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Tilting at Windmills

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May 26, 2006
By: Kevin Drum

WAGE GROWTH IN AMERICA....Brad DeLong has a nice, readable introduction to income and wage trends over at his place that's worth a look. At MaxSpeak, Max Sawicky comments that "I don't envy the politician trying to explain it in less space," while the Sandwichman wonders if the tiny growth in wages over the past few decades is even tinier than it looks because some of it is due to the fact that the average worker is older now, and older workers get paid more regardless of whether average wages are going up.

Well, here's a single data point that addresses both questions. It's a chart that shows median income for 35-44 year old men and women since the end of World War II.

First the good news: women have made steady increases though it's worth noting that about half of that gain is because women work more hours than they did 30 years ago. On an hourly basis, the increase since then amounts to about 1% per year.

And men? Not such good news. The average 40-year-old guy made $44,000 in 1973, and that was as good as it ever got. Today that number is about $40,000. It's gone down even though the American economy has nearly doubled on a per-person basis during that time.

So where did all the money go? What happened in 1973 that suddenly stopped wage growth for half the population in its tracks? And what should we do about it?

Kevin Drum 6:01 PM Permalink | Trackbacks | Comments (158)

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Compensation includes wages and fringe benefits. For whatever it's worth, the composition of compensation going to fringe benefits has increased since 1973.

Posted by: pgl on May 26, 2006 at 6:10 PM | PERMALINK

PGL: Not by much. If you include that, it adds maybe one or two thousand dollars to the median income.

Posted by: Kevin Drum on May 26, 2006 at 6:15 PM | PERMALINK

That is a very impressive graph.

Posted by: Commenterlein on May 26, 2006 at 6:18 PM | PERMALINK

It was in 1965 that immigration policies were liberalized. That matches up well with the flatlining income.

Seems like pretty simple economics to me. If you have an ever expanding labor pool, the only way average income would increase is if the economy expands faster than the labor pool.

Posted by: Brad on May 26, 2006 at 6:20 PM | PERMALINK

I'll hazard an initial hypothesis for folks to tear down: The combination of the influx of the Baby Boomers into the job market and the winding-down of the Vietnam War's man-power needs generated competition amongst wage-earners, and forced salaries down across the board.

I could also add that the attitude of employers towards their middle-aged employees also changed during that time, on through the '80s and '90s, particularly when you look at the growing lack of job-security starting in that era. These are the folks who, when thrown over the corporate-restructuring transom, have the most to lose. The older employees (in their 50s) may be offered buy-outs; the younger employees (under 30 or so) don't have the major investment in specific job-skills.

Posted by: Dave Alway on May 26, 2006 at 6:22 PM | PERMALINK

To motivate productive behavior, the economic gains should go to the parties most responsible for it. Increasingly, the most productive employees have been magnitutes of order more beneficial than other employees. A software engineer creating a piece of software distributes an economic benefit to millions, and should be rewarded accordingly. There was no paralel to that thirty years ago. Conversely, the manager of a grocery store hasn't become more productive; he's still just managing a grocery store. Under that backdrop, a large disparity in wealth distribution is both desirable and expected.

Posted by: American Hawk on May 26, 2006 at 6:22 PM | PERMALINK

Despite these numbers, it's clear that people are getting wealthier. Partly it's that technology has reduced the cost of many appliances. Most people, including those below the poverty line, have large-screen color TVs with a wide selection of stations, air conditioning, microwave ovens, computers, etc. We generally take running water and indoor plumbing for granted. Home ownership is at an all-time high (as a percentage). Medical care is better than ever, due to research advances. People eat out frequently, although not necessarily gourmet style.

As to what can be done to create further imporvement, the government could reduce onerous regulations, cut back on lawsuits, and reduce personal and business taxes. These steps would lead to greater prosperity, although they might have other bad consequences.

Posted by: David on May 26, 2006 at 6:22 PM | PERMALINK

What impresses me most is the striking difference between median wages for women compared to men. Women earn $15,000 less than men, on average! That's 62.5%. I have a hard time believing it's because women work 62.5% of the hours that men work.

Posted by: Sparky on May 26, 2006 at 6:23 PM | PERMALINK

Despite these numbers, it's clear that people are getting wealthier.

That's true.

KEvin-- Would you rather live now, or in 1973? Want to go back to pre-internet days? Hell, your main line of work didn't even EXIST in 1973.

Posted by: American Hawk on May 26, 2006 at 6:23 PM | PERMALINK

"So where did all the money go? What happened in 1973 that suddenly stopped wage growth for half the population in its tracks? And what should we do about it?"

Nothing to see here. Move along. That giant sucking sound you hear is just my maid vacumning.

Posted by: Crony Capitalist on May 26, 2006 at 6:25 PM | PERMALINK

Does this analysis factor in the possibility of lower wage workers entering the workforce? e.g. Mexican, Indian, etc. that may be depressing the "average" wage.

Seems that the dollars earned by the upper wage tiers would be significantly driving up the average (i.e. "more millionaires and billionaires than ever" type of data) unless there was an increasing pool of low wage workers to offset.

An interesting, but perplexing piece of data, Kevin.

Posted by: pencarrow on May 26, 2006 at 6:25 PM | PERMALINK

The entry of the large Baby Boom Generation cohort into the workforce might've reduced wage growth. And 1973 is about when they'd be hitting the workforce in large numbers. The continued post-1973 growth in female wages could, as suggested, be attributable mainly to longer average hours.
I'll also echo the prior comment about the effects of immigration.

Posted by: Peter on May 26, 2006 at 6:26 PM | PERMALINK

I think the solution here is obvious - and no it is not the Kevin Drum stodge of ' thereoughtabealaw' - it's a market and net based solution. In this brave new ' Brinworld' we now find ourselves it is a simple matter to list the worlds richest people.
Then by utilizing a private version of the PAM plan ( Policy Analysis Markets) http://www.nex.com/innews.htm
we may all 'bet' small amounts on the exact time that accumulted wealth all reverts to the commonwealth. For example ' Bill Gates - November 17th @ 06:21 Norte America EST - my 2 e-dollars.
See how easy net based mutualist socialism is?
I'm working for a way to tax loud mouth blinkered political jackass's for my next trick. First grow a digital carrot...

Posted by: professor rat on May 26, 2006 at 6:26 PM | PERMALINK

Sparky: What impresses me most is the striking difference between median wages for women compared to men. Women earn $15,000 less than men, on average! That's 62.5%. I have a hard time believing it's because women work 62.5% of the hours that men work.

Not all work is equal. Women tend to gravitate towards occupations that pay less, such as teaching. Women also tend to take a few years off when they have children; doing so is naturally disruptive to one's career (and, therefore, salary). To get a meaningful measurement of any gender bias, one needs to stick with one occupation, and correct for women taking time off to have children.

Posted by: American Hawk on May 26, 2006 at 6:27 PM | PERMALINK

A thought arises: is there any reasonable correlation over time between the ratio of the size of the economy divided by the size of the active workforce (E/W) and the (presumably real) wages on the chart?

Further, can that workforce be divided up into the "usual suspects" (returning Vietnam War vets, general population growth, women in the unrestricted workforce, immigrants, etc., etc.)?

Such information might go a long way towards supporting or refuting various mooted causes.

Posted by: Dave Alway on May 26, 2006 at 6:28 PM | PERMALINK

"Seems that the dollars earned by the upper wage tiers would be significantly driving up the average (i.e. "more millionaires and billionaires than ever" type of data) unless there was an increasing pool of low wage workers to offset."

It looks like this graph plots MEDIAN wages, which means half are above and half below. The actual dollar earnings of highly paid people will not drive up the median.

Posted by: Sparky on May 26, 2006 at 6:30 PM | PERMALINK

Actually, I would rather have lived in 1973! I was much younger and healthier back then.

Posted by: Dave Alway on May 26, 2006 at 6:32 PM | PERMALINK

Its' also because women get paid less for the same work. Los Alamos National Lab just settled a class action suit by women for $12 M. Lawrence Livermore National Lab settled one for $10 M a few years ago. Wouldn't it have been cheaper to just pay women equitably? Probably not.

Posted by: Sparky on May 26, 2006 at 6:34 PM | PERMALINK

penarrow, this is median income, not average. So it doesn't matter if the richest few make much more money.

Median is the number which half of the population makes more than and half makes less than.

So if 100 people are spread evenly, (one makes $1, one makes $2, one makes $3...) the median will be about $50. Now if the richest guy suddenly goes from making $100 to making $1000, he still counts as 1 person above the median. So the median will stay very close to $50.

Posted by: Jon Marcus on May 26, 2006 at 6:34 PM | PERMALINK

My 20-year-old daughter doesn't want to go to college, but she is interested in a technical program to train as an electician. I have saved this graph to show her exactly who her bosses will be if she ever becomes an apprentice. These are the angry white guys who listen to Limbaugh et al.

Now you see why these guys are angry: they are the only group in our society that has really lost in these last few decades. This group tends to vote Republican because the GOP appeals to their anger, though it offers them no actual hope.

Posted by: John Evans on May 26, 2006 at 6:34 PM | PERMALINK

So where did all the money go?

Thats rhetorical, right? I mean where would it go? OECD tells us that the US economy is the worlds most competitive and Economy 101 tells us that raising the workers pay may be good for a number of reasons, but competitiveness isn't one of them.
I'll take a wild shot and claim that if you take out the top 10% earners across the board, the figure will become even more disturbing. Taking out the bottom 10% won't change much, though, because minimum wages is always a hot political issue.

Oh, and we ARE talking inflation-adjusted figures, right?

Posted by: OmniDane on May 26, 2006 at 6:34 PM | PERMALINK

That is a very disturbing graph. The neo-liberal ideologues are even more disturbing. People are not becoming wealthier, they are becoming poorer. The countries that are distributing increasing weatlh to their citizens have higher taxes and more regulation.

Posted by: Powerpuff on May 26, 2006 at 6:36 PM | PERMALINK

"What happened in 1973 that suddenly stopped wage growth for half the population in its tracks?"

1973 is when the Bretton Woods system broke down, and capital was allowed to flow freely across the globe to find the best return - in other words, the beginning of globalization. The much greater mobility of capital has given those who have it and those who weild it much greater leverage over the rest of America. That continues to this day.

Posted by: Tom DC/VA on May 26, 2006 at 6:39 PM | PERMALINK

Kevin -

The title of the post talks about "wages," yet the graph and underlying data is "median income." The two are not the same, please correct or note that the differences are immaterial (if they are).

Posted by: Ugh on May 26, 2006 at 6:42 PM | PERMALINK

Important note: These numbers are worse than you think, because, largely at the instigation of Greenspan, we have been understating escalation in the cost of living for years.

It should be more of a downward trend.

Food, shelter, and essential transportation all consume a greater proportion of household income than they did in 1973.

What has offset this, to a small degree, is that credit has become easier to get, so you can buy more, but you are more in debt.

