Are Wages Really Surging?
Paul Krugman, writing in Money Talks, says beware of recent statistics showing labor compensation is rising rapidly - there may be more to the story:
Compensation Statistics: A Note From Paul Krugman: Are wages really surging? ...[T]oday (Wednesday, Sept. 6) the Labor Department released revised estimates on compensation. And these numbers seem to show a wage explosion: the rate of increase in unit labor costs labor costs minus productivity growth is at its highest level in 16 years.
So, are workers making out like bandits? Don't be surprised if you start seeing opinion pieces claiming that they are.
But here's the thing: We have evidence from three different sources that tells a very different story. First, wages of non-supervisory workers, as measured by the Employment Survey, a survey of employers, are lagging slightly behind inflation. Second, median weekly wages, as measured by the Household Survey, a survey of (duh!) households, are lagging well behind inflation. Third, profits ... are growing much faster than G.D.P., which has to mean that labor costs are growing slowly.
Oh, and one more piece of evidence: polls showing that people are unhappy with the state of the economy suggest that most people can't be seeing big wage gains.
So what's going on? The best guess is that something is wrong with the numbers. Dean Baker ... suggests that some capital gains, such as income from cashing in stock options, may be erroneously showing up as wage income.
The moral of the story? Beware: Interpreting economic data can sometimes be tricky. Above all, don't believe what a number seems to say if it conflicts with all of your other information.
Here's the Labor Department report on productivity and costs, and here's the analysis from Dean Baker.
Posted by Mark Thoma on Wednesday, September 6, 2006 at 04:02 PM in Economics, Income Distribution, Unemployment |
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