Maybe it’s too much grayness from the Gray Lady. In news stories, columns, and editorials (like this one titled “Downward Mobility”) the NY Times harps on the same general point: things are getting worseÃ¢â?¬â??wages are stagnating or fallingÃ¢â?¬â??and average workers are really getting hosed. Generally speaking, there are a bunch of problems with such accounts. For example: They ignore the fact that wages are only part of what determines living standards. The price of goods is very important too. And the price of just about everything that’s exposed to competition has been falling (see Exhibit 6). They highlight wages, but ignore other forms of compensation. (Since Dec. 2000 total compensation is up 40 percent.)Poverty stats often overlook the earned income tax credit and other forms of welfare. They ignore the influence of immigration: millions of poor people pour into America each year and that pulls average wages down. They examine a narrow time frame. Periodic downturns are inevitable, but take a wider view and things generally look much better. (Check out this recent BLS report: for example, in 1901 the average American family devoted 80 percent of its budget to the basics (food, clothing, housing), but by 2002-2003 that figure shrunk to 50 percent.) Here’s a recent LA-focused attempt by me to prove that things are getting better and here the Investor’s Business Daily takes on a page one NYT story titled: “Real Wages Fail to Match A Rise In Productivity,”
it notes that the median hourly wage, adjusted for inflation, has slipped 2% since 2003, and that wages and salaries, as a share of GDP, are the lowest they’ve been since 1947. There are all kinds of problems, however, with such a narrow analysis. Most of us aren’t paid just in “wages” but in wages and benefits. And when the two are put together, total compensation is up 8.7% since 2003, for an average annual gain of 3.5%. Why is this? Wages may not be soaring (up just 0.7% since 2000), but benefits are (13.1%). In other words, we’re making more but getting it in the form of tax-free benefits.