Having trouble making ends meet? A beer income rather than champagne tastes could be the reason.
That’s because real average salaries – wages adjusted for inflation – today aren’t much bigger than they were in 1978, according to the Pew Research Center.
Lately we hear a lot of rah-rah about low unemployment (3.9 percent), and the fact that the private sector has been creating jobs consistently (101 straight months as of July). However, the Pew study indicates that not only has wage growth dawdled, most salary gains have gone to higher-paid workers.
Workers in the private sector averaged $22.65 per hour, a gain of about 2.7 percent from last year. That’s the new normal, according to the study; in the past five years workers have seen salary gains of 2 to 3 percent.
However, average hourly earnings tended to go up by 4 percent in the time period before the Great Recession. In the 1970s through the early 1980s, it wasn’t unusual to get wage increases of 7 to 9 percent. Those were high-inflation times, however, so the money was desperately needed.
Here’s where it gets depressing, though: Our inflation-adjusted salaries haven’t gone up by much. In January 1973, average hourly wage was $4.03. Today, that would be $23.68 – and as noted above, private-sector wages currently average $22.65 an hour.
The rich stay richer?
Another way to measure income is called “usual weekly earnings,” i.e., a person’s wages, tips and commissions before taxes and other deductions. In 1979, median earnings in seasonally adjusted current dollars amounted to $232.
In the second quarter of 2018, the median usual weekly earnings amount was $879. Sounds like a pretty big jump? It isn’t. That $232 from 1970 would be about $840 today.
(“Seasonal adjustment” is a statistician’s attempt to account for the ways seasonal patterns affect earnings. For example, a retail worker might get a slew of overtime hours from Black Friday through Christmas Eve, and a freelancer could cut way back during the summer when his kids were out of school.)
In the past 18 years, usual weekly wages have gone up by 3 to 4.3 percent for workers in the lowest-earning quarter of workers. Up at the top, it’s a different story: Wages have gone up a cumulative 15.7 percent. Earners in the top one-tenth get $2,112 per week, which is almost five times more than the bottom tenth ($426).
Keep in mind that averages lie. If the salaries of a fast-food worker, a divorce attorney and a pediatric oncologist were averaged, that burger-flipper would be bringing in a ton of money (on paper, anyway). But averages are at least a starting point to talk about money.
One discussion topic is income inequality. According to a Pew analysis of Census Bureau income data, the top 10 percent earn 8.7 percent more than the bottom tenth. But back in 1970, the top dogs out-earned by a rate of 6.9 percent.
This no doubt has a lot to do with manufacturing; when my dad graduated from high school, he had his pick of decently paid factory jobs. You didn’t need a bunch of additional education to make a salary that would comfortably support a family.
Some of those manufacturers had closed by the time I graduated, 22 years later. However, you could still get a job packing glass, dyeing fabric or working in a cannery.
These days, not so much. While visiting family a few years back, I talked with a supermarket manager who told me he’d posted five jobs. Two thousand people applied.
Salaries: More than money?
Too, wages aren’t the only measure of income. During my newspapering years we didn’t earn a whole lot but at some point the company added a 401(k) with a modest employer match. We also had excellent health insurance (a godsend when my daughter was critically ill).
The newspaper allowed us to take “mental health days,” i.e., if you felt burned-out you could take a sick day without having to prove you were sick. I’ve also heard of companies that provide gym memberships, rides to work, a free or heavily subsidized cafeteria, and other perks that improve quality of life and help keep down the cost of living.
But salary tends to be the bellwether, in part because we have daily expenses that keep going up (even if wages don’t) and in part because it feels good to say, “Yeah, I earned $80k last year.” The Pew study cited plenty of possible reasons why wages stagnate, including but not limited to the rise of service-sector jobs, non-compete clauses, a lack of education and the decreasing impact of unions.
Earnings are all over the map, obviously, due to choice of profession and/or good fortune and/or hard work and/or wild-card variables such as being in the right place at the right time. For example, I know exactly one person who gets an annual bonus, whereas in some professions a Christmas check is standard.
A woman I know earns six figures as a freelance writer, while other word nerds struggle to bring in a few thousand a year. An old friend began her career as a licensed practical nurse, but saw her life go sideways due to personal and family issues (and a couple of bad personal choices); she now scrapes by with part-time wages at a major discount retailer.
Some people I know can look forward to a reasonably comfortable or even wealthy retirement. Thanks to that 401(k) I should be okay myself, despite the fact that I haven’t held a square job in 16 years.
At least two old pals, however, haven’t saved one thin dime for their golden years – and Social Security alone is not going to cut it. Income inequality will feel exponentially worse in your last few decades of life.
Readers: Are you feeling the pinch? Seeing raises of 1 to 2 percent, or no raises at all?
- College is optional. Education is not
- Towards a care-free retirement
- What do we want to be? A few thoughts on labor
The post Average salaries haven’t gone up (much) in 40 years. appeared first on Surviving and Thriving.