It's the economy, stupid

By Nancy Jane Moore

You know that working people in the US are in trouble when even the National Association of Manufacturers admits (PDF) that real hourly wages are falling even though productivity is way up.

NAM tries to spin the numbers, of course, blaming the decline in real wages on the cost of oil. They also point out that total compensation is up -- because the cost of employee benefits such as health insurance is skyrocketing, not because employers are providing more benefits.

But the fact remains: productivity is up 2.4 percent in the last year, but workers are effectively earning less than they did the year before.

As a detailed analysis piece by Steven Greenhouse and David Leonhardt in the Aug. 28 New York Times explains:

[T]he current expansion has a chance to become the first sustained period of economic growth since World War II that fails to offer a prolonged increase in real wages for most workers.

Here's the nitty-gritty of their report:

Worker productivity rose 16.6 percent from 2000 to 2005, while total compensation for the median worker rose 7.2 percent, according to Labor Department statistics analyzed by the Economic Policy Institute, a liberal research group. Benefits accounted for most of the increase.

Again, don't forget that it's the cost of benefits that has gone up, not the actual benefits themselves.

This decline in wages for the people who do the actual work is in sharp contrast to the increased wealth for investors. As Greenhouse and Leonhardt observe:

As a result, 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. UBS, the investment bank, recently described the current period as "the golden era of profitability."

The rich are getting richer, the workers are losing ground, and the poor remain stuck. 37 million people still live below the poverty line in the US -- that's about 12 percent of the population. That number and most of the data in the newspaper articles I've mentioned comes from a Census Bureau report (PDF).

A New York Times story on the Census report points out that the level of income for defining poverty for a family of four was $19,971; for a family of two, it was $12,755. The last time the poverty rate dipped in the US was in 2000.

It's always interesting to see how news reports can slice and dice data such as that in the Census report. For example, The Washington Post put the following headline on its Census Bureau story:

D.C. Suburbs Top List Of Richest Counties

The subhead was more to the point:

Nationwide Data on Health Coverage Bleak

After bragging about how rich our suburbs are, The Post conceded:

The new figures showed that a record number of Americans lack access to health insurance.

The Times also lead with a positive spin on the Census news, headling its story:

Census Reports Slight Increase in '05 Incomes

But the story quickly got to the real facts: Incomes are up because people are working second jobs or earning money besides wages. "[B]oth men and women earned less in 2005 than 2004," the article reported. It went on to observe:

Nationally, the small uptick in median household income reported yesterday, 1.1 percent, was not enough to offset a longer-term drop in median household income -- the annual income at which half of the country's households make more and half make less.

That figure fell 5.9 percent between the 2000 census and 2005, to $46,242 from $49,133, according to an analysis of the data conducted for The New York Times by the sociology department of Queens College.

The Times minced no words on its editorial page. It quoted President Bush as telling reporters, "Things are good for American workers," and then observed:

The comment is preposterous.

Washington Post columnist Harold Meyerson was even harsher. In an Aug. 30 op-ed, he pointed out:

From 1947 through 1973, American productivity rose by a whopping 104 percent, and median family income rose by the very same 104 percent. More Americans bought homes and new cars and sent their kids to college than ever before. . . .

That America is as dead as the dodo. Ours is the age of the Great Upward Redistribution.

And he provides a good explanation:

According to a report by Goldman Sachs economists, "the most important contributor to higher profit margins over the past five years has been a decline in labor's share of national income."

That is, those who actually do the work in our society aren't getting the benefit of economic growth. In addition, the only wage earners who actually do see some benefit from economic growth are the people at the top. The Greenhouse/Leonhardt article points out:

In 2004, the top 1 percent of earners -- a group that includes many chief executives -- received 11.2 percent of all wage income, up from 8.7 percent a decade earlier and less than 6 percent three decades ago, according to Emmanuel Saez and Thomas Piketty, economists who analyzed the tax data.

The Post article on the Census report puts the inequity in simple terms:

Between 2004 and last year, earnings increased by an average of nearly $1,200 for people with incomes in the top 10 percent, compared with $17 for those in the bottom 10 percent.

Happy Labor Day.