The problem with stagnant wages is our socio-economic system requires ever-higher incomes to function. One of the enduring mysteries for conventional economists is why wages aren’t rising for the bottom 95% even as unemployment is low and hiring remains robust. According to classical economics, the limited supply of available workers combined with strong demand for workers should push wages higher. Why have wages for the bottom 95% lost ground in an expanding economy?We can start our search for answers by looking at a chart of wages going back 44 years to the early 1970s. Note that the top 5% began pulling away in the 1980s, when financialization and globalization took off, and accelerated in the 1990s tech boom
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Why have wages for the bottom 95% lost ground in an expanding economy?We can start our search for answers by looking at a chart of wages going back 44 years to the early 1970s. Note that the top 5% began pulling away in the 1980s, when financialization and globalization took off, and accelerated in the 1990s tech boom and the early 2000s housing bubble. The bottom 95% benefited from these booms, but at a much more modest level: wages for the bottom 95% almost returned to 0% gain as opposed to actual declines.
But after the wheels fell off the bubble in 2008/09, the “recovery” since then has seen wages for the top 5% soar and the wages for the bottom 95% crater. (This chart is for males; the next chart reflects family income.)
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Ever-Widening Wage Gap, 1973 - 2015 |
Here’s family income going back to the postwar boom of the late 1940s and 1950s. Note the structural change in the early 1970s and the stagnation in all income levels since 2000: |
Diverging Income Trajectories, 1947 - 2015 |
As I have noted many times, filling the gap between stagnant wages and higher expenses with more debt works for a while, but it isn’t a permanent solution, as eventually the costs of servicing the higher debt eats the borrower alive–and when he defaults, the bad debt eats the lender alive, too.If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.
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