Not Your Father's Pay: Why Wages Today Are Weaker

[cato2]

Not Your Father's Pay: Why Wages Today Are Weaker

American men in their 30s today are worse off than their fathers' generation, a reversal from just a decade ago, when sons generally were better off than their fathers, a new study finds.

The study, the first in a series on economic mobility undertaken by several prominent think tanks, also says the typical American family's income has lagged far behind productivity growth since 2000, a departure from most of the post-World War II period.

The findings suggest "the up escalator that has historically ensured that each generation would do better than the last may not be working very well," says the study, which is scheduled for release today.

The study was written principally by John Morton of the Pew Charitable Trusts, which is leading the series, called the Economic Mobility Project, and Isabel Sawhill of the Brookings Institution. Other participating think tanks are the Heritage Foundation, American Enterprise Institute and the Urban Institute.

In 2004, the median income for a man in his 30s, which is a good predictor of his lifetime earnings, was $35,010, the study says, 12% less than for men in their 30s in 1974 -- their fathers' generation -- adjusted for inflation. Just a decade ago, median income for men in their 30s was $32,901, 5% higher than 30 years earlier. The median is the midpoint: half of men earn more, half earn less.

Ms. Sawhill said she isn't sure why men's wages have stagnated. "It seems there's been some slowdown in economic growth, it's possible that the movement of women into the labor force has affected male earnings, and it's possible that men are not working as hard as they used to."

The study suggests that absolute mobility -- the rate at which an entire generation's lot improves relative to previous generations -- has declined in recent years. But within a particular generation, individuals can still get ahead if relative mobility, the rate at which the rich and poor trade places, remains high. Poor fathers, for example, may have rich sons, and vice versa. To determine whether relative mobility is high would require studying specific parents and their children rather than broad categories. Mr. Morton said the group will tackle that in a later analysis.

The report also found that between 1947 and 1974, productivity, or output per hour, and median family income, adjusted for inflation, both roughly doubled. Between 1974 and 2000, productivity rose 56% while income rose 29%. Between 2000 and 2005, productivity rose 16% while median income fell 2%, challenging "the notion that a rising tide will lift all boats," the report says.

Ms. Sawhill said several factors could explain the divergence: a growing share of income going to the highest-paid workers, or to profits; an increased share of labor compensation going toward benefits such as health care; or a decline in the number of wage earners, or hours worked, in the typical family.

Bill Beach of the Heritage Foundation said increased immigration could also have pulled down median wages, since most immigrants at first earn less than native-born workers. But he said their incomes may also move up more rapidly in subsequent years.

EMP American Dream Report
Economic Mobility: Is The American Dream Alive And Well?


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[BrianK]

The variety of information in the article is interesting. I focused on this paragraph.

The report also found that between 1947 and 1974, productivity, or output per hour, and median family income, adjusted for inflation, both roughly doubled. Between 1974 and 2000, productivity rose 56% while income rose 29%. Between 2000 and 2005, productivity rose 16% while median income fell 2%, challenging "the notion that a rising tide will lift all boats," the report says.

My thought on this particular paragraph is the differance in manual labor vs. technology. I believe the period after 1974 began the trend towards use of technology. Technology has replaced & improved productivity or at least made manufacturing more profitable with less manpower. Add to that the use of outsourcing.

The article pointed out those with better than average skills are making more.Not mentioned but what seems logical minamum wage service jobs have increased to do those things that used to be a routine part of everyday life. I think the wage comparison boils down to,a change in the overall structure of the American worker. Sandwiched in between higher pay and a larger minamum wage work force is a smaller manual labor force being paid what the job skill requires. It may not be as high as people would like in order to keep up but the manufacturer is paying relative to what is produced.

IMO if the trend continues what is considered the middle class now will no longer exist.

[Caldric]

I never understand these numbers. This write up says income fell while you go around the business places and many say it has went up. ...

I don't know who is right and who is wrong.

[BrianK]

Originally Posted by Caldric

I never understand these numbers. This write up says income fell while you go around the business places and many say it has went up. ...

I don't know who is right and who is wrong.

Shooterman has the answer for the drop. Devaluation of the dollar.

A wealth of other factors contribute but the overall starting point IMO is the loss in purchasing power of the dollar.

[leobold1]

Originally Posted by BrianK

Shooterman has the answer for the drop. Devaluation of the dollar.

A wealth of other factors contribute but the overall starting point IMO is the loss in purchasing power of the dollar.

I don't get much of economics, but tell me if I'm correct.

A DVD player in 2004 costs $199. Today it costs $250. So the price has gone up 25%. But, Americans don't make 25% more, things just cost that much more.

I realize its simple, but I'm trying to put it in terms I can get.

[BrianK]

Originally Posted by leobold1

I don't get much of economics, but tell me if I'm correct.

A DVD player in 2004 costs $199. Today it costs $250. So the price has gone up 25%. But, Americans don't make 25% more, things just cost that much more.

I realize its simple, but I'm trying to put it in terms I can get.

I hope this explanation helps.

Shooterman has been explaining in differant threads. A dollar used to have a higher value than it does now.

Maybe a reverse approach to explaining would make sense.

I'll use a Mexican Peso then A Euro.

1.00 MXN Mexico Peso = 0.0927616 USD United States Dollars.

That means a dollar spent to buy something in Mexico has almost 11 times the value it has here in America. So if a Mexican managed to save $100.00 and wire it to his family in Mexico they would enjoy the equivalent of about $1100.00 in purchasing power.

The reverse is true when comparing the EURO.

1.00 Euro EUR = 1.34610 USD United States Dollars

The dollar has a loss of 34 cents in purchasing power when exchanged in Europe. It takes 34 cents more to equal the value of the EURO.

That basically is where the reverse comes in. When buying that DVD player for $199.00 in order to break even we'd have to get $250.00 if we sold it 2 years later. That is what merchants are experiencing. In order for them to make the same profit to stay in business they charge more for something that in reality costs less to make. Nothing changed except the loss in value of the money we have in our pocket.


As the dollar declines in value. You could make $3500.00 a week but a hamburger & fries could cost $75.00 Imagine how that translates to paying freebies & obligations like Soc. Sec.

With the work force declining does it look good for future retirees without savings? Do you think a couple of people will make enough to support the direction this is going?

[Caldric]

However doesn't the Euro being higher have good benefits? Such as trade problems?

Because use to be in Europe they could build things cheaper they can't anymore. Maybe the reason Benz and several other products are made in the US now. Same with Japan it was cheaper and logical to build in the USA when it cost so much to ship. It was easier to build factories in the South that has seen a major benefit from globalization.

You see this is hard to understand. I am like Leo it just makes no damn sense. And for every negative I bet I can find a positive. We cannot hold the world market as hostage forever as we have since WWII the thing to do is to be smart. I think Greenspan was very smart and I think dropping the dollar amount is not all bad.

Because to be honest that CD player cost 200 dollars 10 years ago and I can get a cheap one for 29.95 now. I make 9 times more money than my mother did. I had single parent home so she is the only base I have to go off of.