More Voodoo Economics

Economist Dean Baker admits today that he “messed up” in an earlier column, in which he forgot that if the highest paid of 100 workers leaves, then what remains is not 99% of the wage pool. He really should have based his premise on the highest paid person of a 100-member work force making more than 1% of the total, rather than having to have a reader point it out for him, but… What can one say; he’s an economist.

He also says in that erroneous article that the retirement of the oldest worker "should be associated not only with slower wage growth, but also slower productivity growth,” notwithstanding that the topic of the article is wage growth.

He doesn’t explain why he thinks that a 65-year-old worker might be increasing the plant’s productivity more than a 24-year-old might be. Note that he is not talking about productivity level itself in that sentence, he is talking about the rate at which productivity is increasing. Strange. An older worker was contributing to improvements in productivity and younger workers are not.

Anyway, today he does get back on the topic of wage growth and wants to make sure we understand that the retirement of older workers who make higher wages and their replacement by younger workers who make lower wages, and the concurrent slowing in the growth in wages, is “an important issue that we should be able to think about clearly.”

“The question,” he says today, “is whether the slow pace of wage growth in the last year or two can be explained to any substantial degree by changes in the mix of workers, specifically lower paid younger workers taking the place of relatively higher paid workers who are retiring.”

He then discusses at great length the relative proportions of the workforce in age groups 16-24, 25-34 and 16-34, with graphs in three colors. First, he is discussing the relative proportions within a total of 35% of the workforce, and second, he apparently thinks that everyone retires at age 36.

Tell that to my wife, who is 70 and still working. And he proves that the issue of slow wage growth is not "an issue that we are able to think about clearly."