Jeb Bush Needs Some New Economic Advice » 420MedBook Social Network
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Posted: 2015-07-04 04:00:00

Jeb Bush is said to have brought on Glenn Hubbard as an economic adviser — the dean of the Columbia University Graduate School of Business and a prominent conservative who served as President George W. Bush’s chief economist and was an architect of the big tax cuts in 2001, which favored the wealthy. He can be expected to weigh in on wage stagnation and income inequality, campaign issues that all the candidates, including Mr. Bush, have said they will address.

If the former Florida governor heeds Mr. Hubbard’s advice, he’s not likely to get the issue right. Answering a question from two Times reporters about the long stagnation in middle-class incomes, Mr. Hubbard argued that “compensation didn’t stagnate.” He said that wages have been stuck because of global competition but that employer-provided benefits for health and retirement have increased.

Politically, the comment is notable because it seemed to minimize a problem that Mr. Bush has already said is significant. It is also off point. For the broad middle class, more than three-fourths of family income is from wages and salaries, which have stagnated since the late 1970s, with the exception of one growth period in the latter half of the 1990s. Since then, wages have been flat or falling for most of the work force, including college graduates, a consequence of the underlying weakness in the bubble economy of the George W. Bush years and ensuing income losses from the financial crisis and its aftermath.

Factoring in benefits doesn’t alter the basic picture. In recent decades, wages have sometimes grown faster than benefits, sometimes more slowly. So the argument that compensation has not stagnated may appear more plausible in some periods than in others. But that does not change the overall trend of prolonged stagnation and widening inequality.

Similarly, benefits are a more robust part of the compensation picture when private-sector employees are lumped together with government employees. In general, health and retirement benefits in the private sector have become less generous in recent decades, while public-sector employees have had relatively more success in holding on to valuable benefits. For private-sector employees, the share of compensation represented by benefits has largely been flat since the government began to separately track private-sector data in 1987.

Finally, the data surely overstate the value of benefits for typical workers. That’s because they are averages, and in a time of rising wage inequality, the average is pulled up by the gains of highly paid employees and executives.

Mr. Hubbard’s comment echoes a similar argument made in 2005, when the labor secretary at the time, Elaine Chao, dismissed concerns about poor wage growth during the Bush years by pointing out that overall compensation, including for health care, was on the rise. That seemed to explain the problem away, but as a practical matter, it meant that money that otherwise could have gone toward raises went to cover what were then the exploding costs of health coverage.

Like Ms. Chao’s focus on compensation, Mr. Hubbard’s similar focus today is off the mark. Mr. Bush, and the public, should not expect fresh perspectives from advisers who were in positions of power when wage stagnation became entrenched.

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