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Sunday, March 24, 2013

Real Wages Decline; Literally No One Notices

Your read it here first: Real wages fell 0.2% in 2012, down from $295.49 (1982-84 dollars) to $294.83 per week, according to the 2013 Economic Report of the President. Thus, a 1.9% increase in nominal wages was  more than wiped out by inflation, marking the 40th consecutive year that real wages have remained below their 1972 peak.

Yet no one in the media noticed, or at least none thought it newsworthy. I searched the web and the subscription-only Nexis news database, and there are literally 0 stories on this. So I meant it when I said you read it here first. In fact, there was little press coverage of the report at all, in sharp contrast to last year.

Below are the gory details. The data source is Appendix Table B-47, "Hours and Earnings in Private Non-Agricultural Industries, 1966-2012." The table has been completely revised since last year's edition of the report. The data is for production and non-supervisory workers in the private sector, about 80% of the private workforce, so we are able to focus on what's happening to average workers rather than those with high incomes.. I use weekly wages rather than hourly because there has been substantial variation (with a long-term decline) in the number of hours worked per week, from 38.5 in 1966 to 33.7 in 2012. The table below takes selected years to reduce its size.

Year     Weekly Earnings (1982-84 dollars)

1972     $341.73 (peak)
1975     $314.77
1980     $290.80
1985     $284.96
1990     $271.10
1992     $266.46 (lowest point; 22% below peak)
1995     $267.17
2000     $285.00
2005     $285.05
2010     $297.79
2011     $295.49
2012     $294.83 (still 14% below peak)

This decline is especially amazing when we consider that private non-farm productivity has doubled in this period:

But, if you've been paying attention, you know the drill: higher productivity plus lower wages = greater inequality. The question is, why aren't our media paying attention when real wages fall, yet again?

Cross-posted at Angry Bear.


  1. We need to raise the minimum wage to $10 an hour,and then add a dollar and hour every year,possibly more.

    1. If you add an hour every year, wouldn't you soon be working 24/7? I don't like that part of the deal.

    2. The data shown above are for median usual weekly wages, so it's likely that riasing the *minimum* wage would have little-to-no effect on the trend shown in the table.

    3. doc, the data are for mean, not median, weekly wages, but for the bottom 80% of the private labor force, which gives us a different way of excluding top incomes than using the median.

      This means that if you raised the wages of people at the bottom earning minimum wage, this figure would go up, since it is a mean rather than the median.

  2. You mean our corporate media whose profits keep going up and whose profits would only be reduced by an increase in wages? Those media?

  3. Ah, No. I think he means the more easily outsourced worker class struggles when wages are competitive. Raising the minimum wage only makes the matter worse. I am curious if the data set supports real wage declines across industries and levels of education. As more and more US workers seem to toil in low skill, localized jobs, e.g. healthcare and resturants, the fallout from globalization apparently is not bringing much fun when our educational, political, etc. class is focused on the solution set of 1950.

    1. I am an educated and credentialed professional and can tell you from my own experience as well as that of colleagues in law and high tech development, it is not just the low skilled, uneducated workers who are being replaced with labor from low cost countries. CPAs, attorneys, programmers are being replaced with labor from India, Philippines and other sources.

      Raising the minimum wage won't make it worse. It would improve our economy. Who is focused on 50's solutions?

  4. "f the approximately 5.8 million manufacturing jobs the U.S. lost between 2000 and 2010, according to McKinsey Global Institute, two-thirds were lost because of higher productivity and only 20 percent moved to places like China, Mexico, or Thailand."
    Rise Of The Droids: Will Robots Eventually Steal All Of Our Jobs?
    Obama must face the rise of the robots
    Technology will leave a large chunk of the US labour force in the lurch
    The Rebound that Stayed Flat
    Has been going on for a while, but is now accelerating....
    Labor’s Declining Share in the Computer Age
    America's New Economic Problem
    Seymour Melman at Cape Cod, July

  5. If the federal minimum wage were raised to $15/hr Wal-Mart wages would go up 50%; Wal-Mart prices would go up only 5% (retail wages 10% of costs) -- fast food wages would go up 107%; fast food prices would go up 35% (fast food 33%). 10-33% is pretty much the range of labor costs -- clustering close to 10% I believe.

