The Case of the Missing Middle Class Wages
Nobody reads Politico to discover something new. Campaign staff and their consultants read Politico in order to gauge how their latest spin played out in the DC Beltway. Celebrity politicians check Politico to make sure they’re mentioned. The media reads Politico to see what the dominant narrative for the day will be.
Every so often, Politico will break some news, or publish an editorial that reframes a debate. But the day-to-day grind of Politico—its bread and butter—is regurgitating known knowns for the DC crowd. It’s the outlet for pushers of conventional wisdom to promote and bolster conventional wisdom for other pushers of conventional wisdom.
All this brings us to a story by Danny Vinik titled “The economy keeps improving. Why aren’t wages?” Here’s the nut of the problem, as Vinik sees it:
Wages have grown just 2.5 percent over the past year, only slightly higher than inflation. Since 2010, nominal wages have grown about 2.5 percent each year, while inflation has averaged 2 percent. Perhaps most concerning, as the labor market has tightened, wage growth hasn’t accelerated.
Vinik talks to some economists who have “a few theories” about why wage growth hasn’t happened, and he boils their theories down to three main hypotheses:
“The economy still isn’t at full employment”
“Workers aren’t becoming more productive”
“Industries are too concentrated”
Let’s just say up front here: the conventional wisdom isn’t really interested in solving this problem. The conventional wisdom is interested in paying lip service to the problem while ensuring the status quo. And so of these three theories, two are completely wrong and one barely lands a glancing blow on the real problem. So let’s talk about the wrong theories first.
http://civicskunkworks.com/the-case-of-the-missing-middle-class-wages/