The good news about the economy you are not hearing

The media keep telling us that the economy is a losing issue for Democrats. I know that this is the Republicans’ talking point, but that is not what the data show.

For tens of millions of people, there is a huge amount of good news about the economy over the last year and a half. That doesn’t mean that tens of millions of people are not struggling, they are. And, that is always true in the US economy.

The fact that a country as rich as ours does not have decent welfare state provisions that can ensure people adequate housing, food, and health care is an outrage. But that is a longer-term story, not something that just happened in the last year and a half. When the media suddenly choose to emphasize the struggling population, in ways that they have not done in the past, that is a political decision on their part, not one responding to a new economic reality.

Anyhow, with that issue out of the way, I’m going to emphasize some of the positive aspects of the economy which are getting little attention from media.

Inflation has taken a toll on workers in the last year and a half, but the impact has been hugely exaggerated. If we look at the real average hourly wage for all workers since the start of the pandemic in February of 2020, it was down by 0.7 percent, as of August. (We don’t have inflation data yet for September.)

This is bad, but hardly unprecedented. For example, real average hourly wages dropped a full 1.0 percent in the year from November 2006 to November 2007, which was before the start of the Great Recession. The picture looks somewhat better if we look at the data for production and nonsupervisory workers, which excludes most higher end workers. This series also goes back much further, historically. As of September, the real average hourly wage was down by less than 0.1 percent from its February 2020 level. That’s the wrong direction, but not exactly a crisis.

By comparison, this measure fell by 3.8 percent from January of 1980 to January of 1989, a period in which the media were touting “morning in America.”

The story looks better if we look to the lowest paid workers. Real average hour earnings for production and nonsupervisory in the leisure and hospitality industry (hotels and restaurants), rose by 3.9 per cent from February 2020 to August. (Arin Dube and David Autor have been doing careful analysis with the Current Population Survey documenting the sharp increase in pay for low end workers during the pandemic recovery.)

To be clear, we should want to see a better picture on wage growth, with workers across the board seeing pay hikes.  But the experience in the last year and a half hardly stands out as being especially bad by any historical measure. Furthermore, we have been through a worldwide pandemic and are now seeing the largest conflict in Europe since World War II. It would be a bit nuts to think we could pass through these events without any disruption to the economy.

There has been a huge surge in the number of people working from home since the start of the pandemic. During the shutdown period in the spring of 2020, this was largely because there was no alternative. However, for the most part, people working from home at present are doing it by choice. In 2021, there were roughly 19 million more people (12.7 per cent of the workforce) who reported that they primarily worked from home than in 2019.

This is a huge benefit for these workers. The average amount of time spent commuting in 2019 was 27.6 minutes for a one-way trip, or 55.2 minutes for the round-trip. If we assume an eight-hour work day, time spent commuting added an average of 11.5 per cent to the length of the workday. We can think of this as equivalent to an 11.5 per cent reduction in the hourly pay rate, compared to a situation where no time is spent commuting.

Commuting to work doesn’t just take time, it is expensive. The average commuting distance to work is more than 15 miles. That means 30 miles for the round-trip. At federal government’s mileage reimbursement rate of 62.5 cents per mile, this comes $18.75 a day or almost $4,900 a year. That is 7.0 per cent of the annual pay of a worker earning $70,000 a year.

It’s not just travel expenses that people save by being able to work at home. They can save on paying for business clothes, dry cleaning, and buying a purchased lunch at work. For many families, working from home may also save on childcare, insofar as they are able to care for young children without seriously disrupting their work.

In short, the option to work from home can mean large savings in time and money. Also avoiding traffic jams may mean a major quality of life improvement. It is true that the option to work from home is available primarily to the top half of earners, and especially the top fifth, but this is still a very large number that extends far beyond just the rich.

Also, these higher paid workers have on average not seen their pay keep pace with inflation since the start of the pandemic. Insofar as they are able to save time and money by working from home, many are still likely coming out well ahead of where they were before the pandemic, if they can work from home at least part of the time.

There has been a huge surge in telemedicine since the start of the pandemic which will likely continue going forward. According to a recent survey by the Department of Health and Human Services, almost one-in-four adults reported having a remote appointment with a health care professional in the four weeks prior to the survey.

Counterpunch