Allison's ode to the second moment: Second issue

Hello and welcome to the 2nd addition of Allison’s Ode to the Second Moment; a newsletter that provides a safe space for people who think budget constraints are important.

First up, let’s think a little more deeply about wage stagnation. As you probably heard, median wage earnings in America have been flat for the last 15 years. Fixing wage stagnation has been the rallying cry of pretty much every politician and it has become an excuse to bash trade.

But the life-cyclist in me is frustrated with hearing the average American hasn’t gotten a raise in 15 years. Most people’s earnings increase as they age and gain more experience. I show in Quartz that’s still true. Or it was until very recently. Here’s a figure that didn’t make the final cut. It’s median earnings for people who were age 30 to 35 in 1999 by education. I calculated their earnings each year as they grew into middle age.


High school graduates didn’t get a raise, while college graduate earnings are 23% higher. But what is surprising is that no group, not even college grads have gotten a raise since the recession. I can’t help but wonder if wage stagnation has more to do with the recession than we thought. And maybe something went very wrong in the post-recession period that we still don’t totally understand.

Another reason why it’s great to be rich and thin

The big news in the pension world is about income and demographics. First Barry Bosworth, Garry Burtless and Kan Zhang released a chilling study demonstrating how much longer high income people live. As it turns out, most of the recent gains in life-expectancy went to high earners. The authors estimate a linear relationship between income and life-expectancy, suggesting that each dollar of income you earn increases the expected number of years you’ll live. It’s a big deal because it means Social Security is less progressive than people had assumed.
Also it throws water on the idea that we should increase Social Security’s retirement age. After all, if people are living longer they should work longer too, right? Maybe not if only rich people live longer. Eh, says Andrew Biggs. He argues increasing the retirement age isn’t so regressive if you keep the early retirement age the same.
And then just when you thought it couldn’t get more complicated. Ray Chetty’s recent work revealed low income people have very different life expectancies depending on where they live. Turns out in places like New York City, where everyone walks, doesn’t smoke, or drink big cups of soda, the rich don’t live that much longer than poor people.

Call me crazy, but it seems if we’ve identified a group that isn’t living as long as everyone else—that’s not a reason to keep everyone’s retirement age low. Maybe we can do more to improve their health outcomes. Or we can just help the disadvantaged group retire early and make everyone work longer.

And finally, another opportunity to bond over our shared outrage at GASB accounting standards.

Josh Rauh continues to do the Lord’s work, He calculated how short on cash municipal pensions really are. He estimates the unfunded liability is $3.4 trillion! Turns out those new 2014 GASB’s guidelines didn’t induce pension funds to use a discount rate grounded in reality after all. Pensions shortfalls have only got worse, despite a booming stock market. Not only that, the new guidelines may have encouraged pension funds to take more risk. Sigh…

Until next time, fellow pension geeks!

Allison