Your Real Wages in Bad Decline

Sorry, you were just born at the wrong time.

By Heather McGhee

Last week’s New York Times featured a splashy slide show and a string of economists scrambling to explain why real wages fell for the average worker last year. Real wages—which take into account inflation, reflecting the actual purchasing power of your paycheck—fell by a little less than one percent in 2004. The article ends by acknowledging that the 5 years of rising fortunes across the board during Clinton’s second term may have been just a tech-induced blip. The fact is that real wages have been stagnant or declining for the average worker since 1973, which is also right around when the minimum wage reached its peak purchasing power. Seems like stagnant wages are our dubious birthright.

I hope this seems illogical to you. I hope you would argue that the American worker hasn’t exactly been slouching for the past thirty years. I hope you would bring up the astounding technological innovations, educational gains, and that little segment of the population known as women storming into the workforce. And you’d be right … sort of. All of those efforts and innovations have paid off—just not for everyone. Take a look at the following images from United for a Fair Economy in Boston:

So what happened? Basically, the social contract that said that the whole point of all this economic business was so that everyone could have a decent life was shredded like so much bad accounting data. Wages for the top income earners have soared as a new and mostly unjustified premium was placed on higher degrees. A worker with a college degree now earns about 70 percent more than a worker with only a high school diploma, a gap that can add up to more than $1,000,000 in lost earnings over the course of a lifetime.

But I don’t want to fall into the common trap of putting too much emphasis on education levels. Only a quarter of Americans have a college degree, and while almost half of our generation has some college experience, I wouldn’t expect wages to suddenly skyrocket for everyone once we start collecting diplomas en masse. Too many economists and journalists talk about “unskilled” jobs as if the problem somehow lies with a sudden drop in workers’ capacities over the course of a generation. It wasn’t the players that changed – it was the game. The fact is, in the 60s, when barely any workers had college degrees, the gap between a CEO’s pay and an average worker’s pay was less than a tenth of what it is now. In a reversal of traditional economic rules, productivity gains now go to corporate profits and top executive pay, and aren’t reflected in worker pay. So if your future paychecks aren’t what you wanted them to be, take heart. It’s not your fault. Blame it on the Inequality Economy: you were just born at the wrong time.

At 24, Heather McGhee is the youngest member of the Economic Opportunity Program at Demos, a think tank you don’t know but should. Her experiences working in film & television, in the EU, and in politics & economic policy have convinced her of one thing: it’s all about who tells the best stories.

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