Thursday, February 23, 2012

Understatement of Real Wages

Economists generally understand that what we use as real wage data understates the improvements in real wages that have occurred through time. Out in the Wal-Mart parking lot, people like to deny this.

David Henderson at EconLog goes over three reasons:

  • The CPI overstates inflation, because it can’t completely account for people switching towards cheaper products.
  • We get a lot more, and better, health care as part of our compensation.
  • Working conditions have improved just about everywhere.
  • The risk of death on the job, which has a monetary value, is down across the board.

P.S. The next time someone bemoans the “fact” that women get paid less, remind them that death rates for “male” jobs are several times higher than for “female” jobs. That requires extra compensation for the living who undertake those risks.

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