Timmy elsewhere

At the ASI.

If you don\’t measure worker compensation then it\’s easy enough to show strange things about worker compensation.

1 thought on “Timmy elsewhere”

  1. Let me just check that I’ve grasped these basic numbers. When we measure compensation in the USA, we should include increasingly expensive (employer-provided) healthcare. When we measure compensation in the UK, it should be net of the tax that pays for, among other things, increasingly expensive healthcare. Is that right?

    Tim adds: No, not right.

    When we measure compensation we should measure compensation. For example, if we wish to measure the labour share of national income we should do so by measuring gross compensation, not gross wages and salary.

    We might, at other times, desire to measure disposable income say. Either before or after housing costs. This is another number that people like to look at. To do so we should clearly measure after the influence of the tax and benefits system.

    Take, for example, a possible desire to measure the distribution of market incomes as opposed to those post tax post benefit ones. The difference would be a measure of how redistributive the tax and benefit system is. We must, while doing so, include total compensation on the market side, plus all taxes and all benefits on the other.

    And I am in fact consistent in my shouting about these things. In the US numbers I here am saying that we must include compensation, including that employer provided health care, not just wages and salaries. And for years now I have been saying that when we look at the incomes of the poor in the US we must also include services in kind which they receive (housing vouchers, Medicaid, food stamps) and also benefits received through the tax system (EITC mainly) in order to arrive at real incomes. And I whine constantly that the US is near unique in not including most of these things that they do to alleviate poverty in their calculations of poverty. Think of what the UK poverty figures would look like if we excluded tax credits, housing benefit etc? Included only the dole?

    In short, if we want to measure different things then we need to measure them in different ways.

    Just as an example of the difference. According to recent TUC work derived from ONS, the 90:10 ratio (ie, average income in the top 10% as against average income in the bottom 10%) is, at market incomes, near 30:1. Once we include taxes and benefits, including those state services, it comes down to 6.5 or so:1.

    Quite a difference, eh?

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