Home > Uncategorized > Back to 1998. A decade of declining real wages (USA)

Back to 1998. A decade of declining real wages (USA)

Earning less than your your older siblings and nephews and nieces is getting increasingly likely, though less so for women and blacks. This is not mainly a sectoral composition effect.

From the Levy institute:

Workers’ wages are the most important component of household money income. Representing about 83 percent of total household income, they are the driving force behind changes in income growth and inequality. Consequently, changes in wages play an important role in determining trends in income inequality, household spending, and the overall welfare of households. In the last 20 years, while nominal wages have shown a consistent and upward trend (Figure 1), real wages have progressed much more slowly … after a long period (beginning in 1973) of stagnant real wages, in the late 1990s low unemployment rates, increases in the minimum wage, and improvements in labor productivity contributed to a boost in wages, which translated into 12.4 percent cumulative growth in real wages from the late ‘90s until 2002. Partially resulting from a weak economic recovery after the 2001 recession, real wages then stagnated despite continued growth in labor productivity … real wages have shown practically no improvement (1 percent growth) since 2002. The period between 2002 and 2013 has become known as the decade of flat wages … . However, over the same period of time … there were significant changes in the composition of the labor market. In particular, the labor force is aging and becoming more educated. In addition … workers are delaying retirement. Increases in age, experience, and education (which are all positively correlated with wages) could in fact be propping up observed real wages…. This is exactly what we uncover… what appears to have been a decade of flat real wages was actually a decade of declining real wages within age/education worker profiles.


changes in the composition of industries and occupations contributed to the observed trends: the labor market has been slowly shifting toward higher-wage occupations and industries. Holding only occupation and industry at their 1994 levels would have resulted in slower real wage growth, but industry and occupation changes were not the driving force behind the counterfactual real wage declines


  1. June 6, 2014 at 1:27 pm

    Reblogged this on MERCIAR BUSINESS CONSULTING and commented:
    Taken from the Levy Institute – something we’ve all known for a long time. Declining real wages, especially affected by the increasing skill set visible in the workforce:

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