Posted by: Matthew Saroff on May 26, 2006 at 6:44 PM | PERMALINK

Didn't peak oil production in the US occur at about that point?

Posted by: cld on May 26, 2006 at 6:45 PM | PERMALINK

The graph suggests that we should exhume Reagan to be the President, and Bill Clinton should be appointed the Prime Minister.

Posted by: lib on May 26, 2006 at 6:46 PM | PERMALINK

Given the steep slope of the male curve up until '73 compared to the female one, perhaps the gentlemen decided to wait until the ladies caught up?

... nah...

Posted by: Arachnae on May 26, 2006 at 6:47 PM | PERMALINK

The early 70's would be about when women started entering the workforce in greater numbers and fields. This would increase the labor supply and decrease wages (for men - for women, the opening of new, higher-paying job types would increase wages for quite a while).

Posted by: K on May 26, 2006 at 6:51 PM | PERMALINK

It was about that time, also, that the petroleum producing countries in the Middle East started to receive a better percentage of profit from their production, which spurred them to start translating their medieval feudal states into modern corporations, which made such an extraordinary impact on the Republican corporate mind in the US.

Posted by: cld on May 26, 2006 at 6:52 PM | PERMALINK

Wow... nobody has even mentioned the 1973 oil crisis? Or the fact that US oil production peaked in 1971? Wow.

Modern american economic history can be divided into two periods: Pre-1971 when we were able to fuel our own growth with natural resources, and post-1971 when we became dependent on foreign oil, debt, and technology to fuel growth.

Look at any significant measure of US economic health and you'll see the same pattern: WWII to 1971 = wild growth, 1971 to present = relative stagnation.

Posted by: david on May 26, 2006 at 6:53 PM | PERMALINK

JohnEvans:
The median expected salary for an Electrician III (see below) in the US is $50,275. Your daughter would do pretty well in economic terms as an electrician. And after her appreticeship and a few years experience, she can start her own company and be her own boss. The electrician who has done lots of work on our house in recent years makes a good salary, runs his own show, and gets in lots of skiing and bicycling. Could be a lot worse.

Electrician III
Inspects, repairs, installs, modifies, and maintains electrical/electronic systems, circuits and equipment. Requires a high school diploma or its equivalent with at least 5 years of experience in the field or in a related area. May have to complete an apprenticeship and/or formal training in area of specialty.

Posted by: Sparky on May 26, 2006 at 6:53 PM | PERMALINK

I think Tom DC/VA nailed it, and I mean that seriously.

Posted by: nixon on May 26, 2006 at 6:53 PM | PERMALINK

What happened in 1973 that suddenly stopped wage growth for half the population in its tracks?

This is a lie.

The table does not show that wage growth stopped "for half the population."

It shows it stopped for half the population in that age cohort.

Ginormous differnce.

Posted by: Al on May 26, 2006 at 6:55 PM | PERMALINK

Tom DC/VA and cld nail it.

Posted by: Powerpuff on May 26, 2006 at 6:55 PM | PERMALINK

It all started with Nixon's election in '68. It's reasnable to assume that there is a lag time of 4-5 years for the economic policies of a new Repub administration to take effect.

Posted by: nut on May 26, 2006 at 6:56 PM | PERMALINK

It's been said before that the moon landings marked the peak of western civilization, they were our pyramids. Everything since has been refinement and consolodation of previous gains, and dealing with resource and environmental depletion.

There isn't going to be much more raw "quantity" gains, and when we try, the costs and "externalities" will exceed the benefits. We have to focus on gains in Quality from now on.

Posted by: Bruce the Canuck on May 26, 2006 at 7:01 PM | PERMALINK

Very enlightening chart. I'd like to see it next to the growth of CEO pay over the same period.

In any case, what's the cause? I really have only guesses. I believe oil shocks and runaway inflation may have had an impact on growth in the 70s. Since the beginning of Reagonomics in the 80s, we have had a completely different mindset about distribution of wealth. The erosion of labor and other contributing economic factors have meant less for the little guy (i.e., most of us). Once upon a time, the Dem party used to stand up for the rest of us. The Dems really care more about business interests today, and it sure is hard to argue that that has helped the Dems from a political standpoint, but economically it sure is hard for the middle class when there's no one in government on your side.

Posted by: JJF on May 26, 2006 at 7:09 PM | PERMALINK

People have pointed out various reasons that the supply of labor has increased since 1973, but I don't think anyone has mentioned one that I have often wondered about: feminism.

As women became able to compete for every job, not just a pink collar ghetto, the labor nearly doubled for those jobs.

Don't get me wrong. It's a good thing that women can work outside the home if they choose and that they can get jobs other than hairdresser or waitress. But it seems like that shift must have had some macroeconomic impact, an impact I've never seen analyzed.

Posted by: TreeTop on May 26, 2006 at 7:11 PM | PERMALINK

Question: "Where did all the money go?"

Answer: (from the The Economist) The average salary of a Goldman-Sachs employee (including assistants and secretaries) was $520,000 in 2005. And YOU, no matter what your age, don't work there.


Posted by: All-knowing sage on May 26, 2006 at 7:14 PM | PERMALINK

I see that K and Dave Alway already made the same point about women entering the work force in greater numbers around the time of the slowdown in men's wage growth.

Carry on!

Posted by: TreeTop on May 26, 2006 at 7:14 PM | PERMALINK

Wrong link to the Economist above. Here is the correct one:
http://www.economist.com/opinion/displaystory.cfm?story_id=6855910

Posted by: All-knowing sage on May 26, 2006 at 7:16 PM | PERMALINK

The question is, what could a person live like making 44k inflation adjusted dollars in 1973.. he probably could own a car, a color TV, maybe a stereophonic system, a phone, and reasonable health care. The difference is he could probably own a house, although he may choose not to, as home ownership was lower then. A person making 40k now has a car, TV, stereo, PC, home phone and cell phone, cable TV, and if his company provides it, reasonable health care. He wouldn't be able to afford a house in any of the higher density cities like SF, LA, or New York. I'm not sure if you can do a fair comparison, since most married couples are both working, so that $40k becomes $60 or 70k. Also, a person can afford more 'stuff' now, although he may not have a house to put it in.

Posted by: Andy on May 26, 2006 at 7:18 PM | PERMALINK

Exogenous outward shift of female labor supply curve due to cultural changes. Plus inward-shift of aggregate semi-skilled labor demand due to automation and computerization.

What to do about it? Redistribute smartly. Two words, endless work for wonks.

And I self-nominate for comment of the year.

Posted by: zev on May 26, 2006 at 7:18 PM | PERMALINK

I'm shocked that none of the usual suspects (Al, American Hawk, et al) have simply blamed it on Roe v. Wade. Granted there's no logical connection there, but there never has to be where conservative talking points are concerned.

Posted by: Alan on May 26, 2006 at 7:19 PM | PERMALINK

There was an article in JAMA recently about Americans being sicker than their European counterparts. It doesn't seem to be a far leap to suggest income insecurity leads to increased stress, which leads to poorer health. Somemone must have done a study on income security (@ same bracket) vs. health/stress level.

Posted by: Jor on May 26, 2006 at 7:20 PM | PERMALINK

I'm confused.

Why is it a bad thing if men top out at a certain rate and women continue to rise? Extrapolating, looks like there's a meeting somewhere in future years at about the same level. Isn't that what any sane economic system-slash-culture would want, equality in wage earning?

Posted by: Piehole on May 26, 2006 at 7:21 PM | PERMALINK

Does American Hawk think before it speaks? Is it a parody or does it really think it's being intelligent?

Posted by: gq on May 26, 2006 at 7:22 PM | PERMALINK

The downturn for men in the late 1980's coincides closely with the ubiquitous adoption by industrial users of high-speed data communication technology. That more than anything else opened the door to off-shoring lots of low-level white collar jobs.

Posted by: Jim Strain on May 26, 2006 at 7:35 PM | PERMALINK

Hooray for Piehole! I'm with you. I think you are exactly right. In another 50 years, we should have parity as some women gradually move into better paying jobs.

Posted by: Sparky on May 26, 2006 at 7:36 PM | PERMALINK

I suspect that the greatest factor is inflation as I assume the wages are in constant dollars. The buying power in 1973 was hugely greater dollar for dollar. A nice home was $67,000 in Orange County (I bought one) but that home would sell now for $800,000. It takes a lot of wage growth to match that inflation. My first new car was a 1968 Mustang convertable. It was $3050. and my payments were $95/month for 36 months. Inflation has robbed the middle class blind.

Posted by: Mike K on May 26, 2006 at 7:37 PM | PERMALINK

"Its' also because women get paid less for the same work. "

I recall an interview on npr a couple years ago where some (female) economist had headed a large study controlling for everything they could think of that would reasonably lead to women being paid less (field of work, years without employment, etc) other than gender and came up with the result that women are paid 92% of what men are paid.

The average woman, of course, has a much greater difference from the average man but that is, according to this study, almost entirely because of thier different life histories rather than wage discrimination or poor negotiation.

Posted by: jefff on May 26, 2006 at 7:44 PM | PERMALINK

"...almost entirely because of thier different life histories..."

Which, of course, does not at all mean that this is all by thier choice, just that only a small part of the difference is because women are less valued by employers.

Posted by: jefff on May 26, 2006 at 7:46 PM | PERMALINK

Speaking of Roe v. Wade, a new (?) theory from a book says it is responsible for lower crime rates starting the late 90's.

Posted by: K on May 26, 2006 at 7:47 PM | PERMALINK

It's a chart that shows median income for 35-44 year old men and women since the end of World War II .... What happened in 1973 that suddenly stopped wage growth for half the population in its tracks?

1. Since 1973 the workforce has become much more gender balanced. A much greater proportion of high-paying jobs are now held by women--doctors, lawyers, engineers, business executives, etc. The unfair income advantage that men used to enjoy has now been substantially reduced.

2. As Brad DeLong notes (along with most other economists), CPI-based measures of real income are seriously flawed and substantially understate economic growth. As a result of this, as DeLong writes, workers "wind up better off than CPI-based measures of real income indicate. How much is this effect worth? My guess is between half a percent and a percent a year--say ten to twenty five percent since 1979."

3. The income figures obviously do not include non-income measures of wealth, such as non-income employment benefits and the values of homes and investments.

Even ancedotally, it's hard to believe that anyone who is remotely familiar with ordinary life in America could really believe that the typical American man of 2006 is no better off materially than the typical American man of 1973. Not only do ordinary Americans today routinely possess and consume products and services of a nature and quality that were considered luxuries or near-luxuries in 1973 (frequent air travel, foreign vacations, color television [with dozens or hundreds of channels, VCRs, DVD players, etc.], microwave ovens, a vastly greater range of diet and dining choices, cars that are much safer, much more reliable, and much better equipped, etc, etc.) but they also consume many products they clearly value highly that didn't even exist in 1973--everything from cell phones to viagra.

