ThosLives's Journal: Employment Statistics and other musings

I've just read this small article about the employment situation (December 2004 payrolls supposedly increased 157,000, but some 360000 or so folks filed for first-time unemployment. Funny money all the way). There was a linked article about how the "average wage" for small business is declining. The number they cited was employment was up 4.4% (in terms of number of people working) but average paycheck was down 4.8% and they article gives you the idea "ah! people make less than they used to!"

I'm not sure I agree with that statement simply because if you have 10 people working and all making $100, then you hire 5 more at $50, you have employment up 50%, but average wage down 17% (down to $83.33). However, total payroll increased 25% (from $1000 to $1250). I would agree that the average standard of living for all people working is less than it used to be, but the average standard of living for all people, in this example, goes up. Here's why: if you include those 5 extra workers in the picture before they have a job, the average per-capita income for those 15 people is only $66.67. That's 20% lower than the $83.33 if they were hired at a lower wage.

The only way that hiring folks at a lower wage is "bad" is when one considers if they were hired at that lower wage after a period of unemployment from a job that paid much more. If the person getting hired is a "new hire" altogether, than it's a benefit. That's a key piece of missing information from the employment statistics that I have seen. It's also hard to say even on what time scale wage changes matter. For instance, going from any job to no job is horrendous, because it's a 100% decrease in wage. However, once you're at the zero-point, do you compare your new job to the zero point or the point you were at before zero?

I know it's tempting to say "I'm not as well off as I was! argh!" but why can't we turn it around and think "but I'm not as bad off as I could be..."

It's definitely interesting, and to be sure I'm quite thankful for what I have right now.

RE:Employment Statistics and other musings

[sanityspeech]

I know it's tempting to say "I'm not as well off as I was! argh!" but why can't we turn it around and think "but I'm not as bad off as I could be..."

Perhaps that was meant to be a rhetorical question, but since I have the opportunity to respond, I decided that I would.

Given that the United States has a capitalist economy, most of its inhabitants seek ever-increasing and never-undulating success. This is not to say you couldn't find it elsewhere. I mean, I grew up in a nation with a mixed* economy, a

IANAEconomist, but...

[Bill Dog]

On your 15-person example, it might also be interesting to factor in expected human behavior. When the 5 get their jobs, they're going to want to do like the 10 did, get married, buy a house, have 2.5 children and the dog and SUV and white picket fence, etc. But if the per-capita income for an area goes up, I'm guessing that would have an upward pressure on inflation, such as the cost of housing. The 5 when unemployed were living in their parents' basement. Now that they've finally begun their careers, they