Listening to way some pessimists talk about the US economy, one would be forgiven for thinking Americans are no better off today than back in 1980. The issue of rising living standards is the subject of the latest IGM Forum survey from the University of Chicago’s Booth business school. As the above chart shows, most economists think we are doing better than the official income numbers suggest.
Now that bit about the “9% cumulative increase in real US median household income since 1980″ refers to the Census Bureau’s data where it measures “money income.” The measure includes cash income from private sources — your paycheck and investment income, for instance — and government cash benefits such as Social Security and unemployment insurance benefits.
But it does not include noncash benefits such as food stamp, Medicare, and Medicare. And it is a pretax measure. Now some broader measures that include the stuff Census does not find median income up more like 40 percent. So while the rise in living standards may have slowed, they are up a lot more than 9 percent. Indeed, one economist comment, by José Scheinkman, thankfully mentions this: “Burkhauser et al. (2011) show faster growth in median post-tax, post-transfer size-adjusted household income including health ins. benefits.” Also lots of talk about about improper inflation measurement.
But what is really interesting about the IGM survey are the economist comments that go beyond income measures:
“I think it’s more likely than not given secular improvements in healthcare, longevity, technology, and air quality.” – David Autor
“So much of our day is spent doing things that didn’t exist back then that it’s hard to believe the #s fully account for new products” – Austan Goolsbee
“Depends how “better off” defined. Technology (eg smartphones), medical services, lower crime, etc have increased quality of life broadly.” – Bengt Holstrom
“No one I know would rather face the 1980 bundle of goods (at 1980 prices) than current bundle, at anywhere near the same incomes.” – Anil Kashyap
“The rise in life expectancy alone is worth on the order of 1% per year.” – Peter Klenow
“Difficult question, but life expectancy is up from 74 to 79 years – seems like a substantial gain not reflected in real median income.” – Jonathan Levin
“Due to measurement issues e.g. prices, family composition, measures of income, prob understates by >1% py. Add to that price quality bias.” – William Nordhaus
But there were a few folks who took the other side of the trade:
“There are gains in health etc. not measured in earnings but also psychological costs of growing inequality and a sense of disappointment.” – Abhijit Banerjee
“Iphones weren’t available then suggesting understatement. But both partners often work, which is stressful. This suggests overstatement.” – Oliver Hart
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