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Source: Visualizing Economics

 

Catherine Mulbrandon covers all sorts of cool data over at Visualizing Economics (Check out her wicked cool book of economic visualizations on income here).

I find the big picture view of employment and wages fascinating, looking at the question, What Happened to Wages? 

As the charts above show long-term growth in wages in the US. has been a steady climber, with big spurts in worker productivity (industrial revolution, technology). As the charts show, however, over the last 40 years, long-term growth has slowed significantly.

Category: Digital Media, Wages & Income

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

21 Responses to “Looking at Wages Relative to GDP”

  1. ByteMe says:

    It’s not so complex:

    Expansion of “free” (or lower tariff) trading with partners that had huge supplies of unskilled nearly-no-cost laborers encouraged manufacturing activities to be moved to other countries. The other part of the equation is C-level managers being compensated for profit increases and nothing gooses the profits like lowering headcount while also lowering production costs. Keeping wages down increases the pay for C-level managers, so why wouldn’t they do it if they could?

  2. quadrillion.me says:

    Trickle down fairy will come soon to solve this

  3. Petey Wheatstraw says:

    Somewhat rlated:

    An NPR story yesterday, regarding the “return” of the housing market, included the statement that housing prices are now growing at a couple of points above inflation. If I’m not mistaken, historically, that ain’t right, or good.

    The “improving” economy seems to ignore the flat-lining of wages (much less those who have fallen off the map, entirely). Reminds me of the modern phenomenon of increased weight gain in the absence of increased caloric intake — it can’t be healthy. A gigantic but benign tumor isn’t a good thing.

  4. willid3 says:

    well, as I recall it, we have seen this story before. seems like in the last ‘recovery’ wages never really recovered then either. only real difference this time is the lack of easy credit for all, and less interest in getting into debt when incomes are collapsing. otherwise it looks a lot like the same story

  5. AnnaLee says:

    Petey W., People smarter than I am will probably disagree with me for reasons I won’t begin to understand but it seems to me that the value of a house is what a person can afford to pay, as in monthly payment. I really don’t think that propping up housing prices is a good strategy in the long run and I don’t think the housing around me dropped to the level of the pay of the person that would normally buy a property. The only way a house is affordable is if the rates are low. If the rates go up, won’t the values drop to accommodate the lost affordability?

    Anyone – If increased GDP is not circulating as wages buying stuff, where is it circulating?

  6. TR says:

    Catherine has a great site-lots of info. for graph lovers

  7. S Brennan says:

    Looking at this chart, I must be categorized as an unskilled worker.

    This Tuesday, on a 2-3 month contract in another city, I was offered a 35.00/hr job no benefits, I cover moving, no per diem and no “split per diem”. That’s less in real dollars [not inflation adjusted] than i was paid in “direct” employment in 1996. I am an engineer from a top school, who is current on the latest software, won more than my share of engineering awards and accolades…as recently as last year. I am also lucky compared to others my age, I can still get work. An engineer I know works at Home Depot checking out customers. I recently saw an add for an engineer at “mid-career” described as 3-5 years…what does that tell you?. I can’t say these charts are wrong, but it does not match my experience, the H1-B’s, H-2′s, TN’s, L-1′s, 0′s et al have really taken a toll, my experience says real wages are dropping.

  8. gusgus says:

    Great charts, but there is a confounding factor — the civilian employment / population ratio has been changing over time. In particular, after being stable for many decades, the ratio began to rise in the mid 1970s as more women began to enter the workforce. While GDP continued to rise at a more or less constant rate, the number of workers increased in the 1980s and 1990s — therefore the wages (or GDP) per worker had to decrease relative to the GDP per person.

    Mind you, the employment – population ratio has fallen back to late 1970s early 1980s levels but wages haven’t rebounded, so clearly something else is going on as well.

    Here’s a link to the Civilian Employment – Population Ratio from the St. Louis Fed http://research.stlouisfed.org/fred2/graph/?s%5B1%5D%5Bid%5D=EMRATIO

  9. gusgus says:

    Here’s the Civilian Employment-Population Ratio from the St. Louis Fed
    [img]http://research.stlouisfed.org/fred2/graph/?s%5B1%5D%5Bid%5D=EMRATIO[/img]

  10. Petey Wheatstraw says:

    AnnaLee:

    It’s being hoarded by those it is distributed to, at effectively negative interest rates, to be lent out at usury rates to those who must use borrowing to cover the widening wage/price gap.

    I think.

  11. MarkKlose says:

    Petey writes, “An NPR story yesterday, regarding the “return” of the housing market, included the statement that housing prices are now growing at a couple of points above inflation. If I’m not mistaken, historically, that ain’t right, or good.”

    It’s worth remembering that even with some rise in prices, in most communities single family homes are still worth considerably less than they were in 2005-2006. But more important is affordability, as it’s the monthly cost that truly determines housing inflation. Looking at mid-2006 mortgage rates we see that the monthly cost of a 30 year fixed rate conforming mortgage was ~28% higher in 2006 than today. For example, a $350k house with a $280k mortgage would have required annual payments almost $6,200 more in 2006 than today. The $515 a month higher monthly payment is important to most middle class families.

    Moreover, one benefit of increasing home prices is that more homeowners become eligible to refinance their homes. This opportunity can significantly lower their housing cost which can have a meaningful impact on housing inflation.

  12. constantnormal says:

    I wonder what my grandchildren are going to be doing to earn a living … and what kind of lives they will have …

  13. Petey Wheatstraw says:

    Mark:

    no doubt there positive aspects to a housing recovery, such as it is (same can be said for the broader recovery).

