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Wednesday, February 7, 2018

          Wage Growth for 80% Stalls Since 1969        

Since 1969 average wages for nonsupervisory workers (NS) have dropped by 7% ($2,860 a year) while the GDP per capita expanded by 128%, more than doubling. The real (inflation adjusted) disposable personal income per capita has grown by 140% since 1969. 







Cumulative change in real hourly wages of men, by wage percentile, 1979–2011 

Source: Authors' analysis of Current Population Survey Outgoing Rotation Group microdata




                            

From EPI's latest report of March 1, 2018, The State of America's Wages by Elise Gould.
This report links to EPI's site "What Should You Be Making?", showing that an income of  $40,000 today should be making $60,939, had productivity and wage gains been equal.
That's about a 50% gain in income. Most of America's workers, the 80% who are nonsupervisory workers, should and could be making about 50% more. See my list below  that shows how incomes from $10,000 to $110,000 would have risen if coupled with productivity gains.   On average most workers would be earning about 50% more than they are earning today.  

Cumulative change in total economy productivity and real hourly compensation of production/nonsupervisory workers, 1948–2015

YearReal hourly compensationProductivity
19480.00%0.00%
19496.25%1.55%
195010.48%9.33%
195111.75%12.35%
195215.04%15.63%
195320.84%19.55%
195423.52%21.56%
195528.74%26.46%
195633.94%26.66%
195737.14%30.09%
195838.16%32.78%
195942.55%37.64%
196045.49%40.05%
196147.99%44.36%
196252.47%49.79%
196355.02%55.01%
196458.50%59.99%
196562.46%64.94%
196664.89%70.00%
196766.89%72.05%
196870.73%77.16%
196974.66%77.88%
197076.59%80.37%
197182.01%87.10%
197291.24%92.05%
197391.29%96.75%
197486.96%93.66%
197586.84%97.92%
197689.66%103.44%
197793.13%105.79%
197895.96%107.79%
197993.43%108.14%
198088.56%106.57%
198187.59%111.02%
198287.76%107.88%
198388.35%114.13%
198486.94%119.73%
198586.31%123.43%
198687.32%127.99%
198784.59%129.12%
198883.85%131.78%
198983.70%133.65%
199082.22%136.98%
199181.87%138.89%
199283.04%147.56%
199383.38%148.37%
199483.82%150.75%
199582.70%150.86%
199682.79%156.92%
199784.80%160.50%
199889.17%165.71%
199991.92%172.08%
200092.90%178.50%
200195.56%182.84%
200299.38%190.72%
2003101.63%200.17%
2004100.84%208.21%
2005100.05%213.58%
2006100.21%215.48%
2007101.70%217.70%
2008101.71%218.24%
2009109.69%224.75%
2010111.53%234.28%
2011109.06%234.67%
2012107.27%236.51%
2013108.32%237.57%
2014109.13%239.30%
2015112.53%241.08%
Cumulative percent change since 1948241.08%112.53%ProductivityReal hourly compensation-50050100150200250%1950196019701980199020002010

