Some good news on workers’ wages
Some good news on workers’ wages
There was some good news the other morning about workers wages. The quarterly employment cost index showed a q/q increase of +0.9% for wages (red in the graph below), and +0.8% for overall compensations (blue) (which includes things like medical benefits). Nominal YoY increases were +3.0% and 2.8%, respectively:
Unlike “average hourly earnings” (green in the graph above), which are reported monthly as part of the jobs report, the employment cost index is a median, rather than an average, measure. This avoids the distortion caused by a few high-wage earners. It also keeps the perecentage of workers in each occupation constant over time, in order to measure the change in compensation for the same job. In other words, as of the third quarter of this year, 50% of all occupations, as a weighted average, got an increase of +3.0% or more in wages over the past year.
Notice that recently the rate of annual growth in average hourly wages for nonsupervisory workers has also been increasing. We’re still not at the best levels of the 2000s expansion, which itself was no great shakes — and in real, inflation-adjusted terms wages only outpaced inflation by +0.7% — but still, this is some unalloyed good news.
“in real, inflation-adjusted terms wages only outpaced inflation by +0.7%”.
Glad you closed with this but in my view all discussions of wages should lead with what is happening in real terms. If nominal growth rises only because inflation is higher – Team Trump will take a victory lap anyway. We as economists need to be more careful in reporting data so the Trumpians will not get away with their usual blatant lying.
The only increase in pay that’s going to make ANY DIFFERENCE in the lives of the bottom 40% — who take 10% of overall income — is 100% increase in pay (overall).
If fast food can pay $15/hr with 33% labor costs, then — Walgreen’s and Target can pay $20/hr with 10-15% labor costs and Walmart can pay $25/hr with 7% labor costs …
… or should I say the consumer can (will?) pay 10% higher prices (at Big Mac’s moving from !0$/hr to 15$/hr — at Walgreen’s/Target moving from $11/hr to $20/hr — at Walmart from $11 to $25/hr.
Will the consumer pay?
Doubling bottom 40% income (SORT OF THE HOLY GRAIL HERE) by shifting 10% of overall income their way will cost mid 59% consumer 14% of their income (10% of overall). There’s no way for the bottom 40% to take back any of their lost 10% FROM THE TOP 1% by raising the price of burgers or paper towels or T-shirts.
The to 1% have doubled their share of overall income from 10% to 20% — where the mid 59% can get their share back from.
The mid 59% consumers can take back the 14% income shifted down to the lower 40% via HIGHER CONSUMER PRICES by reaching up to the top 1% with CONFISCATORY TAXES of the post WWII kind that existed during the Eisenhower administration. These really high taxes were lowered (possibly correctly — I wouldn’t know) to create more incentives. But, between the JFK administration and now per capita income doubled — while top 1% compensation blew out twenty times (think CEOs, ball players, news anchors, etc., etc., etc.)
Problem laying on those taxes may be that the mid 59% have lost what Packer coach Vince Lombardi would call the “winning habit” in an economy illegally shorn of labor unions — too hesitant to upset the apple cart that is running over all of us. That’s why I say “Ask the 40%”, they would have no hesitancy to rein in top 1% blow out with 1950s tax rates.
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I’m reading Ben Bradlee Jr.’s book (i)The Forgotten(/i). In it all these Trump voters in middle America complain how the Democratic Party left them. They don’t really know what’s wrong — I’D VENTURE MOST BEARS DON’T REALLY KNOW WHAT IS WRONG! — they don’t see everything as down to the illegal pruning of the only thing that gives the average person enough muscle to fairly balance competing factions in this mad scramble we call democracy.
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[CUT-AND-PASTE]
Observe Repub: H.R.2723 (115th Congress) — Employee Rights Act
“(2) require union recertification after a turnover in the workforce exceeding 50% of the bargaining unit”
https://www.congress.gov/bill/115th-congress/house-bill/2723
Think blue wave Dem modification: H.R.2723 (1/2) — 116th Congress — All Employees Rights Act
“(1) Require union cert/recert/decert elections at all private workplaces — option for one, three or five year cycles, local plurality rules.”
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Remember; all those blue collar, swing states that have swung supposedly irretrievably into the Republican column voted for Obama — not just over Wall Street Romney in 2012 — but over Viet war hero, half-sensible Republican John McCain in 2008. Looking for someone thought might finally hear out their complaints (no joy).
(late note: just learned Jesse Jackson won 1988 Dem primary in Michigan with 54% over both Dem rivals, Dukakis and Gephardt)
https://www.motherjones.com/wp-content/uploads/2018/08/blog_wwc_lean_democratic_1992_20164.gif
[SNIP]
Over at the White House they are popping the Champagne corks as the Democrats are reduced to grimly hoping their “blue wave” full of retired military and “intelligence” officers who believe Pentagon spending is more important than Medicare-for-all doesn’t turn into a big old “red tide.”
“…is a median, rather than an average, measure. This avoids the distortion caused by a few high-wage earners.”
The opposite is true. The median presents a greater distortion. Take 16 workers, one making $20/hr while the rest work for $8/hr. The average wage is $8.75/hr, while the median wage is a whopping $14.00/hr.
BillH,
No, in your example the median is $8/hr.
No, your both wrong.
ECI is a very loose indicator, not one that actually counts though.