Thursday, June 9, 2016

Walker claim on “average weekly wage” increase isn’t all it appears to be

Differences in median household income and weekly wage increases demonstrate it's likely the top 1 percent are skewing numbers

A common theme of Gov. Scott Walker’s administration is to gloss over bad job reports with finely-spun numbers that are meant to paint a rosier picture.

Sometimes this includes ignoring one set of jobs numbers in favor of a separate report -- Walker has frequently switched back and forth between his preference for monthly reports on jobs versus quarterly reports, depending on which provides him the better numbers.

At times, though, neither report sends him good news. When that happens, Walker & Co. have to get a bit creative with their spinning.

So they look at other figures, like weekly wages. And, it appears at first sight that the spin works -- when you can say that the average wage of a Wisconsin worker has gone up by $51, it has a positive ring.

The Department of Workforce Development made this argument in March 2015, and recently Gov. Walker has been telling news outlets a similar line, bragging about Wisconsin being sixth in the nation in weekly wage growth over the last year.

But looking at the long-term trend provides a different story, and other statistics paint a different picture altogether.

When you look at household median income, for example, you notice that Wisconsin has actually seen a downward trend. From 2009 to 2014, household median income in Wisconsin dropped by more than 4 percent. During that same time frame, however, weekly wages went up by more than 11 percent.

How is that possible? Shouldn't the two coincide? For starters, these figures do come from two separate surveys, so there is likely some differences from that alone. But another possibility is that unequal income distribution is affecting the numbers through inconspicuous ways.

To explain further, imagine there’s a room with 100 individuals sitting together. Assume that 99 of these individuals earn on average $15 an hour. Their weekly wage is around $600. But the last individual earns $100 an hour, or about $4,000 a week.

Now let’s assume that there’s a cut in wages for those bottom 99 workers. They see their wages drop $1 to $14 an hour, or about $560 a week. But the last worker sees a raise instead. His wage actually doubles to $200 an hour.

The result of this scenario? Average weekly wages have gone up by $0.01 per hour, or $0.40 more per week for the entire group. But median income has gone down by a dollar an hour, or $40 less per week.

The same situation is likely playing out in Wisconsin. The top 1 percent are getting most of the new post-recession income while the bottom 99 percent see wages stagnate -- or worse, go lower. The result is likely the same as in the imagined scenario above: average weekly income appears to go up, while the median household income stays the same, or worse goes lower.

Average weekly wages went up from 2014 to 2015. But the reason why may not be what we imagine it to be, namely that it might not be that every worker is getting better wages, just some on the top. Scott Walker should be honest with Wisconsinites, and address why household median income has gone down since he’s become governor rather than tout numbers that could be affected by the rich simply getting richer.

Special thanks to Jake from Jake’s Economic TA Funhouse for clarifying an economics question I had in writing this post

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