Note: Data are for compensation of production/nonsuper

Change in average real annual household income, by income group, 1979–2010

YearAll householdsBottom fifthMiddle fifth81–90%91–95%96–99%Top 1 percent
1979/01/010.0%0.0%0.0%0.0%0.0%0.0%0.0%
1980/01/01-3.3%-3.2%-3.6%-2.6%-2.2%-3.8%-4.7%
1981/01/01-3.5%-5.5%-4.8%-3.4%-2.6%-5.4%-5.3%
1982/01/01-3.8%-7.1%-7.0%-3.9%-3.9%-5.4%-0.8%
1983/01/01-3.1%-9.9%-8.6%-2.8%-1.3%-2.4%8.9%
1984/01/012.1%-6.2%-3.5%3.2%6.2%5.5%20.2%
1985/01/013.8%-5.5%-3.2%2.6%5.7%6.8%28.5%
1986/01/0111.3%-4.6%-0.6%8.1%11.3%17.2%68.5%
1987/01/017.7%-4.9%-1.5%9.0%13.2%15.7%36.0%
1988/01/0112.5%-2.4%0.2%10.6%15.1%20.2%70.7%
1989/01/0113.3%1.0%1.4%12.3%17.5%22.3%59.2%
1990/01/0112.4%5.0%1.5%10.2%14.3%18.4%52.9%
1991/01/019.7%6.4%-0.5%8.3%13.1%15.7%36.7%
1992/01/0112.7%7.6%0.2%9.9%15.3%20.3%55.1%
1993/01/0113.3%9.3%1.1%11.3%16.4%20.8%49.1%
1994/01/0114.7%10.4%1.4%13.4%18.3%23.5%53.5%
1995/01/0119.1%14.6%4.6%16.4%21.4%29.7%70.7%
1996/01/0123.1%13.4%5.8%18.1%25.4%34.4%87.7%
1997/01/0127.8%15.2%7.3%20.5%29.5%42.9%115.5%
1998/01/0133.7%19.0%9.6%24.8%34.0%50.1%143.1%
1999/01/0139.5%21.0%12.4%28.8%39.0%56.2%163.5%
2000/01/0141.6%16.7%11.6%30.5%42.2%59.5%187.0%
2001/01/0134.1%19.5%13.0%28.2%37.2%49.4%126.9%
2002/01/0128.8%16.5%10.6%26.3%34.4%43.4%100.6%
2003/01/0130.6%15.7%10.5%27.4%36.7%47.7%112.8%
2004/01/0138.4%18.6%14.4%32.3%41.6%56.6%153.5%
2005/01/0145.1%21.8%15.7%34.4%46.5%68.2%205.6%
2006/01/0149.5%25.4%16.2%37.2%49.5%72.6%229.2%
2007/01/0153.4%29.2%19.7%39.1%53.0%78.1%244.7%
2008/01/0141.4%26.1%15.3%35.3%46.6%63.0%178.7%
2009/01/0134.0%26.5%13.7%32.9%43.4%53.5%118.9%
2010/01/0137.8%27.6%14.1%33.5%45.9%58.9%153.9%
Cumulative percent change since 1979244.7%53.4%Top 1 percent96–99%91–95%Allhouseholds81–90%Bottom fifthMiddle fifth-50050100150200250300%1980199020002010
Note: Data are for comprehensive income. Shaded areas denote recessions.
Source: Authors' analysis of data from the Congressional Budget Office (2010)


From State of Working America.

From State of Working America.

And from State of Working America.

Real hourly earnings and compensation of private production and nonsupervisory workers, 1947–2013

YearHourly earningsHourly compensation
194711.0511.91
194811.1412.00
194911.7412.75
195012.1313.26
195112.1713.41
195212.5313.82
195313.1814.52
195413.3914.83
195513.9415.46
195614.4516.08
195714.6916.47
195814.7516.60
195915.1517.11
196015.4217.48
196115.6317.78
196216.0618.32
196316.2718.61
196416.6119.02
196517.0119.51
196617.1719.81
196717.3820.04
196817.7220.49
196918.0920.97
197018.2021.18
197118.6221.83
197219.4222.94
197319.4022.95
197418.8722.43
197518.6222.42
197618.8422.75
197719.0523.19
197819.2723.51
197918.9623.20
198018.4422.63
198118.2822.50
198218.2422.53
198318.2322.60
198418.1322.43
198518.0422.36
198618.1122.47
198717.9322.15
198817.8622.06
198917.7822.04
199017.6221.86
199117.5321.82
199217.5221.96
199317.5422.01
199417.6322.05
199517.6821.92
199617.8021.93
199718.1022.17
199818.5722.69
199918.8623.03
200018.9623.16
200119.1323.48
200219.3823.95
200319.4724.21
200419.3524.13
200519.2324.02
200619.3524.03
200719.5724.21
200819.5524.23
200920.2125.18
201020.3525.42
201120.1325.11
201220.0324.90
201320.1325.06
Real hourly rate (2013 dollars)Hourly compensationHourly earnings19501960197019801990200020101015202530
Note: Private production and nonsupervisory workers account for more than 80 percent of wage and salary employment.
Source: EPI analysis of Bureau of Economic Analysis National Income and Product Accounts data and Bureau of Labor Statistics Current Employment Statistics


