Another point about the poverty line is that it has increased much less rapidly than living costs. The poverty line is based on a family budget in which food counts for a certain percentage, housing a certain percentage, etc. To compute the budget food is priced and then the cost is multiplied by a number corresponding to the share of food in the budget in the 1960's. Since then housing has become much more expensive, so much so that the poverty line budget will now provide food and housing with NOTHING left for anything else. Hence, an estimate of inflation based on the poverty line would be a drastic understatement. On this basis wages would have been going up considerably for the last 20-25 years, which is clearly not the case. Dave Richardson ---------- From: pen-l Subject: [PEN-L:3950] Real Wages & the CPI Date: Thursday, April 25, 1996 9:06AM One way to get a handle on whether the real wage has fallen or not (or when it has fallen and when risen) would be to use the BLS's standard budgets that define the poverty level, a moderate standard of living, etc. (I don't have these data available.) One would have to use the bench-mark years for these rather than those which are updated using the CPI, since the whole point is to avoid use of the CPI. Then divide these nominal budgets by the nominal wage, to get the number of hours needed to pay for the nominal budget. (This is an extension of Doug's calculation with cars.) problems: (1) The wage misses the advantage of benefits such as health insurance. One might want to divide the nominal budgets by nominal total compensation (which includes benefits) to check the above. However, one of the problems with benefits is that, at least for health care, the prices have risen much faster than for other wage-goods, so that real health benefits haven't risen much. (2) The official poverty-line budget hasn't been updated in the face of increasing needs. However, I understand that Patricia Ruggles and others have made good estimates of alternative poverty-line budgets. in pen-l solidarity, Jim Devine [EMAIL PROTECTED] Econ. Dept., Loyola Marymount Univ. 7900 Loyola Blvd., Los Angeles, CA 90045-8410 USA 310/338-2948 (daytime, during workweek); FAX: 310/338-1950 "It takes a busload of faith to get by." -- Lou Reed.
