Sunday, March 13, 2016

Bernstein's Misleading Analysis

Jared Bernstein, a very pleasant but extremely partisan economist -- a friendly version of Paul Klugman if you like -- has penned an article in today's Washington Post that is so misleading as to be fatuous.

He is addressing, he thinks, the question of why non-college educated white men are losing ground in American's economy.  He has the wrong group in mind.  The demographic that is getting crushed is anyone -- male, female, white, black, whatever -- who had income below $ 50,000 per year twenty years ago.  This is the group that has been crushed by employer mandates, enacted in a bi-partisan manner, over the past forty years.

It is easy to come up with at least $ 20,000 in additional costs to employers of hiring an employee these days.  That means that a $ 50,000 wage and salary worker costs an employer more than $ 70,000 per year.  It means that a $ 30,000 wage and salary worker cost an employer more than $ 50,000 per year.   (Note that a $ 20,000 additional costs to employers of a $ 200,000 employee is much less significant).  It is the cost of labor, not the employee's take of that cost that matters to an employer.

As these non-wage costs, imposed by various levels of government, grow every year, unless wage and salary compensation declines, labor costs to employers must rise.  This reduces the demand for labor.  If the economy isn't growing, this implies that wage and salary compensation must, by simple arithmetic, decline.  All of this means dramatically reduced living standards for the Americans whose income is less than six figures annually.

That's the data that Bernstein is looking at, but has completely misinterpreted, in order to make a political point.  Bernstein has actively (and is actively) encouraging more mandates and restrictions that would speed the collapse in standard of living that average Americans face (and raise the income of folks like Bernstein, whose consulting fees would escalate).

The elite, like Jared Bernstein, thrive as they seek to plunge the average American further into an economic hole from which there is no escape.

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