and to be honest, my example every day could be from Reich) and involves the idea that there was some golden age in which the worker was being less screwed over than she is now. Here's Reich's set up:

Do you recall a time in America when the income of a single school teacher or baker or salesman or mechanic was enough to buy a home, have two cars, and raise a family?

I remember. My father (who just celebrated his 100th birthday) earned enough for the rest of us to live comfortably. We weren’t rich but never felt poor, and our standard of living rose steadily through the 1950s and 1960s. Now, I'm sure the standard of living did indeed increase during those two decades. But Reich's next stage is to point out that you have all of those things -- home, cars, etc -- today on, say, a school teacher's salary.

The problem is this isn't true. Something which we can tell by comparing the salary of a teacher back then with that of a teacher today and then compare them again, inflation adjusted. Fortunately someone has already done this work for us:

The following representative data on income was obtained from a variety of sources including almanacs, newspapers, US Department of Labor and US Dept. of Education. The occupations selected to be compared were based on the availability of income in 1960 and their performing similar activities in 1960 as they do today.

Hourly Wages                  1960       1960 today       2008 Minimum wage                    $ 1.00       $ 6.95                  $ 5.85 Manufacturing (Avg.)         $ 2.32       $16.12                 $30.01

Yearly Salaries                1960        1960 today      2008 Patrolman (starting)           $4,400     $30,580              $36,245 Teacher (public)                  $5,135       $35,688              $50,700 Engineer                               $9,400      $65,330              $72,300 OK, those are 2008's figures, but they're good enough for our purpose here. Teacher's salaries are now, relative to the cost of all goods, higher than they were back in 1960. Therefore the lifestyle of teachers is today better, less poor, richer if you like, than the lifestyle of teachers back in 1960.

Sure, average inflation is a pretty crude tool, some things have risen in relative price over those years, some things have fallen. Food has definitely fallen relative to other goods, health care risen. That last being at least partially attributable to the fact that there's more that doctors can do for us now. But the total basket of goods that can be afforded with that average teacher's salary these days is larger than that which could be had with that 1960 number. That's what those inflation adjusted figures are telling us.

This is even true about property if we look at Reich's home town of Scranton, PA. A very quick look around the property sites tells us that a 1935 three bedroom, one and a half bathroom, single family home, or a 1967 three bed, one and a half bath ranch style on a quarter acre can be had in the $65,000 to $120,000 range. These are affordable numbers on a $50,000 and change salary. These are not wrecks. These are fully repaired, ready-to-move-into houses.

It is entirely true that relative wages for teachers have fallen over this period: something which is actually a bit of a surprise. For way back then the professions of nursing and teaching had a near monopsony position on the employment of college educated women. That half the species is now freed from this vile sexism is a wonderful change but we would have expected relative wages to therefore have risen as more women get to consider careers and jobs in other fields. That they haven't is something of a puzzle. But this still doesn't change the basic point to be made here. Which is that the living standard that can be purchased by a teacher's income has risen over these 50 odd years, not fallen.

So where is the mistake that Reich is making? It's that the general standard of living has risen strongly since those days. It's actually extremely simple to live today on the inflation adjusted amount that teachers made back then: you just have to live at the standard of living the people had back then. Which wasn't, if we are to be honest all that great in fact. You would most certainly not, as a teacher's child, expect to be flying anywhere for your vacation. And that's where Reich's error, indeed the error in this whole meme of there having been a golden past age is. Living standards now are higher than they were: thus there never was that golden age.

And we can indeed get a house, the cars, not be rich or poor, on the wages that these same jobs pay today. In fact, we'll be a little bit richer than they were as the wages have risen faster than the prices of things we buy.

[Image courtesy daily sunny]