Wages and Prices

“More paychecks starting to shrink,” Sioux Falls Argus Leader, Page 6C, 8 January 2005 (from the Chicago Tribune).

An interesting if poorly worded article from on a dangerous economic development

CHICAGO — More than three years into the economic recovery, U.S. workers’ hourly wages continue to decline when adjusted for inflation with little hope of a dramatic turnaround anytime soon.

My first reaction was “listen to deeds, not words.” “Generous” Democrats wants to tie social security payments to wages to pay retirees more, while “sintgy” Republicans want to swap it to prices to save money. Both parties believe that wages will continue to increase faster than prices. Therefore whatever we are experiencing now will be temporary…

…but later a clarification…

Salary growth historically has averaged between 1 percent and 2 percent above inflation, and it hovered closer to 2 percent in teh late 1990s, according to Mercer Human Resource Consulting’s survey of employers.

“Now it’s closer to 1 percent,” said Steven Gross, leader of Mercer’s U.S. compensation consulting practice.”

What? But this means that real wages are increasing. It says that wages are growing faster than inflation. So how can a newspaper get away with this deception?

“At the same time, companies are payijng more for employee health care, which boosts the costs of total compensation even while salaries lag.

Compensation has been rising at a pretty rapid clip,” said Nariman Behravesh, chief economist for Waltham, Mass.-based research firm Global Insight, Inc. “That’s a trade-off a lot of companies have made.”

Benefit costs are U.S. employers grew at a brisk 6.8 percent for the 12 months ended in September — by the same period when pay grew by 2.4 percent, according to the Bureau of Labor Statistics.”

Oh, so the article is wrong. Pay is growing rapidly for employees. But most of the benefit are being eaten by up rising health-care costs.

But still, this is a problem. Health care costs show no signs of stopping. Both Bush and Kerry have some plans, but none are anywhere near comprehensive enough. If we actually wished to solve this problem, we woud

1. Pay for more health care out of taxes paid by the highest earners. The extra marginal costs for each employees dampens the demand for American workers, and contributes to jobs moving oversees
2. End most heroic care. There should be a rational limit, ($100,000/day? $10,000/day for more than 100 days?) of how much society will subsidize health care. Every society in history, including ours, practices some form of triage. But currently American health care is geared to elongating the lives of those who have already lived, while throwing poor workers and families to the wolves.
3. End pandemics in developing countries. Its cheaper for us to fight AIDS over there now than here later. We are exporting our war on terrorism to Iraq, Afghanistan, and others because we’d rather that foreigners be the ones to experience the shock of armed conflict. So why don’t we export our fight against AIDS so that those cultures experience the cultural shocks that destroying that disease will take, and keep ita “nuisance” over here?
4. Socially ostracize those who endanger their own lives. Society should ceased being concerned for smokers and the obese, and the government should stop paying for their problems. Because young men are the most productive workers, cultural intimidation of male homosexuals would have a great cost-benefit ratio. Tolerating a slight increase in targeted bullying early-on could keep many alive and working for decades.
5. Make those who seek care for non-life-saving treatments pay more. Except for extreme cases, no public funds should ever go to dental surgery, birth control, or viagra.

Do I see these real fixes happening? No.

Will welfare recepients, broadly defined, continue to bilk America and suck the blood of American workers? Of course.