Tuesday, June 26, 2012

Workers' Wages Still Plummeting

Last year, the CEOs of the big banks received an average raise of about 12% to add to the millions they were already making, and most other corporations followed suit with similar big raises for their CEOs. Meanwhile, Americans workers fell further behind. After inflation was figured in, worker wages actually fell by 0.6% just as it has been doing for years now. And this fall in worker wages did not just start with the current Republican recession. It has been going on for the last 40 years. Here's how Jeff Nielson of The Street puts it (I am posting only part of the article, but I urge you to read the whole thing):

In writing about the relentless collapse of Western economies, I frequently point to "40 years of plummeting wages" for Western workers, in real dollars. However, where I have been remiss is in quantifying the magnitude of this collapse in Western wages.


On several occasions, I have glibly referred to how it now takes two spouses working to equal the wages of a one-income family of 40 years ago. Unfortunately, that is now an understatement. In fact, Western wages have plummeted so low that a two-income family is now (on average) 15% poorer than a one-income family of 40 years ago.


Regular readers will recognize the chart above on U.S. average wages.


Using the year 2000 as the numerical base from which to "zero" all of the numbers, real wages peaked in 1970 at around $20/hour. Today the average worker makes $8.50/hour -- more than 57% less than in 1970. And since the average wage directly determines the standard of living of our society, we can see that the average standard of living in the U.S. has plummeted by over 57% over a span of 40 years.


There are no "tricks" here. Indeed, all of the tricks are used by our governments. The green line shows average wages, discounted by inflation calculated with the same methodology for all 40 years. Obviously that is the only way in which we can compare any data over time: through applying identical parameters to it each year.


Then we have the blue line: showing wage data discounted with our "official" inflation rate. The problem? The methodology used by our governments to calculate inflation in 1975 was different from the method they used in 1985, which was different than the method they used in 1995, which was different than the method they used in 2005.


Two obvious points flow from this observation. First, it is tautological that the only way in which data can be compared meaningfully is to use a consistent methodology. If the government thinks it has improved upon its inflation methodology, then all it had to do was take all of its old data and re-calculate it with their "improved" methodology. Since 1970 there is this invention called "computers" which makes such calculations rather simple.


This brings us to the second point: the refusal of our governments to adopt a consistent methodology in reporting inflation statistics can only imply a deliberate attempt to deceive, since it is 100% logically/statistically invalid to simply string together disconnected series of data -- and present it as if it represents a consistent picture. More specifically, we can see precisely what lie our government was attempting to get us to believe.


Roughly speaking, the blue line trends flat. Thus, the U.S. government (and most Western governments) has been lying about inflation for the last 40 years as a deliberate means of hiding the 50+% collapse in the standard of living for the average person. Meanwhile, the situation is more than reversed if you're one of the fat-cats at the top. While average American workers have seen their wages plummet by 57% over the past 40 years, in just 15 years (1992-2007) the 400 wealthiest Americans saw their incomes rise by 700%.


Now we have the complete picture: wages grinding steadily lower year after year, decade after decade for the Little People, while wages go straight up for the fat cats. To say this is unfair would rank as one of history's greatest understatements. This is economic rape, plain and simple. . .

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