CPI and the Rat Race: Reaction to Paul Krugman

Read Paul Krugman's original article at: http://www.slate.com/id/1915/

On the qualitative front, there are a few key differences between 1950 and "today" (1996 in the article) that struck me as key to determining well-being.  Foremost, who was the so-called "average American" this article is really looking at?  I'm sure we all conjure up images of the suburban family with mom in an apron and bottled milk delivery, and indeed this may be what the majority of the experience was.  The average African-American family in 1950 was far far below this comfy ideal that people look at the 1950s as- they had Negro League Baseball and had to give up their bus seats.  Nearly all black people in the South experienced extreme mistreatment, segregation and prejudice, and there was a major uprooting as many migrated to urban areas up North in search of better job opportunities and possilibity of education.  There was little room in America for anyone not Protestant- Irish and Italian Catholics were treated as lesser people.  Lucille Ball was able to have a hit TV show in the 1950s but experienced a lot of public backlash for marrying a Cuban.  In 1950 the rate of marriage was up for both black and white Americans vs today.  But unlike white families, a majority of black children today grow up in families headed by a single mother (sources for much of this: Wikipedia and an in-depth journal article).  Athough there is now Affirmative Action, minorities are still less college educated, more likely to be at or below the poverty level, have higher rates of incarceration, experience racial profiling and other racism, and have lower access to health care.  Like 1950, blacks and other minorities still live overwhelmingly in urban centers, and in neighborhoods that are de facto racially separated. Many of these neighborhoods culturally have more of a community lifestyle.  Perhaps, as Krugman says, this is because they are nearly all at similar income levels.  This implies that quality of life on that measure has not really changed for minorities at all.  It also seems that CPI for the fast-growing, poor minority populations is likely what is driving the poverty levels down today.  Like Mankiw said, there might be 10 white people with all of the wealth and 90 minorities and that gives the same average as an even distribution, even though clearly it is not evenly distributed and the same people are being left out.

Second, in 1950 most families had only a single wage-earner.  This means that families felt financially secure enough to have Mom stay at home.  The average families in 1996 were headed by two wage-earners, and this would still only put some of those in the 20th percentile.  One could argue that if both parents worked for wages in 1950 the actual GDP, mean income, and the CPI would be much higher.  In the 1940s during WWII-era, many women were working in the US.  So it really was a sign of security and economic prosperity that women left the workforce by 1950. The amount of money spent on household expenses from 1950 to today has also increased at a high rate as well (interesting government census info source here).  So even with inflation not being as high as originally thought, parents today have to work harder in order to meet the basic needs of a family.