Real Median Wages Declined 2% since 2003

[unlawflcombatnt]

Monday's New York Times published an article stating that median real wages have declined 2% since 2003. Wages and salaries now make up the lowest percentage of GDP ever recorded. (These numbers first started being recorded by the government in 1947.) Average real wages have shown a smaller decline, due to the increases in wages of the highest paid workers. In contrast to the wage decline, worker productivity has been rising steadily during the same period of time. Workers are sharing progressively less of the value of their increased productivity. Meanwhile, Corporate profits have risen to their highest share of the GDP since the 1960's. Even Federal Reserve Chairman Bernanke issued a warning on Friday about the unequal distribution of the economy's spoils.

Clearly an increasing share of the economy is going to companies, instead of workers. As per the NYT article, " worker productivity rose 16.6% between 2000 and 2005, while total compensation for the median worker rose only 7.2%, according to Labor Department statistics analyzed by the Economic Policy Institute..." (Meanwhile, the consumer price index increased 13% from December 2000 to December 2005. This computes to a -5.8% change in "real" inflation-adjusted hourly wages.)

Below is a chart from the New York Times showing the relationships between median wage declines and Corporate profit increases.


Economists have different explanations for the decline in median real wages. Among them are globalization and immigration. Both are increasing downward pressure on wages. As jobs move overseas, the demand for American labor declines. As illegal immigrants swell our labor force, the supply of labor increases. Both the decreasing demand for labor and increasing supply of labor are driving American wages downward. Immigration alone has been estimated to have suppressed average American wages $1700/year, or about 4%, since 1980. (See: George Borjas. ) 7 million of 143 million American jobs are now done by illegal immigrants. The decline of trade unions, and the bargaining power it gave workers, has also contributed to American wage suppression. Additionally, the buying power of the minimum wage is the lowest it's been in 50 years.

Though average family income has risen since Bush stole his first election, this has come exclusively from the rise in income of the most affluent families. However, even for workers at the 90th percentile of income earners, inflation has risen faster than wages. The income of the top 1% has become a progressively higher fraction of total American income. In 2004, the top 1% of earners received 11.2% of total wage income. This is an increase from 8.7% in 1996, and almost double the 6% fraction from 30 years earlier. Clearly the rich are getting richer, while the majority of Americans are getting poorer. Treasury Secretary Paulson correctly points out, however, that this trend has been going on for many years. However, there is little question that this inequality has increased dramatically under the Bush dictatorship.

The NYT article goes on to state that a large majority of Americans disapprove of Bush's handling of the economy. However, many feel the Democrats have not yet offered an economic agenda that appeals to voters. Will Democrats be able to turn this around, and convince Americans that they have a better economic agenda? Only time will tell.

unlawflcombatnt

EconomicPopulistCommentary

EconomicPatriotForum

___________
The economy needs balance between the "means of production" & "means of consumption."

[sknabt]

1. Gee, only 2%?

I guess the reason I've done so well is the $300 tax cut George Bush gave me. ;)

[unlawflcombatnt]

2. 2% is all they're admitting to

2% is all they're acknowledging, based on their deliberate underestimation of inflation. Many think inflation is much greater than stated by government concoctions, such as the consumer price index. If most things you're buying have increased 20-40% in the last 5 years, it's hard to accept a Consumer price index increase of only 4.3%.

[unlawflcombatnt]

3. Income Inequality Increased dramatically from 1967 through 2005

From 1967 through 2005, the difference between the income of the poorest and richest Americans increased dramatically. Real median income increased from 34% for the lowest 20% of Americans from 1967 through 2005. It increased only 29% for the 2nd lowest and middle quintiles during the same period. In contrast, median family income increased 49% for the 2nd highest quintile between 1967 and 2005, and 80% for the top 20%. For the top 5%, median income increased 102%.


Following the recession of 2001, median real incomes decreased in all income categories. However, the decline was greater in the lower income categories, and smaller in the higher income categories. The top 20% experienced a 1% decline in median income from 2000 to 2005. The 2nd highest lost 2%, the middle quintile lost 3.3%, the 4th highest (2nd lowest) quintile lost 4.8%, and the lowest quintile experienced a 7.5% loss in median income. Even with declining incomes, the fractions of total incomes were redistributed upward.

unlawflcombatnt

EconomicPopulistCommentary

EconomicPatriotForum

___________
The economy needs balance between the "means of production" & "means of consumption."