The News Industry & The Economy

Russell Roberts tears apart a front page NY Times story on the economy. He starts with this assertion found in the story:

"The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity — the amount that an average worker produces in an hour and the basic wellspring of a nation’s living standards — has risen steadily over the same period."

Read the whole critique. You will discover, contrary to the Times story, that real hourly compensation has increased since the recession of 2001. The Times story says labor's share of the economic pie has been decreasing, but this share has actually been about 70% of national income since World War II. Since real hourly compensation has been increasing since 2001, the Times assertion that workers can't keep up with inflation makes no sense.

Does the news story reflect economic illiteracy? Perhaps. Or, as Roberts notes only one economist, Jared Bernstein, is quoted in the article, and Bernstein is employed by the Economic Policy Institute. Here is what Roberts points out about the Economic Policy Institute:

There's a chart accompanying the article. It tells the reader that the median hourly pay data are from the Economic Policy Institute. The Economic Policy Institute has a policy agenda. Their main issue is the stagnant or falling standard of living of American workers. They support a higher minimum wage and the strengthening of labor unions.

What is the moral of this story? Be very, very careful when you read the news.