Categories vs. Individuals

Individual mobility is what we should be watching

We tend to compare categories of people over time. This can lead to false conclusions about progress. This is because most people move between categories throughout their lives.

As the economist Thomas Sowell notes:

Most working Americans who were initially in the bottom 20 percent of income-earners, rise out of that bottom 20 percent. More of them end up in the top 20 percent than remain in the bottom 20 percent. People who were initially in the bottom 20 percent in income have had the highest rate of increase in their incomes, while those who were initially in the top 20 percent have had the lowest. This is the direct opposite of the pattern found when following income brackets over time, rather than following individual people.

Most of the media publicize what is happening to the statistical brackets — especially that “top one percent” — rather than what is happening to individual people.

What happens when we compare the category of unskilled workers to blue-collar workers? According to measuringworth.com, one of the most respected sources of information about hourly compensation (wages and benefits), from 1980 to 2020 unskilled worker wages increased by 253 percent from $4.06 to $14.35, while blue-collar worker wages increased by 257 percent from $9.12 to $32.54. The rates of change look very similar.

But most people don’t remain in the unskilled category for 40 years. They at least move up to the blue-collar category. These workers are “upskilling.” From 1980 to 2020 upskilling workers enjoyed a 702 percent increase in nominal hourly compensation going from $4.06 to $32.54 an hour. Hourly compensation for unskilled and blue-collar workers increased around 3.22 percent on a compound annual basis over this 40-year period, while upskilling workers enjoyed a 5.24 percent annual increase. At 3.22 percent hourly income doubles every 22 years, while 5.24 percent would double every 13.3 years.

Why is this important? Because your standard of living is measured as the rate of change in prices relative to the rate of change in your hourly compensation. This is what a time price is. How many hours does it take your you to earn the money to buy something, and has that thing become more or less time expensive over time? As long as your hourly income is increasing faster than the prices of products, then your time price is decreasing and you are enjoying more abundance. If you invest in upskilling, you should be well ahead of most product price increases. To learn more about why time is a better way to measure than money see our article here

You can learn more about these ideas in our new book, Superabundance, available at Amazon. Jordan Peterson calls it a “profoundly optimistic book.”

Gale Pooley is a Senior Fellow at the Discovery Institute and a board member at Human Progress.