Posted by: GOP on May 26, 2006 at 7:47 PM | PERMALINK

I'm shocked that none of the usual suspects (Al, American Hawk, et al) have simply blamed it on Roe v. Wade. Granted there's no logical connection there, but there never has to be where conservative talking points are concerned.

There is a distant connection; Roe v. Wade allows mothers to murder their children, thus freeing them up to work instead of raising their babies. However, the ultimate impact is probably small enough that it's not worth mentioning. Roe v. Wade is wrong because it allows infanticide and is an egregious abuse of judicial discretion; it has nothing to do with economics.


Does American Hawk think before it speaks? Is it a parody or does it really think it's being intelligent?

I notice nobody here actually refutes or even addresses my points. They simply declare it off-bounds and unacceptable, then move on. I can't tell if y'all are unable to defend your positions, or if you're simply training to be professors.

Posted by: American Hawk on May 26, 2006 at 7:49 PM | PERMALINK

"The difference is he could probably own a house, although he may choose not to, as home ownership was lower then."

I wonder about this.

It seems to me that the definition of "ownership" is used rather loosely by the US government with regard to homes. If a person is in the early years of a 30 year mortguage with 10% equity they are counted as 1 homeowner. Seems to me they ought to be counted as .1 home owners.

Is seems possible that home ownership could be hugely overstated today. I have heard that back then most people would eventually pay off thier mortguage and continue to live in their home for many more years while today far fewer people ever own a home without a mortguage. In effect many 'home owners' might really be renting thier houses from the bank.

Posted by: jefff on May 26, 2006 at 7:53 PM | PERMALINK

Why would anyone have a graph that denotes men's earnings in pink and women's earnings in blue?

Have you no respect for traditition?

Posted by: Joe Canuck on May 26, 2006 at 7:54 PM | PERMALINK

I think this is the well known fact, that the rich are getting richer and the gap between the rich and poor is ever widening that accounts for what occurred.
i.e. the creation of more high individual incomes at one end of the scale and more low incomes atthe other.

The proportion of men earning more than 50K grew from 12.8% to 16.5% between 1975 and 1995. But, overall, the median income for men dropped from 24K to 22K due to declining wages in the bottom tiers.

In the 60s, CEO salaries were 30X greater than the average worker; now their salaries are 200X greater.

More women entered the work force, at low paying jobs..subsequent to the 1964 Civil Rights Act where affirmative action for white females made it possible for them to find jobs.

Women making up a larger percent of the work force had a wage lowering impact on median wages nationally.

In 1960 women earned 35% of bacherlor degrees. They now account for over half, 55%

Immigrants from India have an average income of 44K a year,those from the Phillipines 43K and those from China 36K. Immigrants make more than Americans of English (34k), Swedish (33K) and Irish (31K) ancestry who have been here for several generations.
What does this tell us about the changing contours of our society

But the real answer to your bottomline question Kevin is this:
The wage gap of our time reflects both the declining fortunes of many Americans and the rise of individuals and households who have profitted fromreent trends. Economists, generally agree on what brought about atatic wages and lowered living standards.
In part, wellpaying jobs are scarcer because goods that were once produced here, at American wage scales, are now made abroad and then shipped here for sale.

A corollary cause has been the erosion of labor unions, which one safeguared generous wages for their members. Between 1970 and 1996, the portion of the workforce represented by unions fellfrom27% to 15%.

Today, the moast highly organized occupations are on public payrolls, notably teachers and postal employees. Only 11% of workers in the private sector belong to unions. For most of the other 89%this means that their currrent paychecks are smaller than they were in the past.

Let's not forget the downsizing of corporate America as well. In 1973, the 500 largest industrial firms employed some15.5 million men and women. By 1993, these firms employed only 11.5 million people. This reduction in the industrial workfores amount to a loss of 4M positions.


This data is excerpt from Andrew Hackers book Money (who has how much and why)

Posted by: elrapierwit on May 26, 2006 at 7:55 PM | PERMALINK

The buying power in 1973 was hugely greater dollar for dollar. A nice home was $67,000 in Orange County (I bought one) but that home would sell now for $800,000. It takes a lot of wage growth to match that inflation.

According to the National Association of Homebuilders, the average home size in the United States is now 2,200 square feet. In 1970, it was only 1,400 square feet. And I bet a much higher proportion of homes today also have many other desirable features, like central heating and cooling. This obviously conflicts with the claim that housing is less affordable now than it was in 1973.

Posted by: GOP on May 26, 2006 at 7:58 PM | PERMALINK

jefff:

I disagree. And so does Media Matters. See comments on their website from May 16, 2006.
http://mediamatters.org/items/200605160002?offset=20&show=1
They provide links to the data.
The gender gap in wages still persists when work experience, hours worked, etc are taken into account. Even in the same jobs, men earn more than women.

Posted by: Sparky on May 26, 2006 at 8:04 PM | PERMALINK

"This obviously conflicts with the claim that housing is less affordable now than it was in 1973."

Actually this partially explains why housing is less affordable now than it was in 1973, it does not conflict with the claim.


Another interesting thought I picked up somewhere. Some of the increase in family income inequality is due to women's equality. In the olden days when women were not educated often, and were very rarely working in highly paid fields men with high incomes and valulable skills primarily married women with low incomes and few marketable skills. Today many more of our more highly paid workers are marrying other highly paid workers making doubly relatively highly paid households, and somewhere leaving a doubly relatively poorly paid household.

Posted by: jefff on May 26, 2006 at 8:08 PM | PERMALINK

It's all went south when we went off the gold standard! ;)

Posted by: Nils on May 26, 2006 at 8:11 PM | PERMALINK

America's postwar upsurge lasted barely 3decades. The tidebegan to turn in the eary 70s. Between 1970 and 1980, family incomerose less than 7%. And that small increase resulted entirely fromthe the factthat additional family members were joining the workforce. The most vivid evidence of decline is found in the unremitting drop in men's earnings since 1970.

Averages and medians,conceal important variations, such as that some American households have done quite well for themselves. Those with incomes of $1M or or more reached an all-time high during the closing decades of the last century, as are families and individuals making over 100K.

By outward appearances, there is still pleanty of money around, it is landing in fewer hands.

Andrew Hacker...Money

Posted by: elrapierwit on May 26, 2006 at 8:17 PM | PERMALINK

"jefff:

I disagree. And so does Media Matters. See comments on their website from May 16, 2006.
http://mediamatters.org/items/200605160002?offset=20&show=1
They provide links to the data.
The gender gap in wages still persists when work experience, hours worked, etc are taken into account. Even in the same jobs, men earn more than women. "

I did not say that there was no gap (which is what the talking head that media matters debunks said), I said that according to some economist I can't even point to (heh) it was around 8% when controlled for many contributing factors.

If you look at some of the data presented in the article to which you linked according to its captions none of them purport to control for anything but years of experience and/or general field of work, and even so many of them are around 80% of parity. Other major factors included specific job (are you an accountant for a school, or on wall street), continuity of work experience (did you stop working for any period of time, or change jobs more or less frequently), educational differences, and more.

Posted by: jefff on May 26, 2006 at 8:20 PM | PERMALINK

You live in California, don't you Kevin? Why does your post say 6:01pm when my clock says it's only 5pm?

Posted by: Confused on May 26, 2006 at 8:20 PM | PERMALINK

I am puzzled by "half" of the population. Does that mean for male workers and not for female workers ? More than half of the labor force is male, while the labor force is about half of the population. My first guess is that it is based on the use of a median.

Indeed the graph shows that, in some sense, the labor income of the half of male workers with lower labor income has stagnated (or declined). Only in some sense since they are not the same guys but rather the standard Joe Sixpack and the less fortunate Joe fivepack etc. Average labor income per worker has gone up a lot so clearly people in the upper tail have had much more income growth.

It is actually important to realise that this happens to be true of the extreme upper tail of the distribution of labor income, and also that in the 0's there has been a significant decline in the labor's share of national income. Thus wage stagnation is an experience of much more than half of male workers (goes up well past Joe 2 six packs IIRC).

Posted by: Robert Waldmann on May 26, 2006 at 8:29 PM | PERMALINK

Lots of guesses up there and I won't add to them. What I want to know is whether the information in the graph will be made "public" by our custodians of discourse (MSM)?

Posted by: Hedley Lamarr on May 26, 2006 at 8:31 PM | PERMALINK

Hedley-- It's already in the NY Times, just without enough democrat talking points to suit a former Clinton administration official. What more do you want?

Posted by: American Hawk on May 26, 2006 at 8:33 PM | PERMALINK

I agree with david, it's probably the 1973 oil crisis, and in conjunction with Bretton Woods, as someone else said. The recession, stagflation... Wages never recovered because corporate America's culture had changed when the dust had settled. Corporate America discovered its power to treat workers like crap, something that had previously been socially and morally unacceptable to the generations that went through the shared sacrifice of WW II and the socially leveling effects of the Great Depression. Also I'll bet that unions caught a lot of flack as something unpatriotic at this time by employers eager to use the recession as leverage to weaken them, but I'm just guessing, because the groundwork must have been laid at some point for Reagan to crap all over the air traffic controllers in the 1980s and have public support for it, and it seems reasonable to imagine it was during this period. Have a graph of union membership, Kevin?

That would suggest to me that strengthening unions and reversing cultural attitudes to them would reverse the decline in wages. But now that capital is so mobile as someone said, it's tricky, because companies can just set up shop in some other country. So I guess tariffs on goods imported from countries that don't allow unionization are the best answer I can think of.

Posted by: DanM on May 26, 2006 at 8:38 PM | PERMALINK

I wonder what the graph would look like if it went back further.

I often get the feeling that the wierd time was those few decades after WW2 when the government was giving a free college education to nearly every male citizen who was interested (for service in ww2), taxes were very progressive, and a bunch of brand new infrastructure from the war and depression projects was giving all its benefits and not yet reqiring any major maintenence and the automobile was giving a great degree of mobility, but had not yet converted most of the country into hideously inefficient sprawl.

So the question isn't just what happened in 1972 and the followind decades, but what stopped happening.

Posted by: jefff on May 26, 2006 at 8:40 PM | PERMALINK

The average 40-year-old guy made $44,000 in 1973, and that was as good as it ever got. Today that number is about $40,000. It's gone down even though the American economy has nearly doubled on a per-person basis during that time.

Really, you should get this formulation right. It's not the AVERAGE 40 year old guy, but the MEDIAN 40 year old guy who's losing ground. I'd expect that the average 40 year old guy is doing just fine. (Yeah, maybe you could make a case that the "average 40 year old guy", in this context kind of means the median 40 year old guy, but you're only inviting confusion with the chosen verbiage).

Posted by: frankly0 on May 26, 2006 at 8:42 PM | PERMALINK

Hmmm '73 I remember... I was entering the workforce then.

