Macro right, micro wrong?

Derek Thompson at The Atlantic had some thoughts on labor cost and economics taken from Henry Blodgett’s observation on declining wages for most wage earners. The second paragraph caught my eye as interesting for economists.

My response was that Blodget was macro-right — income inequality is a serious and growing problem — but micro-wrong, because this graph is measuring wages rather than full compensation. Total compensation — that’s wages plus benefits and taxes — hasn’t changed very much as a share of the economy since 1960, according to data from the National Institute of Pensions Administrators. What’s changed is that benefits and taxes have gone up, and wages have gone down.

(Wikepedia provides a short refresher of each term.)

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