August 29, 2006
Under the headline "Real Wages Fail to Match A Rise In Productivity," the New York Times makes its best case for why U.S. workers are worse off today than they were three years ago and have done worse in this economic recovery than in any recovery since World War II. Specifically, it notes that the median hourly wage, adjusted for inflation, has slipped 2 percent since 2003, and that wages and salaries, as a share of gross domestic product (GDP), are the lowest they've been since 1947.
There are all kinds of problems, however, with such a narrow analysis, says Investor's Business Daily (IBD). Most of us aren't paid just in "wages" but in wages and benefits. When the two are put together, total compensation is up 8.7 percent since 2003, for an average annual gain of 3.5 percent.
Why is this?
- Wages may not be soaring (up just 0.7 percent since 2000), but benefits are (13.1 percent).
- In other words, we're making more but getting it in the form of tax-free benefits.
- The Times' implication -- that we are somehow falling behind in the Bush years -- is simply not true.
If you want to know how we're really doing, look at what we spend and the wealth we're building, says IBD. Here, too, you get a radically different picture. Consumer spending in the second quarter hit $8.053 trillion, up $659 billion, or roughly 4.2 percent a year, since 2003. How can we spend so much more if we have less?
Yes, we've been putting more on credit cards, but we've been doing that for 40 years. A better answer is that we're wealthier. We now own about $53.8 trillion in stocks, cash and real estate -- up a whopping 35 percent just since 2002. That "wealth effect" fuels spending, says IBD.
Source: Editorial, "Just Compensation," Investor's Business Daily, August 29, 2006.
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