We advocate that every one of us should be our own editor, doing our homework and asking skeptical questions whenever there is a political claim in the realm of social justice that one group is being disadvantaged compared to another. Even when claims appear to be data-based – perhaps especially when they use government data to back them up – it pays to always conduct our own inquiry and not rely on others, and to never take claims at face value. Here’s Andy Puzder with his own data interpretation of real wages trends, diametrically opposed to Senator Bernie Sanders’ claims. You decide which – if either of them – you prefer to believe.
You can find a similar analysis at reason.com by economist Gene Epstein: Are American Workers Getting Shafted?
Progressives are attempting to discredit the Trump economy by claiming workers aren’t seeing the benefits. Sen. Bernie Sanders recently claimed that the increase in wages last year “nets out to zero” because of inflation and that “the average American worker today, despite the strong economy, is not getting ahead.”
Mr. Sanders has half a point. According to the Bureau of Labor Statistics’ latest report on real earnings, as of July average hourly earnings had increased 2.7% over the preceding year, while inflation was 2.9%, due in large part to a surge in oil prices—a slight decrease in real terms.
But workers have benefited in other ways. The stronger economy has created opportunities to increase earnings by working more hours. Over the past year, the number of people working part time because they were unable to find full-time employment decreased by nearly 700,000 while the number of people working full time increased by more than three million. For those already employed full-time, there are more opportunities to work overtime at 50% higher hourly wages. The BLS credits increased hours with adding 0.3% to weekly earnings, for a combined earnings increase of 3%, slightly more than the 2.9% inflation rate.
None of this takes into account the effect of lower taxes. According to Sentier Research, an economic-research firm founded by former Census Bureau officials, median household income in July 2017 was $60,879. In 2017 a married couple with no children filing jointly with income of $60,879 would have taken a standard deduction of $12,700 plus personal exemptions of $8,100, resulting in taxable income of $40,079. Their tax rate would have been 15%, for a federal income-tax liability of $5,079. After paying payroll taxes of $4,657, this couple would have taken home $51,143.
This year, assuming the BLS’s 3% increase in weekly earnings, the couple’s income would rise to $62,705. Following the tax cuts, their standard deduction would increase to $24,000, for taxable income of $37,705. Their federal income-tax rate would be 12%, for an income-tax liability of $4,264. Their payroll taxes would rise with their income to $4,797.
All told, the couple would take home $53,644. That’s an increase in take-home pay of $2,501, or 4.9%—nearly 70% higher than the 2.9% rate of inflation, assuming the inflation rate holds at around 2.9% for the rest of the year. With the expanded child tax credit, if this couple had one child, their take-home pay would increase 5.5%, or 90% higher than the inflation rate. Since the new withholding tables went into effect on Feb. 15, employees have seen the difference in bigger paychecks. Little wonder the Conference Board recently reported that consumer confidence surged in August to its highest level since October 2000, while the Commerce Department reported that consumer spending increased 0.4% in July, the sixth straight month of healthy gains.
The progressives are wrong. Capitalism is working, for everybody.
Mr. Puzder is a former CEO of CKE Restaurants and author of “The Capitalist Comeback: The Trump Boom and the Left’s Plot to Stop It.”