WurfWhile

Let’s get a basic definition out of the way first. You didn’t receive an “increase in benefits” if the cost of your benefits went up. Somebody else received the “increase” - your insurance company, a pharmaceutical company, a hospital or doctor - not you.

This sounds elementary. It probably has some name in economics and was first elaborated by a famous economist - but it’s really as simple as ‘you don’t get more unless you get more.’ As simple as it is, frequently you read in news articles about labor compensation that people are “receiving more in benefits” at the same time that other articles will tell you that people are paying more of their healthcare bill and getting less health coverage for it (and in some cases their companies have eliminated company funded health coverage). Paying more to get the same or less isn’t an “increasing benefit” - it is the definition of a decreasing benefit. News reports should call it for what it is - a loss of benefits and a decrease in worker compensation.

This preface brings me to yesterday’s front page New York Times article “Real Wages Fail to Match a Rise in Productivity.”

First, I illustrated the concept at issue a year ago in bell-curve chart showing the American worker bending over backwards, as productivity increased and pay decreased (it was a parody proving a point). The chart usefully describes our labor economy, if lacking actual numbers. The New York Times article provides those numbers (I’ve bullet-pointed them below).

American Workers Do More and Get Less

- During the Bush years worker productivity rose 16.6%, but the median dollar value of total compensation (wages plus benefits) rose only 7.2 percent, with “benefits” counting for most of the increase. Employee total compensation in inflation adjusted dollars was “briefly lower” in the mid-1990s, but with that exception, has not been less since 1966.

- While the dollar value of worker benefits has declined, the practical value of benefits to workers has also declined substantially in areas like healthcare. If fixing a broken arm costs you more in inflation adjusted dollars than it did, due to higher premiums or higher deductibles or less coverage, then you have lost what I call ‘practical value’ regardless of the new and higher dollar “value” of fixing that arm. You can think of the situation as ‘getting less of less.’

- The median hourly wage adjusted for inflation has declined 2 percent for American workers since 2003.

- Wages and salaries are the smallest share of the nation™s gross domestic product (45% in the first quarter of 2006) since the government began tracking data in 1947 (in true form one should expect the Bush Administration to stop tracking the data soon - or else make it top secret).

- The purchasing power of the minimum wage is the lowest it has been in 50 years - that’s the lowest ever in the lifetime of most Americans.

- Even top earning workers making about $80,000 a year (the 90th percentile) have lost wage purchasing power to inflation in the last three years - showing that Bush Administration economic policies aren’t good even for most of the wealthy.

Only The Wealthiest and Corporations Get More

- The top 1 percent of wage earners in 2004 gobbled 11.2 percent of all wage income - almost double the 6% they made as a group thirty years ago.

- Corporate profits are the largest share of the nation’s gross domestic product since the 1960™s - and the decline in workers total compensation has been “[t]he most important contributor” to profit margins in the Bush years according to Goldman Sachs economists.