Saturday, March 28, 2009

the fallout from falling real wages

MonthlyReview | Real wages in the US rose during every decade from 1830 to 1970. Then this central feature of US capitalism stopped as the figures below show:

Source: Labor Research Associates of New York based on data from the US Department of Labor, Bureau of Labor Statistics; wages expressed in constant 1982 dollars.

  • 1964 $302.52
  • 1974 $314.94
  • 1984 $279.22
  • 1994 $259.97
  • 2004 $277.57
No comparable steady rise in real wages has occurred since. The most recent data from the Bureau of Labor Statistics indicate real weekly wages declined again over the last year (2005-2006). American workers' reactions to this downtrend in real wages have profoundly shaped the nation's economy and society for the last thirty years.

Stagnant or falling real wages undermine workers' basic expectations of rising levels of consumption. Those expectations had become key parts of what it meant to be "an American." Rising consumption has long functioned as the evidence of success in achieving the American dream. When, after the mid-1970s, real wages no longer allowed for rising consumption, wage-earners turned, with growing urgency, toward other ways and means to maintain rising consumption . This delayed the inevitable, a falling standard of living, but at great economic and social cost.

In one "solution" to counteract the problem of shrinking real wages, many families sent more members out to work more hours. Part-timers switched to full-time positions or else multiplied part-time jobs to secure more income. Full-timers took second and third jobs. While this helped, in part, to offset the real wage problem, it also disorganized family and household life. Time with spouse and children was cut. So too was the energy and attention adults could devote after work to cope with family problems aggravated by lengthenig work times for family members. Rising divorce rates, intra-familial difficulties and abuse, and indices of psychological depression became signs of the costs of this partial "solution." When mothers' entry into the paid workforce required costly day-care for dependents and commercially prepared foods, families again confronted insufficient funds to enable increased consumption.

A second "solution" -- when longer work hours did not generate enough money to increase consumption -- was to borrow. Multiple credit cards per family and increasing mortgages added to vehicle financing to generate historically unprecedented levels of total consumer debt across the last 25 years -- and especially since 2000. March and April 2006 saw negative real savings rates for the public of 1.5%. Nor do these stark statistics count the vast sums that adult children increasingly "borrow" from their parents' savings.