The Real "Truth About the Economy:" Have Wages Stagnated?
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Prof. Don Boudreaux responds to "The Truth About the Economy" (http://lrnlbty.co/z0ACuH), a recent video featuring former Labor Secretary Robert Reich. In the video, one of Reich's key points is that most people's wages have barely increased since 1980. However, when Reich's numbers are examined in greater detail, his claim does not hold up. If you care about this issue, there are three things to consider: 1. How inflation is calculated 2. Benefits workers receive other than wages 3. The distinction between statistics and individuals Adjusting for inflation, especially over long periods of time, is as much an art as it is a science. In an attempt to measure inflation, economists have developed several indexes. All of these indexes are considered legitimate, but all of them yield different results. In "The Truth About the Economy" video, Robert Reich uses the consumer price index (CPI) to calculate the average hourly wage, and he finds that wages haven't risen much over the past 30 years. However, when using other methods of adjusting for inflation, which are no less respected, the average hourly wage rate rises as much at 18% over the same 30 year period. Index differences aside, everyone agrees that all forms of compensation must be considered to accurately calculate worker's compensation. This includes not only wages and salaries, but also benefits like health insurance, retirement benefits, vacation days, sick pay, and more. It's worth noting that fringe benefits have become a larger share of income over the past 30 years. According to Don Boudreaux's calculations, which include fringe benefits, average hourly wages have increased up to 26% over the past 30 years. Lastly, and most importantly, Robert Reich confuses statistical categories with real people. When Reich says that, since 1980, most people's wages have barely increased, he gives the impression that most people have enjoyed no economic gains over the past three decades. What he means is that, adjusting for inflation, average wages have not increased. The real flesh and blood people within these statistical categories have actually experienced increased compensation. Some workers are gaining skills, others are retiring, and others are joining the workforce for the first time. Especially noteworthy is the increasing rate at which women and immigrants have entered the workforce in the past 30 years. To Boudreaux, Reich is right to claim that a strong economy needs a strong middle class. However, taxing the rich, as Reich suggests, is not the path to a strong middle class. The path to a strong economy and a strong middle class requires the hard work and great entrepreneurial ideas of individual people acting in a free market. Watch more videos: http://lrnlbty.co/y5tTcY SUBSCRIBE: http://bit.ly/1HVAtKP FOLLOW US: - Website: https://www.learnliberty.org/ - Facebook: https://www.facebook.com/LearnLiberty - Twitter: https://twitter.com/LearnLiberty - Google +: http://bit.ly/1hi66Zz LEARN LIBERTY Your resource for exploring the ideas of a free society. We tackle big questions about what makes a society free or prosperous and how we can improve the world we live in. Watch more at http://bit.ly/1UleLbP
Comments
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This video makes the case against itself.
Wages have dropped by 4%.
The PCE, which is calculated by cost of living has risen by 10%. SO we're 14% in the hole.
The GDP has grown by 18%, which means that we should be outpacing inflation by at least 8% if the money had "trickled down" like they said it would. -
4:33 women aren't actual people
LOL
please show this to a SJW right now. Trigger them lol.
Funny. We all know what he means, but it's hilarious how you just know someone is going to misconstrue that. -
"The US economy is in bad shape" - that is because there is no life-guiding philosophy to properly motivate people (via enlightening industry, government, education, and individual attitudes, to name a few) other than what I've developed (but who listens to me?)
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On their first point the cpi might just be one index but is the best index to see real inflation from lower class views like those who make minimum wage. this is because the cpi measures stuff like food and basic living expenses instead of luxury good unlike the pce which exclude food and is highly change by the top 1%.similarly to the GDP deflator. if i was going to use one for the minimum wage study i would actually use CLE and that shows and even bigger decrees in wages.
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what i got is women and immigrant are not actual people
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Thank you for an explanation from the other "side."
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My new favourite video
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Where does he get the method from which Joseph Stiglitz and Robert reich and the likes Base their methods of analysis upon? He should clarify using sorted quotations...
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Did he forget student loans, mortgages and credit cards? That's kinda why more people can buy an expensive 50 inch telly... But can they actually afford it?
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think of some actual examples nurse, teacher, air pilot???
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ok so he talks about the median, mean of the economy and how they can be missleading. ok, so when the average rises even by his "art" of inflation is 26%. the average wage of the top 1% acounting for inflation has raised by 68%, ow you dont have to be a genuis to understand that if part if one part is growing by 68% and the total is growing by only 26% that someone along the line vast portions of the economy were growing by well under 26%. One more thing, he says that the thing that will make the economy great in the first place was inovation. ok, the time that the american economy grew the fastest was when america gave a roughly 30 million people cheap morgages, and paid huge amounts of there tuition to collage/university. The tax rate on the top percentile was also 90+
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was great up until that last sentence, ''all acting in a free market' wtf ridiculous...and can NEVER be said EVER again after the bailouts, the biggest single world crime in the history of the planet, free market my ass, its a limited access market to those favored by the elites, the rest are permanent slaves, what a load of PR fluff shite
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Why the hell does his data stop at 2006?
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The only thing I would trust is looking at the big mac index, even though meat has become easier to mass produce over the years, the price is still going up. Compare the price of a big mac 30 years ago and today, you will see some insane inflation numbers, something like close to 200% (at least where I live) I don't think wages have been increased by 200% in 30 years...
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I love how a bunch of ordinary liberals with at the most a bachelors degree, are trying to say that an economist with a phd is incorrect.
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Stop whining babies, it's the year 2006 and of course it's going no where up from here. You damn know nothing libs!
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"Lilly0Kins5 months ago
"But not necessarily the actual pay of actual people."- Because we all know women and immigrants don't count as people..."
When did he say that the actual pay of women and immigrants had decreased? He said they joined the workforce, so cleary their compensation has increased from zero. Poor attempt at a cheap shot. -
Haven't we had a free market system which resulted in the crash. I would like for them to explain systems without regulation, especially in a global economy.
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Divided (wages + fringe benefits) by hours worked. Then deflate by the personal consumption expenditures deflator. The result is the real hourly wage.
All data are from the NIPA. Use annual data from 1976 to 2012, the most recent year available at this writing.
1976-81 1981-2007 2007-12
Private Industries 0.7% 1.5% 0.7%
Government -0.2% 2.1% 1.2%
The Great Recession has had a marked depressing effect on real wages.
The rapid growth of government compensation includes the exploding claims on state & local government defined benefit pension plans.
Robert Reich is indeed mistaken about the years between the 1974-75 recession and the Great Recession.
That said, employee compensation has been a declining fraction of GDP since 1971, especially since 2000. In 2012, employee compensation as a % of GDP was at its lowest level since 1950. -
At 2:58 "I estimate the….." how many economists will agree with the "I estimate"? Is this strictly a Libertarian interpretation or widely accepted?
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