Friday, January 16, 2015

Stagnation of Western Living Standards?

David Leonhardt (NY Times) has written another article musing about why middle class disposable income has not increased in two decades.  Like other authors he misses the key reason.

Costs of labor have gone through the roof in the last two decades, but what workers receive in take home pay has hardly budged.  Perhaps, Leonhardt should explore why the huge and growing gap between what employers pay and what workers receive.

Remember that employers only care about one number -- the costs per employee.  What they don't care about is what part of that cost represents health care costs, paid sick leave costs, legal costs for defending lawsuits or potential lawsuits, complying with government regulation costs, etc.  Any increase in these costs will directly, one for one, reduce disposable income for employees.

So when Elizabeth Warren and Barrack Obama push for more paid leave sick days, be aware that employees will directly pay the cost for this benefit as they pay for Obamacare as well.  The idea that employers pay for employee health care is ridiculous.  Employee health care costs that are ostensibly paid for by employers are, in reality, paid by the employees in reduced disposable income.  These mandates aren't free for employees.  Employees are paying for them and cannot opt out.

All of these employer mandates simply take money from employees and give it, inefficiently, to whatever cause that big government advocates are pushing.   Employees have no choice in the matter and are forced to settle for stagnant real income.

You wonder why Leonhardt and others can't see the obvious.  Why, if this is the fault of capitalism is the cost of labor going through the roof, while what workers actually receive is going nowhere?  Is Leonhardt, like all the others, simply pushing a political agenda as opposed to doing the obvious arithmetic?  The government is the problem not the solution to stagnant living standards.

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