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Real Wage Slaves
Posted by: Jon Henke on Monday, January 09, 2006

I have a column up at TCSDaily on wages and the political rhetoric surrounding the issue. Briefly: we're not doing as badly as Paul Krugman and the Democratic Party would have us believe.
It’s a testament to the immutable characteristics of economists and politicians that, good times or bad, the capacity to find data that supports their conclusions remains undiminished. In good times, they just have to dig a bit deeper.
Read the whole thing here.
 
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we’re not doing as badly as Paul Krugman and the Democratic Party would have us believe.
Right enough... but I wonder if that’s ever NOT been the case.

 
Written By: Bithead
URL: http://bitheads.blogspot.com
It was very good article. But I have one question. If we are to account for health benefits as a part of compensation wouldn’t increasing (at a rate much higher than inflation) health care costs essentially wipe out this benefit? What I am trying to say is that shouldn’t health care costs be brought into equation?
 
Written By: IR
URL: http://
If we are to account for health benefits as a part of compensation wouldn’t increasing (at a rate much higher than inflation) health care costs essentially wipe out this benefit?
Those rising health care costs are accounted for in rising inflation. But while health costs drive a lot of the underlying inflation rate, compensation increase to keep up with that inflation do not, in fact, get measured in terms of wage gains. So, by eliminating a portion of compensation from income measurement but not from the consumptions measurement, it appears as if income is not keeping up with inflation.
 
Written By: Jon Henke
URL: http://www.QandO.net
Excellent article. Easy to read and the points made are very clear. It is tough to write simply about economics, but this article rings the bell. Not too many examples and not too few. Not just a partisan swipe at the “bad” guys, but enlightening comment on how things work. Good stuff.
Disclaimer: The article takes a shot at Krugman, an excrescence, and nails him. We’re talking “good” article right there.
.
 
Written By: Notherbob2
URL: http://
Total compensation may be on the rise, but it is also important to look at what that actually means. Are workers actually getting more value for their increased overall compensation? It is not clear that is the case, since much of that increase is undoubtedly taken up by surges in healthcare cost. I dont think anybody is getting better healthcare than they were a few years ago, so the increases there are largely wasted to workers.

I’m not going to say that things are gloom and doom, and things seem to be doing relatively well at the moment, but it is important to consider just what those numbers actually mean.
 
Written By: Rosensteel
URL: http://
I don’t know about you, Rosensteel, but FH and I sure as hell had a much better health plan in 2005 than in 2004. We spent thousands of dollars in 2004 on $1500 per person deductibles, when everybody in the family had to go to the hospital at some time during the year, plus all but $200 of the monthly premiums. Now we pay virtually nothing out of pocket, and the company picks up the premiums. Every couple of months we get an e-mail from them saying they’re increasing our benefits— more hospitals covered by our plan, better dental, etc. I’d say our total compensation is on the rise, especially when you consider that FH now only has to work 40 hours a week instead of 60 to make the same salary. If that increase is being eaten up by rising healthcare costs, I haven’t heard or seen anything about it.

I guess maybe there are some people out there who don’t share my (admittedly anecdotal) experience. I just don’t happen to know any of them. I wonder how many of them Paul Krugman knows.
 
Written By: Wacky Hermit
URL: http://organicbabyfarm.blogspot.com
"I dont think anybody is getting better healthcare than they were a few years ago, so the increases there are largely wasted to workers."

So Rosensteel, there have been zero beneficial advances in medical technology and practice in the last few years?

 
Written By: Unknown
URL: http://
So Rosensteel, there have been zero beneficial advances in medical technology and practice in the last few years?
Enough to justify the skyrocketing cost of healthcare? No. Ultimately said advances are irrelevant if the strain to companies to provide healthcare benefits is too great and the a large number of people are left uninsured or shifted onto the public dime.

Healthcare is afterall, after pension liabilities, one of the greatest hardships on American companies at the present time. There is a reason why most companies are pushing for employees to take on a greater amount of the cost of healthcare, bt it through premiums or copays... because the amount of added value to the worker by having a small copay rather than none at all is simply not worth the large price difference on the employer side.

