Personal income includes the various “factor returns”?wages, salaries, rents, interest, dividends, and proprietors’ income?plus transfer payments that individuals receive from the government. All of these items together constitute the income available to individuals for use in purchasing consumption goods, paying taxes, and saving. Personal income is much superior to GDP as a measure whose variations tell us something about changes in people’s economic well-being as the economy ebbs and flows.
Examining how the components of personal income have changed, however, we see that the recovery so far has been somewhat ambiguous, even apart from its “joblessness.” For example, private wages and salaries, which peaked in the third quarter of 2008 at $5,419 billion and then fell during the next three quarters to $5,129 billion, or by 5.4 percent, regained only a small fraction of their loss and ended the year at an annual rate of $5,179 billion, still 4.4 percent below their previous quarterly peak. It seems unlikely that the current shortfall will be eliminated within the next two years, even if the economy continues to recover steadily. Absent a turnaround in private employment, the prospects for a return to the previous high rate of wage and salary payments seem even less encouraging.
While private wage and salary income was falling, the disbursement of government wages and salaries was ascending. Between the fourth quarter of 2007 and the fourth quarter of 2009, such government payments (at an annual rate) increased from $1,106 billion to $1,189 billion, or by 7.5 percent in just two years.
Anybody surprised that government workers have been benefiting at everyone else’s expense? Higgs continues:
Another such troubling sign has to do with the flow of government transfer payments to individuals, which have increased greatly since the recession’s onset. In the fourth quarter of 2007, they were running at an annual rate of $1,721 billion; by the fourth quarter of 2009, they had reached $2,130, having risen by an astounding 24 percent in just two years. Of course, unemployment insurance payments (a subset of all government transfer payments to individuals) ballooned even faster, increasing from an annual rate of $34 billion in the fourth quarter of 2007 to $127 billion in the fourth quarter of 2009, or by 274 percent. In 2007 as a whole, total government transfers to individuals amounted to 14.2 percent of personal income; late in 2009, they constituted 17.5 percent.
To sum, transfer payments such as food stamps and unemployment benefits were up a whopping 24% in two years, and grew from 14.2% of personal income to 17.5%
As I noted last month, the radical far-left statists at NC Policy Watch had this to say about government transfer payments:
…money spent on food stamps or unemployment directly stimulates the economy because people almost always spend it. That helps create jobs.
I’ll ask again, if food stamps and unemployment benefits create jobs, and such transfer payments are up dramatically in the last two years – where are those jobs?