Editorials

Since most coverage of economic news during a six- or seven-year period of robust growth in the wake of the early Bush administration tax cuts, it is not surprising to see gloom- and doom-type attention going to the recent slowdown.

With a bump of the unemployment rate to 5.5 percent, a highly respected figure in most past years, there has been a flood of pessimistic economic comment.

Even though the national economy remains strong, such coverage and comment have many Americans convinced the sky is falling, observed Edwin Feulner, president of The Heritage Foundation.

A recent USA Today poll found more than half of all Americans think “their standard of living is no better today than five years ago.” RealClear Politics.com polls show almost 80 percent of Americans think the country is on the “wrong track.”

It is understandable people might think that, since they are frequently told the “rich” are getting richer while members of the middle class are merely working more, Feulner said. He cited a 2006 paper in which the liberal Economic Policy Institute wrote: “Despite strong growth in labor productivity, hourly wages for most workers are not keeping pace with inflation.”

There is more to compensation than wages, Feulner pointed out, “and benefits have actually grown faster than worker productivity.”

Almost a third of the average employee’s compensation is paid in benefits. When wages and benefits are added, “over the past 40 years, compensation per hour and output per hour (productivity) have moved almost in unison,” said Heritage’s James Sherk.

One federal measure of total compensation shows an increase of 3 percent from 2003-06 and of 9 percent from 2000-06, even after adjusting for inflation.

Benefits, including health coverage, 401k plans and paid sick leave, are expensive, yet critical, it is pointed out.

For example, health care costs employers more than it did decades ago because employees get more and our entire society reaps benefits, Feulner said. Better health care allows workers to live longer, healthier lives.

Claims that employers are “squeezing” workers simply don’t hold up, Sherk said. “The compensation companies pay their employees has held constant at slightly more than 70 percent of national income, never deviating more than a few percentage points from that number.” It has been so steady that, “in the first quarter of 1968, employee compensation was 69.9 percent of national income. In the last quarter of 2007 it was 70.6 percent.”

Employees are actually doing better, because there is more money to go around, Feulner pointed out. The economy has grown by leaps and bounds since the 1960s, and “that rising tide has benefited those near the bottom of the economic scale as well as the wealthy.”

Even at 5.5 percent the nation’s unemployment rate is remarkably low by historic standards.

Economic growth can create concerns because as new jobs are created, old job often go away. Results, however, are positive.

Many low-wage manufacturing jobs have been lost in our economy by growth, Feulner pointed out, but more wage jobs have been created in engineering computer science and nursing.

Economic problems clearly exist in the country today, and that will always be the case, Feulner said. But the facts on wages and jobs offer solid reasons to believe in the nation’s future.

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