
US Wages Finally Get Back to Where They Were in 1973 - Four_Star
https://thesoundingline.com/in-brief-us-wages-finally-get-back-to-where-they-were-in-1973/
======
kaycebasques
Now that I’m a bit older (29) it’s fascinating to reflect back on my childhood
and teenage years in the context of economic trends. I’ve been interviewing my
grandpa to make a biography of his life and it’s mind-blowing to hear about
how different the 50s were. A teacher (grandpa) and a part-time worker
(grandma) supporting 2 babies and a senior (great grandma), yet still able to
buy a home in Millbrae and a plot of land in Tahoe (which my family still has
to this day). And then the decline of the 70s, 80s, and 90s, and I put the
histories of my mom and dad and their generation into that context. It brings
a whole new dimension to my understanding of them.

~~~
rayiner
The article is misleading in an important respect. While real wages haven't
budged much (they certainly haven't declined), benefits, which are tax-
advantaged relative to wages, have increased quite a bit. For example, while
wages rose 3% since 2000, benefits rose 22%:
[https://www.pewresearch.org/fact-tank/2018/08/07/for-most-
us...](https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-
real-wages-have-barely-budged-for-decades).

The changes you're talking about regarding quality of life more have to do
with increased costs for housing in developed coastal areas. A teacher and a
part-time worker can still afford to raise a family today, they're just doing
it in Texas or Iowa rather than the Bay Area. You can buy a beautiful 3BR
house in a good school district in Des Moines (and frankly, tons of other
places in America) for a bit over $200k.

~~~
danans
> The article is misleading in an important respect. While real wages haven't
> budged much (they certainly haven't declined), benefits, which are tax-
> advantaged relative to wages, have increased quite a bit. For example, while
> wages rose 3% since 2000, benefits rose 22%:
> [https://www.pewresearch.org/fact-tank/2018/08/07/for-most-
> us...](https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...).

Despite the article not mentioning benefits, the primary reason for the
increase in benefit costs is the skyrocketing increase in cost of healthcare
(which is mentioned in the article you provided), which we know has inflated
faster than the CPI for decades:

[https://en.wikipedia.org/wiki/Health_care_prices_in_the_Unit...](https://en.wikipedia.org/wiki/Health_care_prices_in_the_United_States#/media/File:US_healthcare_cost_panel_v1.png)

The only other significant component of employer-provided benefits, retirement
contributions, has if anything been cut back via defined contribution plans of
today (i.e. 401ks), rather the generous defined-benefit (AKA pension) plans of
the past.

And things like transportation subsidies, etc are marginal compared to
healthcare expenditures.

So it's not as if the increase in employers' benefit spending is being
experienced by most workers as in increase in utility. Therefore, the spirit
of the article, which is that workers have received little real[1] value from
the GDP increases of the last 40 years, is still correct.

What the article doesn't address, but your article does, is the fact that
wages are recovering unequally, with most of the gains going to the highest
earners.

1\. I'm not counting ever cheaper electronics and entertainment in my
definition of "real".

~~~
rayiner
"Increases in labor compensation are being eaten up by increases in benefits
costs" is a different statement than "labor compensation isn't increasing."
From the employer's point of view, whether they're spending 22% more because
of higher salaries or more expensive benefits doesn't make a difference.

And the implications are different for policy. If labor compensation isn't
going up, that suggests a structural problem in the economy. If labor
compensation is going up, but it's being eaten up by increasing healthcare,
education, and housing costs, then that suggests targeted reforms are
necessary in those sectors.

~~~
danans
> If labor compensation isn't going up, that suggests a structural problem in
> the economy. If labor compensation is going up, but it's being eaten up by
> increasing healthcare, education, and housing costs, then that suggests
> targeted reforms are necessary in those sectors.

Both are true, simultaneously.

For the majority of workers, wages are historically static despite rising GDP,
and that requires reconsidering the structure of the economy (in particular
how it has changed in recent decades).

And indeed we need targeted reforms of the highly inflationary sectors.

~~~
rayiner
That is not necessarily true. There is data showing that _total compensation_
is rising at the same level as labor productivity, and the percentage of
national income going to labor, when accounting for benefits, has been
extremely consistent since 1970:
[https://www.nber.org/digest/oct08/w13953.html](https://www.nber.org/digest/oct08/w13953.html).

If we assume the status quo in 1970 was acceptable, then the data shows no
need for "reconsidering the structure fo the economy." Rather, labor
compensation grew just as fast as it was "supposed to" but that growth was
eaten up by a handful of sectors.

