End Times: Elites, Counter-Elites, and the Path of Political Disintegration

by Peter Turchin

The startling conclusion from these data is that Americans without a four-year college degree—64 percent of the total population—have been losing ground in absolute terms; their real wages shrank over the forty years before 2016. But we are not done yet. So far, we’ve been focusing entirely on inflation-adjusted wages, or “real wages.” But what makes them real? Adjusting wages for inflation is not quite as straightforward as it may seem. Over the past decades, some goods became cheaper: TVs, for example, and many toys. The cost of other things, such as new cars, hasn’t changed much in current dollars, which means that new cars became cheaper in inflation-adjusted dollars. But the cost of other items and products increased much faster than the official inflation rate. To estimate this rate, government economists must define a basket of consumables and then calculate how its cost changes from year to year. There are several problems with this approach. First, the baskets of Steve and Kathryn are utterly different. In other words, each experiences a different rate of inflation. Second, the basket of consumables changes dramatically over time. For example, people didn’t have smartphones in 1976, and now everybody uses them. How do we factor this in?