    With half the labor force getting percentage wage increases that are multiples of their employers' percentage price increases their employers should do better than ever.

    Unrealistic? Wal-Mart supported the 2007 minimum wage increase from $5.15/hr to $7.25/hr so its customers would have more to spend.

    Wal-Mart would not like a minimum wage of $15/hr. Wal-Mart had to close 88 big boxes in Germany because it could not compete paying the same as everyone else. Since the late 1940s, economies on the continent (and since, around the world) have instituted sector-wide collective bargaining: all employees doing the same work (e.g., retail clerk) in the same locale work under one commonly negotiated contract. Only way to reset middle class mojo here.

    1. Thanks for the interesting points about Wal-Mart in the U.S. and Germany.

    2. You correctly ended your 1st paragraph with "I believe", meaning you are not providing any hard statistical reports or data to back your claim. You are working with fear mongering arguements by corporations whose only concern is their bottom line profits. So of course they are going full chicken-little mode citing our economic sky is going to fall to protect their profits.
      Try reading reports from individuals like Jeannette Wicks-Lim, an Associate Professor at the Political Economy Research Institute in Amherst, Massachusetts. She completed her Ph.D. in economics at the University of Massachusetts Amherst in 2005.
      Her groups study on Arizona's 2006 state wage increase only saw cost increase of 0.1 perfect for every $1.50.
      So what are we looking at for Federal increase to $15.00 dollars? Probably a total of 1.0 precent.

  6. These static comments trying to make themselves dynamic by real dollar adjustments always entertain me. My first year of employment was 1933 at $3 her hour. In 1982 dollars that's $260.72 per week. Just completed my 2012 tax return yesterday. In the same 1982 dollars, I only made $215.69 per week las year. That's a 17.3% decrease!

    Poor, poor, pitiful me! As the song goes. There is one significant problem. My weekly paycheck was variable in between those to points in time and I saved some money. My lifestyle today is much more comfortable today than it was in 1973. I can do anything I want these days despite the cut in "pay." It's called saving and investing over the last 39 years.

    I no longer punch a time clock, but I still actually make more than I spend. Doesn't matter if you want to talk about 1982 dollars or 2001 dollars or any other dollars. Makes no difference to me.

    1. A secure retirement a fading dream for growing numbers

      To hear some people talk, you’d think all older Americans were living large on Easy Street. Policy wonks debate whether older people have too many advantages. Every week, it seems as though Washington comes up with another proposal to cut Social Security benefits, restrict Medicare eligibility or scale back veterans’ benefits.

      But a new AARP Florida survey reflects a far more sobering reality for Floridians 50 and older, and by extension, older Americans across the nation:

      Some 53 percent of Florida voters age 50-plus now say they plan to put off complete retirement, compared to only 8 percent who say they are very likely to retire as planned.

      Asked why they are planning to work past what they considered “retirement age,” 62 percent of them said they will need the money.

      Older Floridians overwhelmingly say they are banking on Social Security to be there for them when they retire. Some 83 percent say they expect Social Security to provide income for them in retirement.

      By contrast, only 48 percent are expecting a pension from their employer, and less than half expect income from stock investments (46 percent), an IRA (38 percent) or a 401(k) retirement account (33 percent).

      Meanwhile, some in Congress propose big changes in Medicare designed to shift more of the cost of health care onto the shoulders of older Floridians.

      Perhaps this is why survey results show that a growing number of 50-plus Americans are seeing the dream of a secure, stable retirement slipping out of reach.

      AARP now predicts that unless we are able to reverse the trends that are driving the decline of the middle class, many of today’s middle-class workers will not have a middle-class retirement. In fact, 30 percent of those currently in the middle class will become low income in retirement.

      you're not everybody.

