BITTER ABOUT BETTER:

Got to Admit It's Getting Better... (David R. Henderson, 01 Sep 2006, Tech Central Station)

The basic message Greenhouse and Leonhardt deliver is that "wages and salaries now make up the lowest share of the nation's gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960's." That is literally correct, according to the federal government's measures. But it's also misleading, for two main reasons, in order of importance.

First, as marginal tax rates have increased for most people except the highest-income people, due mainly to rising Medicare and Social Security tax rates over the last 40 years, employers have paid a higher and higher percent of compensation in the form of untaxed benefits. So a more-relevant measure is not wages and salaries but total employee compensation. Second, national income is a better base to use for considering each group's -- employees, corporations, proprietors, landlords, and lenders -- share of income. [...]

The Washington Post's "Devaluing Labor" by Harold Meyerson, credulously quotes the New York Times piece to buttress his case. And what is Meyerson's case? He hearkens back an America from 1947 to 1973 when "More Americans bought homes and new cars and sent their kids to college than ever before" and writes, "That America is as dead as a dodo." He doesn't present data to make his case, which is understandable because the America of today is even in better economic shape than the America of his golden era. Let's take his own criteria -- home ownership, car ownership, and the percent of the population with college degrees. In focusing on these data, I'm assuming that Meyerson cares about whether Americans own homes, own cars, and have college degrees, not whether they bought houses, bought cars, and went to college last year.

Take home ownership. In the first quarter of 1965, the first date I could find quickly, 62.9 percent of American households owned their homes. That was during Meyerson's golden era. In the second quarter of this year, the "dead middle-class era," it was 68.7 percent, an all-time high. Cars? What's relevant, as with homeownership, is the percent of the population that owns cars. And this has boomed. In 1970, presumably near the peak of Meyerson's golden era, there were 108.4 million vehicles registered in the United States; by 2003, this had soared to 231.4 million, an increase of 113.5 percent, while the population had risen by only 42.4 percent. And note that Meyerson doesn't even mention air travel, which, due to deregulation and technological improvement, has become so much cheaper that even poor Americans, let alone middle-class ones, can now afford to fly. How about college? In 1970, only 10.7 percent of the population 25 years old or more had a college degree; by 2004, this was up to an all-time high of 27.7 percent.

The bottom line is that the vast majority of us are doing well by the standard measures. Finally, (like Don Boudreaux) ask yourself this: Would you rather be in the middle 20 percent of the income distribution today or in the top 20 percent 50 years ago? How much do you value cell phones, cars that last 10 years, airline travel to Europe, iPods, and being able to fight cancer and win?

Perhaps the only things to prefer about the 60s and 70s are the fewer college degrees and cars and less frequent air travel.

Posted by Orrin Judd at September 1, 2006 11:34 AM