Wage stagnation in the US: more than meets the eye

If you can, always look below the surface of data.

Via the Economist journalist Daniel Knowles comes a good example of why its important to look below the surface of statistics. American economist Steve Landsburg addresses a commonly heard refrain – that the wage of the median worker has barely risen in the past thirty years – and shows that all is not as it seems.

Landsburg cites a book by economist Edward Conard (first chapter, containing what we're talking about, here), which itself cites the Census Bureau. I confess that, without a more specific citation, I can't find the exact data Conard uses, but have found similar enough data (pdf, table A-5) to confirm the overall thrust of the argument.

Conard shows that from 1980 to 2005, median income in the US rose just 3 per cent once inflation is taken into account, from $25,000 to $25,700. 2005 is pre-crash, as well, so this isn't a tale of the recession.

But when you break the data down by race and gender, a very different story appears:

  1980 Median 2005 Median Increase
All Workers 25,000 25,700 3%
White Men 30,700 35,200 15%
Nonwhite Men 19,300 22,300 16%
White Women 11,200 19,600 75%
Nonwhite Women 10,200 16,500 62%

For every single demographic group, there was a much bigger increase in the median wage than we see when the groups are combined. The reason for this is obvious when it's pointed out: demographic change in the US means that there are far more (low-salaried) women and people of colour working now than there were in 2005, which pushes the overall average down.

Landsburg illustrates it with a farmyard analogy:

Imagine a farmer with a few 100-pound goats and a bunch of 1000-pound cows. His median animal weighs 1000 pounds. A few years later, he’s acquired a whole lot more goats, all of which have grown to 200 pounds, while his cows have all grown to 2000. Now his median animal weighs 200 pounds.

A very silly person could point out to this farmer that his median animal seems to be a lot scrawnier these days. The farmer might well reply that both his goats and his cows seem to be doing just fine, at least relative to where they were.

This is almost an example of Simpson's Paradox, a well-known (to stats nerds) effect where the direction of a correlation disappears when that correlation is disaggregated. I was taught it with an example involving racial discrepancies in application of the death penalty:

Sixty per cent of white murderers are executed for their crimes, and fifty per cent of black murderers. Are black people discriminated against in the application of the death penalty?

Now suppose that we break down the murder victims by race as well. We find the common pattern that people tend to attack victims of their own race:

Number of murders where death penalty is applied

White Murderer Black Murderer
White Victim 50/70=71% 25/30=83%
Black Victim 10/30=33% 25/70=36%

What about now? Does it begin to look like black people are discriminated against? In this example, black people are more likely to be executed for the murder of black or white victims; but because the murder of black victims isn't taken as seriously by the courts, the fact that murderers predominantly attack people of their race makes it look like black people are less likely to be executed than white people.

The median income example isn't quite a case of Simpson's Paradox, because there is still a positive increase in wage whether or not the statistics are disaggregated. But it's still an example of a time when it is best to dig beneath the surface.

But there is more to be said on the story of wage stagnation. Because a second claim normally accompanies the belief that US wages have stagnated, and that is that there has been a "decoupling" of wages. Due to rising inequality, the median household wage hasn't risen as fast as the mean wage:

If we've seen that the median wage grows faster when disaggregated, then the solid red line is likely to take a steeper ascent. But what happens to the dashed red line when disaggregated?

Sadly, I cannot find the data required to answer the question. If anyone knows where to look, tell me, and maybe we can put the issue to rest.

An immigrant worker protests in Orlando, Florida. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty
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There's just one future for the left: Jeremy Corbyn

Labour's new leader is redefining Labour for the 21st century, argues Liam Young. 

The politics of the resurgent left comes down to one simple maxim: people are sick and tired of establishment politics. When one makes this statement it is usually met with some form of disapproval. But it is important to realise that there are two different types of people that you have this conversation with.

First there are the people I surround myself with in a professional environment: political types. Then there are the people I surround myself with socially: normal people.

Unsurprisingly the second category is larger than the first and it is also more important. We may sit on high horses on Twitter or Facebook and across a multitude of different media outlets saying what we think and how important what we think is, but in reality few outside of the bubble could care less.

People who support Jeremy Corbyn share articles that support Jeremy Corbyn - such as my own. People who want to discredit Jeremy Corbyn share articles that discredit Jeremy Corbyn - like none of my own. It is entirely unsurprising right? But outside of this bubble rests the future of the left. Normal people who talk about politics for perhaps five minutes a day are the people we need to be talking to, and I genuinely believe that Labour is starting to do just that.

People know that our economy is rigged and it is not just the "croissant eating London cosmopolitans" who know this. It is the self-employed tradesman who has zero protection should he have to take time off work if he becomes ill. It is the small business owner who sees multi-national corporations get away with paying a tiny fraction of the tax he or she has to pay. And yes, it is the single mother on benefits who is lambasted in the street without any consideration for the reasons she is in the position she is in. And it is the refugee being forced to work for less than the minimum wage by an exploitative employer who keeps them in line with the fear of deportation. 

The odds are stacked against all normal people, whether on a zero hours contract or working sixty hours a week. Labour has to make the argument from the left that is inclusive of all. It certainly isn’t an easy task. But we start by acknowledging the fact that most people do not want to talk left or right – most people do not even know what this actually means. Real people want to talk about values and principles: they want to see a vision for the future that works for them and their family. People do not want to talk about the politics that we have established today. They do not want personality politics, sharp suits or revelations on the front of newspapers. This may excite the bubble but people with busy lives outside of politics are thoroughly turned off by it. They want solid policy recommendations that they believe will make their lives better.

People have had enough of the same old, of the system working against them and then being told that it is within their interest to simply go along with it.  It is our human nature to seek to improve, to develop. At the last election Labour failed to offer a vision of future to the electorate and there was no blueprint that helped people to understand what they could achieve under a Labour government. In the states, Bernie Sanders is right to say that we need a political revolution. Here at home we've certainly had a small one of our own, embodying the disenchantment with our established political discourse. The same-old will win us nothing and that is why I am firmly behind Jeremy Corbyn’s vision of a new politics – the future of the left rests within it. 

Liam Young is a commentator for the IndependentNew Statesman, Mirror and others.