What happened to middle class wages?

December 18th, 2012 | Alex Stone

1950s americana family picnicIn the 1950s and 60s, the American middle class grew from the “middle out” thanks to government policies encouraging education and home ownership. There was also plenty of demand for American-made goods, as much of Europe’s manufacturing base had been destroyed during WWII. Times weren’t good for everyone – most notably African Americans, Japanese Americans, and other groups that suffered from de jure racism – but expansion of the U.S. economy led to one of the most prosperous societies in history.

Single-income families were the norm, high student loans were virtually unheard of, and good benefits like pensions and health care were the rule – not the exception. So what’s happened since then?

Although gains in productivity translated to increased wages through the early 1970s, compensation has remained essentially flat since then despite a two-fold increase in productivity.

productivityvscompensation

Bearing a striking similarity is a chart showing the average income of the top 1% versus that of the 99%. The gains are even more startling when breaking out the top 1% by 0.1% and 0.01%. This chart makes it clear that the vast majority of monetary gains from productivity went exclusively to those at the top.

average income 99% vs 1%

Why did this happen? Derek Thompson at The Atlantic magazine explains: “As manufacturing eroded, so did unions, whose coverage fell from 27% in the early 1970s to just 13% in the late 2000s. Without unions, middle class workers without skills to move into higher-paying jobs lacked the collective power to bargain for higher wages.”

union coverage in the us

There’s a dozen more charts over at The Atlantic article – plus plenty more¬†explanation.

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