Home > Plutonomy, upward income redistribution > US wages and productivity 1968 – 2012 (minimum, average and The 1%)

US wages and productivity 1968 – 2012 (minimum, average and The 1%)

from David Ruccio


Here, according to David Cooper, is what the federal minimum wage in the United States ($7.25) would have been under three different scenarios:

  • if the minimum wage had kept pace with average wages ($10.46)
  • if the minimum wage had kept pace with productivity ($18.75)
  • if the minimum wage had gone up at the same rate as incomes for the top 1 percent ($28.34)
  1. William Neil
    February 21, 2013 at 2:08 pm

    David, thank you, and Dean Baker for keeping the discussion broad, not limiting it to links to just inflation, although I do note that Dean, in follow up postings to his Feb. 12th, 2013 CEPR Blog with Will Kimball, raises the issue of – the difficulty – of implementing his middle figure of $16.54 cents per hour (arrived at by a conservative methodology) all at once, suggests it could not be done without inflationary implications. He may be right, I would like to see a fuller discussion of that.

    The remarkable thing to me, though, if one thinks back to the late 18th century and early 19th century decades, the formative years for classical economics, was the central role which “labor value” played in Smith, Ricardo, and the work of Marx. It was a controversy which went on and on and I recently re-read a discussion of the issues by the late George Lichtheim just to refresh my memory.

    Over the past three decades of the rise of the Right and a new version of neo-classical economics, no topic has received more public attention than the trials and tribulations of productivity’s rise and fall – and measurement. But just when it seems that we have re-discovered some gains post 1995, when it comes to figuring labor’s missing share of the minimum wage, most of the discussion suddenly forgets productivity and focuses just on adjustments to inflation. Very interesting how the productivity angle gets dropped. Not only does it raise old ghosts for economists (and Lichtheim gives a critical view, but a fair one, of Marx’s work) but it shows just how far labor considerations have fallen out of the whole discussion of productivity, where R & D, savings rate and capital formation, overall levels of education and how could we forget – the organization of businesses themselves – have eclipsed poor old labor.

    In that sense, the eclipse of labor over the past thirty years is perfectly mirrored in the 98% who now just want to talk about inflation links to the minimum wage. Isn’t that what happened in the tumultuous 1970’s, when Keynesianism appeared to collapse, and full employment (remember the struggle under Carter?) was pushed aside to focus on controlling inflation…?

  2. Nell
    February 24, 2013 at 10:43 am

    Fantastic graph – I just wish we could see more of these graphs in the mainstream press. I think alot of people know they’ve been screwed over, but I don’t think they realize the extent nor for how long they’ve been screwed.

    • February 24, 2013 at 2:57 pm

      Yes, Nell, but the hourly rates don’t take account of the number of those for various reasons fully or only partly unemployed and what their pensions and benefits amount to.

      • William Neil
        February 24, 2013 at 4:19 pm


        I highly recommend the report Demos did, about the retail sector, where it recommended an hourly wage of 12 dollars an hour and some odd cents, twenty five or so I think. (although they compartmentalized their recommendation by not addressing the rest of the service sector and aiming their proposal at only retail firms employing more than 1,000 workers.) Certainly Walmart is part of the Demos portrait, and the complaint there is that the company deliberately keeps hours well under a 35 hour week…and I strongly suspect more hours – “normal hours” are used as a form of carrot compensation thereby avoiding the issue of the low wages. Your reward for meeting their standards is what in other decades, other regimes we would call a “normal workweek.”

        While there are certainly retirees in the service sector, there are also now lots of college grads who can’t find work. Looks to me like you want to avoid the “justice issue.” You can’t leave the overall societal context out: CEO pay way up, shareholder compensation and Wall Street quarterly expectations driving this – and they are raking it in as well, increased socialization of everything we mean by the productivity inputs – but the line workers sqeezed like lemons, as Jack Welch was quoted as saying.

      • February 24, 2013 at 9:50 pm

        “Looks to me like you want to avoid the “justice issue.”?

        On the contrary. If showing the minimum wage shows how unjust the situation is, how much more strongly that will be demonstrated by showing how many have an even lower income than what might be expected from working long hours at minimum wages.

  3. William Neil
    February 24, 2013 at 2:10 pm

    I wanted to recommend to the economists and other visitors to this site a book which got a bit of coverage when its author, James Livingston, wrote a nytimes op-ed on Oct. 26, 2011, with the editorial by-line that “Business investment is not the key to growth.” (The title of the piece was “It’s Consumer Spending, Stupid.”)

    His book, “Against Thrift: Why Consumer Culture is Good for the Economy, the Environment, and Your Soul,” is daring, stimulating, and possibly offensive, at the same time, to the “savings drives investment the key to productivity (and therefore all future possible good things in life)” crowd, and Marxists worried about suprlus value being squeezed out of the workforce to drive that process.

    Livingston’s daring thesis, to condense greatly, is that net capital investment began its decline around 1919, and business has been able, via depreciation and retained earnings, to replace its aging fixed capital (machines and computer programs) without all the lower taxes, higher savings and modest wage shares to labor which are still pushed by the Right – think Larry Kudlow and Steven Moore – as the key to future growth and happiness. Because there is a ongoing social process of productivity, built around science and technological improvements which are in turn reflected in the new machines used by business (not to mention the advances in individual education within the workforce itself) the old Protestant Ethic abstinence-austerity-bounteous tax break model of driving investment as the key to productivity – is obsolete.

    For those who will surely demand a more rigorous presentation of this thesis and some hard data to back it up, he has an 18 page Appendix entitled “Capital in the American Economy: Kuznets Revisited.” Disclaimer: I don’t know Professor Livingston, owe him nothing, although I have commented at his blog site several times. I’m putting this out because he really does what intellectuals are supposed to do: engage in critical thinking which challenges cherished assumptions. And I doubt he’ll be appearing anytime soon at Brookings, the Center for American Progress, EPI, CEPR or America’s Future…did I leave anyone out? Oh yes, The New America Foundation.

    But I thought you should at least be aware of him and his ideas.

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