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Wages of Stagnation
www.townhall.com ^ | Tuesday, September 26, 2006 | By Bruce Bartlett

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.


TOPICS: Business/Economy; Extended News; News/Current Events
KEYWORDS: bartlett; incomes; wages
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To: .cnI redruM
Re Post 66
I agree with you. I think that there is a cyclical component to wages -- albeit with a slight upward trend to the right (at least for a healthy economy). I didn't realize Bartlett had an axe to grind against Bush. I've never heard of him. Funny that he didn't pick Clinton's last day in office (January 2001). Picking a peak number for wages prior to a nasty recession, and then proclaiming puzzlement as to why people aren't upset with this 'stagnation' is just a load of malarky on Bartlett's part.
81 posted on 09/26/2006 2:45:27 PM PDT by El Cid
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To: 1rudeboy

so we can only accept what the BLS tells us, so long as they dare not be forward looking.

young people entering college now - need exactly this kind of forward looking information to make career decisions.


82 posted on 09/26/2006 4:43:38 PM PDT by oceanview
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To: lucysmom
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.

I one thought that too.


Me three. I'm about at the same spot, maybe just a tad above where I was in 1994/95 right now.
83 posted on 09/26/2006 4:52:16 PM PDT by Nowhere Man (Pansy: b. 8-19-1987 - d. 8-27-2006, I'll miss you, little princess.... B-()
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To: lucysmom
Yes, and some think they can pass out tax cuts and put the difference between revenue and expenditures on the national credit card.

I'd gladly give it back and even go for the revocation of the tax cut if it would mean closing the borders but that is another issue entirely.
84 posted on 09/26/2006 4:54:39 PM PDT by Nowhere Man (Pansy: b. 8-19-1987 - d. 8-27-2006, I'll miss you, little princess.... B-()
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To: oceanview
sure, there is a "bubble" out there of americans entering retirement now, who worked when wages and pensions were "fat" in the US, and those well heeled seniors are living it up. but right behind them, we have a demographic time bomb headed towards retirement. a time bomb of corporate workers who are seeing pension and retirement benefits stripped away by US corporations at an alarming rate (I am one of them), and who are not going to have anywhere near the retirement experience of americans who are current 60+ years of age. I'll be lucky to avoid working at McDonalds in my "golden years" at the rate I'm going.

I'm 40, I'll have to work until I croak.
85 posted on 09/26/2006 5:02:29 PM PDT by Nowhere Man (Pansy: b. 8-19-1987 - d. 8-27-2006, I'll miss you, little princess.... B-()
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To: Nowhere Man

switch to a government job, its about the only safe path now to a decent retirement package. and young people are starting to realize that - I have never heard so many young people tell me that want to work for government. they see their parents getting beat up in the private sector - hours worked, benefits slowly trimmed away, always tied to a cell phone even during "off hours" - and alot of them are wondering whether its worth it.


86 posted on 09/26/2006 5:06:50 PM PDT by oceanview
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To: oceanview
"Forward looking information?" Don't make me laugh. I can see it now:

college-bound senior enters Guidance Office at Doom H.S.
Examining Magistrate, dressed in black, briefly looks up and resumes reading a file
[obscure Kafka reference]

"It has come to my attention, K., that you wish to go to college."
"Yes, sir." [nervously]
"I'll have you know, K., that the BLS has determined that 6 of the 10 fastest growing occupations between 2004 and 2014 do not require a four-year degree, and four of these call for no academic degree at all. Of course I know nothing of any fast growing occupations that require a four-year degree. You are expected to take your life at once. Use this gun."


87 posted on 09/26/2006 5:13:46 PM PDT by 1rudeboy
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To: BeHoldAPaleHorse

ping


88 posted on 09/26/2006 5:23:18 PM PDT by 1rudeboy
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To: 1rudeboy
Since when does a prediction count as fact?

If it's a prediction that supports your premise, it's a fact.

If it's a fact that doesn't support your premise, it's obviously DA MAN conspiring to keep you down.

89 posted on 09/26/2006 5:25:02 PM PDT by BeHoldAPaleHorse ( ~()):~)>)
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To: Fan of Fiat
I don't care what your government pushed statistics say.

At first, I thought this was a hedgetrimmer response. LOL!

90 posted on 09/26/2006 5:30:46 PM PDT by Toddsterpatriot (Goldbugs, immune to logic and allergic to facts.)
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To: 1rudeboy

they had best do some planning, before then incur $100K in debt for a degree that can't get them a decent job, and end up working in a job they could have had, without the degree and the debt.


91 posted on 09/26/2006 5:36:34 PM PDT by oceanview
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To: oceanview

I agree. That's why engineering is the best bet, not gender studies.


