NCPA - National Center for Policy Analysis

PRIVATE PAY SHRINKS TO HISTORIC LOWS AS GOV'T PAYOUTS RISE

May 26, 2010

Paychecks from private businesses shrank to their smallest share of personal income in U.S. history during the first quarter of this year.  At the same time, government provided benefits -- from Social Security, unemployment insurance, food stamps and other programs -- rose to a record high during the first three months of 2010, says USA Today. 

Example of key shifts in income this year: 

  • A record-low 41.9 percent of the nation's personal income came from private wages and salaries in the first quarter, down from 44.6 percent when the recession began in December 2007.
  • Individuals got 17.9 percent of their income from government programs in the first quarter, up from 14.2 percent when the recession started.
  • Programs for the elderly, the poor and the unemployed all grew in cost and importance.
  • An additional 9.8 percent of personal income was paid as wages to government employees.  

Those records reflect a long term trend accelerated by the recession and the federal stimulus program to counteract the downturn.  According to University of Michigan economist Donald Grimes, this trend is not sustainable because the federal government depends on private wages to generate income taxes to pay for its ever more expensive programs. 

Economist Veronique de Rugy of the free market Mercatus Center at George Mason University says the riots in Greece over cutting benefits to close a huge budget deficit are a warning about unsustainable income programs. 

Source: Dennis Cauchon, "Private pay shrinks to historic lows as gov't payouts rise," USA Today, May 25, 2010. 

For text:

http://www.usatoday.com/money/economy/income/2010-05-24-income-shifts-from-private-sector_N.htm 

 

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