Jeff Madrick: US median wage 13% lower in 1998 than in 1973

Louis Proyect lnp3 at SPAMpanix.com
Thu Aug 31 10:41:11 MDT 2000


NY Times, Aug. 31, 2000

ECONOMIC SCENE

Despite Times of Prosperity, Many Feeling a Pinch

By JEFF MADRICK

Make no mistake about how good the last five years have been to Americans.
The usually cautious economists at the Economic Policy Institute point out
in their new issue of The State of Working America that wages went up
strongly across the board since 1996, even for low-income workers. In the
meantime, low levels of unemployment meant that many who dropped out of the
labor force were back at work, and jobs in general were more stable. Small
wonder that Americans are confident again.

But what is too often ignored is that this remarkable performance has not
yet compensated for the persistent erosion of the income of male workers
since the early 1970s. And this goes a long way toward explaining why Al
Gore's message at the Democratic convention to help working families seems
to have caught on. Women have had to fill the breach, with a far higher
proportion of them now working. But although their wages have risen
substantially on average, they remain roughly 20 percent below what men earn.

Few of the instant television analysts at the convention grasped the point.
"Contentment" is the tenor of the times, one pundit asserted, claiming that
Gore was misreading the electorate. The going line was this: Maybe we
should worry about the poor and those without health insurance, but should
we really be concerned with most of working America?

A few facts will help. The Census Bureau provides a useful measure of
income by sex that includes not just wages and salaries for all workers,
which are typically cited by analysts, but also sources of income like rent
and interest as well as government transfers like Social Security benefits
and unemployment insurance. The bureau also provides data by age group and
for the typical, or median, worker -- the worker who earns more than half
of all workers and less than the other half.

I have also had the data discounted for the latest estimates of inflation,
which adjust incomes upward for new improvements in the quality and variety
of products. Thus the following conclusions are based on a quite generous
estimate of income growth.

Despite significant gains recently, however, the median male worker has
fared poorly since the 1970s. In fact, adjusted for inflation, the median
worker in the 25-to-34 age group earned 13 percent less in 1998 (the latest
data available) than the median worker of the same age in 1973.

Median workers in the 35-to-44 age group earned about 9 percent less in
1998 than their counterparts 25 years earlier. And the 45-to-54
median-income group essentially stagnated since 1973, up only slightly. By
comparison, in the post-World War II period, median incomes for these age
groups rose by 50 to 100 percent over 25 years.

But even if overall incomes fell compared with levels for equivalent
workers in the past, how did men do as they grew more experienced at work
and built up financial and real estate assets over time? These same data
allow us to assess this, and the findings are sobering.

Beginning in the 1970s and persisting into the 1990s, the incomes of a
majority of men under 35 rose about half as fast as they did in earlier
decades, and the incomes of a majority of men aged roughly 35 or older
essentially stagnated or fell.

To take but one example, the median income of a male aged 35 to 44 in 1988
was $39,331. In 1998, the equivalent man, now 10 years older, took in $300
less. To match the gains typically made in the 1950s and 1960s, the median
income should have been approximately $51,000 by 1998.

Updating the data through 2000 would improve the performance of the past 25
years only slightly.

Some economists say such data do not tell the whole story. Incomes for the
top 20 percent of men rose rapidly in the past 25 years, and some assert
that because income mobility is greater now, many in the lower 80 percent
occasionally climb into the highest quintile. But claims of greater income
mobility have been criticized by both conservative and liberal economists.

A more relevant criticism is that even if incomes stagnate, Americans can
buy many more exciting new products at low and falling prices. Even the
poor own VCRs, microwave ovens and Sony Walkmans. But the costs of products
and services that some may view as even more critical to modern life than a
VCR -- housing, education, medical care, and public transit -- have all
risen much faster than incomes since the early 1970s.

It is an extraordinary social achievement that so many women now have the
opportunity to work. But the inescapable fact is that if women did not
work, most family incomes would not have risen at all in the 1980s and
1990s. The median annual income of a two-worker family is now about
$60,000. The median family income of a one-worker family is about $32,000.

The resulting pressures are obvious. A parent now stays at home full time
in fewer than one out of four families, compared with two out of three in
the 1950s. In half of all families, both parents work, compared with one
out of five in the 1950s. Twenty-five percent of all families are headed by
a single parent, typically a mother.

This is a new reality in America. Despite five years of prosperity, the
poor are still not doing well, and working families in the broad middle are
in need of relief -- both from long work hours and from the pressures of
the rising cost of education, health care and other requirements for a
middle-class life. And the cost of professional child care has risen much
faster than incomes.

Surveys by two sociologists, Jerry Jacobs of the University of Pennsylvania
and Kathleen Gerson of New York University, among others, show that those
who work especially long hours want to work less. And those who work short
hours, usually earning too little, want to work more.

For a long time, both political parties put the best face on these grinding
facts. Al Gore simply let the cat out of the bag. My guess is that George
W. Bush is beginning to get the message, even if the instant media pundits
are not.


Louis Proyect

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