Compensation

| 5 Comments

Ah, the subtle art of producing clear figures. Here's a picture that just obviates the need for lengthy description (via the consumerist):

The only note I would add, for those not used to looking at economic plots, is that this is in inflation-adjusted dollars. So if your pay were just keeping up with inflation, it would be a straight line here.

5 Comments

Not that I'd stand up for CEO's right to get paid ridiculous salaries, but that chart borders on untruthful in the way it presents the information.

What in particular do you find misleading about this graph?

The average worker pay, adjusted for inflation, should pretty much always be a straight line.
The value of the dollar changes with how much the average person makes.

Where is the bottom portion of the chart? Shouldn't some folk be shown making less money when adjusted for inflation?

But you say yourself, if average salaries were falling dramatically relative to inflation, the value of the dollar would rise somewhat to compensate. Thus there can't really be a lower segment of this chart, unless you subdivide "workers" into finer categories.

Or, you could argue that this won't happen, because the graph clearly shows that worker salaries are now uncorrelated to both stock performance and corporate profits, and thus decoupled from the larger economy.

Anyway, standard economic theory states that when worker productivity rises, as it has dramatically over the past two decades, salaries should rise without driving inflation (since the increased supply of money is offset by increased supply of goods and services to purchase). So you actually would expect worker salaries to have grown faster than inflation, which they clearly have not.

CEOs work for a living and have been sub-divided from the "average" worker. I'm sure you can find numerous categories of workers that would fall into the missing bottom portion of the chart. Perhaps, auto-workers, dot-commers, certain types of salesmen, etc.

All you can conclude is that the theory you mentioned is wrong.

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This page contains a single entry by Milligan published on April 10, 2007 7:58 PM.

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