~~~
danans
That paper switches out the CPI for a statistic of its own invention,
"implicit price deflator for the output of the nonfarm business", which is far
more charitable to its conclusion that workers have taken home a consistent
percentage of economic growth since the 1970s.

But the paper completely avoids the problem of how those gains are distributed
across workers in the economy, that is, it doesn't address income inequality
trends at all (the author was an economist for Reagan, so that's not terribly
surprising).

Even if the paper's statistics are taken at face value (that labor share of
GDP has been consistent since the 1970s) it's simultaneously true that the
majority of GDP growth has gone to those at the high end of the income
distribution in the time period it covers. You might not call that an economic
structure problem, or even consider it a problem at all, but many would
reasonably disagree.

------
avengersunite
US economy is at an amazing position currently. Even though it has a smaller
share of the global economy than 1960s (40% then vs 22% now), the 60s was an
anomaly as most of Europe and Asia's economies were decimated from the war -
the jump in worldwide prosperity is a lot better for the human species. US
economy is the biggest in the world, twice as big as the next country, and 5
times bigger than Japan, and 6 times bigger than Germany. It has survived
stagflation and oil crisis in the 70s, and globalization in the 80s and 90s.
The US economy is much diversified - from tech in Silicon Valley,
entertainment in Hollywood, oil and gas in Texas, tourism in Florida, finance
and fashion in NY, agriculture, manufacturing, services, etc - and safer from
systemic shocks from a loss of one particular industry. Capital is freely
flowing into US - and away from emerging countries. US growth is in the 3%,
while Japan/Germany is close to recession, and China is experiencing its own
great depression.

~~~
A2017U1
> US economy is the biggest in the world, twice as big as the next country,
> and 5 times bigger than Japan

Nominally yes, but PPP is generally more apt.

> GDP comparisons using PPP are arguably more useful than those using nominal
> GDP when assessing a nation's domestic market because PPP takes into account
> the relative cost of local goods, services and inflation rates of the
> country, rather than using international market exchange rates which may
> distort the real differences in per capita income.

[https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)](https://en.wikipedia.org/wiki/List_of_countries_by_GDP_\(PPP\))

------
binalpatel
Inflation adjustment is weird across time and geographies. I'm not saying the
article is wrong, but just something to keep in mind. In 1973 the internet was
nascent, we didn't have smartphones, insulin was still hard to produce, and so
on. Even making the same amount "inflation adjusted" as 1973, our lives are
much richer in part to all these advances.

As an example - it's likely in adjusted terms someone in the top 1% a 100
years ago would be close to the top percentiles today, and yet it's pretty
easy to argue that the average person today is still doing much better in
almost any measure than a 1%-er from a century ago.

~~~
coldtea
> _Inflation adjustment is weird across time and geographies. I 'm not saying
> the article is wrong, but just something to keep in mind. In 1973 the
> internet was nascent, we didn't have smartphones, insulin was still hard to
> produce, and so on. Even making the same amount "inflation adjusted" as
> 1973, our lives are much richer in part to all these advances._

Or much poorer. Smartphone means FOMO, constantly accessible to bosses, less
interaction and more wasted hours with BS apps (people are starting to treat
it as addiction), and the "easier to produce insulin" is balanced by
skyrocketing healthcare costs, much more stressful lives (including being
worked to the bone, and with no "company loyalty" anymore), and loss of
quality of life in many important ways...

It's just that for many US people, "access to BS gadgets" (which nobody missed
in the 70s because they didn't exist anyway) trumps other qualitative life
factors that don't even register. I think e.g. Europeans would appreciate
those much more...

> _As an example - it 's likely in adjusted terms someone in the top 1% a 100
> years ago would be close to the top percentiles today, and yet it's pretty
> easy to argue that the average person today is still doing much better in
> almost any measure than a 1%-er from a century ago._

Regarding quality, meaning of life, friends, lifestyle, etc, or just based on
access to stuff?

------
s3r3nity
To be precise, for "production" and "nonsupervisory" workers. Doesn't say
anything about the size of this population, and how representative it is of
the general earnings potential of the US as a whole.

~~~
Fifth_Star
Production and non-supervisory is most people

~~~
AnimalMuppet
It's probably less "most people" than it was in 1973, though.

~~~
conception
Why would that be the case? Has there been a significant spike in farm workers
or managers per capita?

