Are working class wages really still a malady?
The Bonddad Blog: Are working class wages really still a malady? New Deal democrat
Via Kevin Drum, NY Times columnist Nick Kristof says, “There isn’t a good term for the bundle of pathologies that have afflicted working-class Americans . . . .”
“One gauge of how many Americans are struggling is that average weekly nonsupervisory wages, a metric for blue-collar earnings, were lower in the first half of 2023 than they had been (adjusted for inflation) in the first half of 1969. That’s not a misprint.”
Drum says that’s not true if you use the PCE deflator rather than CPI. But I’m dissatisfied for another reason – I don’t think weekly measures are appropriate.
Here is the graph of Kristof’s metric:
It does indeed show that weekly wages, even as of last month, were equal to wages in most of the latter part of the 1960s and early 1970s.
But the problem is that the work week itself has gotten much shorter in the past half century, declining from an average a little below 39 hours in the 1960s to under 34 hours in the past 15 years:
It’s no wonder that, in real terms, people working 5 hours less per week might be earning less.
Indeed, as I have pointed out many times, real average *hourly* wages for nonsupervisory workers (red in the graph below) made a new all-time record earlier in the post-pandemic period, and are still higher than at any point before the pandemic now:
But let me make a further comparison with real aggregate payrolls for nonsupervisory workers. In the below graph I also divide payrolls by the number of workers on payrolls as well as by inflation (gold):
Real payroll per worker as of last month was within 1% of its value 50+ years ago in the late 1960s. If the economy continues to expand this year, there’s a pretty good chance it will surpass that level.
Bear in mind that the biggest reason of the decline in wages was the entrance of the huge baby boom into the jobs market, including for the first time most women. Once that was finally fully digested (in the 1990s) real wages started to rise again.
Real wages now are 20% – 25% higher now than they were at their nadir in the 1990s. There are certainly maladies affecting the working class, and over the long-term wages have been an issue, but certainly not recently.
Real average wages declining, while real aggregate payroll gains remain below peak, Angry Bear, by New Deal democrat.
Isn’t the problem really that the prices the rose during Covid never declined and are still considered “high”? Then there are house and car prices with high interest rates. Those things are real.
@Jackd,
Aren’t mortgage rates falling? I’d read that they had.
Aren’t interest rates falling? I’d read that they had.
US mortgage rates peaked at ~8%, last week it was down to 6.92%.
Source: RatesJan192024.PNG (396×262) (googleusercontent.com)
Calculated Risk Blog.
Yes but they are still high, historically and inventory is still limited.
Jack:
Twelve percent was high and it went even higher, We had a 12 percenter. There is only so much house one can buy even at 4% which it was mostly. The homes are over priced and poorly built. The lots are small. Still a supply and demand issue of which Labor is a small portion.
Bill, when I say, “high”, bear in mind that people have short memories. I’m not suggesting the Biden administration hasn’t done a good job economically; I’m just acknowledging people’s perceptions.
Jack:
And the perception needs to be countered which is one of the reasons I spoke up. I know it if not you I am speaking too. Hey what about Jamie Dimon? What do you think he is worried about? 2016 and it ends in 2026.
Jamie wants to get rid of bank regulations that interfere with profits.
One of the big problems with median usual weekly earnings is that the BLS only counts those who work more than an average number of hours per week. That’s right–the median number includes only those who work at least 35 hours a week while the average work week is only 34 hours. It’s like saying that the average college grade is a B because you don’t count those with a C or below!
If BLS established their minimum at 30 hours a week, a commonly used definition of full time work, median usual weekly earnings would actually be much lower.
There’s also the fact that wages haven’t kept up with GDP per capita. I know I harp on this, but GDP per capita is a measure of our society’s productive capacity. An hour of labor seems to get one a smaller and smaller share of it. There has been an increasingly growing difference between potential and actual wages.
P.S. Time studies show that hourly workers have been working less weekly while salaried workers have been working more. I wrote a piece on this in 2007. The situation hasn’t improved.