The Reality of the ‘Real Wage’
Economists often debate the implications of trends in the “median real wage.” There is no such thing. Calculating trends in the real wage is much harder than we realize. Without being explicit about it, we are lumping together in terms of “real income”: somebody who prefers living in Manhattan with someone who prefers living in the Midwest; someone for whom an Ivy League education for their children is a must with someone for whom it is not; someone who could get along with the medical state of the art in 1958 with someone who could not; or people whose countries are industrializing in a world of cell phones with people living in countries that industrialized decades earlier. Such an exercise can be misleading at best and meaningless at worst.