1) Mid 70's... the flood of cheap foreign imports began to really kick in. Foreign made cars, steel, appliances, (yada) replaced American manufactured goods. People began buying Toyota and Honda instead of Ford and Chevy. Philco was replaced by Sony.

2) In response to low-wage foreign competition american companies either a) moved manufacturing overseas, b)closed (the rust belt) or c) automated, which further reduced demand for workers.

3) With the tide of imports and under pressure from automation, the power of the unions in the US manufacturing base began to rapidly erode. Without union protection, the balance of power shifted to the multi-national corporations.

4) At the same time, feminisim saw increasing numbers of women entering the workforce just a as manufacturing jobs began leaving.

5) The environmental movement and it's associated regulations increased costs for american manufacturing.

Combine the above, and the base of high-paying jobs for 'ordinary folk' was pretty well doomed.

Posted by: Buford on May 26, 2006 at 8:42 PM | PERMALINK

THE REGRESSIVE-DEMOCRATS COUNTER-CULTURE (DEBAUCHERY AND DRUGS) LIFESTYLE ADVOCACY AND "GREAT SOCIETY" PROGRAM BEGAN TO HAVE IT'S EFFECT ON THE MOST VULNERABLE AMONGST US; THE LOWER INCOME AMERICAN WORKFORCE WAS OBLITERATED IN TERMS OF CHARACTER AND QUALITY OF LABOR, CUMMULATIVELY AND STATISTICALLY SPEAKING, LEAVING STONED, SEX OBSESSED HIPSTERS IN IT'S PLACE. IF YOU WANT TO EXPLAIN WAGES SINCE 1973, JUST ASK YOURSELF, WHY WOULD YOU PAY MORE FOR LESS?

TOH

Posted by: The Objective Historian on May 26, 2006 at 8:53 PM | PERMALINK

Lot of good comments here. I feel that we are all like blind men confronted by an elephant, each of us describing a different body part but not yet seeing the whole ;-)

I do think we have a real problem and that people are starting to suffer. By accepted measurements of wealth inequality, the US approaches the inequality of a third world nation. I think most people haven't noticed due to a combination of successful propaganda (such as "wage growth equals inflation!"), new tactics (in most families all adult members of the household now work), and that we are so well off compared to so many. But that won't carry us any more. When a health insurance company executive gets 1.6 billion (yes billion) dollars in compensation when many people can't pay for health insurance, we have a legitimate problem.

I don't believe that this trend is an accident of any sort, but is a long term strategy by the wealthiest (and most powerful) members of our society. Taxes have, since the 60's, been lowered for the rich and increased for the poor and middle class. Government has been starved meaning that we are paying more in non-tax forms, such as paying a fee to use a state park or hike in a National Forest.

I believe we are going to have to go back towards the tax structure of the 60's and 70's and reduce taxes on the middle class while dramatically increasing taxes on unearned income and corporate income. We will also have to reduce our trade deficit by increasing tariffs on goods from countries that abuse their workers (i.e., China) so that our workers are given a fair shake. We need to go back to that economic policies that made us great: I can't remember who said it, but one of our early government officials once said something like, "I'd rather spend $25/ton for American steel even when I can get it for $20/ton from Britain because that is $25 that will stay in America".

Posted by: lownslowav8r on May 26, 2006 at 9:00 PM | PERMALINK

I've always wondered about 1972. It seems to have been a pivitol year for America. We know it was the year of peak oil for the US, the end of the gold standard and the break down of Bretton Woods. I don't think it's a conicidence that wages peaked (and they really just stopped dead, no gradual slowdown) that year as well. What else happened that year?

Lucky for me I was born the same year as the end of American's golden years =(

Posted by: Adventuregeek on May 26, 2006 at 9:04 PM | PERMALINK

A lot of factors have contributed to these trends. Among them is certainly the increasing numbers of women entering the workforce for career purposes since the early 1970s. Compare this to the much smaller numbers of career women before then, and you have a major change in the number of working women, the nature of jobs being held by women, and the median compensation received by women.

What happens when you increase the supply of something (like career labor, here)? You reduce the price of it (salary and wages, here). Women's compensation can continue to rise because of their expanding participation the labor force, particularly in better paying career jobs. But it comes at the expense of men's opportunity for growth in compensation, because of the increased competition for jobs. It has probably also tended to hold down the level of investment in technology below the level that would otherwise have occurred, because with more available workers there is reduced demand for productivity-enhancing technology as a substitute for labor.

When men and women have similar desires to hold down careers, we can't be too surprised that it then takes two careers in a family to maintain a middle class standard of living. And we shouldn't be surprised that the desire of women to compete equally with men in the workforce shows up in a reduced level of compensation for men. These results were almost unavoidable, since economic theory is really a good description of the evolution of economic systems over time.

No, I'm not an economist. Just a physicist turned business owner, who then learned that economic theory is for real.

Posted by: Robert Crawford on May 26, 2006 at 9:04 PM | PERMALINK

I am in general agreement with the oil embargo/Bretton Woods theories as being key to understanding the decline of the American middle class.

And this may seem off-the-wall to many of you, but I believe that Watergate played a part as well. For it was ultimately the economic power and political awareness of the American middle class that drove Richard Nixon from office. No sooner then had Nixon resigned, the mandarins were determined that something like that must never happen again, and this meant that the power of the middle class had to be broken. Call me crazy, but...

Posted by: dr sardonicus on May 26, 2006 at 9:12 PM | PERMALINK

jefff,

Actually this partially explains why housing is less affordable now than it was in 1973, it does not conflict with the claim.

Huh? If housing is less affordable now than it was in 1973, how do people afford to live in much bigger houses now than they did in 1973?

Posted by: GOP on May 26, 2006 at 9:17 PM | PERMALINK

I seem to recall that Nixon took the trade dollar off the gold standard in 1973 (or was it 1972?) Going from a specie currency to a fiat currency would most likely account for a large part of the wage stagnation.

Posted by: old fogey on May 26, 2006 at 9:20 PM | PERMALINK

There was a terrible recession in 1973, partly due to the Arab oil embargo, right? The stock market went down to 735 or something awful like that. It's gone up and up and up ever since. But that's interesting, that the stock market has grown enormously, but income hasn't.

But let's face it-- we didn't all have two cars per family, and we didn't go out to dinner twice a week. I suspect that the "average" income includes both much better off upper middle class types, and much worse off working class types.

Then again, I remember senior partners in even small lawfirms earned $400K a year-- and few of them do now. And doctors used to earn better livings too, from what I can tell.

Posted by: aaaa on May 26, 2006 at 9:30 PM | PERMALINK

If housing is less affordable now than it was in 1973, how do people afford to live in much bigger houses now than they did in 1973?

For one thing people had savings, as opposed to massive debt. Also, most homes at that date could still be supported by one person working full-time, with maybe a little extra money brought in by the spouse. Also, it was a lower percentage of household income.

Then too, it was itself a form of real savings since a much higher equity requirement existed. If a calamity struck the family, you could always sell the house and have resources left.

Also, the much bigger houses are often made of crap.

Posted by: jim p on May 26, 2006 at 9:36 PM | PERMALINK

A couple of ways people could afford bigger houses w/o being wealthier is that houses can be built for less (productivity gains) or the purchaser can chose to spend a greater % of their income on their house.

Comparing house size over time is not likely a good measurement of wealth.

Posted by: lownslowav8r on May 26, 2006 at 9:37 PM | PERMALINK

AdventureGeek says:

I've always wondered about 1972. It seems to have been a pivitol year for America. We know it was the year of peak oil for the US, the end of the gold standard and the break down of Bretton Woods. I don't think it's a conicidence that wages peaked (and they really just stopped dead, no gradual slowdown) that year as well. What else happened that year?

Didn't the gang that's in the white house get their start under Nixon about then? They got the ball and ran with it.

I was 25 in 72 and I'd say you've 'bout nailed it.

Posted by: slanted tom on May 26, 2006 at 9:39 PM | PERMALINK

America's postwar upsurge lasted barely 3decades. The tidebegan to turn in the eary 70s. Between 1970 and 1980, family incomerose less than 7%.

Do you just uncritically accept and regurgitate everything you read?

From the Census Bureau's Historical Income Tables - Families:

Median real family income, 1970: $41,568

Median real family income, 1980: $45,647

Real dollar increase between 1970 and 1980: $4,079

Percentage increase between 1970 and 1980: 9.8%

And that small increase resulted entirely fromthe the factthat additional family members were joining the workforce.

This seems highly unlikely. Please substantiate this claim.

The most vivid evidence of decline is found in the unremitting drop in men's earnings since 1970.

Median real income for men has not declined. It has remained more or less constant as measured by the CPI. But as I said earlier, the CPI substantially understates economic growth. Brad DeLong estimates that true real incomes have increased by 10-25% more since the late 1970s than the CPI-adjusted figures.

By outward appearances, there is still pleanty of money around, it is landing in fewer hands.

No, the basic picture is that almost everyone has gotten wealthier, but that the rate of increase in wealth has been higher for richer Americans than for poorer ones. The pie is sliced more unequally than it was, but it's also a much bigger pie, and almost everyone's slice is bigger than it was.

Incidentally, the biggest increase in economic inequality of the past 30 years occurred during Clinton's presidency.

Posted by: GOP on May 26, 2006 at 9:42 PM | PERMALINK

"The buying power in 1973 was hugely greater dollar for dollar. A nice home was $67,000 in Orange County (I bought one) but that home would sell now for $800,000. It takes a lot of wage growth to match that inflation.

According to the National Association of Homebuilders, the average home size in the United States is now 2,200 square feet. In 1970, it was only 1,400 square feet. And I bet a much higher proportion of homes today also have many other desirable features, like central heating and cooling. This obviously conflicts with the claim that housing is less affordable now than it was in 1973.

Posted by: GOP "

That may be averages but I'm talking about specifics. The house is on a 1/2 acre of Mission Viejo and had about 2800 square feet. My previous house was in South Pasadena and I sold it for $36,000 in 1973. About 12 years ago a friend gave me a brochure from an open house. It was for sale for $895,000. It was 1500 square feet on a lot 50 x 100. The difference was the proximity to downtown LA.

Inflation is a terrible tax on kids. Those of us who owned houses when it began, made out but many did not. We are getting back into an inflationary cycle.

Posted by: Mike K on May 26, 2006 at 9:50 PM | PERMALINK

OK, I understand most, but why do females have the pointy tops and men are square heads? What? Flat tops are in style again.

Posted by: Matt on May 26, 2006 at 9:52 PM | PERMALINK

"Incidentally, the biggest increase in economic inequality of the past 30 years occurred during Clinton's presidency."

Some data please.

Posted by: Sparky on May 26, 2006 at 9:59 PM | PERMALINK

For one thing people had savings, as opposed to massive debt. Also, most homes at that date could still be supported by one person working full-time, with maybe a little extra money brought in by the spouse. Also, it was a lower percentage of household income.

