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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



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

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:

$10,000    ----    $17,845
$20,000    ----    $32,256
$30,000    ----    $46,855
$40,000    ----    $60,744
$50,000    ----    $73,299
$60,000    ----    $82,747
$70,000    ----    $92,308
$80,000    ----   $100,453
$90,000    ----   $107,919
$100,000   ---   $115,832
$110,000   ---   $123,807
$120,000   ---   $131,782

Of the 163 million American workers submitting W-2 forms to the Social Security Administration in 2016, 91% reported income below $100,000. 

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 average weekly wages in for several years 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 Disposable Income Per Capita, inflation adjusted, 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

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. 
We can see in Column 4 that the real national income grows steadily --  it nearly   quadruples  
In Column 2 we see the real average income per citizen grows steadily -- almost   triples  
In Column 1 income is rising, then falling and then rising over the years --   no change after 54 years  . We see an income high in 1971 falling by about 5% in the 1970s, and then falling by 15% in the 1980s, 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. 
So, if  today a worker earns $20,000, he or she could be earning $41,000, if $60,000 the worker could be earning $81,000, if $80,000 then it could be $101,000.  

Column 1 is the average non-supervisory worker’s annual income. Column 2 is the total national income, less federal taxes, divided by the total U.S. population, giving per capita disposable (after-tax) income. Column 2 comes from BEA.gov, Personal Income, Table 2.1, in chained 2009 dollars.  Column 3 divides Column 1 by Column 2. Column 4 comes from the same 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 lower-earning 80% gain in income 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 is a question not just economist need to ask. In France during these years the incomes of the lower 50% matched the rate of growth of the entire economy. 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 Dems need to be divisive. They mumble along, and the public dislikes them for not challenging the Republican corporatism. They need to sound like they have a real plan; Trump at the least asserts that his proposals are "marvelous", "tremendous", and makes people believe he has all the answers to stagnant income and disappearing jobs. He understands the psychological malaise and uses it to his gain. 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 Medical for All proposal that 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 

 It was plausible. It is plausible, the Dems need to sell a vision.