Let’s try a simple thought experiment. Say I’ve been at George Mason twenty years (much less since 1973) and my real wage had never gone up (not the case). But my Dean were to say to me: “Tyler, U.S. health care has some new procedures, when you’re 73 you’ll have stents, and now can surf the internet and watch reruns of Battlestar Galactica. We’ve treated you very well!” Such a claim would not pass the laugh test and few people would accept it as applied to their own employment relation. Yet many of those same people make this same argument in the aggregate. I still think that if measured real wages for a group (or individual) have not gone up very much, over a long period of time, something is wrong. Wrong with the Dean, wrong with me, whatever, but something is wrong. Who would have predicted in 1972 that measured male median wages were going to stagnate and even possibly fall? You should be shocked by this result and indeed I am.But my question is, what are real wages? Do we measure our 'real' wealth in 2005 chained dollars, or in the goods we can buy? In plain dollar terms, my father was far wealthier in 1982 than I am today. Would I trade temporal places with him? No way. I'd much rather make what I make and live in 2011 than make what he made and live in 1982. I think the whole concept of 'real' wages and 'wage growth' as defined by mainline economics is nearly useless in a world of constant technological progress.
Perhaps by some peculiar calculation, the male median wage has fallen since 1972. But our wages aren't valuable to us for their value in 2005 chained dollars; they're valuable to us for discomforts we can use them to alleviate. If my father, back in 1982, missed a movie he wanted to see during its theatrical run, he was more or less S.O.L., unless he was one of the very few with a home video player. (As it happens he wasn't; we got a VCR when I was in the 2nd grade circa 1988.) I watch pretty much whatever at my house whenever I like for a low subscription free. Dr. Cowen can be as dismissive as he likes; would he return to life in 1972 given the opportunity? Even if he was guaranteed a higher "real" wage?
I am not shocked by the result he cites because, to put it plainly, I think it is the rankest sort of nonsensical gibberish. Unless your intertemporal comparison of wages accounts for all the changes in what those wages can buy, then it's a useless comparison- no one works because they want wages; they work because they want what wages can buy. Since such a comprehensive comparison is plainly impossible (what is an iPad worth in 1972?), I question the usefulness of any attempt.
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I agree with your point that Mr. Cowen's argument seems to miss what we mean by real wages (if the basket of goods used to measure "real wages" gets better, that should mean real wages have gone up). There is another problem with Mr. Cowen's hypothetical as well - it conflates individual wages with aggregate wages.
The reason you get wages at work is because, over time, workers tend to become more valuable in two ways. First, a worker with 10 years of experience hopefully will be more productive than a worker with no experience. Second, you become a known entity so you employer no longer has to discount your productivity based on the chance that you were good at bullshitting during your interview (presumably if you were significantly worse than you came across at your interview, you would not keep your job long). This is also why you would expect a professional's or a tradesman's wages to increase more than a factor linesman's wages - experience is less important for a linesman than for a doctor or a carpenter, in terms of overall productivity.
If an individual works at a job for 20 years, you expect their salary to go up in real dollars, because they, presumably, have become better at their jobs and more productive, in real dollars. On the other hand, if you are measuring the experience and productivity of a class of workers, this likely will not go up in real dollars over time, as, with retirements and new hires, the experience of the class of workers should stay approximately the same over time.
This is especially true, if you define real dollars by swapping out new technology for old in the basket of goods you are measuring the real dollars against. By swapping out a phonograph for an iPhone, and leaches for MRIs, you essentially prevent real dollars from reflecting societal productivity gains.
Now it may be that even after you factor in both of these arguments, you still come away with stagnant wages, but Mr. Cowen's argument certainly doesn't prove this.
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