The Question Has ‘more economic freedom’ helped Americans since the mid-1970s? Or, asked only somewhat differently…

… was this man a menace to the middle-class?

inflation-adjusted, before-tax, money income for the median American household has stagnated since the mid- 70s. (Today only about 18% higher.) Inflation-adjusted hourly money wages for the median, non-supervisory worker has hardly budged.

Real Household Income

In 2012 dollars, average hourly earnings for non-supervisory workers in 1975 were $4.73. In 2012 dollars that’s $ Today, they’re $20.42 – higher by a mere 3.6 percent

Great Stagnation? “Median [family] income is the single best measure of how much we are producing new ideas that benefit most of the American population. Yet the picture is depressing.” - Tyler Cowen, The Great Stagnation (2011) p. 14

Almost all the benefits of economic growth since [the 1970s] have gone to a small number of people at the very top. —Robert Reich, Financial Times, Jan. 29, 2008

So is this narrative correct? Are the policies advocated by Milton Friedman really a menace to the middle-class?

We could talk about how only a few of Friedman’s policy suggestions have been put in place….

… or we could talk about how measures of inflation inadequately account for changes in product quality….

… or we could talk about how, since the mid- 1970s, the per-person size of the median household has fallen by 11 percent… … or about how much more compensation today is paid in the form of non-wage – or, “fringe” – benefits… … or about how what happens to a statistical measure, such as an ‘average’ or a ‘median,’ does not necessarily tell us what happens to the individuals whose actions make up the data.

Average Household Size: Down 24% in 50 Years persons

Per-Household-Person Income In 1976 the average household was 2.86 persons, then it fell 10.5 percent by 2006 (to 2.56 persons). Per-household-person income, therefore, rose not by18% but by 32%.

Different Respected Ways to Calculate Inflation

But let’s not. Let’s look at living standard from another angle… Purchasing power.

7.7 hours

minutes

6.3 hours

2 hours

1.5 hours

1 hour

75 minutes

50 minutes

7 hours

4.4 hours (So, 11.4 hours total)

5.5 hours And it’s got wheels!

9 hours

4.9 hours

15.8 hours

5.4 hours

13 minutes

3.8 minutes

12.6 hours

30 minutes

57 hrs.

52 hrs.

73.4 hours

1 hour, 52 minutes

44 hours

11 hours

8.6 hours

4.0 hours

40.2 hours

13.1 hours

93 hours

4 hours

48.6 hours

12.2 hours

2.9 hours

1.5 minutes

26.4 hours

3.9 hours

12.7 hours

3.9 hours

158.6 hours

17.1 hours

One final set of data….

<$15K$15K-25K $25K-35K$35K-50K $50K-75K$75K-100K>$100K 15.8% 13.0% Percent of U.S. Households Earning Incomes in These Ranges, Constant (2009) dollars