Bill McBride looks forward to reading David Leonhardt’s NYT series on middle class decline, the first installment of which I quote:
Since median inflation-adjusted family income peaked in 2000 at $64,232, it has fallen roughly 6 percent. You won’t find another 12-year period with an income decline since the aftermath of the Depression.
Mr. Leonhardt apparently distinguishes between income and compensation which is appropriate. Why is he so concerned with income rather than compensation? I don’t see the evidence that total real compensation is declining, quite the contrary. See here for median real wages in non-financial firms and here for total compensation and compensation less healthcare premiums.
They say that the first step in recovery is admitting that you have a problem. If the problem is that wage income is flat, maybe we should start taxing total compensation rather than wage income. Preferentially taking an increasing proportion of total compensation in the form of healthcare insurance is rational when wage income is taxed and benefits aren’t. It’s a policy that also bestows an advantage on large, established companies (that can self-insure) relative to small companies and, particularly, new companies. These are the very companies that create new jobs so perhaps we shouldn’t be too surprised that job growth is so sluggish.
It is also a policy that works well for smaller service providing corporations. Pay a large 401k percentage and provide a generous health package, delay vesting in the 401k, and you get people to come and stay. Total compensation stays about the same for the corporation, but the employee comes out a bit ahead rather than taking more salary.
Steve
Steve
I think Dave’s point is that a large corporation can provide a similar suite of compensation but tilted to more wages vs smallco because they have eliminated some admin costs by self insuring.
That said, we, and it’s all manufacturing, take a similar approach in an effort to retain employees. This is probably especially true for you where, as they say, the assets walk out the door every night.