Do you have any actual evidence for any of these claims? According to this press release from the National Association of Realtors, the Housing Affordability Index reached a 30-year high in 2003. And as I said earlier, homes have also been getting bigger.

Posted by: GOP on May 26, 2006 at 10:04 PM | PERMALINK

Productivity is the underlying guide to a worker's worth. If pay does not stay in line there are factors affecting such. The legal and the power or generality of unions may have also affected the same.

The easy conclusion is that there are too many workers. That's why the right trolls say Europe has too few. From a business point of view, if there is an over-supply of skilled, even graduate or post-graduate workers, all the better. Lower employee costs. Even the benefits, such as pensions or health care, can be degraded.

For women, there would have been a gap to close as they adanced form unskilled work, through semi-skilled work to the present. Now they are more than 50% of undergraduates. We can argue abour what work they get into but we can't argue about peer to peer. Off the top of my head, women's pay is still 70-75% of men's pay for substantially the same work.

I am no longer married. Wouldn't it be a counter balance if, when a woman gives up time to give birth and raise a child, they don't totally sacrifice their career? As a man, would you do the same?

Posted by: notthere on May 26, 2006 at 10:07 PM | PERMALINK

Kevin: Could you weigh in here with your source for this graph? I could spend hours looking for it or you could tell us where you got it. Lots of speculation going on here...

Posted by: Sparky on May 26, 2006 at 10:08 PM | PERMALINK

Where all the money goes: we already know that it goes to the top few percentiles, who can leverage more and more due to Repiglican policy shifts. Some of that is the "financialization" of the American economy. As for people really being better off than the chart implies, as claimed by GOP et al, note that much of that is due to both spouses working! Income per hour has stagnated, or fallen, so if both spouses work (as now usually the case) then the couple's standard of living is comparable to what a man could bring home to a wife in the '70s. (Hence apologists like GOP for the trickle-up shakedown can seem superficially to be right, as often their tack.)

BTW, any such chart should show hourly or equivalent income, so we can see what we get per hour of work.

Posted by: Neil' on May 26, 2006 at 10:11 PM | PERMALINK

No, the basic picture is that almost everyone has gotten wealthier, but that the rate of increase in wealth has been higher for richer Americans than for poorer ones. The pie is sliced more unequally than it was, but it's also a much bigger pie, and almost everyone's slice is bigger than it was.

Incidentally, the biggest increase in economic inequality of the past 30 years occurred during Clinton's presidency.

Posted by: GOP on May 26, 2006 at 9:42 PM

This is completely inaccurate. Everyone has NOT gotten richer. The rich have become richer and the poor have become poorer.

In 1979,13,505 individuals or families earned the equivalent of $1M dollars a year. Only 15 years later in 1994, thatnumber hadjumped to 68,064.

The pie did not get bigger.

Point of fact, In 1970, America ranked first in per capita output, the nearest rivals were Sweden, Canada, Denmark and Switzerland. The per capita figures in 1994 showed dramatic changes. The USA fell to fifth place, behind Switzerland, Japan, Denmark and Norway. More striking is that between 1970 and 1994, Italy, Japan and Austria all doubled their per capita production.

America is the world's largest market,measured by the amount of money available for shopping, and if that purchasing power is the criteria, we have the highest living standard. But being the leader in consumption does not create national wealth nor the prospect of a prosperous future. America is no longer first and is unlikely to regain its primacy.

Posted by: elrapierwit on May 26, 2006 at 10:11 PM | PERMALINK

There was a huge technology shift in 1979 that no one here has even mentioned - the invention of the spreadsheet. This allows the folks at the top to run the numbers and see how much more money they get if they don't give the workers a pay raise. Or if they lay them off. Or hire temporaries instead of permanent employees. The huge mergers and aquisitions followed by layoffs - busting out companies - trend of the 80s had its roots in the rising of the spreadsheet toting consultant class.

The spreadsheet allows a manager to privately work out the numbers. The IT department doesn't have to run a report. Justifications can be made later.

Spreadsheets have made a huge difference in the ways companies are run. No one seems to notice this, or make changes in corporate taxation and employment law to reflect this new environment.

Posted by: NotThatMo on May 26, 2006 at 10:11 PM | PERMALINK

Huh? If housing is less affordable now than it was in 1973, how do people afford to live in much bigger houses now than they did in 1973?

Posted by: GOP on May 26, 2006 at 9:17 PM

The usual appeal to the lowest common dittomenator. The loose use of "people" here as a generalization holding no subcategories is neccessary to cover up the disparity between sectors. Because of money being funneled to the top, maybe half the population can afford bigger (not neccessarily better quality) houses than average in the past, while the rest struggle to get any, or to find an apartment, and more and more at the lower end can't even do that.

Posted by: Neil' on May 26, 2006 at 10:17 PM | PERMALINK

Some data please.

See, for example, the Census Bureau's Historical Income Tables - Households. Between 1993 and 2001 (Clinton's term as president), mean household income for the lowest quintile increased by about $3,000. Mean household income for the highest quintile increased by a whopping $44,000. And for the highest five percent, by a staggering $86,000.

And that's just income. Non-income increases in wealth (mainly, the appreciation of assets like real estate and stocks) increased the disparity between rich and poor in America even more.

If you can find a greater increase in economic inequality under any other president of the last half century, in either absolute or percentage terms, please show it to me.

One of Clinton's primary economic legacies was a massive increase in the gap between rich and poor in America.

Posted by: GOP on May 26, 2006 at 10:19 PM | PERMALINK

I checked history in http://www.brainyhistory.com/years/1973.html for causes of male menapause. Some possible 1973 events:

Roe vs Wade: U.S. Supreme Court legalizes some abortions Woman, the poor things, had to go to work.

George Steinbrenner III buys Yankees from CBS for $12 million Very significant!

British Darts Organisation founded in North London. Chaos theory says this might be the cause.

Tap dancer Ray Castle measured at 1440 taps/min on BBC TV. Demonstrating the men had reached their peak.

Mushtaq Mohammad follows up 201 to take 5-49 vs. NZ Dunedin. The last time an Islamic won anyting in sports? Was this a sport?

U.S. dollar devalues 10 percent. Men finally gave up working.

Pope Paul VI publishes constitution motu proprio Quo aptius. And Latin finally died.

Dean tells Nixon, "There is a cancer growing on the Presidency". Nixon had his moles checked.

Indies troops invade Sikkim. Who were the Indies and what is Sikkim?

Netherlands recognizes North Vietnam. Finally they found the little place.

Ernie Banks fills in for Cubs mgr Whitey Lockman who is ejected during the game, thus technically becoming baseball's 1st black manager. Lower wage black people take control.

Thomas Bradley elected 1st black mayor of Los Angeles, California. Good God! More black people.

John W Dean tells Watergate Committee about Nixon's "enemies list" . The entire male population surrenders to police.

1st U.S. - China basketball game, U.S. collegiates beats Shanghai 96-61. China finally gives up on sports and decides to make widgets.

1st all - U.S. women's Wimbledon, Billie Jean King beats Chris Evert. Lesbos advance.

Bahamas declares Independence from U.K. and adopts constitution. Finally, a tax haven.

Billy Martin fired as manager of Tigers. Billy's first career move.

"...people have got to know whether or not their President is a crook. Well, I'm not a crook". Nixon reveals true identity.

President Nixon's attorney, J Fred Buzhardt, reveals presence of 18 minute gap in a White House tape recording related to Watergate. Failure of American consumer products?

US Psychiatrist say homosexuals are not mentally ill. Gays discover they are just wierd.

"Exorcist," starring Linda Blair and rated X, premieres. Sticking a cross in your croch only worth one X.

Posted by: Matt on May 26, 2006 at 10:21 PM | PERMALINK

From the Census Bureau's Historical Income Tables - Families:

Median real family income, 1970: $41,568

Median real family income, 1980: $45,647

Real dollar increase between 1970 and 1980: $4,079

Percentage increase between 1970 and 1980: 9.8%

Posted by: GOP on May 26, 2006

Income and Earnings: 1950-95 (in 95 dollars) from Census Bureau

Median Family Income .....Change During Decade
1950 21, 069

1960 28, 926 +37.3%

1970 36,410 +25.9%

1980 38,930 +6.9%

1990 41,223 +5.9%

1995 40,611 -1.5%

Earnings of Men (35-44)

1950 20,656

1960 28,457 +37.8%

1970 37,164 +30.6%

1980 37,046 -0.3%

1990 34,704 -6.3%

1995 31,420 -9.5%

Posted by: elrapierwit on May 26, 2006 at 10:29 PM | PERMALINK

August 15, 1971. President Nixon imposed wage and price controls, lasting 1,000 days in three phases.

Anybody mention this?

Posted by: Matt on May 26, 2006 at 10:32 PM | PERMALINK

This is completely inaccurate. Everyone has NOT gotten richer. The rich have become richer and the poor have become poorer.

No, the poor have NOT gotten poorer, they've gotten richer. See the income data I have linked to for details (which understates true increases in wealth, anyway). Obviously, this doesn't mean that every single member of the population has gotten richer. It means that, in general, poorer Americans are richer than they used to be.

In 1979,13,505 individuals or families earned the equivalent of $1M dollars a year. Only 15 years later in 1994, thatnumber hadjumped to 68,064.

I have no idea how you think this claim, even if it's true (you provide nothing to substantiate it) supports your claim that the poor have become poorer.

The pie did not get bigger.

The pie has most definitely gotten much bigger. U.S. GDP today is far bigger than it was in the 1970s and 1980s.

Point of fact, In 1970, America ranked first in per capita output, the nearest rivals were Sweden, Canada, Denmark and Switzerland. The per capita figures in 1994 showed dramatic changes.

Per capita output of what? The measurement of a country's production of wealth is GDP - Gross Domestic Product. GDP is a measure of the total value of goods and services produced by an economy. Whatever "output" you're referring to, it's not the right measure.

America is the world's largest market,measured by the amount of money available for shopping, and if that purchasing power is the criteria, we have the highest living standard. But being the leader in consumption does not create national wealth nor the prospect of a prosperous future. America is no longer first and is unlikely to regain its primacy.

America's GDP (production of wealth) is by far the largest in the world. No other country even comes close. And its per capita GDP is routinely amoung the highest in the world, consistently higher than that of all other major first-world nations, and exceeded only by small countries in niche economic positions, like the tiny banking principality of Luxembourg or the (temporarily) oil-rich Norway.

Posted by: GOP on May 26, 2006 at 10:33 PM | PERMALINK

Sparky --
No sparks. Click the graph. Don't blush!

Posted by: notthere on May 26, 2006 at 10:33 PM | PERMALINK

elrapier,

If there is a point to your post of 10:29pm, I have no idea what it's supposed to be.

