THE RICH GET RICHER, PART ONE ZILLION….A few weeks ago the BEA reported that wage-and-salary income had risen in the first half of the year more than they had initially estimated. Pay was up about 7%, a pretty healthy number.
But who was getting all this extra dough? The average worker sure didn’t seem to be seeing much of it. Something seemed fishy about the numbers, and today the Wall Street Journal says the BEA thinks it’s figured out what happened:
The likely explanation: stock options. The income earned when employees cash in stock options is counted in both gross domestic income and the Labor Department’s productivity-adjusted labor-cost measures, but not in most of the other wage measures.
“The stock market was strong in the first quarter, so that suggests probably quite a bit of stock-option exercise,” says Brent Moulton, associate BEA director for national economic accounts. Because higher-paid employees are more likely to have stock options, this helps explain why the advance in labor income doesn’t reflect the average worker’s experience.
So total income was up, but a big part of it was corporate executives cashing in stock options. This also explains why corporate profits were strong despite the higher pay numbers: companies weren’t actually paying out more money to their workers. All that exercising of stock options barely affected the bottom line at all.
So that’s that. I just thought you’d all like to know why you weren’t seeing any of that pot of gold the BEA told us about. It’s the usual reason: you’re not rich enough. Tough luck.