As reported in the press (right now kicking around the 7.2 percent official unemployment rate), 2008 was a particularly bad year for American workers. Nonetheless, one can say that it is just one more bad year in a lengthening string of bad years.
The year 1973 is often seen as a turning point for the U.S. economy. Between that year, and 2006 (the last year to end before the current recession), per capita GDP went up from $6,521 in 1973 (about $29,600 after adjustment for inflation) to $44,073, a roughly 49 percent increase. What most people actually earned, however, seems to tell quite a different story.
When current dollar figures are adjusted using the Consumer Price Index (CPI), mean income rose ten percent for males, 64 percent for females in the 1973-2006 period.1 When considered as a proportion of per capita GDP, however, male mean income fell from 142 percent of per capita GDP to just 106 percent of it. For females, income went from 58 percent of per capita GDP to just 64 percent of it.
A measure of the mean, however, has its limitations when covering such a wide range of figures as a survey of incomes produces, making the figures on median income well worth examining. As it turns out, this has not merely stagnated, but dropped. As of 2006, the median male income ($32,265 in current dollars) was actually 12 percent less than it was in 1973 ($36,578 in 2006 dollars, after adjustment using the Consumer Price Index, which suggests a higher inflation rate than that used in the Census's data sets).
Median female income did increase, by about 60 percent in real terms (to about $20,000 a year). However, when reconsidered relative to per capita GDP, median male income went from 124 percent of per capita GDP to 73 percent of it during those thirty-three years; while for women the increase was a mere 3 percent, from 42 percent of per capita GDP in 1973 to 45 percent of it in 2006.
The picture becomes particularly interesting when the total figures are broken down by the level of educational attainment. The available data does not indicate what happened during the 1970s and 1980s, but it does show what happened in the 1990s and 2000s. Males 25 years and over who have less than a bachelor's degree saw their median income stagnate in real terms after 1990. Those with some college and no degree, or an associate's degree, actually saw their income fall slightly by the end of the period.
Those who have attained four year degrees earned just 6 percent more in 2006 than they did in 1991-their median income falling from 167 percent of per capita GDP, to 139 percent in that same time frame.
By the same measure, women with college degrees also saw their income fall relative to per capita GDP, though to a more limited extent, from 64 percent to 60 percent of it.
The Minimum Wage
Not surprisingly, the lack of increase has been felt especially sharply at the bottom of the pay scale. In 1968, the minimum wage was $1.60. While it kept up with inflation through the 1970s, it was allowed to slip in the three decades since. Simply to recover the purchasing power it had forty years ago, it would need to be revised up to $10 today. To reflect the per capita GDP increase between 1968 and 2008, it would need to be in the range of $16. That is close to three times its present level, and more than twice what it will be when the recent increase takes effect in mid-2009.
Putting It All Together
In short, what the figures show is that the growth of income has not kept up with the reported growth of GDP (which is to say, it has fallen in relative terms). In fact, not only has it grown much more slowly in real terms, but for many-those earning minimum wage, or near to it; men closer to the lower than the higher end of the labor market in general-income actually fell. Women appear to have done better, but they still earn substantially less than men by just about every measure.
Readers should keep in mind that CPI is often thought to understate inflation, rather than overstate it, in which case the picture presented above may be optimistic. (That is especially the case with large expenses like housing, education, and health care, the prices of all of which have been going up faster than inflation; and it is worth noting that it does not account for the spikes in the prices of food and energy.)
Additionally, annual money income does not tell the whole story. The picture also includes longer working hours-20 percent more than in 1970, according to Fareed Zakaria (who actually has the gall to celebrate the fact)-which suggests that the gains have been more limited, the losses more severe than they appear at first glance.
And of course, when they lose their jobs, Americans have to do without new ones for a longer time. The period of unemployment averaged about 10 weeks in the 1970s, but that figure has since risen to 16.9 weeks. (Keep in mind that it has long been the practice of the Bureau of Labor Statistics to regard anything more than 15 weeks as "long-term" unemployment.)
They are not unrelated factors: the scarcity of jobs (always much worse than the official unemployment figures) and the greater insecurity that goes with it has exerted a downward pressure on wages.
I could go on, talking about the credentialing crisis, and the lengthening commutes (and lack of decent public transport to help out with them), and all the rest of it, and the price that these things exact from the people who have to put up with them, but if you have read this far, I am sure you have heard the story before, many, many times. The only part you have yet to see is a happy ending. For all the hopes surrounding the new administration, I am very doubtful that we will actually see that.
1 All data on reported income comes from the U.S. Census Bureau.