~~~
AnimalMuppet
Well, I was assuming that people like engineers and programmers weren't
"production". There are more of them now than there were in 1973, and fewer
factory workers.

~~~
conception
Yeah, for service industries, it counts anyone not in a supervisory role, so
it'd include them as well. :)

------
nostrademons
Wow the 1970s were not kind to inflation-adjusted wages.

It's interesting to look at this graph through the lens of demographics &
generations. The post-war wage boom from 1949-1963 corresponds almost exactly
to when the Silent Generation (those born during the baby-bust years of the
Depression & WW2). The peak of the graph in 1973 corresponds to the initial
entry of the peak of the Baby Boomers (1955) into the workforce. There's a
rise from the 90s onwards corresponding to Gen-Xers entering the workforce (at
22 now, since college degrees have become more prevalent) and the G.I. Gen
retiring, but it stalls out in 2005 just as the first Millenials start
entering the workforce.

Maybe there's actually something to the Econ 101 models about factors of
production and how a relative shortage of labor increases labor's share of
national income relative to capital while a glut does the opposite.

HS-educated members of generation after Millenials (born 2001-onwards, and
_tiny_ \- fertility has been dropping to record lows) start entering the
workforce in 2019; college-educated ones in 2023, and the peak of the baby-
boomers starts retiring in 2020. Perhaps we'll see another sharp rise in wages
in the near future, assuming we don't destroy ourselves because of the coming
stock market crash as all the baby boomers try to cash out their 401(k)s at
once.

------
supersleepgrump
I really think these numbers are antiquated, and with modern data science, a
more robust picture of wages and employee compensation will emerge.

The median salary only accounts for the top 30% of Americans, and almost every
job that pays more than $23/hr requires a college degree, not to mention that
training / education / certification is financed through families and
individuals, increasing their debt burden, which brings down their real wages.
And that's one parameter, individual debt has also been increasing, as well as
the gradual decline of the interest rates since the 70s.

All-in-all the bigger picture is more complex, and with every metric of
inequality increasing, globally, I think the numbers calculated for inflation
adjusted average wages for production and non-supervisory workers are
antiquated.

~~~
bfrydl
> The median salary only accounts for the top 30% of Americans

I'm not a mathematician but this doesn't sound right to me.

~~~
username90
It can be true if median salary only counts people with a job.

------
RickJWagner
Thank goodness the trend line is moving in the right direction. It'd be
terrible if we got this news and the trend was downward (getting worse).

------
SlipperySlope
High tariffs on imports help to bring back USA manufacturing no doubt.

All sufficiently large economies should protect their domestic industries with
tariffs. Otherwise its a race to the bottom for labor wages.

~~~
Bombthecat
Story time : from my boss his son is specialized in factory logistics for
production lines. He helps plan to build streets transportation plans how much
when where how etc.

He looked into jobs in us and Japan / China.

When he looked at the US it was basically : planning canceled, canceled,
stopped, pushed back for later etc etc. So he moved now to China.

So, from a data point of one. It does not look so great...

------
lokidokiro
Another way of writing the same title that sounds completely different:
"Inflation adjusted US wages reach highest level since 1973."

I'll never understand what compels journalists (or wannabe journalists) to
insert words like "finally" into their headlines. It would have been just fine
without that one word.

~~~
mabbo
Because the GDP growth in that time is staggering, yet workers have shared in
none of it. If the proportion of the country's earnings going up labor had
been maintained, the average wage would be double.

------
drvbipstr
Looks like the economy is finally turning good.

------
NTDF9
Phew. It only took pumping some trillions into the pockets(assets) of
multimillionaires to finally trickle down to 1973 levels.

~~~
jackfoxy
Yes, but if you look at the chart, most of the loss occurred in the decade of
the 70s, before any talk of trickle down economics. From the end of the 82
recession until the mid nineties the erosion continues, but at a much slower
pace, closer to being static until the trend starts a long slow ascent, close
to 25 years to recover what was mostly lost in 10.

~~~
NTDF9
What does that trend line look for top 1%?

------
NoblePublius
How much did a 55” LCD TV cost in 1973? Cuz they’re $249 now.

~~~
Fifth_Star
Can you live in a TV and eat it? Cause the average rent was $175 dollars a
month

[http://www.littlehouseinthevalley.com/cost-of-living-
compari...](http://www.littlehouseinthevalley.com/cost-of-living-comparisons)

~~~
refurb
An average car cost $4,000. So about 1/10th. Applying that to rent, the rent
would be $1750, which is pretty close.

~~~
ksaj
Now do that same analysis with average/mean pay scales and compare. Then the
article will make sense.

