Wage Decline

WAGE DECLINE

Wage stagnation and decline have continued this year, despite the statements by the government that the economy is "strong, and getting stronger." Inflation-adjusted hourlywages have continued to decline through the month of June, according to the Bureau of Labor Statistics. June's inflation-adjusted wages declined 0.6% from May. June's inflation-adjusted $8.13/hour marked a decline from May's $8.18/hour. This also marks a 1.2% decline from April's inflation adjusted $8.23/hour. At this rate, hourly wages would decline a whopping 7.2% over 12 months.
This information can be found at the U.S. Bureau of Labor Statistics site at:
http://stats.bls.gov/news.release/realer.t02.htm

June's weekly, inflation-adjusted income declined 0.8% to $274.95, from May's $277.29. June's decline marked a 1.7% decline from December 2004's weekly income of $279.73. Going back further, June's decline represents a 1.8% decline in the weekly wages from December 2003, which were $280.09/week.

Here is a graph of per capita real disposable income from the Dept. of Commerce. They use a different inflation measure than the Bureau of Labor Statistics, called "chained 2000 dollars," which deliberately understates inflation. Even with this understatement of inflation, wages have clearly been stagnating since the beginning of 2005. Note in the graph below the lack of increase since January of 2005.


(Note: the above chart includes all income, including stock dividents and other non-wage sources of income.)

Wages definitely have NOT recovered during our alleged "recovery." In contrast, corporate profits have soared. Is corporate profit growth the ONLY measure of our economic growth?

unlawflcombatnt

That would be enlightening to see. Thanks.

wli,

I think I can find a different kind of graph at the Bureau of Labor Statistics site. Sometimes it's difficult to get their graphs to load in directly.

I'm glad you appreciate the difference between the Dept. of "Commercial's" graph of
pseudo-inflation-adjusted personal income, and the more realistic inflation-adjusted wages of the BLS. There certainly is a difference.

unlawflcombatnt

This graph is from the BLS. It shows "real" wages (inflation-adjusted from BLS's Consumer Price Index.)



Notice how much higher real wages were during the 70's. After dipping at the end of the 70's they leveled off, declined under Bush I, and then starting rising again under Clinton. And then started stagnating under Bush II. If you go to the site and see a smaller chart, you can see that wages have been declining under Bush II. Unfortunately, I can't link to a shorter time frame chart.

unlawflcombatnt

If you can reduce those two parts of the balance sheet, and if you can rely on consumers' willingness to go into debt (or if you sell things people don't have a choice about buying like prescription medicine and government contracts) then it doesn't matter if the middle class is disappearing.

I heard on NPR a dumb story about why corporations aren't investing in ways to expand their businesses even though their profits are up (which is an historical anomally). I'll tell you why: because they're making money off of reduced tax burdens and labor costs and they know that there's no expanding middle class to sell to, so why bother investing in ways to sell to them if they don't have increased purchasing power?

So much of what has been going on since 2000 is about shifting a lot of wealth to the already wealthy through the tax code and through the devaluation of labor. This is what happened in the 20s and early 30s.

1932,

You hit the nail right on the head.

There is no reason to invest if it doesn't lead to increased sales. With consumer income declining, there is nothing to suggest increased consumer spending and demand in the future. There are no potential investment "opportunities," because those opportunities are created by consumer demand.

Companies don't hire workers because they can "afford" to hire them (due to increased profits.) They hire them only when they need them. They hire them when demand for production increases, causing an increase in demand for workers to provide that production. And the aggregate increase in demand for production comes only from increased purchasing power. And reduced labor costs reduce that purchasing power, because they reduce labor and consumer income.

Investment does not create any jobs. Demand for production does. I've given an example of how this works before. It's worth repeating again.

Let's say I'm a doctor who sees 6 patients per day. I need one nurse. What if my new friend, George Bush, gives me $1 million because he likes me. (for some unknown reason.) I still only have 6 patients per day. Will I hire more nurses? Of course not. I don't NEED more nurses. They won't increase my profits any, so I'm not going to hire them.

Let me change the example. Let's say I'm the same doctor, and my ex-friend, George Bush, takes back the $1 million. Then he gives it to the potential patients who live around my office. Now more people can afford medical care. Now I have 30 patients per day. Am I going to hire more nurses? Yes, indeed. Because now I NEED more nurses. The DEMAND for nurses has increased. Hiring more nurses increases my profits.

I hired more nurses only when I NEEDED them. I hired none when I didn't need them, even though I could afford them. Being able to afford hiring of nurses had no effect on hiring. Demand for their services did. This increased demand was due to increased consumer income. Increased consumer income ALWAYS increases aggregate demand. (It may effect demand for individual products differently. But is still increases the sum total of demand for goods and services produced.)

unlawflcombatnt

with a few super wealthy people and a lot of very poor people.

The greatest expansion of the economy occurred for almost four decades after the 1930s when FDR put in place the mechanisms of a society that delivered wealth to a middle class which derived wealth from working. That's the best example of the former (although there were antecedents where economies that worked for a lot of people always grew faster and became more competitive than counterpart economies which were simply channeling wealth from workers to the people at the top).

The run-up to the great depression, the fall of rome, decayed European monarchies are examples of the latter -- of upwardly-redistributive economies.

Today is another example of the latter.

Where this is headed is so obvious.

1932,

You couldn't be any more right. Concentration of wealth in the hands of the few leads to a stagnating economy.

Why would anyone manufacture goods, if no one could pay for them? Why would a manufacturer hire workers if he couldn't sell the products those workers produced?

