What Have Wages Really Been Doing Over the Last 50 Years?
I decided to break a rule. The BLS says that it is inappropriate to calculate seasonally adjusted wages in constant dollars. But I did so anyway. Real wages in constant dollars allow us to compare wages over time.
Average real wages (blue line) were calculated by dividing nominal weekly wages seasonally adjusted for production and nonsupervisory employees (blue collar workers) by the CPI-U All Items index and multiplying the result by 100. This index is expressed in 1982-1984 dollars and is why the blue line intercepts the nominal wage line in 1984.
As I pointed out in a post on the annual report Income, Poverty, and Healthcare Coverage which the Census does for the Commerce Department, easily accessible and understandable information on wages is hard to come by from the government. I was looking for weekly wage data expressed in constant dollars on all private workers from the 1960s to the present.
I had to make do with a subset, production and nonsupervisory employees, and create a work around to express these wages in inflation adjusted dollars.
The BLS does keep constant dollar indexes for wages, but they go back to 1981. A new system of job categories was instituted for them in 2006. The use of an index based on 100 instead of dollars is, I think, conceptually less effective for most people. Finally, weekly wage information for all employees also only goes back to 2006.
What the chart above shows is that weekly wages for blue collar workers were better in the 1960s and 1970s than they are today. They topped out in October 1972 at $348.08, and began their long decline in 1979. In part, they were beaten down by the high inflation of the times:
But they did not recover due to anti-unionism and deregulation begun under Carter and expanded under Reagan, and most importantly the institutionalization of the anti-inflation policies of Paul Volcker which treated all wage gains as inflationary and to be suppressed. As a result, real weekly wages continued their slow decline before bottoming out in January 1996 at $259.13. This represented a 25.6% decrease from the October 1972 high. The small recovery in wages that began at this time was a function of the Clinton expansion. Interestingly in the present crisis, wages dropped moderately only for about 6 months in mid-2008 before returning to their pre-recession levels. 2008 and 2009 you will remember are when the economy was suffering major job losses, but this appears to have had little effect on real wages. For the last month, September, for which we have data, average real weekly wages stood at $288.34, still 17.2% lower than their October 1972 peak.
Now perhaps I have committed some grave methodological error, but seasonally adjusted wages are just points on a trendline running through the unadjusted data. Applying a transformation like the CPI affects them all in more or less the same way. However it is, the chart created accords with both the information from the Income, Poverty, and Healthcare Coverage report and with historical events. It is more evidence of what a disaster the last 40 years have been for the base of the American labor force. Not only have workers wages not gone up in real terms, despite great gains in productivity, they still remain below a high set 40 years ago. This is especially important because many of the jobs being created nowadays are lower level, i.e. nonsupervisory in nature.