The Economist: Fiscal cliff gives way to slippery slope

Well, there was no dramatic leap off the fiscal cliff on Jan. 1, just the start of a gentle slide down a long, slippery slope … which is likely to have us end up the same place.

My husband is raging about his taxes going up $1,000 a year so the government can send barrels of greenbacks to NASCAR. My grandson in Afghanistan writes, “If the poor are going to be taken care of then jobs need to be created, the educational system revamped and we have to stop spending billions of dollars on programs that are designed in a way that encourages individuals to do nothing.”

I’m sick of the whole topic. So, let’s talk about something else for the next two months, until the hype about the next budget crisis – $110 billion in automatic spending cuts and bumping up against the debt ceiling – dominates thinking in Washington (perhaps I’m being too kind in my analysis) and the headlines once more.

I always end the year with a bunch of column ideas that never got used. One of my perennial favorites is a quirky measurement of inflation from PNC, a large bank headquartered in Pittsburgh, based on the gifts in the “Twelve Days of Christmas.”

Inflation, you remember, is a rise in the price of a basket of goods and services consumed by the average household. Every month the Bureau of Labor Statistics (BLS) sends data collectors to thousands of retail stores, service establishments, rental units and doctors’ offices all over the United States to obtain information on prices. This results in several monthly “inflation rates,” the most widely used being the Consumer Price Index for All Urban Consumers or CPI-U.

PNC’s index takes a narrower, more lighthearted focus – the 364 items you’d get over the 12 days of the song. Last year they would have cost you $107,300, up 6.1 percent from 2011. The geese and swans were especially pricey, up 29.6 percent and 11.0 percent respectively. Grain prices soared last year and those pesky birds eat a lot. More broadly, worldwide food prices increased almost 10 percent. Wages, on the other hand, showed little change – up 1.3 percent to just under $20 an hour. And those milkmaids – who work at minimum wage of $7.25 an hour – cost the same as they have since 2009.

Then there was an interesting piece on weekly earnings of wage and salary workers, also from the BLS. The median weekly wage for a man working full time in the third quarter of 2012 was $828 and for a woman was $685. (The median wage is the point where half of workers earn more and half earn less.) Why the 11.3 percent difference? It’s a question for a labor economist, a route I didn’t pursue because I was advised that’s what women economists always specialized in and I certainly didn’t want to do what everyone else did.

The temptation is to blame the disparity on sexual discrimination, but I’m guessing the reason goes much deeper. Partly it is a choice of occupations. Partly it is taking time off to have children. Partly it may be because many women choose to have a more balanced life rather than working 80 hour weeks. It is interesting to note that, when adjusted for inflation, men’s wages fell 3.7 percent between 2003 and 2012, while women’s wages rose slightly. Maybe our decisions not to work on assembly lines or in heavy construction weren’t so bad after all.

The report also pointed out the importance of an education. The median weekly earnings for a person with less than a high school education it was $464; for a person with a college education it was $1,071; for a person with an advanced degree it was $1,381. Graduating from high school increased one’s earning power by 40 percent, even without going to college. A college degree more than doubled it. For a woman the gains were even more dramatic – 50 percent for a high school diploma versus 44 percent for a man.

So, ignore the goings on in D.C. for a while, don’t buy any geese, get a good education and enjoy 2013! I think we can count on the mild recovery of the economy continuing throughout the year.

Categories: Economy/Politics