Home > The Economy > In the USA “the real earnings of the median male have actually declined by 19 percent since 1970.”

In the USA “the real earnings of the median male have actually declined by 19 percent since 1970.”

from David Ruccio

I often tell people, in class and in talks I give, that workers’ wages have been stagnant for decades in the United States.

But, according to Michael Greenstone and Adam Looney, I’m wrong. Things are much worse. 

When we consider all working-age men, including those who are not working, the real earnings of the median male have actually declined by 19 percent since 1970. This means that the median man in 2010 earned as much as the median man did in 1964 — nearly a half century ago. Men with less education face an even bleaker picture; earnings for the median man with a high school diploma and no further schooling fell by 41 percent from 1970 to 2010.

Women have fared much better over these 40 years, but they started from a lower level, and the same problems faced by their male counterparts are beginning to have an effect. Since 1970, the earnings of the median female worker have increased by 71 percent, and the share of women 25 to 64 who are employed has risen to 71 percent, from 54 percent. But after making significant wage gains over several decades, that progress has slowed and even reversed recently. Since 2000, the earnings of the median woman have fallen by 6 percent.

Clearly, it’s time I update my claim and face the facts: the situation of working-class Americans, leading up to and now in the midst of the Second Great Depression, is even worse than I have led people to believe.

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Categories: The Economy
  1. Bruce Carman
    October 26, 2012 at 3:10 pm

    The situation is worse than presented. If one accounts for the increase in payroll taxes for Social Security and Medicare and the cost of housing to median income, the loss of the purchasing power of real median earnings for males since 1970 is 30-35%, which is an equivalent depression in terms of the loss of labor income over a working lifetime.

    Moreover, it is not a coincidence that the peak in male median earnings and purchasing power of labor income occurred with peak US domestic crude oil production in 1970 and the onset of deindustrialization and financialization of the US economy.

    Also, total local, state, and federal gov’t spending is an equivalent to two-thirds of private GDP (GDP less total gov’t spending, including personal transfers), which is nearly 20% higher than the peak of gov’t spending to private GDP during WW II. Since US peak domestic crude oil production in the 1970s, onset of deindustrialization, and the end of the Vietnam War, the US has effectively been in an equivalent WW II-like wartime position with respect to local, state, and federal gov’t spending as a share of private GDP.

    Finally, the cumulative compounding interest to term for total US credit market debt owed is now an equivalent of 100% of private GDP, implying that there can be no growth of real private GDP per capita hereafter owing to the onerous debt service burden on the economy. These conditions are coinciding with the onset of the peak Boomer demographic drag effects and constraints imposed by peak global crude oil production and oil exports.

    Growth of any kind is no longer possible hereafter.

  2. Podargus
    October 26, 2012 at 6:29 pm

    @ Bruce – Depends how you define growth.Some types of growth are not desireable.In fact,they are quite destructive.
    But you are looking at the situation through a small lens and through a glass darkly at that.
    You have also fallen into the neo-liberal trap of regarding government spending as undesireable.Maybe some lessons in MMT would go some way to relieving your personal depression.

    • Bruce Carman
      October 27, 2012 at 7:31 pm

      Podergus, MMT is chartalism. Need more be said? If gov’t deficits were not the result of deindustrialization, financialization, and globalization, and the trade deficit, and because of the US no longer being able to afford an industrial economy because of oil imports, then there would be a structural framework within which chartalism might apply but with a completely different tax code (taxing rents, pollution, resource extraction, etc., instead of labor, production, savings, inter-generational transfers, etc.) and distribution system.

      The US has run structural balance of trade and fiscal deficits since the ’80s because US domestic crude oil production peaked in 1970-85 and we could no longer afford to be an industrial economy, which the bankers responded to by removing the US$ from gold, deindustrializing, financializing, and globalizing the division of labor and production and supply chains.

      The US replaced the notion of credit expansion growing roughly at the same rate as labor product and production with an increase in oil imports, cheap goods from US subsidiaries abroad, and debt-money claims against labor, profits, and gov’t receipts.

      In the meantime, we have added $42 trillion in total credit market debt owed with an imputed compounding interest to term equal to GDP. Total credit market debt owed per capita today is $165,000, which is 5 times the median income and more than 3 times median household income.

      Total local, state, and federal gov’t spending is now equivalent to 100% of private wages.

