Trading Concept
  • Home
  • Trading News
  • Email Whitelisting
  • Privacy Policy
  • Home
  • Trading News
  • Email Whitelisting
  • Privacy Policy
No Result
View All Result
Trading Concept
No Result
View All Result
Home Trading News

All Americans—Not Just the Wealthy—Are Better Off Than Ever

by
November 8, 2021
in Trading News
0
0
SHARES
0
VIEWS
Share on FacebookShare on Twitter

Illustration by Ben Mounsey-Wood

Text size

About the author: Edward Yardeni is the president of Yardeni Research and author of In Praise of Profits!

Most Americans are better off today than ever before. This is an easily verified fact, but to say so these days is to risk arrest by the cancel-culture police. It flies in the face of a core belief behind progressive policies—that only the wealthy in America have never had it so good. This simple belief, however, is wrong.

RELATED POSTS

Labcorp to pay $2.1 million to settle DOJ lawsuit for allegedly overbilling Defense Department

Barclays highlights 10 top quality stocks that are also cheap

In the progressive narrative, the standards of living of all but a tiny percentage of Americans have been stagnating for decades. That’s supposedly because most of the gains in national income have benefitted corporate profits at the expense of labor compensation. The rise in productivity growth since the early 1970s has reputedly gone mostly to profits, meaning that employers have exploited employees.

The solution? Riches must be redistributed by taxing corporations and upper-income households, and the government must provide more support to lower-income households. This isn’t new. Indeed, the contention that most Americans are struggling has given rise to many social safety nets, including unemployment insurance, Social Security, Medicare, Medicaid, SNAP (food stamps), and Obamacare.

Let’s give credit where credit is due: The progressives have made much progress. But it is never enough for them. It should be. Belief in stagnation is based on myths.

Myth No. 1: the productivity/pay gap. Progressives, including at the Economic Policy Institute in Washington, assert that the gap between productivity and inflation-adjusted hourly compensation has been widening since the mid-1970s. However, this calculation deflates hourly compensation with the consumer price index, which long has been recognized as upwardly biased. Doing so weighs misleadingly on real hourly compensation. The gap narrows using the personal consumption expenditures deflator, a more accurate measure of consumer prices.

Myth No. 2: wage stagnation. Adjusted for inflation using the PCE deflator, hourly compensation rose 2.1% per year, on average, from the first quarter of 1995 through the second quarter of 2021. That’s a solid increase in the standard of living consistent with gross-domestic-product growth.

Progressives usually counter that their preferred measure for the purchasing power of Americans is median household money income deflated by the CPI, a data series compiled by the Census Bureau. But this series distorts the picture: It is based on surveys asking respondents to provide their money income before taxes. Medicare, Medicaid, food stamps, and other noncash government benefits are excluded.

These sources of income are included in the personal income series compiled by the Bureau of Economic Analysis, however, which makes it the more accurate measure. Furthermore, the BEA data are based not on survey replies like the Census series, but on “hard” data, like monthly payroll employment statistics and tax returns. The BEA also compiles an after-tax personal income series reflecting government tax benefits such as the Earned Income Tax Credit. The BEA series for personal income, disposable personal income, and personal consumption expenditure—on a per-household basis and adjusted for inflation using the PCE deflator rather than the CPI—refutes the stagnation claims.

The standard critique of using the BEA data series on a per-household basis is that they are means, not medians. So, those at the top of the income scale, the so-called 1%, in theory could skew both the aggregate and per-household data. That’s possible for personal income, but unlikely for average personal consumption per household. The rich can eat only so much more than the rest of us, and there aren’t enough of them to substantially skew aggregate and per-household consumption, considering that they literally represent only 1% of taxpayers.

Myth No. 3: the exploited workers. Since the early 1990s, the share of national income going to labor compensation has trended downward, and the share represented by profits has risen—angering many a progressive.

But these shares are misleading. They don’t reflect the fact that pass-through businesses—including S corporations, sole proprietorships, and partnerships—have grown rapidly in recent years. Collectively, their owners and employees account for more than half of employment. Many are small businesses run by entrepreneurs. S corporations account for about a third of corporate profits, while the income of sole proprietorships tends to be about 80% as large as corporate profits.

The true story about inequality. Progressives are right about income and wealth inequality, I’ll give them that. It has gotten worse. What they miss is the bigger picture: Economic inequality always gets “worse” during periods of prosperity. That’s a small price to pay for widespread prosperity that lifts all boats. Most workers gain on an absolute basis, especially since there is greater upward income mobility during periods of prosperity.

And what drives prosperity? Profits, mostly. It is profitable companies that expand their capacity and payrolls, revving the engines of an economy and creating prosperity. Profits are too critical to all of us in society, up and down the income ladder, to jeopardize the profit motive through the unintended consequences of ill-conceived, though well-meaning, progressive policies.

Email: ideas@barrons.com

ShareTweetPin

Related Posts

Labcorp to pay $2.1 million to settle DOJ lawsuit for allegedly overbilling Defense Department

by
March 27, 2023
0

A Laboratory Corporation of America Holdings (LabCorp) 642E centrifuge sits in a Community Clinic Inc. health center in Silver Spring,...

Barclays highlights 10 top quality stocks that are also cheap

by
March 27, 2023
0

As the likelihood of a hard landing this year rises, Barclays says investors should seek quality stocks that are not...

Shooting at Nashville Christian school leaves at least 3 children and 3 adults dead, officials say

by
March 27, 2023
0

Metro Nashville Police Department officers walk outside of Covenant School, Covenant Presbyterian Church, in Nashville, Tenn. Monday, March 27, 2023....

Binance and founder Changpeng Zhao violated compliance rules to attract U.S. users, CFTC alleges

by
March 27, 2023
0

The CEO of the largest online exchange for trading cryptocurrency, Binance, said he is establishing a recovery fund to help...

Virgin Orbit extends unpaid pause as Brown deal collapses, ‘dynamic’ talks continue

by
March 27, 2023
0

In this article VORBSPCE Follow your favorite stocksCREATE FREE ACCOUNT NEWQUAY, ENGLAND - JANUARY 09: A general view of Cosmic...

Next Post

Pledges, progress and PR spin? What you need to know as the COP26 climate talks enter the final week

Apple, Intel and more: Jefferies just named its top 'cashflow machines' to beat stagflation

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

email

Get the daily email about stock.

Please Enter Your Email Address:



By opting in you agree to our Privacy Policy. You also agree to receive emails from us and our affiliates. Remember that you can opt-out any time, we hate spam too!

MOST VIEWED

  • WHO says Covid vaccine booster programs will prolong pandemic

    0 shares
    Share 0 Tweet 0
  • Forget Tesla — this auto stock is the one to buy right now, analyst says

    0 shares
    Share 0 Tweet 0
  • Spin or Split? AT&T Has a Big Decision to Make on Discovery Stake.

    0 shares
    Share 0 Tweet 0
  • Here’s how Carl Icahn is positioning for a possible recession in America

    0 shares
    Share 0 Tweet 0
  • Some lawmakers and their families are betting thousands of dollars on crypto

    0 shares
    Share 0 Tweet 0
  • Home
  • Trading News
  • Email Whitelisting
  • Privacy Policy
All rights reserved by tradingconcept.net
No Result
View All Result
  • Email Whitelisting
  • Home
  • Privacy Policy

All rights reserved by www.tradingconcept.net