Yet what is receiving almost no attention from those pontificating on the economy is the nature of the growth they so admire. In fact, it demonstrates a massive growth discrepancy between corporate profits and wages. As the Economic Policy Institute calculated last month, corporate profits have grown by 62 percent since the first quarter of 2001, but "labor compensation" -- which includes paychecks and benefits -- grew only 2.8 percent, and "private wage and salary income" fell by 0.6 percent.
In turn, the EPI study concludes:
"Most of this growth in total labor compensation has been accounted for by rising non-wage payments, like health care and pension benefits. Rapidly rising health care costs and pension funding requirements imply that these higher benefit payments are not translating into increased living standards for workers, but are rather just covering the higher costs of health care and pension funding."
Other recent confirm the view that living standards are not improving and may even be declining. This week, Bloomberg reported:
"A 2.2 percent rise in wages in the 12 months through May has been more than offset by a 3.1 percent gain in consumer prices. It's unlikely that employees will get raises that outpace inflation over the next five to 10 years, said William A. Niskanen, former acting chairman of the President's Council of Economic Advisors during the Ronald Reagan administration.… Niskanen and other economists cite global competition, which forces companies to keep costs down, shrinking union clout and continuing slack in a labor market…"
- from the Center for American Progress
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1 comment:
I still don’t understand how this recovery is bad in anyway – or why anyone would think it is unwelcome. The problems mentioned in the excerpt (excluding healthcare) are things that the growing economy will help. I realize you’ve pointed out that Bush is still 1.5 million(?) jobs shy of where he was when he inherited a recession, but surely you won’t deny the growth going on now. I remember a Economics 101 concept that you once explained to me a couple of years ago that went something like this: your value on the job market is affected by the demand for people of your skill-set. In broader terms, the more job this recovery creates, the higher the value of each employ which results in higher wages and better benefits. Also, regarding the lower living standards – consider the lag effect. I’m sure many Americans racked up some debt during the recession. I’m sure that there plenty of new homeowners who are struggling with their mortgage. The institute should have factored those things in as well. As jobs grow and eventually wages go, I’d imagine that a lot of folks will see their situations improve. You can’t play the economy like a fiddle, but I’d say that Bush has manipulated it as best as any president could. Consider:
in 2000 he forewarned of the bubble bursting;
he called for tax cuts to stimulate the economy;
he realized the importance of investment confidence – when scandals racked the stock market, he administered castor oil in the form of CEO signoffs on corporate reports (I vividly remember how that hurt the stock market as it anticipated the deadline);
he also pushed for the elimination of the dividend tax – and got it cut in half (you might want to check my facts there);
the stock market turned around, the beginning of the recovery – Bush was criticized for the lack of job growth, for losing 3 million jobs, and giving money to the rich (how do you give somebody something that is already theirs?) – but Bush stood his ground even when his Treasury Secretary disagreed;
in 2004 we started seeing job growth – the U.S. saw the fastest growth of any industrialize nation – now his criticized because corporate profits have out-stripped wage increases.
Now a projection based on your lesson two years ago: as the unemployment rate decreases, employees will be in a better bargaining position. Wages will increase. As they pay off their debt and homes, they will have more money to invest.
So much of the economy is like a force of nature – the president doesn’t control it. That said, Bush is one of the best things that’s happened to the economy. He lowered taxes, encouraged investment, promoted free trade and worked to expand our economy. He knows what’s going to fuel long-term investment. The naysayers are going to have less and less to complain about.
I just hope that Bush survives the election to enjoy the fruits of his victory.
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