Business Insider runs false report, cites misunderstanding of own article
December 8, 2021
Business Insider reports that American wages have been declining for the past five decades. This is not true. In fact, it’s not true in any manner at all.
What’s worse is that the reason they believe it is because they’ve not understood their own article on their own site.
The article is about a new suggestion from the progressive caucus in Congress that there should be a four-day workweek in America. We can all have our own ideas about that, and probably do. In the course of justifying this, Business Insider says this: “In the U.S., wages have been declining for five decades.” That’s not something that could have been written by anyone with any economic or even business knowledge.
Business Insider’s source for this is one of its own articles, which says, “Wages and salaries have steadily made up a smaller and smaller share of GDP since peaking in 1969.” That is at least correct, if horribly misleading.
Adults who can do math know that a smaller share of something growing is not – necessarily – the same as less. And we all also know that wages haven’t actually fallen for the past 50 years, whatever the wage part of the whole economy has been.
More technically, the wage share is just the actual money we receive in our paychecks. We can see this here. What actually matters though is what do we get for going to work? That’s called the labor share and we can see that here. The difference between the two is the things we get from going to work but which aren’t cash – health insurance, those employer social security taxes, maybe matching 401(k) contributions and all the rest. We get more of our compensation from work not in cash these days then we all used to.
It is still true that the labor share is falling as well and there are economists’ arguments about how well that is being measured. But the important point here is that a smaller share of GDP is not the same as falling wages. Anyone with even the slightest knowledge of economics, the economy, or even just the usual numbers will know that “US wages have been declining for five decades” is simply flat out wrong, ignorant on the subject under discussion.
Business Insider is a major media outlet, it ranks number 18 in news and media sites in fact. It gets perhaps 100 million site visits a month. This is a major source of information – and one, as its name suggests, which at least claims to know about money, the economy and numbers.
That Business Insider doesn’t know these simple facts about wages and the economy is bad enough. But that it gets misled by not being able to understand one of its own articles is worse.