From Steven Landsburg:
Imagine a farmer with a few 100-pound goats and a bunch of 1000-pound cows. His median animal weighs 1000 pounds. A few years later, he’s acquired a whole lot more goats, all of which have grown to 200 pounds, while his cows have all grown to 2000. Now his median animal weighs 200 pounds.
A very silly person could point out to this farmer that his median animal seems to be a lot scrawnier these days. The farmer might well reply that both his goats and his cows seem to be doing just fine, at least relative to where they were.
That’s exactly what’s happened with median incomes. Each demographic group has progressed, but at the same time, there’s been a great influx of lower income groups — women and nonwhites — into the workforce. This creates the illusion that nobody’s progressing when in fact everybody’s progressing.
Here is the graph Landsburg uses, which comes from this book.
Notice, as Landsburg is pointing out, that although the change in median wages for all workers increased a paltry 3% between 1980 and 2005, it increased substantially for all native born workers when you disaggregate the data.
Let's add a little more. This is from a lecture I give each fall. The following chart shows the percentage of the U.S. labor force that is foreign born. It more than triples since 1970.
Of these foreign born workers, Hispanics make up 49%, while Asians make up 22%. The average weekly earnings for foreign born workers is $609, about $170 or 22% less than the $780 average weekly earnings of native born workers.
The chart below shows single mothers and single women as a percentage of the U.S. labor force. (I have not yet updated it for 2010.) Notice here, too, that the percentage of the U.S. labor force comprised of single mothers jumped 50% between 1970 and 2000.
The problem with using aggregates is that you mask changes taking place within those aggregates.