Rep. Chris Van Hollen, D-Md., used a misleading statistic Thursday when trying to make a point about income inequality.
Since 1973, productivity has gone up by 100 percent, while average hourly wages have actually dropped 7 percent, adjusted for inflation. While the statistic is technically true, it is an apples-to-oranges comparison that does not tell the whole story.
“We’ve seen this yawning gap over the last really 30 years where on the one hand you have rising worker productivity, it’s been going up dramatically, and for a long period in the ’50s and ’70s, that rising worker productivity coincided with rising wages and benefits for workers,” Van Hollen, the ranking member on the House Budget Committee, said at The Atlantic’s Summit on the Economy. “Then in the late 1970s you see this great divergence, you see worker productivity continue to rise, but that’s not translating into higher wages and benefits for workers. And it also led to this growing income inequality.”
Van Hollen used the argument as a justification for his tax reform proposal, which would prevent corporations from claiming deductions for executive bonuses under certain conditions, levy a financial transaction tax and create new tax credits for families, among other changes.
What’s left out of the productivity wage gap calculation is the effect of salaried workers and benefits. Health insurance, pensions, vacation days and sick leave are the type of benefits left out of the calculation. Actual compensation for work is higher than the average hourly wage shows. Furthermore, the calculation uses a less-than-accurate inflation measurement. A better calculation of compensation that accounts for all these factors shows a 77 percent rise in compensation since 1973, according to James Sherk of the conservative Heritage Foundation. Still not quite as high as the 100 percent rise in productivity, but it is a completely different picture than the one painted by a 7 percent decline.
Furthermore, the increase in productivity is overstated and gives workers credit for productivity improvements that simply come from using cheaper foreign imports as production inputs. Sherk says the Bureau of Labor Statistics, which calculates productivity rates, fails to account for this factor.
When anyone, let alone liberals, argues about inequality, they should use arguments that don’t mislead their audience. Making someone believe a problem is far worse than it truly is only makes the public more uninformed. While some economic policies have hurt workers and have failed to boost wages, turning to bigger government and anti-financial-industry, anti-wealthy policies won’t help.
