Meanwhile, Back at the Economy

August 1st, 2011 at 5:40 pm

…wages, like much else, are stuck in neutral.

Recent data show that total compensation is actually accelerating a bit, which I took to be good news (revealing that I’m not one of those people who rush for the fire extinguisher anytime wages pick up a bit).

But alas, it’s not paychecks—ie, wages.  It’s non-wage benefits.  That ain’t nothin’ but it’s less helpful to both family budgets and the macro economy.

Source: BLS

Compensation—wages+benefits—clearly decelerated with the onset of Great Recession, hit bottom in terms of growth in late 2010, and have picked up the pace a bit most recently.  I’ll get to whether they’re beating inflation in a minute, but for now, if one were to look solely at comp, one might envision a tightening labor market generating a trend like that.

But if you break out wage growth from benefits, the story changes.  Wages are flat in nominal terms, and with faster inflation of late, that means declining real paychecks, on average.

The acceleration in comp is a function of benefits.  Interestingly, it’s not health care (data not shown), as that component has also not grown much of late (a quick look suggested retirement benefits are up a bit).

At any rate, when you adjust compensation growth for inflation, you get the unfortunate trend in the next figure, as recent price growth has outpaced the acceleration in overall comp.  That of course means real wages/paychecks are falling even faster.

Source: BLS

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5 comments in reply to "Meanwhile, Back at the Economy"

  1. Sharon says:

    How do they “pivot” to jobs after this debt deal?


  2. Kevin Rica says:

    If we don’t like cheap labor, we should mandate e-verify. E-verify will create labor shortages.

    Just as housing shortages raise the price of houses, oil shortages raise the price of oil, and food shortages raise the price of food, labor shortages will raise the price of labor!

    What’s wrong with using labor shortages to raise wages? Nothing to us old Truman Dems!

    The farmers, who pay the worst wages in America for some of the hardest work (shouldn’t harder work pay more) are already worried!

    http://www.nytimes.com/2011/07/31/us/politics/31verify.html


  3. Sandwichman says:

    How do they “pivot” to jobs after this debt deal?

    During the 2008 campaign, Senator Obama said, “If they bring a knife to the fight, we bring a gun.” But the debt-ceiling debacle wasn’t a fight, it was a lynch mob — and Obama brought a rope. The following quote is offensive, but I think it accurately reflects the mindset of the folks the President imagined he could get all bipartisan cozy with:

    “Mocked by The Wall Street Journal and Sen. John McCain as the little people of the “Lord of the Rings” books, the Tea Party ‘Hobbits’ are indeed returning to Middle Earth — to nail the coonskin to the wall.” — Patrick Buchanan

    “Nail the coonskin to the wall,” and you can just hear Buchanan’s audience bellow with feral laughter at the “joke”. These folks are not motivated by wrong ideas; they are motivated by an atavistic hatred.

    Where was Obama when the rest of the class was reading Machiavelli in second-year political philosophy?


  4. EdH says:

    are companies starting to reinstate 401K matches?


  5. PeonInChief says:

    That means that higher wage workers are getting more benefits, as retirement plans are skewed to those workers. Lower wage workers, not so much.


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