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> The article is misleading in an important respect. While real wages haven't budged much (they certainly haven't declined), benefits, which are tax-advantaged

by danans 8y ago

> The article is misleading in an important respect. While real wages haven't budged much (they certainly haven't declined), benefits, which are tax-advantaged relative to wages, have increased quite a bit. For example, while wages rose 3% since 2000, benefits rose 22%: https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us... https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us.... Despite the article not mentioning benefits, the primary reason for the increase in benefit costs is the skyrocketing increase in cost of healthcare (which is mentioned in the article you provided), which we know has inflated faster than the CPI for decades: https://en.wikipedia.org/wiki/Health_care_prices_in_the_United_States#/media/File:US_healthcare_cost_panel_v1.png https://en.wikipedia.org/wiki/Health_care_prices_in_the_Unit... The only other significant component of employer-provided benefits, retirement contributions, has if anything been cut back via defined contribution plans of today (i.e. 401ks), rather the generous defined-benefit (AKA pension) plans of the past. And things like transportation subsidies, etc are marginal compared to healthcare expenditures. So it's not as if the increase in employers' benefit spending is being experienced by most workers as in increase in utility. Therefore, the spirit of the article, which is that workers have received little real[1] value from the GDP increases of the last 40 years, is still correct. What the article doesn't address, but your article does, is the fact that wages are recovering unequally, with most of the gains going to the highest earners. 1. I'm not counting ever cheaper electronics and entertainment in my definition of "real".

rayiner 8y ago
"Increases in labor compensation are being eaten up by increases in benefits costs" is a different statement than "labor compensation isn't increasing." From the employer's point of view, whether they're spending 22% more because of higher salaries or more expensive benefits doesn't make a difference. And the implications are different for policy. If labor compensation isn't going up, that suggests a structural problem in the economy. If labor compensation is going up, but it's being eaten up by increasing healthcare, education, and housing costs, then that suggests targeted reforms are necessary in those sectors.
- danans 8y ago
  > If labor compensation isn't going up, that suggests a structural problem in the economy. If labor compensation is going up, but it's being eaten up by increasing healthcare, education, and housing costs, then that suggests targeted reforms are necessary in those sectors. Both are true, simultaneously. For the majority of workers, wages are historically static despite rising GDP, and that requires reconsidering the structure of the economy (in particular how it has changed in recent decades). And indeed we need targeted reforms of the highly inflationary sectors.
  - rayiner 8y ago
    That is not necessarily true. There is data showing that total compensation is rising at the same level as labor productivity, and the percentage of national income going to labor, when accounting for benefits, has been extremely consistent since 1970: https://www.nber.org/digest/oct08/w13953.html https://www.nber.org/digest/oct08/w13953.html. If we assume the status quo in 1970 was acceptable, then the data shows no need for "reconsidering the structure fo the economy." Rather, labor compensation grew just as fast as it was "supposed to" but that growth was eaten up by a handful of sectors.
    - danans 8y ago
      That paper switches out the CPI for a statistic of its own invention, "implicit price deflator for the output of the nonfarm business", which is far more charitable to its conclusion that workers have taken home a consistent percentage of economic growth since the 1970s. But the paper completely avoids the problem of how those gains are distributed across workers in the economy, that is, it doesn't address income inequality trends at all (the author was an economist for Reagan, so that's not terribly surprising). Even if the paper's statistics are taken at face value (that labor share of GDP has been consistent since the 1970s) it's simultaneously true that the majority of GDP growth has gone to those at the high end of the income distribution in the time period it covers. You might not call that an economic structure problem, or even consider it a problem at all, but many would reasonably disagree.

by danans 8y ago

rayiner 8y ago

"Increases in labor compensation are being eaten up by increases in benefits costs" is a different statement than "labor compensation isn't increasing." From the employer's point of view, whether they're spending 22% more because of higher salaries or more expensive benefits doesn't make a difference. And the implications are different for policy. If labor compensation isn't going up, that suggests a structural problem in the economy. If labor compensation is going up, but it's being eaten up by increasing healthcare, education, and housing costs, then that suggests targeted reforms are necessary in those sectors.

danans 8y ago
> If labor compensation isn't going up, that suggests a structural problem in the economy. If labor compensation is going up, but it's being eaten up by increasing healthcare, education, and housing costs, then that suggests targeted reforms are necessary in those sectors. Both are true, simultaneously. For the majority of workers, wages are historically static despite rising GDP, and that requires reconsidering the structure of the economy (in particular how it has changed in recent decades). And indeed we need targeted reforms of the highly inflationary sectors.
- rayiner 8y ago
  That is not necessarily true. There is data showing that total compensation is rising at the same level as labor productivity, and the percentage of national income going to labor, when accounting for benefits, has been extremely consistent since 1970: https://www.nber.org/digest/oct08/w13953.html https://www.nber.org/digest/oct08/w13953.html. If we assume the status quo in 1970 was acceptable, then the data shows no need for "reconsidering the structure fo the economy." Rather, labor compensation grew just as fast as it was "supposed to" but that growth was eaten up by a handful of sectors.
  - danans 8y ago
    That paper switches out the CPI for a statistic of its own invention, "implicit price deflator for the output of the nonfarm business", which is far more charitable to its conclusion that workers have taken home a consistent percentage of economic growth since the 1970s. But the paper completely avoids the problem of how those gains are distributed across workers in the economy, that is, it doesn't address income inequality trends at all (the author was an economist for Reagan, so that's not terribly surprising). Even if the paper's statistics are taken at face value (that labor share of GDP has been consistent since the 1970s) it's simultaneously true that the majority of GDP growth has gone to those at the high end of the income distribution in the time period it covers. You might not call that an economic structure problem, or even consider it a problem at all, but many would reasonably disagree.