The cost of healthcare has been consistently and signifigantly outpacing inflation, and I have seen nothing to suggest that the cause for said cost is because of any revolutions in the way normal healthcare is provided. The problem is, as far as I can tell, insurance institutions being involved in routine and normal medical manners... whereas in all other forms insurance is viewed as something that must only be used in certain unusual circumstances.

This is, afterall, the theory behind the administrations push towards high-deductible coverage and HSA’s. Remove insurance companies from routine care and use health insurance in the same manner as you would use auto insurance, only during extraordinary circumstances.



 
Written By: Rosensteel
URL: http://
I think you are missing the impact of rising health care premiums on total compensation. From where I am (and yes, this is anecdotal), health care premiums paid by my employer are going up by a large amount while the coverage is getting worse. So my out of pocket expenses are rising, chewing up more of my take home pay. The amount paid by my employer for health care premiums are rising so technically my total compensation is rising yet my disposable income is actually less.

The economy is improving and I hope to see some benefit from that this year but as of yet I am actually worse off than the year before (and I am not even talking about where I was during the boom years. I don’t expect to have another year like I did in 2000 for a long, long, time).

But if the health care mess could be cleaned up and I was to get the extra amount that my employer has to spend on health care as a raise, that would be a sweet!
 
Written By: Lighthouse
URL: http://
Although it seems like economists can find anything to prop up their conclusions, just like in the other sciences they might be submitted to peer review for their work. I have read other economists absolutley savage the work of Krugman. So although it might all be economics, it might not all be good economics.
 
Written By: kyle N
URL: http://impudent.blognation.us/blog
Are workers actually getting more value for their increased overall compensation? It is not clear that is the case, since much of that increase is undoubtedly taken up by surges in healthcare cost.
Well, 1) I think they unambiguously are getting more value (especially considering the problem of overstated inflation) and 2) why do you think surging healthcare costs are not being accounted for within CPI?
I dont think anybody is getting better healthcare than they were a few years ago, so the increases there are largely wasted to workers.
They’re not? Who, then, is getting the benefit of new drugs and medical technologies? Clearly somebody is.
I think you are missing the impact of rising health care premiums on total compensation. From where I am (and yes, this is anecdotal), health care premiums paid by my employer are going up by a large amount while the coverage is getting worse. So my out of pocket expenses are rising, chewing up more of my take home pay.
Again, rising healthcare costs are incorporated into CPI. So, if wages are keeping up with CPI, then wages are inclusively keeping up with rising health care costs. You can’t include the impact of higher health care costs, but bifurcate out the impact of higher health care compensation.
The amount paid by my employer for health care premiums are rising so technically my total compensation is rising yet my disposable income is actually less.
I won’t speak to your specific circumstances, but look at the figures I cited in the column:
Finally, it’s also worth noting that Real Disposable Personal Income — the inflation-adjusted portion of compensation that we the proletariat get to pocket (i.e., spend or save) — has risen by 3.1 percent, 2.4 percent and 3.4 percent over the past three years.
 
Written By: Jon Henke
URL: http://www.QandO.net
Kyle N
Although it seems like economists can find anything to prop up their conclusions, just like in the other sciences they might be submitted to peer review for their work. I have read other economists absolutley savage the work of Krugman. So although it might all be economics, it might not all be good economics.
Economists DO submit to peer review, when publishing in economist journals. Ah yes, the pulse-pounding Administrative Science Quarterly, and others, even more exciting.
When publishing in the popular press, the bar is set WAY lower, obviously, which is why so much partisan bullshit is laid before us in those venues. Krugman’s crap in the NYT, to take a worst-case example, is lightyears removed (and not in a good way) from his peer-reviewed work in the journals. At least it was back in the 1990s when I was reading those journals. Before he whored himself out to the NYTocrats ... ah but I digress ...
 
Written By: Stoop Davy Dave
URL: http://

 
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