A Decade of No Wage Gains

In a decade in which we have experienced not one, not two but three market bubbles and collapses (stocks and houses) we now find that the entire period has left us with stagnant wages. An entire decade with ZERO wage gains! Shocked? Surprised? Not me. From this viewer's chair the entire period was characterized by malinvestment-- first in telecom, media and internet-related businesses and then in financial services punctuated by "financial innovation" (if there is such a thing). The NY Times article is here.

The typical American household made less money last year than the typical household made a full decade ago.

To me, that’s the big news from the Census Bureau’s annual report on income, poverty and health insurance, which was released this morning. Median household fell to $50,303 last year, from $52,163 in 2007. In 1998, median income was $51,295. All these numbers are adjusted for inflation.

In the four decades that the Census Bureau has been tracking household income, there has never before been a full decade in which median income failed to rise. (The previous record was seven years, ending in 1985.) Other Census data suggest that it also never happened between the late 1940s and the late 1960s. So it doesn’t seem to have happened since at least the 1930s.

And the streak probably won’t end in 2009, either. Unemployment has been rising all year, which is a strong sign income will fall.

What’s going on here? It’s a combination of two trends. One, economic growth in the current decade has been slower than in any decade since before World War II. Two, inequality has risen sharply, so much of the bounty from our growth has gone to a relatively small slice of the population.

Well, the early betting line from here is that 2010 sees flat to declining wages as well. It's hard to imagine wages rising with such slack in the labor market (9.7% at last look). Can anyone imagine employers bidding up the cost of labor when your neighbor and mine is collecting extended unemployment benefits? Who is betting on a vigorous "V" shaped recovery other than Wall Street?

Anyway, another data point that structural changes are needed to right this economy. So far, we seem little interested as a country in that bit of hard work.