Why Americans aren’t happier about the economy

I’ve got to admit that I’m honestly puzzled that more economists, in particular, don’t seem to understand why Americans aren’t happier about the economy. There’s tons of good news. GDP is growing, unemployment is low, inflation is low. Are we a bunch of chronic ingrates or petulant children?

I don’t think so. I can’t put my hands on a citation just now but a substantial portion of the increase in total compensation over the last several years has been in the form of increased benefits rather than increased wages. “Benefits” is largely code language for the increasing cost of health insurance.

Perhaps economists don’t understand the nature of insurance. Health insurance is a bet with an insurance company that you or your family are going to get sick. You should be happy that you think you or your family is going to get sick?

Median real wages have been, basically, static for a lot of years. Compensation i.e. wages plus the cost of health insurance has risen.

So, let’s consider the average Joe right now. Higher gas prices (with longer commutes) and higher health insurance and healthcare costs mean that you’ve got less money in your pocket at the end of the week than you did a few years ago. Your opinion about the economy isn’t particularly optimistic. I think that’s completely consistent and reasonable.

UPDATE: Tigerhawk makes essentially the same point that I do. Glenn Reynolds responds:

Hmm. Maybe. But two observations: One, the shift from satisfaction to dissatisfaction is awfully abrupt, and comes when Bush was elected. Wages can’t stagnate that fast, but media coverage can shift tone that fast. Two, I keep hearing about real-wage stagnation, but everyone I know who has a business complains that they can’t get enough decent help even when they raise pay, because people are always leaving for better jobs. That may be a local phenomenon or something, but I’d like to see something that accounts for worker mobility, too.

Selection bias.  Median real income rose during the Clinton Administration for the first time in many years.  That was the anomaly not the resurgence of dissatisfaction after the collapse of the Internet bubble.

I can’t comment intelligently about hiring since I changed my business strategy some years ago and stopped looking for new employees to expand my business with.  But back when I was hiring the problem always was that people with experience weren’t available and people who didn’t have experience wanted to start at the salary I was making while I trained them and, once I trained them, go off on their own and take my clients with them.