Falling Wages

My Own Measures and What the Statistics Say

By - October 17, 2015

(Photo by Bill Jacobus on Flickr)

Are wages going up or falling? You might think it's an easy question to answer, but there are so many different ways to measure how much we make that it is difficult to know exactly what's happening to employees in the United States.

For example, should we look at household income as being indicative of how well people are doing? The problem with this figure is that it might remain the same as more and more households have two people working or employees work longer hours. Can we really say that we're doing no worse if we need to work harder than ever to make the same amount of money?

I have my own ways of comparing what I experienced in the past to the situation today. For example, my old journals and notes tell me that I averaged $8.63 per hour as a pizza delivery driver in 1985, in Traverse City, Michigan. The BLS inflation calculator says that's equivalent to making $19.09 per hour today. A friend who was recently delivering pizzas in that same city tells me he was making about $14 per hour.

In 1991 I worked for a temporary labor agency and was paid differing rates according to the particular assignments I accepted. For example, I made $8 per hour handing out samples in grocery stores. That would be two-cents short of $14 per hour today. Do you think small town temp workers are getting that for handing out samples?

I was paid $9 per hour for more physical labor, like a four-hour gig I had unloading rolls of insulation at a Home Depot. That would have to be $15.73 per hour to have the same purchasing power today. Not a likely wage for that work anywhere today.

In fact, between businesses and other jobs I happened to work at a temp agency in 2013, doing construction and cleaning tasks. I made $7.63 per hour -- the minimum wage here in Florida at the time. Notice that is less than half of $15.73 per hour.

To look at that another way, $7.63 per hour is equivalent to making $4.46 in 1991. I would have laughed and refused any job that offered that. It seems we get used to the new normal.

What About College Graduates?

My experience with jobs is mostly at the low end (business and investing have been good to me, but jobs... not so much). What if you have a college degree? Certainly you'll make more if you get a job based on your degree.

But even here there is bad news. NBC news reports that college graduates are making 2.5 percent less upon graduation than they were 15 years ago. And women graduating college make $3 per hour less than men. And these lower wages coincide with students having more debt than ever.

Other Ways to Measure Wages

So yes, it seems that wages are falling. Except for corporate executives; CEOs in particular are doing just fine. Their pay rose 21 percent in just three years (2010 to 2013), even as employees saw wages drop. In 1965 the average CEO made 20 times as much as the average worker. Now CEOs make 295 to 510 times as much as workers, depending on the data used.

People may have different ideas about what can be done to correct falling wages and rising income-inequality. But the fact that the middle class is stagnating (or worse) economically seems pretty clear.

There is one last measurement that provides a stark contrast between the past and the present in terms of what workers at the low end make. It involves the per-capita GDP and the minimum wage.

Per-capita GDP (gross domestic product) is a measurement of how much we produce in the country, divided by the number of people in the country. In constant dollars this was $20,208 in 1965 versus 49,310 in 2013. In other words all the hard work people are doing results in production worth 144 percent more than 50 years earlier.

Now, it is true that management and good ideas and other factors contribute to that value. And so the owners of capital (the rich, for lack of a better way to put it) have gotten richer. In fact, one could argue that even if the proportion of economic output that went to them was the same, they would be 144 percent richer. But maybe they got more than that.

The minimum wage in constant 2012 dollars was $9.18 in 1963. Now, what if minimum wage workers had seen an increase proportional to how the economy did? In other words, what if they continued to get a proportional share of what their labor helped to produce? In that case the minimum wage would have been $22.40 in 2013.

In fact, it had dropped to $7.25.

Yeah, maybe wages are falling.

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Falling Wages