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Sunday, January 18, 2015

Have Wages Finally Turned the Corner?

Is the middle class "dying"?

For years we have been hearing from the Bureau of Labor Statistics, the Census Bureau, from private foundations and think tanks, on both the left and the right side of the political spectrum, that the "middle class is dead", that "middle class wages and income are declining", etc. etc.

Is this true?

Well, the inflation adjusted average income for non-supervisory and production workers, peaked back in 1972-1973, as you can see from these charts:

Above:  Average Weekly Earnings of Production and Non-supervisory Employees in 1982-1984 dollars.  BLS table CES0500000031.
Above:  Average Hourly Earnings of Production and Non-supervisory Employees in 1982-1984 dollars.  BLS table CES0500000032.

"Regular" workers, factory people, blue-collar workers, administrative workers, most transportation and utility workers, the workers included on these charts, have never recovered back to that peak of wages that they earned back in 1972-1973.

The average wages of "regular" workers declined in the early 1970's, pulled up a bit in the mid 1970's, and then really plummeted.  The big culprits in the late 1970's and early 1980's were the serious inflation of the late 1970's, caused to a great degree by the problems of oil supply in the 1970's, and then the Reagan Recession of the early 1980's.  Even though the economy recovered from the Reagan Recession, you can see from the charts that average wages of "regular" workers kept declining and bottomed out in early 1993  Clinton rallied his campaign workers with the slogan "It's the economy, stupid!", and that was true.

Regular workers had lost about 24% of their inflation-adjusted earnings between early 1973 and 1993, from a peak of $347 (inflation adjusted) in early 1973 down to $266 in early 1993.  

But average wages did start back up.  The 1990's were not a bad time, though I do know many people who struggled as their companies were merged, shuttered, jobs sent to other companies, etc.  This was particularly true if they were older.  

These regular worker wages meandered in the 2000's.  They were also pulled artificially up during the recession, which brought with it deflationary prices.. and wages that LOOKED higher.  Unfortunately, many fewer people were working, as we lost over eight million jobs during that recession.

But starting in 2011, regular average wages have pulled up, and they are now higher than they have been at any time since 1979, even with 11 million more people with jobs.

So "the end of the middle class" may well be a myth, but that doesn't mean that we shouldn't all be concerned.

We are still 13% below the highs of 1973, but we are 12% above the lows of 1993

There are many things that this chart doesn't look at.  I'll be investigating some of these things in the coming weeks, so check back.  These charts don't look at median income, median family income, income left after taxes, etc. (The latest Census numbers do finally show an increase in the inflation-adjusted median household income... more about that later.)  These charts only account for people who are working, not those who have retired, and we have more and more retirees every year now and we will for at least another decade.

But, starting after we turned the recession corner in mid 2010, inflation-adjusted wages for the middle class, for the "regular" worker, have risen more than at any time since the Clinton years.   

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