U.S. Workers Endure "Lost Decade" of Declining Wages

November 26, 2012

Real earnings have declined across most job sectors since the Great Recession. Now, real wages are about the same level as they were in December 2005, highlighting the slow growth of the economy. This has been referred to as a "lost decade" for workers, says Kevin G. Hall of McClatchy Newspapers.

  • Real wages have been on a downward slope for more than 40 years now.
  • The median working-age man earns 4 percent less than he did in 1970 when adjusted for inflation.
  • Nearly every occupational group is either below the 2005 level or at most 1.5 percentage points above the 2005 level.
  • As a result of stagnant wages, economic recovery is likely to be more difficult since Americans are unable to pay off their debts.

To the confusion of many economists, the only occupational category that has seen a rise in real wages is office and administrative workers.

There are several explanations for the decline in wages.

  • First is that the Federal Reserve has tamed inflation so wages have not had to increase to keep up with the rising prices of other goods and services.
  • Second, it is possible that the decline in labor unions have resulted in less of a force for demanding higher wages and better benefits.
  • Another likely reason is that productivity has improved due to automation of many jobs.

Some economists say that consumption is a better measure of the increase in wages. Since the 1970s, there hasn't been much of a change in inequality or a widening of inequality in consumption tables. In fact, low-income households have seen their purchasing power increase. However, this may be the result of increase in government transfer programs.

Some argue that the reason wages haven't increased is because the labor market is so depressed. So many people are unemployed and looking for jobs that employers are able to land workers that are willing to take less money.

Source: Kevin G. Hall, "U.S. Workers Endure 'Lost Decade' of Declining Wages," McClatchy, November 15, 2012.

 

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