This should have the neocons dancing in their streets!
U.S. Falls to No. 15 in Average Worker Income
By David Francis, Christian Science Monitor. Posted November 13, 2007.
That ranking would surprise most Americans, who likely consider their
nation the most prosperous in the world.
"Comparisons are odious," that is, hateful, according to a popular
phrase about seven centuries old. Comparison, however, is one of the
tasks assigned to the Organization for Economic Cooperation and
Development in Paris, an international body of 30 of the richest
countries. It tries to compare its members' economic and social data,
a difficult, perhaps even odious, job.
Sometime back it broadened statistically (for comparison purposes) the
definition of the average workers in its member nations while trying
to examine relative tax burdens. The result was "monumental," reckons
Jacob Kirkegaard, an economist at the Peterson Institute for
International Economics. The OECD ranked the after-tax income of the
average worker in the United States as 15th among its member nations.
The richest middle class, if measured in terms of the purchasing power
of their income, was Britain.
That ranking would surprise most Americans, who likely consider their
nation the most prosperous in the world.
In one fell swoop, OECD statisticians lowered the estimated income of
the average American worker by more than 10 percent and raised average
incomes of other rich nations by as much as 30 percent, notes Mr.
Kirkegaard.
It may well be that the comparative US standard of living is slipping.
The price of oil has risen more dramatically in the United States than
in other nations because of the dollar's large devaluation.
The reason for the drop is also statistical. In the past, the OECD had
been using a proxy for the middle class based on the "average
production worker." This concept focused on full-time workers in the
relatively declining manufacturing sector, which tends to be unionized
in the US and better paid on average. The OECD's new measure is based
on the "average worker," which captures all sorts of private-sector
jobs including mining, utilities, construction, retail,
hotel/restaurants, financial services, real estate, and other areas.
So this new system ought to provide a fairer comparison.
But 15th place?
Not likely, figures David Grubb, an OECD economist in Paris. He points
out that the US and Canada included in the statistics that it sent to
Paris the wages of nonsupervisory workers, and not those of higher
paid supervisory workers and salaried professionals. When that
statistical difference is corrected, the rank of the American middle
class would move up from 15th. How far is uncertain.
In the newest OECD Economic Outlook, the average annual wage in the
total economy of the US was $45,563 for 2005. That's exceeded only by
Luxembourg, a wealthy banking duchy, with $50,634. Britain, Ireland,
and Australia, are not far behind the US with incomes above $40,000.
The problem is that this is a measure of total wages, not just the
middle class, and it includes the richest Americans whose incomes have
risen enormously in recent years. Outside of Hungary, the US has the
most extreme income inequality in the OECD.
Kirkegaard figures middle- and lower-income Americans are being
squeezed by the flood of money going to the superwealthy. Democrats in
Congress have the same view, and their tax proposals would shift the
tax burden up the income ladder.
After the early 1990s, the incomes of "very well-off Americans
increased much faster than those of both the middle class and the
poor," figures Gary Burtless, an expert at the Brookings Institution
in Washington. For example, top corporate officers got pay increases
of 9.5 percent a year in the 1990s, on top of high levels to start
with.
This doesn't mean that Middle America incomes have been entirely flat.
An analysis by Terry Fitzgerald, an economist at the Federal Reserve
Bank of Minneapolis, concludes that a "broad swath of Middle America
experienced notable hourly wage gains" since 1975. In other words,
children can still assume they have a better living standard, on
average, than their parents did. [Editor's note: The original version
misidentified the Federal Reserve Bank of Minneapolis economist.]
To reach that conclusion, Mr. Fitzgerald had to disentangle a
"confusing web of data." Two data series on individual hourly wage
rates showed little, or even negative, growth over the past 30 years.
But labor income for the entire national economy was shown to have
grown 39 percent in that time span.
To square this apparent contradiction, Fitzgerald applied to the two
wage series a broader price index (personal consumption expenditures),
which covers the basket of final goods and services that people
consume each year. The new result: Average hourly earnings rose 10
percent, rather than declining 4 percent, from 1975 to 2005. Median
hourly wages also rose 20 percent rather than 12 percent. Then he
factored fringe benefits into the wage calculation, since they have
become increasingly expensive and "contribute to workers' well-being."
That combination accounted for 28 percent of the 39 percent growth of
total labor income. "This does not contradict the claim that wage
inequality increased over this period - it did," writes Fitzgerald in
a bank publication. In other words, the rich are still getting
proportionately richer.
See: http://www.alternet.org/workplace/67723/
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