US employment and non-wage benefits

Doug Henwood dhenwood at
Wed Aug 30 09:47:03 PDT 2000

John.Pennington at wrote:

>In one of our major dailies one of New Zealand's favourite right wing sons
>claimed that even if the median real wage in the US is no higher today than in
>1973 that 1. the real wage is an unreliable indicator of income levels and the
>distribution of income.

Au contraire, I think it's the best single indicator, since it shows how much the "average" worker gets in return for an hour of work effort. People can compensate for lower real hourly wages by working longer hours or sending more family members to work, but that's a real disutility, as economists say.

> 2. Non-wage benefits have surged since 1973, are omitted
>and now average 70% of wages

This is bizarre. Fringes are about 18% of wages, down a bit from the late 1980s. Over the last 10-15 years, fewer employers have offered health insurance coverage, and those that did have throttled back on the generosity of coverage. Still, the narrow direct wage and broader compensation indexes follow the same pattern - a long decline from 1973-95, and a modest rise since.

There are several reasons it's misleading to look mainly at the broader compensation figures (which include fringe benefits). One is that Only 63% of all workers have health coverage, down from 70% in 1979, and slightly under half have pension coverage (and there's been a big shift from defined benefit to defined contribution plans). And two is that a lot of the growth in benefits in the 1980s was the result of pure health care inflation - the medical care component of the CPI grew over 8% a year during the 1980s, almost twice the rate of general inflation. In the 1990s, med inflation fell back to around 5%, still well above average. So a sharp rise in nominal compensation masks a much slower rise in its real value. Also, lots of the benefit of health coverage goes to doctors and drugmakers.

Finally, fringes are disproportionately enjoyed by upper-income workers. 82% of workers in the top quintile have health coverage, while 30% of those in the bottom do, and 70% of those in the middle.

I'm reading galleys of the Economic Policy Institute's forthcoming State of Working America 2000-2001, which is full of truth about these issues. It's under embargo until September 3, so I can't say more than what a splendid piece of work. It's one of the few indispensible volumes in the political economy game. The published edition won't be out until Janauary, though.

> and between 1973 and 1996 average hours worked fell
>by 10%.

Actually it's 7%, but who's quibbling? That's probably because there's been a slight growth in the share of part-time workers, from about 14% of total employment in the early 1970s to about 17% today (though most of that growth happened in the early 1970s; the share's been pretty flat since). The workweek for fulltime workers has been pretty steady for decades, though there's been a growth in the share of the workforce working very long weeks (49 hours or more). See <> for more.) But the bigger story is the increased work effort among the population as a whole; while the average worker may not be putting in longer weeks, more people are working than ever, especially women. U.S. workers put in more hours than workers anywhere else in the world except East Asia.

Do these fuckers consciously lie, or does their unconscious lie for them?

> Our daring correspondant also claimed that most households on low
>incomes move to higher incomes over time.

Of course, because average incomes grow, and peoples' incomes tend to rise as they age. But most people stay close to the income quintile they were born into (about 2/3 move no more than one quintile over the long term).

> Between 1970 and 1997, real median
>household income in the US increased by 9%

Devious fucks. Most of that gain happened between 1970 and 1973, which is no doubt why 1970 was chosen as a base year. 1973 is the year the real hourly wage peaked, and is the usual beginning year for talking about income stagnation.

>while that for Afro-American
>households increased by 16%.

Most of that gain happened after 1992; black HH incomes were virtually flat from 1970 through 1992. Black incomes are up very strongly in the 1990s (of those blacks that aren't behind bars, of course). This is one of the good things that happen when you boost the minimum wage and keep unemployment below 5% for years.

Curious this data ends in 1997. The 1998 income numbers, which would have strengthened this hack's case, have been out for almost a year (1999 figs are out in a couple of weeks). No doubt this is being recycled from some dusty rightwing source.


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