Real Wages, after inflation, up 24%, mostly in lower incomes

[Superman]

No, this study is not about wage upward mobility in a general sense. It is about the upward mobility of an individual over time. The trick, that you appear to have fallen for, is to confuse this with an increase in overall wages. To see if wages rise over time, you don't follow individuals through their careers. Of course their wages will rise.

To track general wage growth, you look at the history of wages for a particular job. Lots of studies have done this. This is where you hear that wages are not keeping up with inflation.

As I said before, folks who do not understand statistics should not read statistical studies.

[red-beard]

So, explain the decrease at the upper ends

[Superman]

Originally Posted by red-beard

The Treasury study examined a huge sample of 96,700 income tax returns from 1996 and 2005 for Americans over the age of 25. The study tracks what happened to these tax filers over this 10-year period. One of the notable, and reassuring, findings is that nearly 58% of filers who were in the poorest income group in 1996 had moved into a higher income category by 2005

Brilliant! Shocking and brilliant!

[Superman]

Originally Posted by red-beard

So, explain the decrease at the upper ends

That's partly easy and partly real real gnarly. The real real gnarly part is the value of those executive services. It could be that industry has noticed that very excellent executive performance might be more common than rare. It could be there is a glut on that market.

The easy part is this: Executive compensation is somewhat like investment income. Once you're earning 16%, how easy is it to turbocharge that to 32% (double). Not easy.

But.......if you're operating a cash register at a gas station, you have some pretty darned delicious upward potential.

Again, the ugly trap in this study is concluding that wages increased for JOBS. They didn't. The increase because PEOPLE changed JOBS.

[DanielDudley]

That study compares to 96. Most news stories are stating that real wages in the last five years haven't gone up - and that is not even taking into account inflation.

Who did you say bought the WSJ ? I already know who bought the Government.

[Nathans_Dad]

Once again we have proven that people will see whatever the hell they want to see in any given statistic. Supe sees this supporting his position, Red Beard his.

There are lies, damn lies, and then there are statistics.

[jyl]

http://www.treasury.gov/press/releases/reports/incomemobilitystudyfinal.pdf

is the study. It seems pretty straightforward, and basically confirms the findings from some previous studies.

Basically, it turns out that after 10 years, more than half of the people who started in the very-lowest-paying jobs have moved on to the next-to-lowest-paying jobs or better.

Specifically, for people who were in the lowest quintile in incomes in 1996, by 2005 42% were still in the lowest quintile, 27% had moved to the next-to-lowest quintile, 14% had moved to the middle quintile, 10% to the next-to-highest quintile, and 5% to the highest quintile (the Horatio Algers). Overall, for people in the lowest quintile in 1996, by 2005 their mean income had increased 90% or about 7% per year (adjusted for inflation).

Well, enough about the working poor, what about the middle class?

Of the middle quintile in 1996, by 2005, 33% were still in the middle quintile, 30% had moved up to the next-to-highest quintile, 13% were in the highest quintile, 18% had moved down to the next-to-lowest quintile, and 7% had fallen to the lowest quintile. Overall, for people in the middle quintile in 1996, by 2005 their mean income had risen 23% or about 2% per year (adjusted for inflation)

So, seems like if you start in the lowest quintile, you have a pretty good chance of of moving up at least one rung (quintile) and growing your income. Makes sense, you are starting from a low level. Once you get to the middle quintile (middle class?), your income grows much more slowly.

Notice that last part. If you started in the middle quintile in 1996, then after ten years, even though 43% of you moved up the ladder versus 25% who moved down, your mean income rose only 2% per year (adjusted for inflation). So, measured in dollars rather than in rungs on the quintile ladder, your progress over 10 years was, well, not so very much.

The inflation adjustment uses the CPI, which as we know excludes food and energy, excludes house prices (it uses a rent measure), and uses hedonic adjustments (see below). If you believe that CPI understates true inflation as the ordinary consumer feels it, then you might wonder if the 1996 middle quintile got any real income gain at all in those 10 years.

Heonic adjustments:

Between 1980 and 1981, for example, the average transaction price of a new car rose from $7,574 to $8,910, an increase of $1,336. Based on that, it is possible to calculate the rate of car-price inflation for 1981, at 17.6%, a very substantial increase.

But the wizards at the BLS got rid of most of that increase. In a BLS document, "Quality Changes for Passenger Cars, 1969-99," the BLS initially attributed 99% of the price increase to "improved quality." Then, after it made further adjustments, the BLS finally attributed 66% of the 1981 increase in the price of a car to "improved quality," and 34% to actual price increase. The BLS reported to the BEA, that only $454 of the $1,336 price increase in 1981 was actually an increase in price. Thus, the BLS threw away two-thirds, or $882, of the price increase you paid in 1981. It reported an auto-price inflation rate of just 6.0%.

[Normy]

Why is it that whenever Republicans are in power, I loose money; yet when Democrats are in power I get wealthier-?

hello?

[Caveat: I'm a union member]

N!