TOO AFFLUENT TO REVOLT:

The Myth of Stagnant Wages (James Pethokoukis, 9/20/07, US News)

If the standard of living of the average American really had not improved for more than three decades, wouldn't there have been a tremendous political backlash by now? Wouldn't the Democratic Party have fully mutated into a full-scale social democratic party—nationalized healthcare, a return to superhigh tax rates—rather than moving right over the past three decades? Would centrist or right-wing candidates (Reagan I, Reagan II, Bush I, Clinton II, Bush I, Bush II) have won six of the past seven elections? I think not. Anyway, here are the real numbers:

1) According to the Labor Department, median weekly earnings in the second quarter were a full 2 percent higher than they were in the second quarter of 2006. What's more, economist Brian Wesbury of First Trust Advisors points out that earnings for workers at the 10th percentile of earners (where 90 percent of workers earn more than they do) rose 1.1 percent faster than inflation as measured by the consumer price index. Workers at the 25th percentile enjoyed wage gains of 2.3 percent above inflation, the fastest increase for any point along the income distribution, even faster than for those at the 75th percentile and 90th percentile.

2) Men who go to college are making more than they did in 1973. Men who don't have any college make less. That's according to data from the left-leaning Economic Policy Institute. But those numbers are all adjusted for inflation, and many economists think government numbers overstate inflation. If so, then all Americans, on average, are substantially wealthier than they were back then. Here is what Northwestern University economist Robert Gordon E-mailed me earlier this year:

The correct statement is that correcting the upward bias of the official CPI adds more than 1 percent per year to official estimates of the growth in median and mean wages. Cumulatively since 1977, my best estimate of the upward bias in the CPI cumulates to 38 percent between 1977 and 2006. Thus, if someone came along and said the male median wage adjusted for CPI inflation has been stagnant since 1977, I would translate this into a true 38 percent increase. [...]

5) All these wage data ignore that benefits are an important part of compensation and have been rising faster than inflation for some time. Why does access to our increasingly technologically sophisticated healthcare system not count as improving our standard of living?

Go tell your grandmother how much harder you have it than she did when she was young and the mark her slap leaves on your cheek may be permanent.

Posted by Orrin Judd at September 20, 2007 3:09 PM