Blind Men & Elephants

When you read things like this, it’s easy to be glum about the economy. But, as with a lot of things, you can know the facts but not know what the facts mean. At least two things need to be remembered.

First, forecasting the US economy is like forecasting the national weather. We don’t discuss the national weather much because the concept isn’t very helpful. For practical purposes, there is no national weather. To a lesser degree, there is no national economy.  Yes, technically, such a thing can be described – but it’s utility is greatly overrated.

Second, discussions of wage stagnation tend to overlook or discount non-wage compensation. For example, employer provided health care is becoming more expensive – and if an employer absorbs some of the cost increase, that is an indirect financial benefit to employees. Employer actions which benefit employeees in non-financial ways (flex time, for example) are also changing. So, while wage data is correct, it gives an incomplete picture of total compensation.

I’m not disputing the data or claiming that everything is rosy. But when your best data is incomplete, it’s wise not to put too much faith in what it seems to be telling you.

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One response to this post.

  1. Reports don’t make you glum about the economy — inflation, depreciating assets, and poor wage growth does.

    Non wage compensation? Co-payments have been going up, as coverage going down. Its taking more and more of the employees paycheck to stay even That’s called falling behind.

    If you are an investor, you will quickly learn that believing the blather in WSJ OpEds are an expensive hobby.

    Thinking Things Through is a great idea. Look more closely at the data

    Reply

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