Excerpt from Paul Krugman in today’s New York Times:
Behind the disconnect between economic growth and family incomes lies the extremely lopsided nature of the economic recovery that officially began in late 2001. The growth in corporate profits has, as I said, been spectacular. Even after adjusting for inflation, profits have risen more than 50 percent since the last quarter of 2001. But real wage and salary income is up less than 7 percent.
There are some wealthy Americans who derive a large share of their income from dividends and capital gains on stocks, and therefore benefit more or less directly from soaring profits. But these people constitute a small minority. For everyone else the sluggish growth in wages is the real story. And much of the wage and salary growth that did take place happened at the high end, in the form of rising payments to executives and other elite employees. Average hourly earnings of nonsupervisory workers, adjusted for inflation, are lower now than when the recovery began.
So there you have it. Americans don’t feel good about the economy because it hasn’t been good for them. Never mind the G.D.P. numbers: most people are falling behind.
Krugman goes on to say it’s “harder to explain why.”
Wages and median family income often lag behind profits in the early stages of an economic expansion, but not this far behind, and not for so long. Nor, I should say, is there any easy way to place more than a small fraction of the blame on Bush administration policies.