Cumulative change in real annual wages, by wage group, 1979–2012

YearTop 1%95th to 99th90th to 95thBottom 90%
19790.0%0.0%0.0%0.0%
19803.4%-0.2%-1.3%-2.2%
19813.1%-0.1%-1.1%-2.6%
19829.5%2.2%-0.9%-3.9%
198313.6%3.6%0.7%-3.7%
198420.7%6.0%2.5%-1.8%
198523.0%8.1%4.0%-1.0%
198632.6%12.5%6.4%1.1%
198753.5%15.0%7.4%2.1%
198868.7%18.4%8.2%2.2%
198963.3%18.2%8.1%1.8%
199064.8%16.5%7.1%1.1%
199153.6%15.5%6.9%0.0%
199274.3%19.2%9.0%1.5%
199367.9%20.6%9.2%0.9%
199463.4%21.0%11.2%2.0%
199570.2%24.1%12.2%2.8%
199679.0%27.0%13.6%4.1%
1997100.6%32.3%16.9%7.0%
1998113.1%38.2%21.3%11.0%
1999129.7%42.9%25.0%13.2%
2000144.8%48.0%26.8%15.3%
2001130.4%46.4%29.0%15.7%
2002109.3%43.2%29.0%15.6%
2003113.9%44.9%30.3%15.7%
2004127.2%47.1%30.8%15.6%
2005135.4%48.7%30.8%15.0%
2006143.4%52.1%32.5%15.7%
2007156.2%55.4%34.1%16.7%
2008137.5%53.8%34.2%16.0%
2009116.2%53.6%35.4%16.0%
2010130.9%55.7%35.7%15.2%
2011134.0%56.9%36.2%14.5%
2012153.6%61.6%39.2%17.1%
Cumulative percent change since 1979156.2%153.6%55.4%61.6%34.1%39.2%16.7%17.1%Top 1%95th to 99th90th to 95thBottom 90%-50050100150200%1980198519901995200020052010
Source: EPI analysis of Kopczuk, Saez, and Song (2010) and Social Security Administration wage statistics

See State of Working America

This report by Bivens and Mishel from EPI summarizes the graphs found at their web page, State of Working America. A key paragraph: "Since 1973, hourly compensation of the vast majority of American workers has not risen in line with economy-wide productivity. In fact, hourly compensation has almost stopped rising at all. Net productivity grew 72.2 percent between 1973 and 2014. Yet inflation-adjusted hourly compensation of the median worker rose just 8.7 percent, or 0.20 percent annually, over this same period, with essentially all of the growth occurring between 1995 and 2002." Figure B of the report shows this brief wage growth spurt. 


The Economic Policy Institute published on March 3, 2018 an interactive bar graph with specific "real" wage increases for percentiles from 10th to 90th from 1979 to 2017. The lower earning 80% of workers saw on average a 10% wage increase over 38 years, 4 cents a year. The majority of male workers lost wages, but "all workers" up to the 50th percentile saw growth of 6.5% on average, over 38 years when productivity increased by 75%. 

Today the average NS worker receives $39,032 yearly in income. In 1969 he or she was receiving $41,892. In 48 years while the economy doubles its per person output, 80% of workers get a wage cut of 7%. The chart above states "hourly" income, and I have drawn from the Federal Reserve Chart which states "weekly" income. Let's imagine that average wages grew commensurate with the whole economy's growth; that $41,892 income would be 128% higher, $95,513. The economy doubled in per capita output, why did the wages not grow equally? Even I think that is unrealistic. But between the years 1946 and 1971 the two growth rates matched.

