Economic triumphalism at the WaPo.
Last Friday I had a piece showing statistically what everyone knows intuitively: that the reporting on economic growth during this business cycle obscures the fact that most of us are hurting.
There was a great example of the kind of reporting I was talking about in yesterday's Washington Post. Sebastian Mallaby argued that we lefties shouldn't get our knickers in a twist about median household income dropping for five consecutive years:
Faced with strong growth, full employment and a productivity miracle, Democrats insist that something is profoundly wrong. Responding to President Bush's economic speech on Friday, the Senate's top Democrat complained that "the benefits of economic growth still have not reached many hardworking middle-class families."
Sorry, but that's only half right. It's true that wages have done badly. But in five of the past six years, average compensation -- that is, wages plus benefits -- has risen faster than inflation, according to the Labor Department's Employment Cost Index.You're supposed to say, "oh, when you factor in benefits and look at total compensation, everything's rosy. Thanks Sebastian!"
But scratch a bit deeper and the data Mallaby waves around lead to the opposite conclusion: the naysayers are right!
That's because "benefits," in this case is primarily one benefit: health insurance. Health costs have skyrocketed in recent years. And employers are 1) taking those costs out of wages and 2) kicking workers off of their health plans (according to the Economic Policy Institute, nearly 3.7 million fewer people had employer-provided insurance in 2004 than in 2000, and the share of workers that does have it dropped four years in a row).
While a benefit like health coverage has a huge impact on a family's security, the fact that employers are paying more for it isn't the same as earning higher wages. Your health plan won't get your family into the ballpark or buy the kids hotdogs.
This Financial Times blurb tells you why shifting healthcare costs onto employees is evidence of an unfair economy:
Corporate America is on course for the longest unbroken stretch of double-digit earnings growth since records began in 1950, according to Wall Street analysts.
It would be the 10th quarter in a row that profits have grown by at least 10 per cent - a 2.5-year winning streak only matched in the 1970s and 1990s.
If the analyst forecasts of growth rates of 15 per cent by the third quarter of 2006 prove correct, it would take big companies into uncharted territory - marking the longest ever sustained acceleration in corporate profits.In a fair economy, investors and employees would share the sacrifice in tough times and also share the bounty when things are going gangbusters. Everyone suffered during the last recession. But now that the economy's humming growth-wise, the wage increases aren't there. They're gone, instead, into spiraling health costs (and healthcare, in turn, has been a leading sector in terms of corporate profits).
So, Sebastian Mallaby, those crazy Democrats are in fact dead-on when they say "the benefits of economic growth still have not reached many hardworking middle-class families." But thanks for playing.