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.

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No, IDS, welfare isn't a path to wealth. Quite the opposite, in fact

Far from being a lifestyle choice, welfare is all too often a struggle for survival.

Iain Duncan Smith really is the gift that keeps on giving. You get one bile-filled giftbag of small-minded, hypocritical nastiness and, just when you think it has no more pain to inflict, off comes another ghastly layer of wrapping paper and out oozes some more. He is a game of Pass the Parcel for people who hate humanity.
For reasons beyond current understanding, the Conservative party not only let him have his own department but set him loose on a stage at their conference, despite the fact that there was both a microphone and an audience and that people might hear and report on what he was going to say. It’s almost like they don’t care that the man in charge of the benefits system displays a fundamental - and, dare I say, deliberate - misunderstanding of what that system is for.
IDS took to the stage to tell the disabled people of Britain - or as he likes to think of us, the not “normal” people of Britain -  “We won’t lift you out of poverty by simply transferring taxpayers’ money to you. With our help, you’ll work your way out of poverty.” It really is fascinating that he was allowed to make such an important speech on Opposite Day.
Iain Duncan Smith is a man possessed by the concept of work. That’s why he put in so many hours and Universal Credit was such a roaring success. Work, when available and suitable and accessible, is a wonderful thing, but for those unable to access it, the welfare system is a crucial safety net that keeps them from becoming totally impoverished.
Benefits absolutely should be the route out of poverty. They are the essential buffer between people and penury. Iain Duncan Smith speaks as though there is a weekly rollover on them, building and building until claimants can skip into the kind of mansion he lives in. They are not that. They are a small stipend to keep body and soul together.
Benefits shouldn’t be a route to wealth and DWP cuts have ensured that, but the notion that we should leave people in poverty astounds me. The people who rely on benefits don’t see it as a quick buck, an easy income. We cannot be the kind of society who is content to leave people destitute because they are unable to work, through long-term illness or short-term job-seeking. Without benefits, people are literally starving. People don’t go to food banks because Waitrose are out of asparagus. They go because the government has snipped away at their benefits until they have become too poor to feed themselves.
The utter hypocrisy of telling disabled people to work themselves out of poverty while cutting Access to Work is so audacious as to be almost impressive. IDS suggests that suitable jobs for disabled workers are constantly popping out of the ground like daisies, despite the fact that his own government closed 36 Remploy factories. If he wants people to work their way out of poverty, he has make it very easy to find that work.
His speech was riddled with odious little snippets digging at those who rely on his department. No one is “simply transferring taxpayers’ money” to claimants, as though every Friday he sits down with his card reader to do some online banking, sneaking into people’s accounts and spiriting their cash away to the scrounging masses. Anyone who has come within ten feet of claiming benefits knows it is far from a simple process.
He is incredulous that if a doctor says you are too sick to work, you get signed off work, as though doctors are untrained apes that somehow gained access to a pen. This is only the latest absurd episode in DWP’s ongoing deep mistrust of the medical profession, whose knowledge of their own patients is often ignored in favour of a brief assessment by an outside agency. IDS implies it is yes-no question that GPs ask; you’re either well enough to work or signed off indefinitely to leech from the state. This is simply not true. GPs can recommend their patients for differing approaches for remaining in work, be it a phased return or adapted circumstances and they do tend to have the advantage over the DWP’s agency of having actually met their patient before.
I have read enough stories of the callous ineptitude of sanctions and cuts starving the people we are meant to be protecting. A robust welfare system is the sign of a society that cares for those in need. We need to provide accessible, suitable jobs for those who can work and accessible, suitable benefits for those who can’t. That truly would be a gift that keeps giving.