    The problem, as I see it, is that housing traditionally barely kept pace with inflation. Housing was viewed not so much as a profit generating investment, but as a store of value.

    Generally, the broader “recovery” has been a spike, as opposed to a more conservative/gradual trend. Coupled with the segment of our society that has been left behind, I believe it bodes ill for our future stability.

  14. ashpelham2 says:

    Anytime a discussion like this comes up, the only thing that comes into my mind is “location, location, location”. For every person in America, the situation is different. Ask someone living in a forgotten rust belt city that is losing population what home prices are doing? What wages are doing? This is returning to the land of migrants, into and around the place. Settlers in the east moved west long ago looking for affordable land and new opportunity. People now need to move to find sustainable work and competitive wages. You can’t just sit in your same home town and expect life to come to you.

    So, wages are where you go to seek them. Otherwise, we don’t have much room to complain.

  15. Frilton Miedman says:

    When you pair Fred charts of household debt to income, along with cost vs disposable income to service household debt with current low rates – you then understand just how absolutely necessary Bernanke has been in keeping us above water until Congress figures out that catering to bribers is crushing the U.S., (and illegal/unconstitutional).

    I’m short T’s, not because I want to make money off being short, but because I’m terrified what will happen if rates go up prematurely.

  16. S Brennan says:

    ashpelham2, some truth to what you say, I’ve moved 8 times since my 20th birthday for work…it does get old and it’s hard to have family and friends. I think advocating for shiftless population is the same as advocating for crime, juvenile delinquency, broken homes and a general break-down of social morays.

    The problem is that the US Government [Presidents, Judges and congress of both parties] has for some time been colluding with business “leaders” in destroying good paying jobs.

  17. CitizenWhy says:

    Maximizing Profit = Decline of Wages

    Destruction of the Concept of the Common Good = Decline of Wages

    Globalization = Decine of Wages

    Neo-Liberalism = Decline of Wages

    Effective Attacks on Unions = Decline of Wages

    New Democrats (Clinton, Obama) Controlling the Democratic Party = Decline in Wages

    Propaganda on the “Debt Crisis” = Decline in Wages

    US Chamber of Commerce = Decline in Wages

    Etc.

  18. DeDude says:

    @AnnaLee, the GDP is being harvested by those who do not work for their income. Since those people tend to spend a smaller % of their income on “spending” and a lot more on speculating/investing, the result is speculative bobbles in different asset classes. That model is not going to work in the long run, but the RE bobble sort of helped keep the game going, by producing “income” to those who took that increased value out of their house to spend. There are lots of little tricks that can be used to prolong the consumption growth, but in the long run you have to have a balance between the income going to investor class and the income going to consumer class people. In the end if substantial parts of the consumer class cannot get out of debt by bankruptcy, can no longer get more credit for their spending and cannot find jobs that pay for increased spending – they will collapse and curtail their spending. At that time the greedy bastards who insisted on harvesting more and more of our wealth will finally realize who are the pillars that holds up the country – and surprise it ain’t them. They will also find out that when someone pulls the lever, everybody circles down the drain.

  19. kaleberg says:

    This is no surprise at all. I did a post on this a few years back at Daily Kos. All GDP and productivity growth has gone to a handful of people at the upper end of the wage scale. That sliver has gotten narrower over the years. For a while the losers were the guys with no HS diploma, then the ones with no college degree, then the ones with no advanced degree, and now its the ones without personal connections to the handful of folks who own the country.

    (Wages and benefits have accounted for about 60% of the GDP since 1970 or so. This has fallen a little, but the real effect is the huge wages at the top which were at the expense of the the rest of the curve.)

  20. SecondLook says:

    If you look closely at the chart, you’ll see that wages for unskilled labor started to lag economic growth around the middle of the 19th century. Just at the point in time when industrialization becomes a major factor. For unskilled labor, it was the mechanization of farming – often called the rise of industrial agriculture – that has the greatest impact.
    Quite simply, it was the decline in demand for those workers, with a slow decline in the unskilled labor supply that caused their value, and therefore their wages, to become stagnant, or worse.

    The troubling, and very rarely discussed discussed what happens to the physically able but mentally limited percentage of the potential workforce. Those people who are in good health, willing and wanting to work, but incapable of being trained past a semi-skilled level.
    I’m not talking about the lack of job training, poor educations, but a more fundamental problem: Just not being bright enough. Typically, a 6th to 12th grade education is the best that they can do. Roughly, a third of the population. People who, until the 1980′s or so, could frequently find okay to decent paying jobs, who often became part of the lower middle class (as defined by buying, or being able to buy, a home), but no longer.
    That a modern technological society results in a high percentage of its population being work handicapped is a topic that cuts across the grain of our culture, painfully. So, we do our best to ignore it. However, if you take it into consideration, it explains a great deal of what has happened to the national workforce.

  21. rjensen65 says:

    Other confounding factors are the exploding use of robots in manufacturing plants and reduced participation in the labor force. How do we define number of workers as more and more people remove themselves from the labor force? Increasingly an unmarried parent withdraws from the labor force, collects welfare and food stamps, and receives financial benefits from a a working unmarried partner. There are now 11 states with more people on welfare than are working in the legitimate (non-underground) labor market. Several other states like Vermont are on the brink of raising this number above eleven —
    http://www.cs.trinity.edu/~rjensen/temp/Political/WelfareHeavyStates.jpg