Why Americans Really Are Getting Richer

This is an old article last year. But I hope others may find it as
interesting as I did.

Those of us who read the internet daily are use to seeing large
amounts of BS and other things which are not true. But the below
article boldly tells a lie that even we are not accustomed to. Can
you imagine anybody claiming the government figures for inflation are
too high ? Those folks who claim inflation is 1% when all our bills
are going up by 8 and 10 % ? This article makes that claim.

"....But here's the thing: If one readjusts wage growth for the likely
fact that government inflation numbers have continually overstated
inflation...."

I find it hard to believe. ---gj
------------------------------------------------------

Why Americans Really Are Getting Richer
September 24, 2007 01:08 PM ET | James Pethokoukis | Permanent Link

It's an interesting little factoid. The median American house has
grown by some 40 percent over the past generation. Yet to hear some
economists tell it, that huge home enlargement somehow has happened
just at the same time that the average worker has seen no increase in
his real, inflation-adjusted wages. That means no increase in his
standard of living?at least as measured by his take-home pay. (Of
course, living in a bigger house filled with flat-screen TVs, iPods,
laptops, Wiis, and carpet-cleaning robots could be taken as de facto
signs of a higher standard of living. Plus, those wage numbers ignore
nonwage compensation such as healthcare benefits and 401(k) programs).

But here's the thing: If one readjusts wage growth for the likely fact
that government inflation numbers have continually overstated
inflation, guess what? You find that real wages have grown by around
40 percent over the past generation?matching the increase in home
size. Here is how Northwestern University economist Robert Gordon
calculated the numbers for me during an E-mail exchange earlier this
year:

* The correct statement is that correcting the upward bias of the
official [consumer price index] adds more than 1 percent per year to
official estimates of the growth in median and mean wages.
Cumulatively since 1977, my best estimate of the upward bias in the
CPI cumulates to 38 percent between 1977 and 2006. Thus if someone
came along and said the male median wage adjusted for CPI inflation
has been stagnant since 1977, I would translate this into a true 38
percent increase.

And it sure looks as if that bias continues today, anywhere from 0.9
percent a year, according to two Federal Reserve economists, to 0.67
percent a year, according to economist and inflation-stat expert
Michael Boskin. (Here is a recent, more in-depth posting on this
topic.) Consequently, that means wages most likely have been growing
at a nice clip throughout this decade?even before the recent upsurge
in pay, even as measured by faulty government numbers. Split the
difference between Boskin and the Fed guys, and it means that wages,
rather than being stagnant this decade, have actually risen by around
6 percent when you take inflation into account.

http://www.usnews.com/blogs/capital-commerce/2007/9/24/why-americans-really-are-getting-richer.html

http://tinyurl.com/56qc8h
.

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