Category Archives: Liberty

Do you feel that you are fairly compensated at work?  That is, are you getting from the company a fair return for what you give?  Maybe, maybe not.  I betcha that in this economy more people feel that they are NOT earning what they feel they are worth.

Is that true, though, over time?  Has out income stopped keeping pace with the times?  According to some, it would seem so:

It would seem that since 1970 or so, wages in America have been flat.  In fact, for much of the time since 1970, we have seen wages below the 1970 level.  And this fact is to be used against us to demonstrate that somehow the working class, the middle class, has it worse of now than in, well, than in 1969 apparently.

But is that the whole story?

I don’t think so:

…the level of productivity doubled in the U.S. non-farm business sector between 1970 and 2006. Wages, or more accurately total compensation per hour, increased at approximately the same annual rate during that period — if nominal compensation is adjusted for inflation in the same way as the nominal output measure that is used to calculate productivity.

…

Total employee compensation was 66 percent of national income in 1970 and 64 percent in 2006. This measure of the labor compensation share has been remarkably stable since the 1970s. It rose from an average of 62 percent in the 1960s to 66 percent in the 1970s and 1980s, and then declined to 65 percent in the 1990s where it has remained from 2000 until the end of 2007.

From the actual report:

Another useful way to examine changes in the compensation share is to
focus on the nonfinancial corporate sector (as presented in table B14 of the 2007 Economic Report of the President.) This eliminates some of the very highly compensated individuals in the financial sector. It also avoids the problems raised by separating capital and labor income of sole proprietors . Comparing the compensation paid by the nonfinancial corporations to the net value added of the nonfinancial corporations reinforces the conclusions based on the larger scope of industries. In 1970 compensation was 74 percent of the value added of the nonfinancial corporate sector. In 2006, it was 73 percent. The decade averages rose from 70 percent in the 1960s and were very stable after that: 73 percent in the 1970s and 1990s, 74 percent in the 1980s and 75 percent since 2000.

What’s this all mean?

It means that there are other ways to compensate individual besides “wages”.  For proof of this, listen to the screeching of the Unionista as he complains that having to pay for his own health insurance (actually, just 12% of it) is a “pay cut”.  Of course, that implies that the benefit was first a “pay”, or what we in the biz call a “compensation”.  Similar to health benefits are paid days off, training, 401k and sick days.  To name a few.

I “get” a pager.

So, what does that graph look like if you graph compensation rather than just cash?

That there is total hourly compensation since 1950.  If you notice, right at 1970, we have a massive arc upwards.  Contrary to what you hear, the worker is better off than he was.