Wage gap isn’t real

Marketplace Staff Sep 13, 2006

KAI RYSSDAL: If you’re trying to find out how the middle class is doing…look no farther than the opinion pages. Editorials and commentators have been duking it out. Over jobs and wages. The rising costs of energy and healthcare. And whether it all adds up to a squeeze on most of America. Commentator Steve Moore says the middle class is simply earning the wages of prosperity.

STEVE MOORE: One pundit recently wrote: It used to be that a rising tide lifts all boats, now it only lifts the yachts.

It’s amazing to me that so many smart people believe that paychecks are shrinking and that workers are hardly better off today than in the past. Start with the reality that many of the products that the middle class takes for granted today didn’t even exist 25 years ago.

That includes cellphones, laptop computers, DVD players and iPods, with their constantly falling prices. The real wage, as measured by the Consumer Price Index, understates the huge increase in living standards as measured by these better, cheaper products.

Consider health care, one area that people generally think is worse today. Tell that to millions of cancer and heart disease patients who are alive today thanks to modern drugs and treatments.

Next consider the whole payment package that workers receive. Since 2000, wages have risen at 10 percent, or less than inflation. But all benefits — including health, pensions, vacation, family leave and so on — have risen twice as fast, or 18%.

Add up all these benefits and the average worker in America is now paid $25 an hour in compensation — or one-third more than 30 years ago.

And finally, consider that workers’ incomes rise the longer they are working. Economic studies have found that people who were poor in 1978 were more likely to be rich one decade later than to still be poor. Incredibly, 86 percent of poor families in 1978 were not poor 10 years later.

I recently asked an Eastern European waiter at a restaurant what is different about America from his home country. He said without hesitation: “This is the one country where if you work hard, you can get ahead.”

If a new immigrant can understand that, why do so few homegrown Americans?

RYSSDAL: Steve Moore is a member of the editorial board at the Wall Street Journal.

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