EclectEcon

When I saw the NYTimes story yesterday, saying that real wages have fallen, I figured it had to be wrong. Russell Roberts explains why.

Let me repeat the key sentence:

The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation.

That's a very strange sentence for many reasons:

1. Why would you use a measure of compensation that ignores benefits, an increasingly important form of compensation?

2. Why would you use 2003 as your starting point when the recession ended in November of 2001?

3. There are no government series that I know of on median earnings. Where did those data come from?

There's a chart accompanying the article. It tells the reader that the median hourly pay data are from the Economic Policy Institute. The Economic Policy Institute has a policy agenda. Their main issue is the stagnant or falling standard of living of American workers. They support a higher minimum wage and the strengthening of labor unions.

Roberts goes on to report BLS data on real hourly compensation, showing it has increased in every year since 1996 (the beginning date of his data series). He concludes,

What keeps my wages high (and yours) is our alternatives. Is there any evidence that workers have fewer alternatives than they once had? If anything, workers are more mobile today than ever. What sets workers wages are the wages of those alternatives. That depends, generally, on our skills, our knowledge and our drive and discipline—human capital and how well we are able to apply it. Workers are better educated than ever. That is why I believe that compensation, properly measured, is higher than it was five or ten or twenty or thirty years ago.

By the way, the New York Times quotes one economist in this entire article. That would be Jared Bernstein of the Economic Policy Institute.

I'm surprised they didn't get a quote from Paul Krugman, but he is probably saving his "piling on" comments for his next column.

Too bad they didn't check with a few other economists they way they would if the results had come out differently — you know, get some quotes from other people who might have a different take on the situation.... It is difficult to understand how so many people still cannot see through the biases at the NYTimes.