Thursday, February 26, 2015

Dear Washington Post: may I please have Matt O'Brien's job?

 - by New Deal democrat

Writing in the Washington Post's 'Upshot' blog, Matt O'Brien claims "Why rising wages might be bad news:"
The economy's biggest problem is that workers' wages have fallen, in inflation-adjusted terms, for 15 years now, but we kind of don't want that to change right now. If it did, that would mean the Great Recession had pushed millions of people into early retirement. It'd be better if more of those people came back, and then wages started rising again.
The above phrase "for 15 years now" links to this article by Ben Casselman, which discusses median income:
In 1988, the typical American adult was 40 years old . . . .
Twenty-five years later, . . . [o]ne thing that hasn’t changed? The income of the median U.S. household is still just under $52,000.

As I've said over and over and over, median household income is the most misused statistic in the econoblogosphere.  Claiming that median household income has fallen means that wages have fallen is a fundamental error.  The households included in the measure of median income include the burgeoning number headed by retirees, as well as households with unemployed adults.

Needless to say, retirement typically causes a big hit to income.  Further, those households also include the unemployed. Fifteen years ago, we had a 4% unemployment rate.  You may have heard, that number got a wee bit larger since then. Last time I heard, the unemployed usually had lower incomes than job holders.

Normalize for demographics and the unemployment rate, and - as, for example, I posted yesterday - wages since 1988 have risen significantly. In other words, it is precisely because of the increased unemployment rate that working age household income has stagnated.

So, O'Brien's argument boils down to, it would be better if more working age people got jobs (so raising household income) without raising wages, than more working age people getting jobs at higher wages!

The Washington Post is presumably paying O'Brien decent money to post this essentially circular argument.  I'm getting nothing for making the correction.  May I please have his job?