    2. tom, excellent points about retirement. Did you see my articles earlier this year on the retirement crisis?

  7. Raising the minimum wage is like putting a bandaid on a cut artery. Corporations need to pay their taxes! How do you offshore jobs for cheaper labor and there are no U.S. consequences? Trade agreements pushed through are designed to do this, they off shore jobs and save on labor, jack the price up more and skirt all U.S. Taxes, no wonder there is such a disparity.

    1. sure, US tax policy should not give companies any tax incentive to move jobs away from the US. its worth noting though- less than a quarter of US job loss is actually due to off shore-ing. its a problem that deserves attention, but clearly there are other problems that aren't getting the attention due them. the majority of job loss is actually due to increasing productivity - why pay 3 people when you can fire one and have two people do all the work? the increasing use of computers robots machinery tools etc to replace human efforts is increasing profits for business owners, but those profits are simply accumulating at the executive level without trickling down to the rest of us. raising the minimum wage would provide some direct relief. personally i'd prefer the use of salary ratios though- a legal requirement that executives can't increase their own salaries without also raising the minimum wage within their company. with a salary ratio in place, anyone would be free to start up a business that isn't immediately profitable. but as it becomes more profitable they would be required to spread those gains around to everyone working for them. in the corporate world it would give these execs a selfish incentive to raise wages, instead of cutting wages and giving themselves the savings as a bonus

  8. I think people should also consider the inflation of other currencies too when considering purchasing power. because in a globalized economy, when everyone inflates…

    I think what matters more is the velocity of currency, and its being trapped at the top when its handed out from the central banks…

  9. Raising the minimum wage is like putting a bandaid on a cut artery. Corporations need to pay their taxes so I think they can afford to do this.

    1. productivity has been steadily increasing for decades, but the increasing profits have only accumulated at the top. we really can shake this tree and get more of those profits to trickle down by increasing the minimum wage. its definitely treating one symptom not the entire illness, but its better than a bandaid on a cut artery. fwiw, raising the minimum wage and raising taxes on the mega-wealthy aren't mutually exclusive. we can and should do both.

  10. The forces of greed capitalism want low-pay "slave labor" incomes for worker input in the production of products and services in order to keep labor input and other costs at a minimum and maximize profits to the ownership class. The reality is that the ownership class continues to amass capital ownership and derive the income earned from their private ownership rights. The ownership class is benefiting from the reality that in most economic tasks, productive capital (not labor) is doing ever more of the work, is creating ever more of the wealth, and is contributing to ever more of the economic growth due to increasing capital productiveness rather than increasing human productivity. As a result, private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role. The problem is that the ownership class has not taken the initiative to distribute more broadly private capital acquisition by workers and others. The problem is the system is plagued with injustice and inefficient distribution of wealth. If we are to set the nation on a path to prosperity and growth then it is essential that we recognize that growth is primarily a function of increasing capital productiveness rather than increasing labor productivity. The question before us is who will OWN this FUTURE capital productivity and the resulting wealth-creating capital assets?

    Unfortunately with the means of production controlled narrowly due to concentrated capital ownership which is benefiting from tectonic shifts in the technologies of production that eliminate and devalue jobs and thus there are fewer and fewer "customers with money" to purchase the products and services that the economy is capable of producing. The result is the consumer populous is not able to get the money to buy the products and services produced as a result of substituting machines for people. And yet you can’t have mass production without mass human consumption. It is the exponential disassociation of production and consumption that is the problem in the United States economy, and the reason that ordinary citizens must gain access to productive capital ownership to improve their economic well-being.

