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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To heal Britain’s cracks, it’s time for us northern graduates in London to return home

Isn’t it time for people like me, who’ve had privileges and experiences not open to everyone, to start heading back to our local communities, rather than reinforcing London’s suffocating dominance?

I’m from Warrington. The least cultured town in the UK. My town.

I moved to London almost exactly five years ago. Not because I particularly wanted to. Not because I wanted to depart the raucous northern town that I still call home. Because it was my only choice, really. I’d done my stint in the call centres and had some fun. But that couldn’t, surely, be my lot?

After university, I’d already started feeling a little weird and out of place back in Wazza. There were fewer and fewer people who didn’t look at me like I’d just fallen off a futuristic space flight that’d given me a different accent and lofty ideals.

Of course, that’s because most people like me had already skipped town without looking back and were all in the capital trying to strike beyond the ordinary.

The young, the cities, the metropolitan elite are still reeling after last week’s vote and wondering how people, half of our people, have got it so horribly wrong. We’re different, divided, done for.  

One thing I’ve clung onto while I’ve been in London is the fact that I’m from Warrington and proud. It might not be a cultured town, but it’s my town.

But I wasn’t proud of the outcome of the EU referendum that saw my town vote 54.3 per cent to 45.7 per cent to leave.

To be fair, even in my new “home” borough of Hackney, east London, the place with the third-largest Remain vote, one in five people voted for Brexit.

Yes, in one of London’s hottest and most international neighbourhoods, there are quite a lot of people who don’t feel like they’re being taken along to the discotheque.

Perversely, it was the poorest places in the UK that voted in largest numbers to leave the EU – that’s the same EU that provides big chunks of funding to try to save those local economies from ruin.

In many ways, of course, I understand the feelings of those people back in the place I still sometimes think of as home.

Compared to many suffering places in the UK, Warrington is a “boom town” and was one of the only places that grew during the last recession.

It’s a hub for telecoms and logistics companies, because, ironically, its good transport links make it an easy place to leave.

But there are many people who aren’t “living the dream” and, like anywhere else, they aren’t immune from the newspaper headlines that penetrate our brains with stories of strivers and scroungers.

Warrington is one of the whitest places in the UK, and I’m sure, to many locals, that means those immigrants are only a few towns away. There’s already a Polski sklep or two. And a few foreign taxi drivers. Those enterprising bastards.

We have never seriously addressed the economic imbalance in our economy. The gaping north-south divide. The post-industrial problem that politicians in Westminster have handily ignored, allowing the gap to be filled by those who find it quick and easy to blame immigrants.

When schemes like HS2, which is plotted to smash right through the place I grew up, are pushed against all of the evidence, instead of a much-needed, intercity Leeds to Liverpool investment to replace the two-carriage hourly service, it’s like positively sticking two fingers up to the north.

But I am also a big problem. People like me, who get educated and quickly head off to London when things aren’t going our way. We invested in ourselves, sometimes at state expense, and never really thought about putting that back into the places where we grew up.

There weren’t the right opportunities back home and that still stands. But, rather than doing something about that, people like me lazily joined the gravy train for London and now we’re surprised we feel more kinship with a 20-something from Norway than we do with someone who we used to knock on for when we should have been at school.

That’s not to suggest that our experiences in the capital – or mine at least – haven’t made us a thousand, million times better. 

I’ve met people who’ve lived lives I would never have known and I’m a profoundly better person for having the chance to meet people who aren’t just like me. But to take that view back home is increasingly like translating a message to someone from an entirely different world.

“You know, it’s only because you live in a country like this that a woman like you is allowed to even say things like that,” assured one of my dad’s friends down at the British Legion after we’d had a beer, and an argument or two.

Too right, pal. We live in what we all like to think is an open and tolerant and progressive society. And you’re now saying I shouldn’t use that right to call you out for your ignorance?

We’re both Warringtonians, English, British and European but I can increasingly find more agreement with a woman from Senegal who’s working in tech than I can with you.

It’s absolutely no secret that London has drained brains from the rest of the country, and even the rest of the world, to power its knowledge economy.

It’s a special place, but we have to see that there are many people clamouring for jobs they are far too qualified for, with no hope of saving for a home of their own, at the expense of the places they call home.

It’s been suggested in the past that London becomes its own city-state, now Londoners are petitioning to leave the UK.

But isn’t it time for people like me, who’ve had privileges and experiences not open to everyone, to start heading back to our local communities, rather than reinforcing London’s suffocating dominance?

We can expect local governments to do more with less, but when will we accept we need people power back in places like Warrington if we want to change the story to one of hope?

If this sounds like a patronising plan to parachute the north London intelligentsia into northern communities to ensure they don’t make the same mistake twice... Get fucked, as they say in Warrington.

It was Warrington that raised me. It’s time I gave something back.

Kirsty Styles is editor of the New Statesman's B2B tech site, NS Tech.