Wednesday, September 03, 2008

Economic Report Card

Robert Samuelson takes a look at the Census Bureau's just released "Economic Report Card", sure to cause anguish in the media and punidtry circles, but the appearances of some bad numbers mask some positive signs. Samuelson takes issue with the methodology, which I believe justified, in using the year 1999 as the baseline. As he points out, this was the peak year of the Y2K/millenium boom, so using the peak as a baseline appears to me to be seriously suspect.

Secondly, the study is based on aggregate household data, not that of individuals, so changes in a person's personal life, such as getting married or divorced, children moving out, retirement, etc. effect the results. Samuelson also effectively makes the case that immigration skews the results as more unskilled immigrants are added to the household pool regardless of their legal status. If you look more closely, you find that white and black household gains are remarkably similar.

"Low-skilled immigrants, concentrated among Hispanics, outnumber the high-skilled. They drag down median incomes and raise poverty and the uninsured. One way to filter out the effect on income is to examine groups with few immigrants or their American-born children. Consider non-Hispanic white families. From 1997 to 2007, their median incomes rose about $6,000 to $69,937, a gain of about 9 percent. For black families, the increase was also about 9 percent, though only to $40,222. Again, not stagnation.

Immigration's effects on poverty and health insurance coverage are greater. Since 1990, Hispanics numerically account for all the increase in the number of officially poor. Similarly, immigrants represented 55 percent of the increase of the uninsured from 1994 to 2006, says the Employee Benefit Research Institute. Many unskilled workers can't get well-paid jobs with insurance."

Thirdly is the survey only measures income and ignores transfer payments and fringe benefits provided by employers. Nearly half of compensation gains from employers have been channeled into benefits due to increasing healthcare costs and pension contributions, as well as increased tax payments due to rising (albeit slowly) incomes.

Samuelson notes that things look worse over the long term given the trends - rising helthcare costs and increased immigration risk further damage to the economy and rising burdens to government. If not addressed, these factors threaten the long term prospects of the Americna economy.

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