Yes, that's what I'm saying. (I'm also saying that this understates the case because it ignores the value of noncash employment benefits (wich were 29% of total compensation in 2004 and 30.5% in 2011) and government transfers (which have increased by about 12% of personal income (from 6% of average income to 18%) from 1967 to 2011.)
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It's a pretty complicated argument as shown by the fact that two GMU professors are currently arguing about it here.
And they don't even consider a question I believe is of utmost importance: fallen relative to what basket of products? For example, there is no doubt that middle incomes have fallen relative to high-end wines yet have risen relative to low-end wines. That they have fallen relative to memberships in exclusive clubs but have risen relative to laptop computers.
So, economists don't agree and we don't have to either.
That's a different argument. They're arguing about whether median income has "stagnated" by which they mean, not grown as fast as we'd like.
I'm agnostic about that -- in some ways it's true and in other ways it's not. It depends what you care about. But note that no one in the conversation is arguing that median income has fallen, which is what Appleyard claimed and which is is just wrong.
I should also note that I find the pro-stagnation argument for ignoring the increase in noncash benefits to be incredibly weak. Basically, what they say is that mostly that's health care and "most" health care money is wasted.
First of all, whether it's wasted, it's still real money that employers are paying for the benefit of employees, who like getting it. It is income and there are lots of ways that income is spent that academics might consider to have been wasted.
Second, wasted is a conclusion, not an argument.
(Third of two, they're ignoring the reason employees and employers like shifting income into noncash benefits -- because it's nontaxed. That means that an employer dollar spent on benefits is worth probably at least 1/3 more than an employer dollar spent on salary and wages. The employer and the employee get to split that dollar based on their bargaining power; part of the "waste" is probably the health insurance company muscling in for a cut, but of course the health insurance company's money ends up going to people too.)
Many of the points that Roberts and Cowen are discussing are relevant to both stagnation and whether or not median (household) income can be interpreted as being higher or lower.
For example, CPI is really a fairly arbitrary measure (i.e. the formula is arbitrary and they arbitrarily have changed it over time to "make it better"). Personally, I think it overstates inflation significantly, meaning that median income is actually up a lot more that the official estimates. Nonetheless, there's a pretty wide range of plausible inflation numbers and ones that are even higher than the CPI, if applied to median household income, would show it falling.
I'm agnostic about that -- in some ways it's true and in other ways it's not.
I read recently (I'm too lazy to track down the link) that the amount of labor-market time required to own and operate a car has dropped by 23% in the last 30 years.
There almost no end of things that contain much more value per dollar purchase price, yet are not accounted for in simplistic income statistics. (Here's another: the automobile fatality count was lower in 2010 than any year since 1949. Turn that into a rate. Now, account for that huge cost reduction in income statistics.)
Trickle down is more than just a mere dollar figure.
There
Third of two, they're ignoring the reason employees and employers like shifting income into noncash benefits -- because it's nontaxed. That means that an employer dollar spent on benefits is worth probably at least 1/3 more than an employer dollar spent on salary and wages.
My knowledge of taxes is near as darnnit to zero, but doesn't the employer also get to write off those costs as deductible business expenses?
Sure, but the employer gets write off cash compensation, too.
In other words, to get $100,000 into your pocket, your employer has to spend $130,000, while you only collect 70 cents of every dollar your employer spends on you. For your health insurance, it just costs your employer what it costs, and you get 100% of what your employer spends. Then you just negotiate how to divide up the extra 30% (before giving a cut to the health insurer). Both the employer and the employee want to make the next dollar of income a noncash benefit.
Got it ... thanks.
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