Between 2000 and 2005, [real] compensation for the average worker rose $3000. But money income was only 29% of the increase.
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Suppose real inflation is 5% over those 5 years (quite conservative, especially since final consumers can’t exclude food and energy prices). Then a $3000 increase in compensation compensates the inflation from merely $14000 of the income. I doubt that this is quite the average level of income in USA.
Thanks for pointing this out, Tyler. That is a horrible track record our economy has over hte last 5 years. $3000 in 5 years among full-time workers? And this is the average, not the median, as Roberts acknowledges. So given what we know about the trends in all the other data we have at our disposal, total compensation is probably near flat at the median. The US has done better in the past and probably should be held to a higher standard going forward.
Good point Matt – that’s the median, not the mean. It’s quite possible that very few people saw their compensation increase, given the big gains at the top of the scale.
Also, I agree with spencer – the broken link between productivity and real wages is a conundrum.
It makes perfect sense to me. One just has to be willing to accept the concept of “make the numbers go higher”.
I use that phrase in a figurative sense.. when it comes to inflation, “make the numbers go higher” literally means to make the inflation number lower or “just right” or make it whatever everyone thinks is the good number.
So, mainly, our economic well-being is supposed to be okay since there are a bunch of people standing around pointing at pictures saying, “Look at the numbers going higher!” If I ran the show, I’d just have a 50 year median salary chart printed out and just tell people to refer to it if they wanted to know what everyone was earning that year. You wouldn’t need to bother with all this worry about “What is inflation? Really?” or “Do increasing health care costs count as wage gains?”
Don’t you dare ask 2,000 people aged 40-45 what they were earning after taxes in 2002 vs. 2006. Though, I wonder what that would show.
I wonder if they would remember.. and I wonder if they could gage what their debt was then.
“So… all a government needs to do to convince the population that they are managing the economy well…”
Wow! Central planning. I didn’t realize that free market economies were “managed” by the government. Hint: the ones that have been were dismal failures. The more the government sticks to maintaining rule of law instead of prioritizing your morality for you, the happier you will be.
Has nobody even thought that the people in 2005 are not the same people as in 2000?
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