You claimed: "Between 1970 and 1980, family incomerose less than 7%." In response, I linked to and quoted Census Bureau data showing that median real family income increased by almost 10% between 1970 and 1980.

Where does your "less than 7%" figure come from?

Posted by: GOP on May 26, 2006 at 10:38 PM | PERMALINK

And Arthur Burns, and incredible dumbshit central banker, finally discovers that inflation is a monetary thing.

From:

http://www.econreview.com/events/wageprice1971b.htm

"While there were skeptics in August, 1971, there were a great many who thought "temporary" wage and price controls could cure inflation. By 1974, this notion was thoroughly discredited, and attention gradually turned toward a monetary approach to inflation. In a complete reversal, the policy to curb inflation in now thought to be an increase in interest rates rather than an attempt to hold them down."

Posted by: Matt on May 26, 2006 at 10:45 PM | PERMALINK

Because of money being funneled to the top, maybe half the population can afford bigger (not neccessarily better quality) houses than average in the past, while the rest struggle to get any, or to find an apartment, and more and more at the lower end can't even do that.

Well, as you say, maybe. But unless you can provide some actual evidence showing that housing is less affordable for those below average (below average what? Wages? Incomes? Assets?), that's all it is--a "maybe."

Posted by: GOP on May 26, 2006 at 10:47 PM | PERMALINK

KEVIN: WHY 1973? GREAT QUESTION By chance, I happened to be pondering this the last few days.

I highly recommend you invite a few guest economists to weigh in. Brad De Long, Galbraith, Dean Baker, Krugman???

My understanding is that the US economy was surging post WWII. More for everyone. We were the big dog. It was a time of great expansion as we built out suburbs at home and helped rebuild Europe and Japan. At the same time, since the New Deal, American unions had made a deal with business to protect wages, seniority, pensions, provide healthcare, etc. and in turn the unions agreed not to interfere in the larger questions of governance and regulating the corporate economy (in contrast to European unions). But around 1973, the economy went stagnant as globalization began the leveling of the American surge. Unions began to lose bargaining power while manufacturing fled to other countries. That would be my guess for the core problem: the End of the Red Hot Economy as the rest of the world rose up. Perhaps the oil crises also contributed. I would reject either foreign workers or increased women in the workforce as explanations.

Posted by: geo on May 26, 2006 at 11:00 PM | PERMALINK

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Posted by: biu on May 26, 2006 at 11:04 PM | PERMALINK

Look what got slipped into the Senate's immigration bill that isn't going to help matters any.

Posted by: Maeven on May 26, 2006 at 11:26 PM | PERMALINK

I am a master economist because I'm a right-winger.

I am also very gay.

Do you enjoy my excessive need to dominate a thread? I'd apologize, but I'm a lonely sociopath who doesn't care.

Posted by: GOP on May 26, 2006 at 11:29 PM | PERMALINK

Y'all are overthinking this.

The early 1970s is when the Great Backlash began to kick in - and Americans began to think electing "conservatives" would be a good idea.

It all flows from that.

And really, I'm only half-kidding.

Posted by: Alek Hidell on May 26, 2006 at 11:42 PM | PERMALINK

Sparky: Some data please.

GOP is arguably correct in his assertion, as the GINI index increased 6.45% from 1992-2000. However, the vast majority of that came from a 4.41% increase in 1993; discounting that single year--arguably a hangover from Bush41--the majority of income inequality in the last 20+ years occurred during the Regan/Bush41 years (>3.5%, see here and here).

Posted by: has407 on May 26, 2006 at 11:48 PM | PERMALINK

As a member of the class of '73, I vividly remember the difficulties getting a job after college.

A few stray thoughts:

I think women entering the work force in such numbers is as much due to necessity (i.e. stagnant male wages) as social forces. It takes two incomes these days...

We no longer make many of the things here that are part of our consumer expectations: no tvs, no dvds or players, no baseball gloves (!). One reason we can buy these things is many good factory jobs are now overseas. Our stuff is cheaper but the jobs are gone.

Unions are withering away and we all get to negotiate our salaries one at a time. A friend who has to be the last of the Texas union officials says master union carpenters on the major downtown projects get essentially the same compensation package today that they received in 1985. I can hardly wait for everyone to negotiate their own health insurance premiums.

My father made 27k a year in the early 70's and he sent 3 of us to college: 1 Ivy League, 1 small east coast private school, 1 state school. My wife and I combined make 4 times that and we will be lucky to afford to send 3 kids to state schools here in Texas.

I think the large boomer cohort has a role in stagnant wages. It is also clear that immigration plays a role. As for the daughter above who wants to be an electrician: there will be lots of competition for that job in the years ahead. That's a great job for a young person from Mexico. The trades here in Texas are increasingly dominated by undocumented workers. They work hard and do good work. A Mexican-American friend estimates that a current state owned building work site is 40% undocumented workers.

Delong points out that the housing of 35 years ago was centrally located, and that he couldn't afford the house he grew up in. The housing comparisons above are apples to oranges.

And stagnant wages are a dangerous thing for those of us in Texas who have seen our property taxes soar. I think it is a very common thing (and something I have never seen discussed) for property taxes in places like Austin to far exceed the income taxes of the working families that occupy them.

Posted by: otto on May 26, 2006 at 11:51 PM | PERMALINK

Maeven: Look what got slipped into the Senate's immigration bill that isn't going to help matters any.

Yeah, nurses will get screwed and there's hardly a word of this in the papers.

Well, at least the NYT had one article on it. But programmers, engineers, etc. will get screwed too and I haven't seen a single mention of it in the regular papers. See http://heather.cs.ucdavis.edu/CIS.pdf.

Just cry "shortage" any time you need to flood the labor market. No need to refer to silly things like hard, objective evidence (which indicates anything but a shortage).

US Congress to average American: screw you.

Posted by: alex on May 26, 2006 at 11:53 PM | PERMALINK

Look at all these infiltrators jumping through their asses to explain what is obvious: wages have been depressed in this country and jobs are being reduced to cheap service labor without benefits.

Welcome to the New World Order

Posted by: marblex on May 27, 2006 at 12:22 AM | PERMALINK

First: I was born in 39, was raising 2 little kids in mid 60's, not working, nor did my friends. My kids & their spouses are better educated and work harder than my husband did, and believe me, their quality of life is not close to what ours was. Their houses aren't any better. Of course, everyone has more things now, and eat out more, but job security? stress? time with family? debt? I feel sorry for them. I doubt they'll ever be able to retire. And when will their computer programming and accounting jobs be outsourced to India?

Posted by: carolanne on May 27, 2006 at 12:27 AM | PERMALINK

Comparing quality of life now to quality of life in 1973 is missing the point. Up to then, income was steadily increasing. In 1973, it suddenly flattened out. If nothing had changed, the median income should be at least $70,000 today. That's what you should be comparing to.

Posted by: sc on May 27, 2006 at 1:02 AM | PERMALINK

I am in a drunken stupor. Anything to calm the anxiety of my terrible loneliness.

Pass the green dildo again.

Posted by: GOP on May 27, 2006 at 1:06 AM | PERMALINK

Pink Floyd's "Dark Side of the Moon" was released in 1973.

I believe this explains the decline in wage growth among men.

Posted by: shingles on May 27, 2006 at 1:19 AM | PERMALINK

Nice job. Different world.
Posted by: Matt on May 26, 2006 at 10:21 PM | PERMALINK

Wealth. The small sections are the majority of the people:
http://www.faireconomy.org/research/wealth_charts.html

Income distribution:
http://www.faireconomy.org/research/wealth_charts.html
also income:
http://www.ceu.hu/eswm/zhuportugal.pdf#search='US%20income%20distribution'

But it's all easy to find if you care.

GOP has no idea even about the basics of economics. See prior thread Fuel Economy Wonkishness and search "standard of living". The guy's an idiot of the worst pot-stirring sort.

No one in their right mind, economically speaking, would disagree that there has been a huge flow of both income and, more particularly, wealth to the top 10% of the nation. See above links. Go to "uscensus.gov". The figures are definitely in.

It is a substantail shift that only compares to the early 20th century, and done with the approval of the majority of the US no matter how ignorant they might be.

Are CEOs worth Eleven Times what they were worth in 1980? Personally, I Don't Think So. Just a personal opinion.

Posted by: notthere on May 27, 2006 at 1:20 AM | PERMALINK

If nothing had changed, the median income should be at least $70,000 today. That's what you should be comparing to.

Posted by: sc on May 27, 2006 at 1:02 AM | PERMALINK

Haven't checked your figures but I know you're close. The implication is -- EXACTLY!

Posted by: nothere on May 27, 2006 at 1:23 AM | PERMALINK

Here's an idea. The industrial world outside the US was essentially destroyed in World War II, and took about 30 years to build back up. As a result, everybody needed to buy US products, and that meant unions could demand higher wages and corporations could give them. The halcyon days of the 1950s and 1960s where the UAW and the Big Three got each other rich. But then the world caught up and started making stuff themselves. We couldn't compete in these high labor industries and so we started a decades-long process of job attrition and wage stagnation in order to compete with companies in Asia and Europe. Some people make a ton of money nowadays in information-centric industries that arose recently. But the high-employee old industrial sector offers no competetive advantage on the world market anymore.

Posted by: Elrod on May 27, 2006 at 2:14 AM | PERMALINK

The reason is that the nature of wealth production in the economy has shifted. The majority of real wealth production in the economy has nothing to do with the work people do, its more or less a phantom increase in the value of existing material - stocks and real estate, most commonly.

People who have the resources to take part in this were already well above the median. But most of the people above the median still were not able to participate in the "free money" economy.

As wealth from the free money economy accumlated at the top, the power of the top to move the work based economy around dramatically increased. Factories moved from the unionized north to yokelized south, then to other countries. Even as workers became more efficient and skilled, the value of their work faded in comparision to the money to be made in the free money economy. After all, its a whole lot simpler to sit on some real estate for a year or collect stock options than it is to make and sell a million toasters at 10% profit.

The paradigm shifted from pay-workers-enough-to-buy-your-products to make-products-cheap-enough-your-workers-can-afford-them. And keep the difference.

The top eschalons of business not have little to do with the economy of work. They are all about creating an image of improved value for the company stock, because stock value increases create far more wealth for their efforts than any amount of goods sold. You can see this clearly by the dramatic rise in share cost vs. dividends paid out. Wealth concentrates, and increases the value of items soley because what the heck else can you do with the concentrated wealth that doesn't involve a bunch of actual work?

So, to summarize. Real wages have stagnated because the people who write paychecks no longer value work.

Posted by: Mysticdog on May 27, 2006 at 2:23 AM | PERMALINK

... "The top eschalons of business have little to do with the economy of work" ...

Posted by: Mysticdog on May 27, 2006 at 2:25 AM | PERMALINK

Conventional economic theory [supply vs. demand] would tell you that if prices [wages] stagnate for a commodity [labor] then you have an oversupply of that commodity and that prices [wages] will remain depressed until that oversupply works it's way through the system.

