Beware the AmericaLast media.

Statistical Politics Update by Alan Reynolds of Human Events

My recent column predicted that "the closer we get to elections, the worse economic reporting becomes." To demonstrate how well that theory is working, we need only look at two samples of "news" from one newspaper on a single day, Oct. 15.

On that day, New York Times columnist Eduardo Porter asked "After Years of Growth, What About Workers' Share?" A table showed changes in wages and benefits as a share of GDP from 2000 to 2005 in nine countries. The author concludes, predictably, that "workers in the United States appeared to get a break for a few years in the second half of the 1990s," but "the share of the economy devoted to wages and benefits has eroded in the United States over the last five years."

In my original column, critiquing another New York Times writer for using this same statistical trick, I explained that "serious economists never compare labor's income shares to gross domestic product. GDP includes big items that are not any American's income -- notably, depreciation for wear and tear on everything from computers to highways (which rose from 11.9 percent of GDP in 1999 to 12.9 percent in 2005). The sensible practice is to examine labor compensation as a share of national income."

When wages and benefits are properly compared to national income, Porter's conclusions evaporate. Wages and benefits amounted to a slightly subpar 65 percent of national income in 2005, yet that was identical to the figure for 1999, when workers supposedly got a big break. Wages and benefits were an unusually low 64.2 percent of national income in 1995, which is the only reason Porter is able to show an increase between 1995 and 2000. In fact, real hourly compensation fell in 1993, 1994 and 1995, but rose by 1.1 percent a year from 2001 to 2005.