The typical male U.S. worker earned less in 2014 than in 1973
The typical man with a full-time job
the one at the statistical middle of the middle
earned $50,383 last year,
the Census Bureau reported this week.
The typical man with a full-time job in 1973 earned $53,294, measured in 2014 dollars to adjust for inflation.
You read that right: The median male worker who was employed year-round and full time earned less in 2014 than a similarly situated worker earned four decades ago. And those are the ones who had jobs.
This one fact, tucked in Table A-4 of the Census Bureaus annual report on income , is both a symptom of an economy that isnt delivering for many ordinary Americans and at least one reason for the dissatisfaction, anger, and distrust that voters are displaying in the 2016 presidential campaign.
What about women? Well, they havent closed the pay gap with men, but the inflation-adjusted earnings of the median female worker increased more than 30% between 1973 and 2014, to $39,621 from $30,182, according to census data.
But back to men. Why are wages for the typical male worker stagnating? After all, the U.S. economy has grown substantially since 1973. Output per person in the U.S. has nearly doubled since 1973, a ccording to the Bureau of Economic Analysis . And output per hour of work (minus depreciation) has increased nearly 2.5 times, according to a recent analysis by the Economic Policy Institute , a left-leaning think tank that produces reliable statistical analyses.
As I often do when confronted with puzzles like this, I contacted Larry Katz , the Harvard University labor economist.
He identified three factors to explain the stagnation of mens wages:
1. Although this is not the major factor, workers have been getting more of their compensation in benefits as opposed to the cash wages that the Census tallies. (The EPI chart takes that into account and tracks total compensation.)
2. Labors share of national income has been declining since 2000 and capitals share has been rising. Labors compensation (wages and benefits) has not been keeping pace with productivity growth. In their new analysis of this phenomenon, EPIs Josh Bivens and Larry Mishel argue, This decoupling coincided with the passage of many policies that explicitly aimed to erode the bargaining power of low- and moderate-wage workers in the labor market.
3. The most important factor, Mr. Katz says, is the rise in wage inequality, the gap between the earnings of the best-paid workers and the ones at the middle and the bottom that has been widening steadily since about 1980. Economists differ over how much of this is the result of globalization, technological change, changing social mores, and government policies, but there is no longer much dispute about the fact that inequality is increasing.
Its easy for Republicans to blame wage stagnation on Democrats and vice-versa. Its not hard to understand why so many voters (who dont need Census Bureau tables to understand whats happening to their paychecks) are drawn to candidates who acknowledge this reality, lambast incumbents for not doing more to address it, and style themselves as outsiders with fresh approaches to one of the nations most alarming economic problems.
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The typical male U.S. worker earned less in 2014 than in 1973
by David Wessel
Wall Street Journal
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The disconnect between productivity or GDP or any other measure of overall growth, and median income is stunning.
Somebody is collecting all that additional money. Can you guess who that is???
Yes, the population is nearly double so GDP would be much higher because there are that many more people. The cost of doing business in the US is very high today due to taxes and labor costs and we are no longer competitive in a global economy so I would expect to see wages declining.
Chinese labor is doing OK . A global perspective gives a different result .
If you ask very politely, Dean, perhaps someone will explain the notion of "per capita" to you...
Excellent article/graph Bob.
It really shows what has happened to the middle class since the 70's.
The seeded material is a little misleading because it is only for male workers full time 52 wks per year.
Here is a graph that does not paint as rosy a picture
Note the pink diamond shape objects, and how they are falling down as you follow the graph by year to year. They represent the ratio between the average income and the median income. The median has been losing ground to the average and is presently 65% of the average. This means that more of the new jobs are lower paying compared to past years.
The median U.S. income in 2014 was 28 thousand and change.
The average income keeps going up faster than the median is going up. There are more people not getting full time hours. More people having to work multiple jobs and have multiple worker households.
Look at your top post again it says GDP. Do I need to explain what GDP is to you?
If you have GDP of ten dollars and one guy willing to do the work do you think his wage is going to be higher than if you have three guys willing to do the work?
For number three I'll answer your question. How many Chinese goods were being sold in the US in 1973? Now can you see how it would affect US wages? Since then they've embraced capitalism and now are on the fast track to being the worlds largest economy.
It shows that not much happened that chart is adjusted for inflation. It is only slightly lower than in 73.
No doubt output per worker has increased that is what capital investment does. Technology is not standing still. We don't use the same equipment and technology that we did in 1973. Yes, more money has to go into capital these days just to be competitive. You can't compete if all you have are hammers made of stone.
LGL,
The seed's first graph shows both men and women, with women's income rising slowly but surely over the fifty years... while staying below that of men (of course
( ). If we imagine a combined graph, we can see that it would rise rapidly until about 1975, and then very slowly.
Your graphic is interesting. I'm not sure that I agree with "This means that more of the new jobs are lower paying compared to past years." While that may be part of it, I think it's simpler to say that high incomes have gone up much faster than the others.
I agree completely with your last paragraph.
