Monday, August 28, 2006


The New York Times exlpains why the Republicans don't seem to be getting credit for a strong enconomy:

The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity -- the amount that an average worker produces in an hour and the basic wellspring of a nation's living standards -- has risen steadily over the same period.

As a result, wages and salaries now make up the lowest share of the nation's gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960's. UBS, the investment bank, recently described the current period as "the golden era of profitability."


Anonymous said...

My guess is that the social democrats (i.e. "liberals") will interpret these results as reason to increase corporate and upper bracket income taxes and to provide even greater legal privileges for labor unions. That would of course ultimately damage overall economic performance.

Such a social democrat program would have natural and understandable appeal to low and medium income earners, and arguments from conservatives and libertarians about the long term consequences of state centralization do not win critical votes.

A more realistic response however is a renewed push for tighter and more effectively enforced immigration restrictions.

As long as the US has relatively open borders there will always be a tendency for wage and salary increases to be watered down by an influx of immigrant labor.

In this political debate, it is the liberals who are stuck with electorally ineffective arguments about how in the long run immigration is supposed to create as much demand as it supplies.

Anonymous said...

Cafe Hayek pours a bucket of cold water on the NYT claim that productivity is going up and wages are going down story. See here