92 posted on 09/26/2006 5:44:22 PM PDT by 1rudeboy
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To: oceanview; 1rudeboy
those numbers don't mean much unless you also take into account the # of positions available.

Did you understand what he posted? Average starting salaries for the class of 2006.

Are you claiming that say 100,000 engineers graduated but only 1,000 got jobs? So the salary numbers posted don't count? Because such a huge oversupply of graduates versus jobs wouldn't push the salaries for grads lower?

Is that really what you think?

93 posted on 09/26/2006 5:47:08 PM PDT by Toddsterpatriot (Goldbugs, immune to logic and allergic to facts.)
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To: 1rudeboy

you think so.

well, I can tell you that I know a guy I went to high school with. no college (perhaps some community college). got a job working in the hotel industry in manhattan. worked his way up, I am sure he had some "menial" jobs along the way - front desk, food service, bellhop, who knows. today, he's a conceirge at a top NYC hotel - makes about $90K a year. $90K to make dinner reservations and book theatre tickets - not a bad gig.

there are good jobs in the service industry to be sure, but as I tell young people - pick your spots. get a job providing service to wealthy people, you'll make better pay. want to work in the travel and leisure industry, don't think red roof inn, think ritz carlton. want to sell or service cars, think BMW and not Chevy.


94 posted on 09/26/2006 5:50:57 PM PDT by oceanview
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To: Toddsterpatriot

the average salary number only has meaning in the context of the number of jobs available. that's why I used the NBA analogy - NBA average salaries are very high. who cares?


95 posted on 09/26/2006 5:52:21 PM PDT by oceanview
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To: oceanview
the average salary number only has meaning in the context of the number of jobs available.

So only a tiny fraction of engineering grads got jobs? And starting salaries were still that high?

96 posted on 09/26/2006 6:06:08 PM PDT by Toddsterpatriot (Goldbugs, immune to logic and allergic to facts.)
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To: Toddsterpatriot

I wouldn't use the word "tiny". but first in line are people with experience, then the H1Bs, and finally the college newbies. and the other pheonmena I see at work - people who retire, are not replaced. they are oursourced/offshored instead. that's the most convenient time to do it, someone retires, no entry level person need be hired to replace them. its much less messy to not have to fire someone.


97 posted on 09/26/2006 6:14:46 PM PDT by oceanview
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To: oceanview
Here's more
98 posted on 09/26/2006 6:37:58 PM PDT by hedgetrimmer
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To: oceanview
switch to a government job, its about the only safe path now to a decent retirement package. and young people are starting to realize that - I have never heard so many young people tell me that want to work for government. they see their parents getting beat up in the private sector - hours worked, benefits slowly trimmed away, always tied to a cell phone even during "off hours" - and alot of them are wondering whether its worth it.

Well, it seems to be going that way, work for the government, at least they still have good benefits and decent pay. At one time, government workers were not paid as much, heck, I remember there was a department store that cater to them, GEMCO (Govermnent Employees Market COmpany), my aunt and uncle were meember down in Texas. I don't know how, my uncle drove a truck for Schlitz beer unless it was due to his former military service, he was a paratrooper in the Korean War.

I rmemeber when I had my left hand cut open, it got infected with strep and had to have surgery to clean it out. I could have lost all of it or part of it but I still have it all, albiet some nerve damage. I was CIO of a small startup then (2002/2003) and my boss called me on my cellphone (Mom had it with her, she was with me in hospital) asking how to boot up the server and I was only 20 minutes out of the surgery room from my operation. I was coherent but still very fuzzy from it all.

About working for the government, sometimes if you can't beat 'em, join 'em. B-) B-P I'm afraid that is reality, if you want your piece of the pie. It is like Rodney Dangerfield explained to the business teacher at college where he went "Back To School," you got to bribe the councilman, pay the plumber extra, play nice with the union, and so on. B-)
99 posted on 09/26/2006 7:21:32 PM PDT by Nowhere Man (Pansy: b. 8-19-1987 - d. 8-27-2006, I'll miss you, little princess.... B-()
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To: oceanview
they had best do some planning, before then incur $100K in debt for a degree that can't get them a decent job, and end up working in a job they could have had, without the degree and the debt.

Although this does not address this problem, there are times I think one should not really go to college right after high school right away, maybe take a year or two off and work for a while or go into the military. That way, most might not see it as an extension of high school and such.
100 posted on 09/26/2006 7:24:50 PM PDT by Nowhere Man (Pansy: b. 8-19-1987 - d. 8-27-2006, I'll miss you, little princess.... B-()
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