In 1979 “nonsupervisory workers” (NS) earned $38,584 a year (in dollars adjusted for inflation, or “real”). Thirty-eight years later, in 2017, NS workers earned 1% more, $39,032 a year, on average. 
The real GDP per capita increased, 1979 to 2017, by 83% (see https://fred.stlouisfed.org/series/A939RX0Q048SBEA)
The BLS states that real wages for NS workers increased by 0.7% in 2017. Hourly wages increased by 0.1%, and hours worked increased by 0.6%, giving a total increase of 0.7%. (see here: Table A-2, https://www.bls.gov/news.release/pdf/realer.pdf
What was the increase in GDP per capita for 2017? The Fed reports a 1.8% increase (https://fred.stlouisfed.org/series/A939RX0Q048SBEA
Another way to state it: the NS workers wages increased at 39% of the rate of per capita income increase, in 2017, a good year.   
The BLS says about NS workers: “These groups account for approximately four-fifths of the total employment on private nonfarm payrolls.” 












Cumulative change in hourly productivity, real average hourly compensation, and median compensation, 1973–2011

Note: Data are for compensation of production/nonsupervisory workers in the private sector and productivity of the total economy.
Source: Authors' analysis of unpublished Total Economy Productivity data from the Bureau of Labor Statistics Labor Productivity and Costs program, data from the Bureau of Economic Analysis National Income and Product Accounts, and Current Population Survey Outgoing Rotation Group microdata


From State of Working America
A web page produced by the Economic Policy Institute (EPI) states that if wages for NS workers had kept pace with the economy’s growth rate, then an income of $39,032 a year in 2017 would grow to $58,825, some $19,793 higher. Approximately a 50% gain in income. I calculate that all incomes below $80,000 would be earning approximately $20,000 a year more — if wage growth had matched economy-wide growth.  I contend - albeit a radical claim -- that all 138 million NS workers would be making about $20,000 more each year. Multiply the $20,000 by 138 million and arrive at $2.7 trillion, which is 16.6% of the total national income. The researcher at University of Texas’ Inequality Project, Olivier Giovannoni  states that the lower earning 90% of workers has lost between 15% and 18% of the national income, which is between $2.4 trillion and $2.9 trillion. This is the third essay in which I've posted this graph from Mr. Giovannoni:

(Link to graph, University of Texas, Inequality Project, Working Paper #66, page 34, also published at the Levy Economics Institute)

Main idea: most everyone who is an employee (nonsupervisory worker) could be earning $20,000 year more each year. All 138 million of them. 

Of course I'm not the only one to come to this sort of radical conclusion. The Economic Policy Institute in 2014 published an interactive web page, "What Should You Be Earning?". I collected the earnings' changes for the following incomes:

 Earnings --    Would Be   ----                                  wage income    
                                                                                   percentile                                      
$10,000    ----    $17,783        --- a gain of   78%            22              
$20,000    ----    $32,547                        of   63%            36              
$30,000    ----    $46,339                        of   54%            49              
$40,000    ----    $60,939                        of   52%            61              
$50,000    ----    $73,337                        of   47%            70              
$60,000    ----    $84,920                        of   42%            77              
$70,000    ----    $93,781                        of   34%            82              
$80,000    ----   $102,374                       of   28%            86              
$90,000    ----   $109,393                       of   22%            89              
$100,000   ---   $116.953                       of   17%            91               
$110,000   ---   $125,025                       of   14%            93               
$120,000   ---   $133,155                       of   11%            94               

According to the EPI table and the Social Security table, at least 61% of workers (all in the lower earning 61%) would receive more than a 50% increase in income. Of the 163 million American workers submitting W-2 forms to the Social Security Administration in 2016, 91% reported income below $100,000. This increase of 50% also coincides with the above graph by Olivier Giovannoni; if the drop from 55% to 38% were reversed, and the 55% level were again achieved, then the lower-earning 90% would receive approximately an income gain of over 50%. 

Next, I compare the relationship between the almost static "average weekly earnings of production and nonsupervisory workers" (see Federal Reserve graph) with the more robust growth of disposable personal income per capita, and the national income in billions.  
I looked up the average weekly wages at almost 10 year intervals for nonsupervisory workers (Column 1), converted it to constant dollars, then multiplied for yearly earnings. 

Column 1 -- “average yearly incomes for nonsupervisory workers; 

Column 2 -- Real disposable Income Per Capita, and 

Column 3 -- divides Column 1 by 2; one average worker was equal to the income for x average citizens. 

