Sunday, April 09, 2006


LOUIS UCHITELLE had a good article in the NYTimes (Seizing Intangibles for the G.D.P. ), which highlighted the hidden losses in Labor compensation because of Accounting method in the GDP. The Paper had two other articles on Compensation in today's Issue, (How the Pay Figures Were Calculated and Pay for Oil Chiefs Spiked Like Prices by J. ALEX TARQUINIO) which dealt with compensation of Executives. All defined one element of the Pay Crisis in the U.S.

People may ask why I say a Pay Crisis?

No one, except this Author, accounts Consumer Credit growth as a Pay negative. The growth of this Debt, coming from the longterm aggregation of Consumption Goods, which should have come from current Account Operations balances, signifies an effective Pay Cut. It is a major conponent in the modern Household accounts, and reflects the inability of the standard Paycheck to keep pace with needed Consumption purchases. All Economic models fail of understanding without subtracting Consumer Credit growth from the Totals of Labor Income, before estimation of the rate of increase or decrease in Pay. This Author has not done the Numbers (he is known as a mathematical Simpleton), but I estimate that the quoted estimate of Labor Pay share of 60% of GDP may have dropped 4-6 additional percentage points when Consumer Debt growth is intergrated. lgl

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