    While millions of Americans own diluted stock value through the “stock market exchanges,” purchased with their earnings as labor workers, their stock holdings are relatively miniscule, as are their dividend payments compared to the top 10 percent of capital owners. Even when economies are perceived as experiencing steady, low-inflationary, job-providing growth, the reality is that most people do not earn enough to sustain their reasonable needs and, instead, are heavily in debt and/or dependent upon some form of earnings redistribution. While technological innovation and invention promises the increasing abundance of substantially increased output with much less human effort, there is widespread poverty, even in boom times in which too many people remain poor. "Trickle-down" does not solve poverty because for too many people, the "trickle" is usually only menial, low-pay jobs or welfare, open and concealed. The reality is that capital is the primary source of affluence, whereas labor rarely produces more than subsistence. The solution is to enable EVERY American to acquire capital and pay for their acquisition out of the future earnings of the capital––thus self-financed capital ownership acquisition in the non-human factor of production.

    This paradigm shift impacting society does not have to be a painful transition. It should be welcomed because the promise is to eliminate toil––the labor work that one would not do if they were not paid to do it.

  11. The United States lost 6.3 million manufacturing jobs between January 1990 and the industry's low point in January 2010, a 36 percent decline, according to the Bureau of Labor Statistics. Since that low point, the industry has added nearly 500,000 jobs––not near enough to offset the millions of losses. While America needs and will continue to need workers who can make and fix machines and the software that makes them run, still private sector job creation in numbers that match the pool of people willing and able to work will continue to be eroded by physical productive capital’s ever increasing role. As for jobs, they will be limited to the highly-skilled and technical variety or the non- and low-skilled variety that companies seek to replace with machines. Such anemic job creation is far too limited to solve the reality that by the year 2020, more than 50 percent of the jobs available will be minimum wage jobs!

    There’s nothing new about machines replacing people, but the rate of replacement is exponential and the result is that productivity gains lead to more wealth for the OWNERS of the non-human factor of production, but for others who have always been dependent on jobs as their source of income, there has been a steady decline to poverty-level labor incomes.

    But what about China, the place where all the manufacturing jobs are supposedly going? True, China has added manufacturing jobs over the past 15 years. But now it is beginning its shift to super-robotic automation. Foxconn, which manufactures the iPhone and many other consumer electronics and is China’s largest private employer, has plans to install over a million manufacturing robots within three years. Thus, in reality off-shoring of manufacturing will eventually be replaced by human-intelligent super-robotic automation.

    The pursuit for lower and lower cost production that relies on slave wage labor will eventually run out of places to chase. Eventually, "rich" countries, whose productive capital capability is owned by its citizens, will be forced to "re-shore" manufacturing capacity, and result in every-cheaper robotic manufacturing.

  12. “The era we’re in is one in which the scope of tasks that can be automated is increasing rapidly, and in areas where we used to think those were our best skills, things that require thinking,” says David Autor, a labor economist at Massachusetts Institute of Technology.

    Businesses are spending more on technology now because they spent so little during the recession. Yet total capital expenditures are still barely running ahead of replacement costs. “Most of the investment we’re seeing is simply replacing worn-out stuff,” says economist Paul Ashworth of Capital Economics.

    Yet, while the problem is one that no one can no longer ignore, the solution also is one starring them in the face but they just can't see the simplicity of it.

    The fundamental challenge to be solved is how do we reinvent and redesign our economic institutions to keep pace with job destroying and devaluing technological innovation and invention so not all of the benefits of owning FUTURE productive capacity accrues to today's wealthy 1 percent ownership class, and ownership is broadened so that EVERY American earns income through stock ownership dividends so they can afford to purchase the products and services produced by the economy.

    None of this is new from a macro-economic viewpoint as productive capital is increasingly the source of the world’s economic growth. The role of physical productive capital is to do ever more of the work of producing more products and services, which produces income to its owners. Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum. Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role. Over the past century there has been an ever-accelerating shift to productive capital––which reflects tectonic shifts in the technologies of production. The mixture of labor worker input and capital worker input has been rapidly changing at an exponential rate of increase for over 235 years in step with the Industrial Revolution (starting in 1776) and had even been changing long before that with man’s discovery of the first tools, but at a much slower rate. Up until the close of the nineteenth century, the United States remained a working democracy, with the production of products and services dependent on labor worker input. When the American Industrial Revolution began and subsequent technological advance amplified the productive power of non-human capital, plutocratic finance channeled its ownership into fewer and fewer hands, as we continue to witness today with government by the wealthy evidenced at all levels.