      Total gov’t spending plus household debt service and private health care spending combined is now an equivalent of over 80% of private GDP and over 50% of nominal GDP, growing at nearly twice the rate of private GDP since ’00.

      Were “health care” spending to continue at the 10- to 30-year average trend versus that of private GDP, total public and private “health care” spending will rise from more than 25% of private GDP today to 35% by ’21, 50% by the early to mid-’30s, and 100% by mid-century; obviously, this cannot happen, implying that “health care” and gov’t spending will at some point in the years ahead cease growing, and then contract per capita.

      The fastest growing gov’t spending since ’00 has been for “health care”, war, and transfer payments to the elderly, unemployed, and poor. We have an economy that depends upon endless wars for oil empire and an increasing share of the population becoming old and ill; clearly, this is evidence of long-term structural decline.

      Had the federal gov’t not borrowed and spent an equivalent of 55% of private GDP since ’08 to date, the GDP would be at the level of ’98. In real terms per capita, GDP has contracted since ’08 and is near 0% on a trend basis since ’00-’01.

      In this context, the US economy has not created a net new full-time private sector job per capita since the mid- to late ’80s, and not since the late 1950s to early 1960s for males. The US economy is no longer creating net new living-wage employment for its citizens.

      When federal fiscal deficits exceed 100% of federal receipts in the next recession, and when net interest on the total public debt eventually reaches 20-25% of receipts after Social Security and Medicare, we will join the PIIGS. At the differential rates of GDP and debt growth from permanent deficits of $1 trillion plus, I estimate that we have as few as 4-5 years before we reach the PIIGS threshold, and Japan is already there for all practical purposes.

      Today, contrary to what most of us are conditioned to believe, there is no constitutionally enforceable obligation for the owners of the imperial corporate-state to make good on promises of the federal gov’t to non-owners, i.e., the bottom 99-99.9%. The US has a system of “no representation without taxation”, that is to say that the bottom 80% pay little if any federal income taxes and thus are no represented by the representatives to the owners of the corporate-state. The US as a corporate-state is governed by commercial law, wholly affirmed by the Supreme Court for over a century.

      When the time comes that the federal gov’t obligations drain receipts to the breaking point, the owners will foreclose on the gov’t, declare the state bankrupt, restructure the gov’t and fire tens of thousands, declare pensions and social programs defunct, accept dimes on the US$ for the outstanding debt they own, and seize public assets as recompense, including land, ports, transport systems, etc. The future of the US is that of a privatized corporate-state.

      Robnme is the perfect candidate to oversee the private equity hostile takeover by the owners of the corporate-state of the US federal gov’t and its assets and obligations over the next 4-8 years. Obummer was just keeping the Oval Office seat warm and running cover for the banksters who installed him so the banksters could print themselves out of involvency (for the time being).

      Whichever larger lens through which you are looking must be accompanied by partaking of some powerfully hallucinogenic substances. Or perhaps a twice-daily dose of soma?

      • robert r locke
        October 29, 2012 at 8:58 am

        “because of the US no longer being able to afford an industrial economy because of oil imports.”

        And Germany, and Japan? Don’t they import high priced oil and manufacture. Another example of what is wrong with economics as a “science.”

  3. C. Rademaker
    October 26, 2012 at 9:53 pm

    Greg Mankiw points at an analysis in the book Unintended Consequences by Edward Conard, which makes it look like the “great stagnation” is something of a statistical glitch given rise to by changes in the composition of the US labor force:

    http://gregmankiw.blogspot.nl/2012/07/what-ive-been-reading.html

    The table he refers to is:

    Any comments on this?

  4. October 27, 2012 at 9:21 pm

    All good points in the main, but I’d like to point out the chart shows the peak of 1970 actually also in 1980. All workers and all persons incomes were apparently somewhat higher when Carter left office.. Since these are real numbers, the oil shocks of the 1970s were evidently absorbed without a loss of incomes

  5. October 29, 2012 at 8:56 am

    Where would we be without the women working? It is the rise of female workers, and the credit boom, that has created the illusion of increasing wages for most of the last 30 years. As the chart shows, woman’s wages have leveled off too, or are in recent decline. Our credit boom is over too, probably forever.
    The solutions of debt-free money, Single-Tax/Land Value Tax, CAFR reform, repatriation of multi-trillions in offshore accounts, and better investments and returns through public banks, are too familiar to bear repeating here, but nevertheless, still unimplemented.

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