Got to Admit It’s Getting Better…

From TCS Daily: Got to Admit It's Getting Better…

In the Times piece, "Real Wages Fail to Match a Rise in Productivity," reporters Steven Greenhouse and David Leonhardt give the impression that workers are somehow doing worse and getting a raw deal from employers. Errors in the Times piece make the reporters' case appear stronger than it really is. But the even bigger problem is that the data are presented in a way that will surely leave an incorrect impression in their readers' minds. Indeed, their article is a model of how to write a news story to mislead your reader or, alternatively, a model of how not to write a news story if you want to inform your reader.

The basic message Greenhouse and Leonhardt deliver is that "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." That is literally correct, according to the federal government's measures. But it's also misleading, for two main reasons, in order of importance.

First, as marginal tax rates have increased for most people except the highest-income people, due mainly to rising Medicare and Social Security tax rates over the last 40 years, employers have paid a higher and higher percent of compensation in the form of untaxed benefits. So a more-relevant measure is not wages and salaries but total employee compensation. Second, national income is a better base to use for considering each group's — employees, corporations, proprietors, landlords, and lenders — share of income.

Before considering the more-relevant measure, it's important to at least get the numbers right, which they don't….

…..

Actually, in the first quarter of 2006, wages and salaries were 45.9 percent of GDP, not 45 percent; you can't get from 45.9 to 45 by rounding to the nearest whole number. And in the first quarter of 2001, wages and salaries were 49.5 percent of GDP. So the change was really from 49.5 to 45.9, a drop of 3.6 percentage points, not the 5-percentage point that their numbers would imply.

…..

So what did happen to corporate profits? They rose, from 7.8 percent of GDP to 12.1 percent of GDP. That is a large increase, and percentage-wise it's huge. So why didn't Greenhouse and Leonhardt report this number? I think it's because they didn't want their readers thinking that only 12 cents out of every GDP dollar went to profits.

…..

Take home ownership. In the first quarter of 1965, the first date I could find quickly, 62.9 percent of American households owned their homes. That was during Meyerson's golden era. In the second quarter of this year, the "dead middle-class era," it was 68.7 percent, an all-time high. Cars? What's relevant, as with homeownership, is the percent of the population that owns cars. And this has boomed. In 1970, presumably near the peak of Meyerson's golden era, there were 108.4 million vehicles registered in the United States; by 2003, this had soared to 231.4 million, an increase of 113.5 percent, while the population had risen by only 42.4 percent. And note that Meyerson doesn't even mention air travel, which, due to deregulation and technological improvement, has become so much cheaper that even poor Americans, let alone middle-class ones, can now afford to fly. How about college? In 1970, only 10.7 percent of the population 25 years old or more had a college degree; by 2004, this was up to an all-time high of 27.7 percent.