Posted on 09/26/2006 5:20:47 AM PDT by .cnI redruM
Lately, there has been a big debate going on among Democrats about why workers aren't outraged by their economic condition, and therefore more hostile to Republican economic policies and more sympathetic to Democratic policies.
On the surface, it would appear that workers should be in open revolt. According to the Bureau of Labor Statistics, the average worker is no better off today than he was seven years ago in real terms. In August 2006, his average weekly earnings were $275.49. In August 1999, they were $275.61 (both in constant 1982 dollars).
Census Bureau data confirm this trend. According to recently released information, median annual earnings for men fell to $41,386 in 2005 from $43,158 in 2003 (in 2005 dollars), despite steady economic growth. Male earnings in 2005 were lower than in every year since 1997. Female earnings also fell in 2005 to $31,858 from $32,285 a year earlier and were lower than in any year since 2000.
Looking at the broadest measure of economic well-being, median household income, we also see flatness. In 2005, the median income -- the point at which half of households are above and half are below -- was $46,326. This was up from the levels in 2002, 2003 and 2004, but below those registered from 1998 to 2001. Median household income peaked in 1999 at $47,671 (in 2005 dollars) and fell every year thereafter until 2005's small uptick.
There is no simple explanation for worker passivity in the face of income stagnation. One argument is that labor union membership has fallen sharply over the last generation and, consequently, workers have no organizational mechanism through which to bargain for higher wages or protest wage stagnation politically. In 2005, labor union membership was down to just 7.8 percent of private sector workers, from 24.2 percent in 1973.
Another possibility is that workers have been so beaten down by layoffs and give-backs in recent years that they are just grateful to have jobs at all, even if their pay stinks. And because of declining health coverage by employers, those lucky enough to have health insurance may feel compelled to hold onto such jobs. If they switch to another job, they may get higher pay but lose their health benefits in the process.
Indeed, the rising cost of health benefits is a key reason for the flatness of wages. From the point of view of employers, their total labor costs have risen sharply. But all of the increase has gone into benefits, with nothing left over to raise wages. Workers may not like this fact, but accept its reality.
According to the BLS, wages and salaries have fallen from 72.6 percent of total compensation in 2000 to 70 percent in June of this year. At the same time, health benefits have risen from 5.9 percent of compensation to 7.7 percent.
Still another explanation is that the changing demographics of the population have eased the transition to an economy with slower wage growth. Many baby boomers have just seen the last of their children finish college and leave home. Suddenly, they have had a huge increase in their discretionary income, as the enormous costs of tuition and child care that they have borne for decades have now disappeared. They may not be any better off in terms of their family income, but they feel a lot better off financially.
Finally, despite wage and income stagnation at the macro level, people continue to move up out of the working class into the middle and upper classes. According to the Census Bureau, the percentage of all households with an income below $25,000 per year (in 2005 dollars) fell to 27.1 percent last year, from 27.6 percent in 2004. In 1995, 28.9 percent fell into this income class. In 1985, the percentage was 30.5 percent. In 1975m it was 33.1 percent.
At the same time, the percentage of households that are considered well-to-do -- those with an income above $75,000 (in 2005 dollars) -- rose to 28.3 percent last year, from 27.9 percent in 2004. In 1995, only 24.4 percent of households had that much income, up from 20.2 percent in 1985 and 14 percent in 1975.
In short, despite all the talk about the rich getting richer at the expense of the poor, the fact is that the percentage of households with low incomes has fallen and the percentage of those with high incomes has risen. This is perhaps the main reason why Democrats have had trouble getting traction on the income issue -- there are fewer people in the income class to which they historically have directed their message.
The more people there are in the $75,000-plus income category, the more people there are who are receptive to the Republican message of low taxes.
So, if # of households is a reasonable analogy to population size, the US economy had 150,000 fewer poor people than it did last year. (Assuming a poulation of 300M)
>>>>the percentage of households that are considered well-to-do -- those with an income above $75,000 (in 2005 dollars) -- rose to 28.3 percent last year, from 27.9 percent in 2004.
The number of rich people went up by 120,000.
Sounds like GWB is busily creating a Red State Nation.
On a tangent, I realize Bartlett ran up against his word limit, but I wish he gotten into the roll of investments and asset ownership in the improvement of the average American's lot. It's not just what you get payed, it's what you do with the money.
It's not just what you get payed, it's what you do with the money.
Amen.
Low interest rates have lowered the cost of housing, car ownership etc.
Low costs at places like Walmart have reduced the cost of consumption.
In other words MORE DISPOSABLE/INVESTABLE money!
Americans realize we are overpaid relative to world labor, and that Ford and GM are the sad poster children of union interference in free market economies.
It also helps that ABC/CBS/NBC/CNN/PBS continue to propagate the lie that the U.S. economy is floundering, lowering wage expectations. Great for business and the markets!
I also can't wait for the super-capitalists who will come here and poo-poo the idea of adjusting for "real" wages while on every other thread they will always talk about "real" dollars as it pertains to prices.
You win the Kewpie Doll!!
What these boneheads can't seem to understand is that the people making $275 per week now aren't the ones who were making $275 in 1999. Those currently making $275 were making a lot less in 1999, or weren't working at all. Those who made $275 then are making a lot more now if they kept working and tried to improve themselves.
Get any job in the country, show up and do your best for 7 years, and your wages will likely double or more in that time.
See my tagline
On the other hand, some in government think we keep too much of the money we earn, and are trying hard to "rectify" the situation.
Don't ask me for a link, but it wasn't so long ago that I saw an article on FR which indicted that the breakeven income above which a white man was more likely to vote Republican than Democrat was not $75,000 but more like $20,000. Wish I had the link . . .
Are we overpaid relative to world labor? Of course...and unless you want to ride a bicycle to work and eat rice three times a day do what is necessary to make sure we remain overpaid relative to world labor.
My guess is that the "super-capitalists" are still trying to decide whether it's worth the effort to teach the difference between median and mean, for starters.
1. Comparing wages over long periods of time makes no sense at all from an economic/statistical standpoint. Instead, total compensation should be included in all of these comparisons. If a worker who earned $50,000 five years ago is earning $51,000 today, his "wages" have grown only 2% over that period of time and he's basically lost ground to inflation. But if his employer-paid benefits have increased from $4,000 to $8,000 in that same period of time, then he's actually earning $5,000 more today than he was back then -- a 10% increase.
2. "Household income" is one of the most misleading statistical measures used in political economics these days. The single most important factor in the "stagnation" or "decline" of household income over the years has been the reduction in average household size, and in the number of income-producing workers per household. This is mainly a function of two things: a) a steep increase in the number single-parent families (which explains why most of the "stagnation" in household income occurs at low-income levels where single parenthood is more common); and b) retirees living independently for longer periods of time after they retire.
If the pay for a job, not an employee, stays the same, in 1982 dollars, over the years, isn't that a good thing?
Employees move to higher paying jobs. Higher paying usually meaning more skills, experince, training, education etc.
The job still pays the same, the employee moved up the ladder to a higher paying job. If the employee does the same job for years, getting the same constant dollar pay is economically fair.
I depend on a superior skill set to bargain for higher wages. Not union thuggery and extortion.
Thanks to this philosophy, my life has shown a dramatic rise in wages since '82.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.