However, we know this is wrong because Mr. Drum has told us: "The overall economic effect of immigration is close to zero, and the number of people who are directly impacted by immigrants taking away their jobs is very small." Thus we must conclude that law of supply and demand is moot in matters concerning labor.

And so...the mystery of declining wages during a time when the largest number of immigrants came to America while jobs [both high and low skill] were relocated to other nations remains...an imponderable enigma to our nations elite.

Hmmmmm...sounds fishy.

Posted by: S Brennan on May 27, 2006 at 2:44 AM | PERMALINK

S Brennan-- It's probably just a coincidence. As we all know, immigrants don't use public services OR take jobs. All poverty, unemployment, and taxes could be solved if everybody would just illegally immigrate to some other country.

Posted by: American Hawk on May 27, 2006 at 3:07 AM | PERMALINK

I'd hate to see a smart person like GOP driven away by the ability of trolls to post under his name with a different e-mail address. Save it for parodying people who aren't actually posting.

Posted by: Noumenon on May 27, 2006 at 3:42 AM | PERMALINK

I'll place my bets on space aliens, the Elliot Wave Theory and Bigfoot, in that order.

But seriously. In 1971, the U.S. went off the gold standard with the collapse of Bretton Woods. Since then, we have been monetizing our debt through our out-of-control borrowing. As a result, our currency is worth less and less vis-a-vis the rest of the world. The end result is a declining standard of living.

Posted by: Stephen Kriz on May 27, 2006 at 6:51 AM | PERMALINK

What should we do about it? The only person who answered that question in a way that makes sense to me is the philosopher economist James Kroeger. In his Make The American People Richer he explains that the only way to drive up wages is to create a labor shortage through government spending. I really don't see any other way.

Posted by: Linette on May 27, 2006 at 8:19 AM | PERMALINK


What happened, I think, is that Science and Technology, though renamed and rehashed, NEW Operating system, FASTER processors [people cant see 60 hz A/C much less the divisions of 60 fps in video] new foods, new Digital....is all old.

Computers are about as valuable as a microwave oven. It breaks throw it away. The Binary bits and bites have not changed. Even the NEW architecture of the 'Z' systems is Old. No more empires to build. Nuclear Missiles and even newer scalar technology weapons, have sent us into a loop.
All of our History says War, Empire, Race, Religion..

Yet today most of those dogmas have gone out the window, our books and our words force us to regress and repeat as technology pans out leaving us in a state of political/corporate stupor for the last 40 years.

Posted by: Hamster Brain on May 27, 2006 at 8:32 AM | PERMALINK

This is kind of a funny thread. Let's review: in my working lifespan, the U.S. has created-

The largest prison population in the world- and the largest pool of medically uninsured in the industrialized world.

Military forces roughly equal to the rest of the world combined.

Approximately 47 dictatorships in foreign lands that have since been overthrown by native peoples who now hate us but pretend not to (see 'Military Forces' item above).

A suburban blight zone about 50 miles deep around every major American city.

Dead zones where we once harvested shellfish and bottomfish, tree farms where we once had forests, and global warming where we once had a stable environment. But there's a freebie- air pollution equal to two free packs of cigarettes a day in major cities.

A personal surveillance system for each of us to make sure we all get the benefits of going to jail.

So anyone who isn't blind or from the state of Missouri can see- we're ever so much better off than we ever were. Because we have shiny things.

All is for the best in the best of all possible worlds.

In 1750, that last statement was seen as over-the-top satire; in today's world, it's one of the seven impossible things every American must believe before breakfast.

Posted by: serial catowner on May 27, 2006 at 8:48 AM | PERMALINK

So where did all the money go?

Wall Street. (see All-knowing sage post of 7:14)

Just one example:
Top hedge fund managers now make 9 and 10-digit incomes.
In fact, in 2005 the top ten pulled in almost $7 billion dollars in total.
Thats billion with a "b".
For one year.
Not in stock options.
Cash.
$7 billion dollars.
10 people.

For example, James Simons of Rennaissance Technologies brought home $1.5 billion (give or take a hundred million) alone. And I'm sure everyone has heard of him.

Just to put the numbers in a little perspective. Mr. Simons just made the equivalent of the average lifetime incomes of about 175 surgeons (avg. annual income $250,000) or 350 airline captains, 1200 teachers, etc. And just think, Mr. Simons is so valuable to our society that he did it in just one year. A few years at that rate and he might even be able to retire.

Plus, thanks to the righteous Christian priorities of our Leader, Mr. Simons and his fellows just got a whacking good tax cut, too.

I'd be inclined to say something class warfarish here but I realize that our system is perfect, and divinely ordained. I mean, it must be. Everyone has flat-screen TVs.

Posted by: R. Porrofatto on May 27, 2006 at 8:56 AM | PERMALINK

I will remind you Mr. Porrofatto that it was during the Clinton admin. that people like Lay, Skilling, Winnick, Ebbers, Saunders etc. etc. were bilking the average investor for billions. Greed is a non-partisan cancer on a capitalistic society and abuses will always take place, that's inherent with the system. That does not mean the system is bad, it means that punishment needs to be assured, as in the case with all of the aforementioned.

Your implication that this abuse of capitalism is the result of this administration policies or religious beliefs is ignorant and disingenuous.

Posted by: Jay on May 27, 2006 at 9:36 AM | PERMALINK

serial catowner has a solid lead in today's Drama Queen contest with their 8:48am post which drips with pathetic elitism and faux sincerity. Well done.

Posted by: Jay on May 27, 2006 at 9:39 AM | PERMALINK

Gotta agree- if I'm elite, it's truly pathetic.

Posted by: serial catowner on May 27, 2006 at 9:50 AM | PERMALINK

Yeah, 1970 was pretty rough on the finances. Why, $100 would only purchase $212.31 of 1980 goods. And it would only purchase over $500 of today's goods.
So, GOP says that income incresed almost 10% during the 70s. However, one had less disposable income in 1980 than 1970. Wonder, when the average schmoe was better off?

Posted by: thethirdPaul on May 27, 2006 at 9:50 AM | PERMALINK

But really, what's bothering Jay? Did I leave out a few $trillion in freeway building or factory-farm subsidies?

All part of our plan for the future, don't y'know. After the hammer falls, we'll have the world's largest reserves of skateboard parks and 6-lane bicycle freeways. Everyone will envy our standard of living and want to move here.

Posted by: serial catowner on May 27, 2006 at 9:59 AM | PERMALINK

Graph

Posted by: data on May 27, 2006 at 10:42 AM | PERMALINK

You're really firming up that lead in the drama queen contest serial. The victim mentality you possess is laughable. Poor little serial, just trying to manage a productive lifestyle that's fair to all while everyone else is screwing them at every turn. What is a catowner to do but whine and moan and play the victim. Have fun.

Posted by: Jay on May 27, 2006 at 10:50 AM | PERMALINK

Sparky: You have made essentially the same points as I would. Thus I feel as marginalized as wage growth. . . ; ) Carry on.

Posted by: Sparko on May 27, 2006 at 12:10 PM | PERMALINK

Kevin, could you provide some information on where you got your chart? A link, maybe? You provide links to Delong and Sawicky, but nothing about where you got the data for your chart.

Posted by: nemo on May 27, 2006 at 12:40 PM | PERMALINK

Nemo:

Click on the chart for the source of the data.

Posted by: Aaron Adams on May 27, 2006 at 12:48 PM | PERMALINK

I feel we should consider cutting even more taxes for the wealthy, attack Iran, start buying Robertson's Miracle Muscle Muck, and help our leader think up a witty nickname for the new CIA boss.
That should steady the ship of state. Aarrrggg

Posted by: John Conley on May 27, 2006 at 12:50 PM | PERMALINK

http://carriedaway.blogs.com/carried_away/2003/10/us_government_s.html

A graph that shows big givernment republicanism hit its stride in 1973, and other than a small dip and a large dip under Clinton, republicans have been transfering the private sector to the public sector in an orgy of conservative socialism, fueled by their continuing suppot of a trade imbalance.

Posted by: Matt on May 27, 2006 at 12:51 PM | PERMALINK

Drum:

"What happened in 1973 that suddenly stopped wage growth for half the population in its tracks?"

Wasn't that the year Clinton and his penis were born?

Posted by: koreyel on May 27, 2006 at 12:54 PM | PERMALINK

I'm late to the party, but this is a fascinating post & interesting thread. In the interests of the community, here is my summary of the answers that have been proposed so far to answer the question "What happened in 1973 that suddenly stopped wage growth for half the population in its tracks?"

1. peak oil
2. monetary policy--Bretton Woods/the start of global capital flow/deficit spending paid for by borrowing from the rest of the world
3. the decline of labor unions
4. the loss of manufacturing jobs/the substitution of "knowledge" work for physical labor
5. competition from the rest of the world (as they rebuilt after WW2)
6. labor surpluses (eg, women entering the workforce, the boomer generation,immigration)
7. class warfare--exploitation of the masses by the rich

jefff at 8:40PM proposed a interesting reframing of the question: "So the question isn't just what happened in 1972 and the following decades, but what stopped happening." which suggests

8. the breakdown of a progressive social contract among Americans. Americans began to believe they could do better by themselves and that government was the problem. Conservatives, whose policies will favor capital over labor, began to win elections.

Meanwhile, the trolls deny that anything is happening--in fact, on the contrary, everything is fantastic!

It seems to me that a number of the factors that have been proposed are manifestations of population growth--that is, there are more people to do the work (nationally & internationally) so greater competition for jobs.

If anyone upthread proposed growth in productivity I missed it. By productivity I mean that one person can do the work that it used to require two (or more) people to do. One can get productivity either because people work longer hours (one consequence of competition) or because technology makes work effort more efficient.

Another factor might be that in the US, our demographics are changing. Our historic white male workforce is a decreasing proportion of the population. They have valued skills and a strong work ethic, but there are fewer of them.

Having a larger labor pool doesn't mean that new job entrants duplicate the strengths of the historic white male workforce. Women have different career paths and less continuous work force participation. Immigrants or outsourcing may not provide the same skill level. The combination of these factors--competition, a larger labor pool & fewer skills--allows employers to pay less. In addition, employers have incentives to substitute technology for skilled labor.

So I wonder if the flat median income for white men can be explained in part because they are a decreasing proportion of the workforce. Incomes have been flat because they add value but are "overpriced" compared to the new entrants to the workforce.

Posted by: PTate in MN on May 27, 2006 at 12:56 PM | PERMALINK

The official CPI currently in use significantly understates true inflation rate. The way the CPI is calcluated has undergone significant revisions over the last twenty-five years. You can thank Alan Greenspan and Bill Clinton for most of that, but the trend of statistical manipulation has continued under the Bush administration.