Column 4 -- is the inflation adjusted national income for each year, in billions:

Column 1 Column 2 Column 3 Column 4
 
1964 — $39,519 $13,485 2.9         $4,212 billions 
  1971 — $43,742 $17,191 2.5         $5,772 1981 — $41,808 $20,485 2.0         $7,356
1991 — $35,516 $25,396 1.4         $9,291
2001 — $37,024 $32,075 1.2 $12,658
2011 — $37,554 $36,307 1.0 $14,836
2018 — $39,000 $39,148 0.99 $16,416

The column 4 numbers quadruple; the column 3 numbers triple, the column 1 numbers do not move much, the column 2 numbers steadily decrease. 

One average worker’s income in 1964 equaled the post-tax income of almost 3 citizens. In 2018 one worker’s income equaled less than 1 citizen. 

In Column 1 income is rising, then falling and then rising over the years --   no change after 54 years  . Here's the BLS graph for "average weekly earnings, nonsupervisory workers" 

Data Type:     AVERAGE WEEKLY EARNINGS OF PRODUCTION AND NONSUPERVISORY EMPLOYEES, 1982-84 DOLLARS


The 2018 wage is 11% lower than the 1973 wage! 
Here's the Fed graph of same data, without adjusting for inflation (inflation calculator here).
And here is the employees in the "financial activities" sector: up 46%, while for all employees wages are down 11%. --- ????

We see an income high in 1973, and then it falls by about 5% in the 1970s, and then falls by 15% in the 1980s -- the Reagan years were not so hot in terms of wage drops, but were pretty good in terms of employment to population (see the BLS data). , and then rising little by little, but still in 2018 it remains 11% or $4,742 below the 1971 level. The chart by Giovannoni at my blog’s most recent essay shows the decreasing “income share” received by the lower-earning 90% of U.S. laborers, falling from 55% to 37%, a drop of 18% of national income. This is equivalent to an income loss of $21,000 for every one of the 138 million nonsupervisory workers in 2018 (in the lower-earning 90%), if the income ratios of 1970 had been maintained. Or, it shows a loss of $2.9 trillion in 2018 terms. 
Data source: BEA Table 2.1. 

The problem is not Trump or the Republicans, it is us not paying attention, not watching our neighbors slip into poverty and low income. 

What does that tell you?  As I said, this is the wage history of 80% of U.S. workers. 
Since 1964 the per capita GDP (output) of the economy has increased by 165%, which is double but not triple per person. 
The economy grew, the wages did not.  Who gets angry? Who gets the extra money not going to employees? 
What do the Democrats say, if anything? Who does Trump try to address when he says “you are getting a raw deal”?
Is he talking to the rich people? No, he’s talking to Democrats who vote for him and Republicans. What should the Dems do? 
It’s obvious. 

See another table at State of Working America.













Hourly and weekly earnings of private production and nonsupervisory workers, 1947–2011 (2011 dollars)

Real average earnings
HourlyWeekly
1947$10.67$428.98
196716.79636.48
197318.74690.63
197918.31651.82
198917.17592.72
199517.08586.44
200018.32628.57
200718.91640.23
201119.47654.87
Annual percent change
1947–19672.3%2.0%
1967–19731.91.4
1973–1979-0.4-1.0
1979–1989-0.6-0.9
1989–20000.60.5
1989–1995-0.1-0.2
1995–20001.41.4
2000–20070.50.3
2007–20110.70.6
1979–20110.2-0.1
Note: Private production and nonsupervisory workers account for more than 80 percent of wage and salary employment.
Source: Authors' analysis of Bureau of Labor Statistics Current Employment Statistics

Updated May 14, 2012

See how little the income gain is for the lower-earning 80% since 1973, at State of Working America.

The Bureau of Labor Statistics' graph and table on  "AVERAGE WEEKLY EARNINGS OF PRODUCTION AND NONSUPERVISORY EMPLOYEES, 1982-84 DOLLARS" shows that real wages in April, 1964 were higher than those in December, 2017, 53 years prior. Since 1964 the population has increased by 70%, the total national income has nearly quadrupled (up 289%), the per capita disposable income has nearly tripled (up 190%), and wages for 80% have dropped by 0.5%. (These % come from BEA.gov, Personal Income, Table 2.1) They took a brief upward swing until 1973, dropped some and recovered by 1980, then plunged and never recovered. But they are up by 5% over the past 4 years! If per capita income tripled (nearly), what prevented wages from growing? Where did the extra money go, or to whom? Why? Good choice? What can be done? See my essay "Solutions" and the most recent one on a "Radical Populist Budget."  