And yet the Republicans would actually argue this point, stating that "investment creates jobs" and all of their other self-serving nonsense.

unlawflcombatnt

The issue of "real, disposable income" has been killing people for many years and has not been addressed by anyone who might have helped. It is not visual, fun to frame, or anything else, it concerns the group of people who have become despised in both Parties--you know, middle class types who used to have unions, but now only have bills--and it is complicated, made up of many things. The real decline of living standard, which the middle class experiences as it slips into the poverty that makes stockholders cheer, is not a mere set of numbers, but a whole societal sea-change.

The "minimum wage" is actually the maximum wage, and anyone who is paid at that level will never catch up on bills: credit cards, banks, etc., impose fees that used to be illegal, bleeding more money away; all ordinary expenses are much higher, and people who used to be able to get by, can't any more. With a combination of no raises and price-gouging, things are getting scary, and are not able to be dealt with. New trends have started, such as that most people do not have savings anymore, and credit cards are used for ordinary expenses, as people cannot keep up with higher and higher prices, with no raise of income. Of course, you can never refer to any of this, or you will be a "neo-left McGovernite extremist." Fighting for the non-corporate middle class is not just normal anymore; now it will get you attacked.

Hidden Stillness,

I know how you feel about being "labelled." One poster on another site refers to me as "Marxist Mike." It certainly isn't popular to stick up for the middle class in Washington.

The message I'd really like to get out is that wage decline not only hurts individuals and the middle class, it hurts the economy itself. Our economy cannot grow if consumers can't purchase prodcuction.

Weekly wages have been declining steadily since their peak in November of 2003. Inflation-adjusted wages have now declined for 2 years straight. Yet consumer spending is growing at over 3% annually. That means only one thing. Consumer spending growth is being financed by borrowing. This borrowing "bubble" can't go on forever. This bubble is guaranteed to pop if wages continue declining. Credit card debt and home equity debt cannot continue to maintain consumer spending.

unlawflcombatnt

cost of living, wages, taxpayer-supported social-service stipends and services, taxpayer-supported social-service administrative costs, and corporate profits. Adjusted for inflation, such a graph would show infinitely damning truths about the United States (see footnote), including a seldom-explored implication: the fact the Bush Administration is as much symptom as cause. The graph would also show how the money available for wages and social services shrinks in direct proportion to the growing amount of the money supply hogged by the corporations and the corporate oligarchy. (This underlying Marxist truth is precisely why such graphs are not allowed to exist.)

(Footnote: except for the misleading anomaly of the "high tech" sector, which artificially skews wages upward, U.S. wages as compared to living costs been stagnant or in decline since the early 1970s: hence the need for two-income families. Social-service stipends and services have been slashed radically in every category save women's services, and now those too are under attack; social-service administrative costs have meanwhile soared more than 5000 percent as welfare bureaucrats express their underlying class-hatreds by increasing their own income and benefits rather than actually helping the poor. Corporate profits are even more outrageously off the scale: in one study I read, the average U.S. worker {non-high-tech} now makes only about $13 an hour -- $27,400 per year -- while the average U.S. executive garners $1400 an hour -- $2.9 million a year, a ratio of nearly 108 to 1 -- and most of the executive's pay is tax-free. In other words, this is a society that rates the ability to "manage" {i.e., to tyrannize and exploit} as at least 108 times more valuable than the ability to produce. And we dare call ourselves a democracy?)



Edit: typing error.

"June's weekly, inflation-adjusted income declined 0.8% to $274.95, from May's $277.29. June's decline marked a 1.7% decline from December 2004's weekly income of $279.73. Going back further, June's decline represents a 1.8% decline in the weekly wages from December 2003, which were $280.09/week."

This point should be one of main stays of the democrats. I know several retired repubs who are real worried about their income. Just remind them when the repubs pol's say "good economy" they mean this.

You're absolutely right about reminding Democrats. Wages need to keep up with productivity or we're going to sink economically. That's what happened to Japan. And they are still struggling.

unlawflcombatnt

Thanks for the great slogan, Rep. Stephanie Tubbs!!!

Bvar22,

Do you think there is any way we can get CAFTA thrown out in the future? Is there any legislative process for getting it thrown out?

I know there was legislation submitted to get us out of the WTO. How hard will it be in the future to get us out of CAFTA? It's a really, really bad bill.

Maybe we'll uncover some illegal activity leading up to switching of Congressional votes. And then, maybe I'm just dreaming.

unlawflcombatnt

It has NOT been ratified yet by several Latin American countries. If only ONE of them refuses to sign, CAFTA is dead. So there is still hope.
After that, the only way to get rid of CAFTA is to withdraw from the treaty. It is not that difficult. Withdrawal from NAFTA was an element of Dennis Kucinich's campaign, and he outlined the procedure.

CAFTA ,as bad as it is for the American Working Class, is ONLY A SYMPTOM of the nightmare. The Ownership Class had bought enough influence in the US Government, including BOTH Political Parties, to make CAFTA the law of the land.

The ONLY hope of the Working Class is to reform the Democratic Party. We do this by throwing out the invaders, and exposing organizations like the DLC for what they are and who they represent. If we are unable to do this, then all is lost.

This will be difficult because the DLC has access to all the advertising tools and propaganda machinery of Madison Avenue. The DLC produces slick brochures, and professional image consultants, and then uses their Corporate contacts to deliver their message through the friendly CorpoMedia.

The ONLY Talking Head Democrats you get to see on the Talk Shows are the Hillarys , Bidens and Liebermans. Then the MEDIA calls them the Liberal Fringe. No REAL Democrats are allowed on the CorpoMedia, except Kennedy, and as brilliant as he is, he has been marginalized.

Bvar22,

Thank you very much for that information. What you said about getting out of CAFTA is very good news. We may still be able to do something about it.

unlawflcombatnt