Friday, July 14, 2006

Bumper Sticker Economics, Part 2

My previous post has drawn comments ranging from wonky to snarky and back again. I seem to have hit a nerve. There's enough material in your comments for a week's worth of posts, which means I've got to get busy.
To help us get started, here's a bit of fun titled "Left Behind Economics" from Paul Krugman, via Economist's View, which helpfully posts the Shrill One's columns in a free (if obscure) forum:
I’d like to say that there’s a real dialogue taking place about the state of the U.S. economy, but the discussion leaves a lot to be desired. In general, the conversation sounds like this:
Bush supporter: “Why doesn’t President Bush get credit for a great economy? I blame liberal media bias.”
Informed economist: “But it’s not a great economy for most Americans. Many families are actually losing ground, and only a very few affluent people are doing really well.”
Bush supporter: “Why doesn’t President Bush get credit for a great economy? I blame liberal media bias.” ...
In the coming week, we'll do out part to further the national dialogue on the economy. Stay tuned.

6 Comments:

Blogger FirstState said...

I had to use pictures to chip in to this particular debate.

See here.

6:40 PM, July 14, 2006  
Anonymous Anonymous said...

The idea that the working class and middle class is somehow making up lost wages as fringe benefits ("real compensation") doesn't make sense to me.

Empirically, I know people aren't getting raises, employee contribution to health care keeps going up, and traditional defined-benefit pension plans keep getting cancelled.

There must something fishy with the data or in its interpretation; I admit I don't know the answer right now though.

What is the source for the stats on those graphs? Even if it comes from the govt, I suspect it is self-reported by employers, and could be misleading.

Does "real compensation" consist of just a basket of "available" benefits that never actually accrue to the worker? For example, if you have a tuition reimbursement benefit that you never use, does that count in your "real compensation?"

For example (hypothetically) if a company hires an outsourced Employee Assistance Program, and they calculate that each of their 1000 employees could each potentially use $5000 of EAP services:

- does that add a phony $5 million compensation "cost" to the employer?

- and does it add a phony $5000 to each employees "real compensation?" Even though most employees will never use it, along with many other "benefits" that are never realized?

8:34 PM, July 14, 2006  
Anonymous Anonymous said...

Compensation (National Compensation Survey)
A term used to encompass the entire range of wages and benefits, both current and deferred, that employees receive in return for their work. In the Employment Cost Index (ECI), compensation includes the employer's cost of wages and salaries, plus the employer's cost of providing employee benefits.

From the BLS Glossary.

That tells me that the expense has to be real (not potential) to count.

9:50 PM, July 14, 2006  
Blogger FirstState said...

Sorry, I wasn't logged in. The last post was me.

9:51 PM, July 14, 2006  
Anonymous Anonymous said...

In the Employment Cost Index (ECI)

Well there you go.

During the Bush Administration, the ECI and related data was re-jiggered in more ways than I can count. If you can figure it all out you are a better economist than me.

Note #19 on the linked page also describes a change to the Employer Cost for Employee Compensation (ECEC) in 2004.

Knowing this administration, I wouldn't be surprised if they re-based the ECI data just to produce more favorable statistics.

10:13 PM, July 14, 2006  
Blogger FirstState said...

I don't think the ECI reference in the definition was any more than an example. Also, it looks like the ECI changes were for comparative purposes.

I think if real compensation is defined as compensation received for labor, it looks better for labor than advertised.

9:06 AM, July 15, 2006  

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