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Tuesday, August 14, 2012
Tuesday, August 7, 2012
The Numbers Racket - Cows, Goats and Workers Income
The Numbers Racket This is a great analysis by Steve Landsburg (using numbers from the new book Unintended Consequences by Edward Conard) explaining a seeming paradox in workers median income gain over the period 1980-2005. In total, adjusted for inflation, workers income increased only 3%. However, each category - men, women, whites, non-whites - increased from 15%-62%.
How is this possible? As Steve points out, it happens as the demographics change over time with an influx of more low-income groups - women and non-whites - into the population. This creates the illusion of no progress while in fact everyone has progressed.
It's similar to trying to compare the cost of a basket of goods over time without considering that the mix of goods has changed at the same time that both nominal and relative prices have changed.
How is this possible? As Steve points out, it happens as the demographics change over time with an influx of more low-income groups - women and non-whites - into the population. This creates the illusion of no progress while in fact everyone has progressed.
It's similar to trying to compare the cost of a basket of goods over time without considering that the mix of goods has changed at the same time that both nominal and relative prices have changed.
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