Merely using the pre-Clinton era CPI methodology results in an inflation rate of nearly 7%, or about double the commonly reported inflation rate.

ref.: http://www.gillespieresearch.com/cgi-bin/bgn/

If you take the true, higher inflation rate into account, today's median income is even lower compared to thirty years ago. Only the entry of more women into the workforce has allowed higher apparent prosperty.

But eventually, inflation will catch up to the household income gain provided by the second worker, too. Who will be the next to enter the workforce, the kids?

Posted by: vgnj on May 27, 2006 at 2:07 PM | PERMALINK

I would look at the GI Bill and the influx of more highly educated workers that resulted in the post-WWII period.

Posted by: Jim H on May 27, 2006 at 3:01 PM | PERMALINK

I was thinking '73, oil crisis, American auto industry goes down the tubes, along with other rust-belt industrial unionized jobs.

Posted by: Cal Gal on May 27, 2006 at 3:29 PM | PERMALINK

PTate in MN nailed it.

Even tho this thread is not about immigration, per se, it seems to be the one today to post on re the immigration bill.

So I need to put it out there that the immigration brou-ha-ha is the gay marriage of 2006.

The Republican'ts in the House are going to ride this ugly pony to victory in November. I watched Sensenbrenner on C-Span last night, and he's got it. He's got it by the tail. The Democrats, unfortunately, are grabbing the tar baby again (tip o the hat to SnowJob). Unka Karl got the issue rolling to give the Republican'ts an issue to demagogue and gosh darn it, they're running with it. (Can I get any more bad analogies in here?)

This WILL turn out their base and it will NOT turn out ours.

Posted by: Cal Gal on May 27, 2006 at 3:45 PM | PERMALINK

Contrary to the statements of various Republican apologists, the income gap is increasing
The growing disparity is even more pronounced in this recovering economy. Wages are stagnant and the middle class is shouldering a larger tax burden. Prices for health care, housing, tuition, gas and food have soared.
The wealthiest 20 percent of households in 1973 accounted for 44 percent of total U.S. income, according to the Census Bureau. Their share jumped to 50 percent in 2002, while everyone elses fell. For the bottom fifth, the share dropped from 4.2 percent to 3.5 percent.

Due to Republican tax policy, income disparity is increasing rapidly after Bush took office.

More than a million jobs have been added back to the 2.6 million lost since Bush took office, but they pay less and offer fewer benefits, such as health insurance. The new jobs are concentrated in health care, food services, and temporary employment firms, all lower-paying industries. Temp agencies alone account for about a fifth of all new jobs.
Three in five pay below the national median hourly wage $13.53, said Sung Won Sohn, chief economist for Wells Fargo.
On a weekly basis, the average wage of $525.84 is at the lowest level since October 2001.

I remember in 1972 a friend bought a Datsun, a rarity then. That was the end of the post-war boom and the beginning of the importation of manufactured goods on a large scale: transistor radios and TV's were then all imported as American manufacturing declined.

The income gap is showing up in booming sales of luxury items. Porsche Cars North America Inc. says sales are up 17 percent for the year. Strong sales at Neiman Marcus, Nordstrom and Saks Fifth Avenue overshadow lackluster sales at stores such as Wal-Mart, Sears and Payless Shoes.

The income gap accounts for the increase in outsized housing as well.

There are a record number of millionaires in the US
TNS found that there are now a record 8.2 million U.S. households with a net worth of more than $1 million, excluding primary residences. That's a 33 percent increase over the 6.2 million households that met that criteria in 2003.

The number of Americans in poverty is increasing as well
Census Bureau says 1.3 million more slipped into poverty last year; health care coverage also drops.
August 26, 2004: 1:54 PM EDT
WASHINGTON (CNN) - The number of Americans living in poverty jumped to 35.9 million last year, up by 1.3 million, while the number of those without health care insurance rose to 45 million from 43.6 million in 2002, the U.S. government said in a report Thursday.
The percentage of the U.S. population living in poverty rose to 12.5 percent from 12.1 percent -- as the poverty rate among children jumped to its highest level in 10 years, the Census Bureau said in an annual report.

Republican apologists know, but try to conceal with misleading data, income disparity in America is increasing rapidly under George W. Bush even as the condition of the average American worker is deteriorating badly. If it were not for easy credit and high debt, we would see a far worse situation.

Posted by: Mike on May 27, 2006 at 3:52 PM | PERMALINK

Actually, in terms of staying on point this must be one of the best 150-post thread ever.

I'll lob in one more thing, which although it did not happen in 1973 it did happen in 1991 -- the change in the tax law which disallowed a deduction to companies for wage income over $1M.

What happened next, was called "incentive compensation" roughly known as stock options.

We can save the issue of "who pays" for the unbelievable amounts of money earned by executives and members of boards of directors through stock options for another thread (because it is not at all clear where this money really comes from), but with the Enron court decisions this week its worth pointing out that . . . IMO .. . the grant of stock options has created a conflict of interest for executives and board members which is so great that it really can't be resisted.

Who on this board, if suddenely transported to the boardroom, could consistantly resist making decisions that would increase short term stock price? After all, the compensation of you and all of your superiors (the board of directors) depends not upon salary, but the price of the company stock. Even the most liberal of executives would know that many company employees also own company stock, so if cutting 1,000, 5,000, or 10,000 jobs would be viewed favorably by wall street, would result in an increase in stock price, would result in personal lifetime security for you and your family, would please your superiors, well, this is why companies are managed the way they are.

During one layoff period in the early '90's, a friend said "Wow, this never used to happen. My Dad worked for J.C. Penny for thirty years after WWII, and believe me, him and alot of those guys were not really necessary to that company. But, back then, you did not simply fire some guy because he was 45 and you could get another guy or gal at 25 to do the same work. It just wasn't done."

We need to change the law again, this experiment with tying executive compensation to stock performance has not worked out.

Any given "company" is more than just its top five executives.

Posted by: hank on May 27, 2006 at 4:12 PM | PERMALINK

In addition to Kevin's chart, as broad strokes (dates approximate), I'll offer the following observations:

  • 1973-2004: US GDP increase about 2.5X.
  • 1973-2004: US population increase about 1.4X.
  • 1971: the US starts running trade deficits, and has ever since.
  • 1968-1972: US GINI coefficient inflection from falling to rising; it's been rising ever since.
  • 1975-1983: US pulic debt as % of GDP inflection from falling to rising; it's been rising ever since (except for the late 90's).
I'll avoid the temptation to ascribe causality, but there are obvious correlations with some suggestions previously posted. That said, this looks like someone headed in the wrong direction and living on borrowed time.

Posted by: has407 on May 27, 2006 at 5:25 PM | PERMALINK

Cal Gal, if still out there: The trouble for the Repiglicans is that their base doesn't like what the leadership is doing about immigration (listen to Savage Weiner Mike.) But the leadership is afraid to go back to the harsh old House bill - they're the ones with a dilemma.

PS - GOP contradicted himself about the housing when he admitted that the disparity in income is rising, but said "people" can afford bigger houses (wrong framing in principle, regardless anyway.) But in any case, posters shouldn't appropriate his handle (even if Al's old none@none.com)

Posted by: Neil' on May 27, 2006 at 5:28 PM | PERMALINK

One of the obvious things that has changed over the past few decades is the percentage of the workforce that is unionized.

I've put some stats together which show the relationship between unionization and wages:

Does Unionization Matter?

The simple fact is that labor has had less political power as unionization has declined from about 30% to about 10% of the workforce. With no effective negotiating power wages have stagnated.

In addition I've put together some stats on the correlation between immigration and various economic measures. The principal finding is that the rise in immigration is related to NAFTA and that there is little connection between unemployment levels and immigration rates:

Immigration "Facts" Debunked

Blaming various powerless scapegoat groups is the traditional way to divert attention away from the real causes of economic distress.

Posted by: rdf on May 27, 2006 at 5:40 PM | PERMALINK

has407--interesting observations.

The GINI coefficient--for those of you like me who didn't remember (if I ever knew)--is a measure of the inequality of a distribution. It can be used to measure income inequality. Here is a map of the world in terms of income (or wealth) inequality.

Trying to restate has407's broad strokes in my own words, since the early 1970s, the US has grown faster than the population. However, wealth associated with that growth has not been distributed equally among the population. Income inequality has been increasing since c1968-1972. What is interesting is that much of our apparent standard of living is based on borrowed money.

But Kevin's initial question remains unanswered, "So where did all the money go?"

Posted by: PTate in MN on May 27, 2006 at 5:57 PM | PERMALINK

RDF,

This dicussion is about wages, NOT lost jobs so your point:

"...principal finding...that there is little connection between unemployment levels and immigration rates."

May or not be valid, but it does not speak to declining wages.

As I said above:

"...Conventional economic theory [supply vs. demand] would tell you that if prices [wages] stagnate for a commodity [labor] then you have an oversupply of that commodity and that prices [wages] will remain depressed until that oversupply works it's way through the system.

However, we know this is wrong because Mr. Drum has told us: "The overall economic effect of immigration is close to zero, and the number of people who are directly impacted by immigrants taking away their jobs is very small." Thus we must conclude that law of supply and demand is moot in matters concerning labor."

pixie dust anyone?

Posted by: S Brennan on May 27, 2006 at 6:40 PM | PERMALINK

PTate in MN: So where did all the money go?

Part can be explained by increasing income inequality; by the GINI coefficient that accounts for somewhere between 10-15% in the past 30 years. (However, it's worth noting that the typical GINI coefficient measure based on quintile's tends to understate inequality. Also, the official US calculation changed in 1992-1993, which produced an abberation which GOP et. al. take glee in pointing out as an indictment of Clinton.)

Another part is the lie of using GDP (whether aggregate or per-capita) as the primary measure of "prosperity"--as if production and consumption are the ultimate measures. And that I would offer belatedly as a root cause... The death of Big Ideas. Of goals more lofty and substantial than to simply produce and consume more than the previous generation.

Posted by: has407 on May 27, 2006 at 7:32 PM | PERMALINK

has407: "Another part is the lie of using GDP (whether aggregate or per-capita) as the primary measure of "prosperity"--as if production and consumption are the ultimate measures. And that I would offer belatedly as a root cause... The death of Big Ideas."

An excellent point! Upthread other people touched on the idea that our quality of life has deteriorated over the past 30 years. Our houses may or may not be bigger. We may have more cars, more stuff. But are we simply consumers or is quality of life something bigger than stuff?

Posted by: PTate in MN on May 27, 2006 at 10:37 PM | PERMALINK

The number of people in the 35-44 age group has grown from 25 million in 1980 to 45 million in 2000. Prior to 1970, the growth in that demographic was comparatively slow.

(see http://arunsmusings.blogspot.com/2006/05/vanishing-american-dream.html)

I think the rapid expansion of this demographic has something to do with its (relatively) smaller share of the pie.

Posted by: Arun on May 28, 2006 at 8:15 PM | PERMALINK




 

 

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