Real Wages Have Not Changed in Decades

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This is the finding of a recent study, which showed that despite U.S. unemployment being at its lowest point in almost 20 years, wage growth is lagging behind expectations.

Strong labor market notwithstanding, today’s real average wage (the money people are earnings after discounting for inflation) has about the same buying power as it did 4 decades ago. Top earners have obtained what wage gains there have been.

American private-sector employers have been creating new jobs for 101 straight months – 1.5 million since the beginning of 2018, and 19.5 million since the cuts related to the Great Recession finally abated at the beginning of 2010.

This discrepancy between wages and the job market has fueled much of the recent activism in cities and states around increasing the minimum wage. It has even become a factor in several US congressional campaigns this year.

In the non-management private sector, the average wage per hour was $22.65 in July this year, up 2.7% from the average wage a year earlier, federal Bureau of Labor Statistics data showed. That corresponds to average wage growth over the past five years. The year-on-year increase has been 2.5% on average since the beginning of 2013.

Average hourly earnings often increased by around 4% per year in the years just before the 2007-08 economic downturn. Average wages often jumped by up to 9% year-on-year during the high-inflation years of the 1970s and early 1980s.

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