It can be difficult to measure economic progress because so many of the variables change from year to year. For example, changes in median household income are distorted by the fact that households today are nearly 15 percent smaller than they were in the 1970s - the average household size has gone from 3.01 persons in 1973 to 2.63 today - and therefore household income is spread over fewer people.

Simple wage data also give an unclear picture of economic progress because they ignore employee benefits. Cash wages are taxed but benefits are not. As a result:

• Employee benefits including payroll taxes have grown from 20 percent of payroll in 1953 to more than 41 percent today.

• Because of the tax break, employees may be willing to give up more than a dollar in wage income to receive a dollar's worth of benefits.

• From 1974 to 1993, real wages fell about half a percentage point per year but total compensation rose about half a percentage point per year.

When one considers that today's labor force is roughly two years younger than that of two decades ago, the gains look even better. Further, during that time workers have added seven days of vacations and holidays per year and the average workweek has declined by 2.4 hours.

However, the "wage gap" appears to be growing due to the growing income premium on education. In 1992, for example:

• College graduates earned an average of 82 percent more than high school graduates, up from 43 percent more in 1972.

• Those with graduate degrees earned 2.5 times more than high school graduates.

• High school dropouts earned scarcely half as much as high school graduates.

Source:: W. Michael Cox and Beverly J. Fox, "What's Happening to Americans' Income?" NCPA Policy Backgrounder No. 138, January 29, 1996, National Center for Policy Analysis, 12770 Coit Rd., Suite 800, Dallas, TX 75251, (972) 386-6272.

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