Since December 2014 real wages have grown by 5%. 



Here is the last graph, showing the income drop suffered by male workers age 18 to 34 from 1960 to 2014. After a spectacular increase from 1940, their incomes have slipped from $27,300 in 1960 to $15,000 in 2014. (From the Pew Research Center) What caused this income paralysis is a question everyone should be asking. In France during these years the incomes of the lower 50% matched the rate of growth of the entire economy. (See this excellent article at equitablegrowth.org.) The drop that occurred in the U.S. was not unavoidable. 


For male 18- to 34-year-olds, wages peaked around 1970 and the share living with parent(s) started its ascent


The Democratic Party needs a unified voice — The Dems have two voices. One sounds a lot like Republican-soft. 
They need a stronger, more assertive progressive voice. They should call for higher earnings and income for the 80% who work as employees, who have seen the growth of their incomes stop since 1964. Senator Sherrod Brown, Ohio Dem, has called to double the size of the Earned Income Tax Credit, from $70 billion to $140 billion. That is a real change. They should call for a $12 or $15 minimum wage, for a New Deal of public job creation, and advance ways to rein in corporate power and increase earnings of employees. The Center for America's Future proposes an eleven-point agenda that expands on this plan. 


The Dems need to be divisive. They mumble along, and the public dislikes them for not challenging the Republican corporatism. It's not exactly that, it's corporatism on an international scale driven by short-term financial speculation that is eroding our future prospects. The political system is swamped by the excesses of great wealth that over-shadow ever election and control the major media institutions. The Dems as yet do not project a real change; Trump presents himself as Mr. "marvelous", "tremendous", and "really great" to make people believe he has all the answers to stagnant income and disappearing jobs. He understands the psychological malaise. Sanders alone has drawn a plausible assertive plan. Remember one analyst claimed that under a Bernie Sanders presidency the  economy would grow at a rate of 5% a year?  Gerald Friedman made a strong case (and see here) for Sander's overall plan which included Medical for All; Friedman claimed it would spark lasting added output. Here in part is what Friedman claimed: 
The Sanders economic policy will achieve broad-based and sustained prosperity with the following:  The growth rate of the real gross domestic product will rise from 2.1% per annum to 5.3% so that real GDP per capita will be over $20,000 higher in 2026 than is projected under the current policy  Faster economic growth and redistributive taxation will raise the growth rate of median income from 0.8% per annum to 3.5%, adding nearly $22,000 to median household income in 2026  Higher GDP comes with increased employment, specifically nearly 26 million additional jobs in 2026 

Is it plausible to increase median income by $22,000 in ten years, from about $60,000 to about $80,000? Frankly I doubt it's possible. Such a gain would require a type of price control that takes the form of government provided health care, free higher education, subsidized housing, wide-spread rent control, and child care and pre-K education -- all of which would suppress household expenses which would drive up real income. But we should aim for this vision. If the "real disposable income" per citizen is as the BEA states, $44,501 (see Table 2.1), then a household of four should have a post-tax income on average of around $178,000, not today's current pre-tax income of  $91,000 (see USCensus data here). The Dems need to sell a vision. We could theoretically double the median income of all household sizes. The "disposable income" officially is there, we just do not share it. 

This may come as a shock to many readers. Are the BEA, the Census and the Social Security Administration publishing false data? Why are the actual incomes of all households so low in comparison with the official data from the BEA? Reader, can you answer that question? The answer, I believe, is that "we just do not share it." 
Why is this blog's title what it is? 
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I read the book The Great Financial Crisis by John Bellamy Foster and Fred Magdoff. Here is an hour YouTube talk from November 2017 by Fred Magdoff, author of a new book, Creating an Ecological Society: Toward a Revolutionary Transformation



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