Arnold Kling  

Adjusting Income for Age

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Sticky-Priced, Illiquid Asset... When Hell Froze Over...

Anne Kim, Adam Solomon, and Jim Kessler write,


Progressive economists typically peg median household income at about $45,000. But that includes households headed by 22-year olds (who are on their way up) and 76-year olds (who live on fixed incomes that may be small but are often comfortable since they have no dependents and limited work related expenses).

Among households headed by prime age Americans - adults between the ages of 26 and 59 - the median household income is about $63,000. For prime age married households the median income is over $70,000, and it is nearly $80,000 for two-earner prime age households.


The article is about "disconnects" between Democratic Party ideology and middle-class reality. I think that one could say the same about mainstream media, including the New York Times.


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CATEGORIES: Income Distribution



COMMENTS (11 to date)
Chris writes:

Along with dire claims of "inequality" and "shrinking wages" doesn't it make sense to look at European countries that have many of the policies that progressives want to implement? How are Germany and France doing under higher minimum wages, more powerful unions andmore restrictive labor policies?

Everything is argued in theory, but there are plenty of real world implementations of similar policies.

Tom West writes:

In general European policies have produced more security for their citizens while producing a standard of living that is higher than anywhere else in the world.

Um, unless they are comparing their standard of living to the United States, in which case suddenly they don't look nearly as good, and their economic satisfaction plummets. However, if the United States didn't exist, European citizens would be satisfied with their economies *and* have economic security, a recipe that no other nation can boast about.

So, once again the United States is a major source of unhappiness in the world.

:-)

Chris writes:

@Tom - I am wondering specifically about income inequality and wage growth.

David N. Welton writes:

Hi,

Talking about a "European" model is an error. There was a good article in The Economist on this very argument several months ago. There are three basic models that differ, in some cases by a lot (at least this is my understanding of how things work):

*) Southern Europe. For instance, Italy, where I live, has a very rigid labor market, and yet, provides very little in the way of benefits to the unemployed.

*) France, Germany. Rigid labor markets, with generous benefits.

Both of the above two models have a lot of problems, because of the static labor market. Unemployment and/or the 'insecure jobs' seem to be shuffled off disproportionately on the young.

*) Northern Europe/Holland. More flexible labor markets, with generous social benefits.

The third one seems to be the most workable, and indeed compares pretty well with the US in a number of ways. It has the benefit that the labor market is fluid, and companies don't bare the burden of unproductive workers, and aren't forced into the role of providing social services. It's also a clearer and more transparent pact between voters, the government, and companies, that the voters seem reasonably happy with.

I suppose it's not a system that's everyone's cup of tea (taxes *are* very high), but I think in the end it might come down to what your vision is of the society you want to live in, and reasonable people might differ in their views.

dearieme writes:

"76-year olds (who live on fixed incomes that may be small but are often comfortable since they have no dependents and limited work related expenses)." I'm surprised at the ommission of mortgage repayments as an example of a cost that the elderly don't usually face.

The Engineer writes:

>>I suppose it's not a system that's everyone's cup of tea

Just off the top of my head, the biggest difference between Northern Europe and the US is the homogenity of Northern Europe, racially and ethnically. Also, there are no underclasses (African American, Native American, Appalachian whies, and now Mexican illegals).

We've seen what happens when you combine a generous welfare system with an underclass. It causes a cycle of poverty.

Mr. Econotarian writes:

>>the biggest difference between Northern Europe and
>>the US is the homogenity of Northern Europe,
>>racially and ethnically. Also, there are no
>>underclasses

The percentage of poor among immigrants to Norway is much higher than the percentage among the native population so that immigrant status and ethnic origin may help to explain to some degree the continuing existence of poverty in Norway, an affluent country known for its relatively low income inequality.
http://ideas.repec.org/p/hhs/osloec/2003_007.html

Why Do Self-Employed Immigrants in Denmark and Sweden Have Such Low Incomes?
Using two cross-sections, one for each country, we find large income differences between natives and immigrants in both countries.
http://ideas.repec.org/p/iza/izadps/dp1280.html

Fritz writes:

The NYT's editorial is a perfect example of how immature these people really are. To view the chart of real median income since it's inception and notice that such income was rising since 1980, extended periods of economic growth without recession, to make claims that we should ridicule recent gains in income, is pathetic. When government was following NYT's economic planning, we had short periods of growth, multiple recessions, stagnant incomes, rising poverty. Yet the implementation of Reaganomics the reverse occurred. They wonder why Republican policies win elections?

Timothy writes:

If you figure that the typical, non-specialized straight out of college job in the business world pays about $30,000-$35,000 a year and you multiply that by two (if you are attached during college and live together), it looks like you're going to be getting $60,000 to $70,000 as a two-earner household. That, frankly, isn't a bad living.

Mcwop writes:

This article presents purchasing parity comparisons for the top 10% and bottom 10% between U.S. and many European countries.

http://www.tcsdaily.com/article.aspx?id=082806E

Brad Hutchings writes:

Allow me to read something into Arnold's interpretation. The article says that the Dems are definitely not the answer. But that doesn't mean that Republicans are by process of elimination. Republicans have an opportunity if they look at what the median and above need from government. But they're hosed if they just continue being Dem-Lite.

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