  13. People invented tools to reduce toil, enable otherwise impossible production, create new highly automated industries, and significantly change the way in which products and services are produced from labor intensive to capital intensive––the core function of technological invention. Binary economist Louis Kelso attributed most changes in the productive capacity of the world since the beginning of the Industrial Revolution to technological improvements in our capital assets, and a relatively diminishing proportion to human labor. Capital, in Kelso’s terms, does not “enhance” labor productivity (labor’s ability to produce economic goods). In fact, the opposite is true. It makes many forms of labor unnecessary. Because of this undeniable fact, Kelso asserted that, “free-market forces no longer establish the ‘value’ of labor. Instead, the price of labor is artificially elevated by government through minimum wage legislation, overtime laws, and collective bargaining legislation or by government employment and government subsidization of private employment solely to increase consumer income.”

    Furthermore, according to Kelso, productive capital is increasingly the source of the world’s economic growth and, therefore, should become the source of added property ownership incomes for all. Kelso postulated that if both labor and capital are interdependent factors of production, and if capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all. Yet, sadly, the American people and its leaders still pretend to believe that labor is becoming more productive.

    A National Right To Capital Ownership Bill that restores the American dream should be advocated by the progressive movement, which addresses the reality of Americans facing job opportunity deterioration and devaluation due to tectonic shifts in the technologies of production.

  14. There is a solution, which will result in double-digit economic growth and simultaneously broaden private, individual ownership so that EVERY American's income significantly grows, providing the means to support themselves and their families with an affluent lifestyle. The Just Third Way Master Plan for America's future is published at

    The solution is obvious but our leaders, academia, conventional economist and the media are oblivious to the necessity to broaden ownership in the new capital formation of the future simultaneously with the growth of the economy, which then becomes self-propelled as increasingly more Americans accumulate ownership shares and earn a new source of dividend income derived from their capital ownership in the "machines" that are replacing them or devaluing their labor value.

    The solution will require the reform of the Federal Reserve Bank to create new owners of future productive capital investment in businesses simultaneously with the growth of the economy. The solution to broadening private, individual ownership of America's future capital wealth requires that the Federal Reserve stop monetizing unproductive debt, including bailouts of banks "too big to fail" and Wall Street derivatives speculators, and begin creating an asset-backed currency that could enable every man, woman and child to establish a Capital Homestead Account or "CHA" (a super-IRA or asset tax-shelter for citizens) at their local bank to acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income. Policies need to insert American citizens into the low or no-interest investment money loop to enable non- and undercapitalized Americans, including the working class and poor, to build wealth and become "customers with money." The proposed Capital Homestead Act would produce this result.

    Support the Capital Homestead Act at and

    Sign the Petition at

    See "Financing Economic Growth With 'FUTURE SAVINGS': Solutions To Protect America From Economic Decline" at

  15. Why aren't the media reporting it? Which major media company is not owned by a huge corporation?

  16. I'm old enough and middle-class enough to have much anecdotal evidence to support the conclusion that individual real income has declined for non-supervisory workers in the private sector. Thanks for making it clear with your analysis and charts that this is the case. The question I have struggled with is why? Globalization and capital without borders seems a likely cause and I have found little to argue against that conclusion. I am, however, surprised by the professional consensus that illegal immigration does not affect American wages. The real wages for workers you define have been declining and, it seems to me, that this result is coincident with increasing numbers of illegal workers. I actually found your site based on my search for a chart that detailed the two trends. Is that information available or relevant?

    1. David Card has written about this a great deal for at least 20 years. His findings suggest that the effect of immigration is small. Here is a link for a recent paper of his: