Bush approval ratings at new lows: a look at the economy

Despite the fact that GDP grew by 5.3 percent in the first quarter of 2006 (and 3.5 percent and 4.2 percent for 2005 and 2004, respectively), a new NY Times/CBS poll shows that only 28 percent of Americans support Bush's handling of the economy (lower even than the 29 percent that approve of his handling of Iraq). I have long believed that the reason for this is the low wage growth seen by American workers, particularly over the past 5 years since Bush has been in office. While the unemployment rate has fallen from a high of 6.3 percent in June 2003 to 4.6 percent today, wage growth has been dismal. I made some calculations from Bureau of Labor Statistics wage data of average hourly wages between January 1996 and April 2006, adjusted for inflation. This measure doesn't reflect total earnings very well because the higher income brackets have higher non-wage income, so it will be biased downwards. In addition, it will be biased downwards by the reduction in average hours worked in the Bush era (between 1996 and 2000 it was 34.4 hours per week, while it was only 33.8 hours from 2001 to 2006). During recessions average hours worked usually decrease, and. Furthermore, the unemployment rate between 2001 and 2006 was higher than between 1996 to 2000 (5.4 percent versus 4.6 percent), which will also reduce average earnings. To compensate for both the hours worked per week and the unemployment rate differential, wages need to increase that much more to make a real improvement in the average American's life (which is what is being measured in these polls, the perception of well being). The bare facts are such:

Real wage growth 1996-2000: 6.23 percent
Real wage growth 2001-2006: 0.82 percent
Real wage growth 2001-2005: 0.72 percent

I will deal with the distributional impacts later, but the difference between the last 5 years of the Clinton Administration versus the years until now (and the first 5 years) of the Bush Administration. Real wages were actually significantly increasing under Clinton. Furthermore, average hours were higher and unemployment was lower so more people were benefiting from the average wage growth than under Bush. This explains why Bush has not gotten "credit" for the economy. For most Americans the economy stinks. Either they are working for not much more than they were 5 or 6 years ago, they are unemployed (like me) or are working fewer hours with no increase in wages and therefore taking home less than they were under Clinton. As much as the Bushies hate to admit it, most of America is seeing a stagnation of wages along with higher unemployment and fewer hours than under Clinton. As a reference point, the nominal growth rates of corporate profits are 12.6 percent between 2003 and 2004 and 16.4 percent between 2004 and 2005 (Source: Bureau of Economic Analysis). Even if you knock off a few points for inflation, this is tremendous compared to wage growth. When one is looking at wage data, there is an implicit bias in the distributional allocation of corporate profits and wages. The upper classes hold significantly more in stocks and bonds than the lower classes, and therefore benefit significantly more from higher corporate profits (and are less reliant on wages as a percentage of their income). Therefore, higher corporate profits or lower wages will tend to increase the gap between rich and poor. Under Clinton, corporate profits were increasing quickly, but so were wages (and hours worked were higher and unemployment lower), so the income gap didn't increase as much as it has now with higher unemployment, lower average hours, low wage growth and high corporate profit growth. The reason Bush's approval rating for his handling of the economy is at 28 percent is because that is what he deserves. Most people don't see the economy improving over the past 5 years.