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San Francisco Chronicle, October 25, 2006
As the midterm election draws closer, President Bush switched this week from trumpeting his foreign-policy successes to highlighting his successes on the economic front.
"One of the interesting things about our economy that's also important is
that as the economy has grown, the real wages for American workers has
increased," he said Monday during a meeting with small-business owners.
"Last year, it increased by 2.2 percent. That's the largest increase in
recent years.
"And that's important," Bush added, "because not only does it mean the
small businesses are doing well, it means our working families are doing
well."
Maybe not as well as the president would have people think.
Real wages are computed by subtracting average changes in cost-of-living
expenses from average paychecks. What's left is how much the typical
worker is taking home as his or her piece of the American pie.
The curve ball here is Hurricane Katrina, which slammed into the gulf
states in August 2005 and devastated, at least temporarily, the
petroleum-refining industry. This caused fuel prices -- and the Consumer
Price Index -- to subsequently skyrocket.
The 2.2 percent increase in real wages cited by Bush is thus skewed by a
September 2005 spike in average consumer prices. As consumer prices eased
to normal levels during the ensuing 12 months, and as average wages
remained steady, this created an artificial bump in real wages over the
period.
To minimize the statistical impact of Hurricane Katrina and provide a
more
accurate snapshot of American workers' real wages, you have to go back one
more year, to September 2004, and look at the data over a two-year window.
Since September 2004, average hourly wages have increased 6.8 percent and consumer prices have climbed 7 percent, according to the Labor Department.
This means real wages over the period have declined 0.2 percent. In other words, and contrary to the president's sunny appraisal of U.S. workers' fortunes, many people's paychecks in reality are continuing to
fall behind the cost of living.
"Since 2003, there's been an ongoing decline in real wages," said
Arindrajit Dube, an economist at UC Berkeley's Institute of Industrial
Relations. "There may have been increases in wages in nominal terms, but
paychecks aren't keeping up with inflation."
What makes this situation even more remarkable is that productivity keeps
growing -- up 2.7 percent in the first half of the year. Traditionally,
increases in worker productivity are reflected in increases in workers'
compensation.
No longer. And economists have been scratching their heads to come up
with plausible explanations. Two related factors appear to be the continuing
trend of companies outsourcing work abroad and the waning power of labor
unions.
With workers increasingly skittish about their job security, the thinking
goes, there have been fewer demands on employers for higher wages. This
means less money is flowing to workers and more cash is remaining on
companies' ledgers.
This, in turn, helps to explain the stellar performance of major
businesses and the stratospheric performance of the Dow Jones industrial
average, which closed Tuesday at a record 12,127.88.
"The economy's doing quite well," said Martin Carnoy, a Stanford
University labor economist. "The question is who's getting the gains.
Corporations are definitely seeing higher profits, but middle-class
workers aren't much better off than before."
According to the Center on Budget and Policy Priorities, a Washington
think tank, wages and salaries have grown by an average annual rate of 2
percent, adjusted for inflation, since 2001. Over that same period,
average corporate profits have soared each year by 13.7 percent.
"The overall pie is expanding as fast as ever, but most of that is being
accrued in the form of increased profits," said UC Berkeley's Dube. "Over
the next 15 years, if things don't change, we're going to have a vastly
more unequal society."
Aside from distorting the current state of workers' wages, Bush also
spent
time this week misstating his administration's track record for job
creation.
"We've added a lot of jobs since August of 2003, 6.6 million new jobs,"
he told the small-business owners. "And that's a result of small businesses
growing and expanding.
"I was just talking to Tim," the president continued. "He's got 30
employees. That's up from zero five years ago. It's really enlightening
and encouraging for me to talk to these hard-working people."
A White House transcript of Bush's comments didn't provide Tim's last name
or identify his business. It quoted the president as saying only that Tim
and others at the meeting are "local entrepreneurs who are living the
American Dream."
Tim's startup success notwithstanding, the Bush administration's record on
job creation, as with real wages, benefits from some creative use of statistics.
The job slump that plagued the administration after Bush took office in
January 2001 hit bottom in August 2003. That's perhaps why the president
chose this as the starting point to highlight his administration's
performance in job creation.
About 6.6 million jobs may have come into being since that time, but that ignores the roughly 2.7 million jobs that previously were lost under
Bush's watch.
In reality, Bush gets credit for creating about 4 million jobs since first
implementing his tax-cut-centric economic policies nearly six years ago.
By comparison, former President Bill Clinton's administration presided over creation of almost 23 million jobs during two terms in office, and former President Ronald Reagan saw about 16 million jobs created during
his two terms, according to Labor Department figures.
As Bush said Monday, "One of the great things about America is that
somebody can start with nothing and end up with something when it comes to
business."
Or spin.
David Lazarus' column appears Wednesdays, Fridays and Sundays. Send tips or feedback to dlazarus@sfchronicle.com.
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