Oh, my... It does say "GDP"! Gosh!
Ummm.... Dean??
If you ask very politely, perhaps someone will explain the notion of "GDP per capita" to you...
* * * sigh * * *
And if you ask politely I can explain to you why advancements in technology are always to end up with more productivity per worker. We are not going to stand still and live in a stone age. We are going to continue to make capital investments that increase our output per working hour.
Dean,
It shouldn't be lower at all.
It's all relative Bob, when high incomes go up, the other jobs become lower paying.
The 60's saw huge technological growth, that was far more costly, yet income kept up. BTW, businesses might be getting hit with slightly more taxes, but individuals have less taxes, especially the loopholes at the upper end.
You trouble me, Dean. Just when I am convinced that your posts are willful denialism... you put up something like this which makes me think that you simply do not understand, and do not dare ask...
Of course productivity goes up as technology improves. The nation creates more wealth. That is not in doubt. That is not the subject here. The rise of productivity is the dark line in the second graphic.
The subject here is "Where does that wealth go?" That second graph shows that until about 1975, hourly wages rose at about the same rate as productivity. That is to say, employees got their share of created wealth.
Then, from about 1975 forward, employee income very nearly stopped rising. Productivity continued to rise.
So I ask, "Where is the created wealth going now?"
And I answer, "To the already wealthy!" LGL's graphic on the next page presents these same phenomena in a slightly different manner.
Relatively lower paying, for sure. Nominally lower paying... not necessarily.
If top income rise much faster than the others....
Not directly. It transits someone's pocket...
Chernkov,
These loopholes only benefit individuals who have money but are avoiding taxes, like capital gains. They put it into trusts. The middle class lost their loopholes during the Reagan years, which was deductions for both interest on credit cards, etc and for life insurance. These had a huge affect on savings. Most middle class people used whole life insurance as a forced savings. Without the tax incentive, no one buys it anymore.
Our population has doubled since the 60's. It doesn't take twice as many people to produce twice as many widgets. We didn't have the global competition that we have today. I find that the real advancements didn't come until the mid seventies. In the sixties very few businesses had computers today everything is done with computers and the software licenses are very costly.
Also how many corporations were S corps in the sixties compared to today where the profits of the business are reflected on the individuals tax return?
Dean...
You're making this complicated. It isn't.
It is simple: More and more of the wealth created in America is going to fewer and fewer people.
This is not to say "Good!" or "Bad!". It is an observation of fact.
Exactly.
I understand the reasons behind that and it has to do with advancements in technology more global competition and an increase in population.
Actually, in the 70's my parents business had computerized registers. They cost over $5,000 each. In comparison, registers have gone down in real numbers. (under $2,000).
Think back to your first computer. Mine cost $7,000 and did next to nothing to my Mac, which cost $1,500. Tech has all done down in present value .
As for S corporations, I'm not sure about the number of S corps, since I wasn't practicing accounting then due to the fact that I was a kid.
Dean why should all the benefits of higher productivity(more profit) go to the people at the top?
Not how it happens, why should it?
There is an answer to that . Its called capital risk .
It is not, you are trying to isolate the US economy from the rest of the world. Like Petey said if you look at China they now have a growing middle class. In the sixties they were all very poor in China. You have to take into consideration the cost of doing business worldwide these days.
The middle class in America is losing ground to the growing middle class in other parts of the world.
Technology increases productivity. Increases wealth. Technology does not in any way determine how wealth is distributed.
China is finding that out now . US consumers are not buying a lot anymore . And the Chinese economy is suffering .
Feronia,
The ultra-rich have never gathered wealth at the rate they do today.
Great point Feronia.
If you trace the movement of labor starting in the 60's you'll see that as soon as labor becomes to expensive in a country it's moved to another...Japan to Taiwan. Taiwan to South Korea, etc etc. at some point the cheap labor will cease to exist.
Well put, Feronia.
The gains in productivity are coming from the capital investment.
If a farmer invests in a super productive new tractor for $500,000 dollars and he can find somebody he feels confident to drive that tractor for $15.00 per hour That is what driving that tractor is worth. It is the farmer making the investment and taking the risk not the guy who drives the tractor. The gains from that added productivity will go to the farmer and the people who built that tractor not the guy driving it.
Wages are determined by supply and demand not how much the business puts into capital investment.
If forty years ago it took some level of skill for a worker to produce a widget. Today with technology a worker can produce three widgets in the same about of time with less skill required. The worker is not entitled to a higher wage because he is not the one making the investment and taking the risk. His wage is determined by what his labor is worth in a competitive market.
As far a being concerned about a contracting consumer base I don't see it. I see an expanding consumer base rapidly growing in the Asian markets right now.
I agree it was the seventies when we started to switch our machines over from manually operated to computer operated but in the sixties very few businesses had computers. It was not the machine operators making the capital investment in those computers and machines that is why they are not entitled to the gains from that productivity boost. It did generate good paying jobs programming the computers that did not exist before. Wages are determined by what your skill is worth.