September 29, 2016

“Negative Growth” of Real Wages is Normal for Much of the Workforce, and Getting Worse – New York Fed

The New York Fed published an eye-opener of an article on its blog, Liberty Street Economics, seemingly about the aging of the US labor force as one of the big economic trends of our times with “implications for the behavior of real wage growth.” Then it explained why “negative growth” – the politically correct jargon for “decline” – in real wages is going to be the new normal for an ever larger part of the labor force.

If you’re wondering why a large portion of American consumers are strung out and breathless and have trouble spending more and cranking up the economy, here’s the New York Fed with an answer. And it’s going to get worse.

The authors looked at the wages of all employed people aged 16 and older in the Current Population Survey (CPS), both monthly data from 1982 through May 2016 and annual data from 1969 through 1981. They then restricted the sample to employed individuals with wages, which boiled it down to 7.6 million statistical observations.

Then they adjusted the wages via the Consumer Price Index to 2014 dollars and divide the sample into 140 different “demographic cohorts” by decade of birth, sex, race, and education. As an illustration of the principles at work, they picked the cohort of white males born in the decade of the 1950s.

That the real median income of men has declined 4% since 1973 is an ugly tidbit that the Census Bureau hammered home in its Income and Poverty report two weeks ago, which I highlighted in this article – That 5.2% Jump in Household Income? Nope, People Aren’t Suddenly Getting Big-Fat Paychecks – and it includes the interactive chart below that shows how the real median wage of women rose 36% from 1973 through 2015, while it fell 4% for men:

Read the entire article

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