And This Is Bad Because . . . ?

In his NYT column today, Wages, Wealth and Politics, (both the column and the follow-up on his related weblog are behind the Times Select subscription wall), Paul Krugman discussed the rapidly growing gap in income and wealth between the really wealthy and the rest of us, drawing a causal connection between our politics and our economy:

[S]ince 1980 the U.S. political scene has been dominated by a conservative movement firmly committed to the view that what’s good for the rich is good for America. Sure enough, the rich have seen their incomes soar, while working Americans have seen few if any gains.

In the blog that he maintains in conjunction with his column, Krugman expanded on that theme:

There are real questions about just how closely supply and demand determine wages; the labor market isn't just like the market for wheat. Also, there's a lot of evidence that unions have a large effect on the wages of non-union workers, too. When you're in an economy in which about a third of private-sector workers are unionized, as was true of the United States when I was growing up, even non-union employers tread carefully, for fear of giving their workers a strong incentive to organize. When you're in an economy where unions have been largely banished from the private sector, as is the case now, things are very different.

Of course, there are bright spots. Government workers, who, by dint of being voters, have some drag with their paymasters, have seen their incomes rise over time. Rather than embracing this as good news, in an op-ed piece in WaPo last Sunday, Chris Edwards, tax director at the Cato Institute, was critical of the growth in federal wages:

The Bureau of Economic Analysis released data this month showing that the average compensation for the 1.8 million federal civilian workers in 2005 was $106,579 -- exactly twice the average compensation paid in the U.S. private sector: $53,289. If you consider wages without benefits, the average federal civilian worker earned $71,114, 62 percent more than the average private-sector worker, who made $43,917.

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To get spending under control, Congress should consider trimming overly generous benefit packages and freezing federal wages for a few years.

His comments were echoed by the Tax Foundation's Andrew Chamberlain.

I suspect that there's a good deal wrong with employee management in the federal government. But to say that the principal problem is that federal employees are making too much money relative to employees in the private sector is crazy. After all, one of the major social problems we face is that private sector employees are taking it on the chops. Which is to say that the principal problem we face is that private sector employees are not making enough. The solution to that problem is not to institute policies with respect to federal employees similar to those that have undermined the economic well-being of private sector employees.

Full Disclosure: The woman with whom I sleep with is a federal employee.