Americans’ Real Wages are Flat to Lower

Mr. Bush said these aren’t joyous times with regard to the Iraqi Civil War, but he might just as well have been talking about real wages for American workers. Real wages are the funds in the paycheck when adjusted for inflation. In the latest economic expansion, real wages haven’t risen for the average worker, and indeed, in some groupings, those wages have declined. Maybe that’s why the GOP doesn’t get credit for a “booming” economy.

According to the Labor Department, the mean real wages are up, but the median isn’t. In other words, what non-mathematicians call the average is up only because the people at the top are making a lot more. The truth is that for 9 out of 10 American workers, real wages have dropped. That ninth worker could be earning as much as $80,000 a year – the 90th percentile of wage earners.

To balance that out, the top 10 percent have to do very well, but fortunately, they have friends in high places – actually, they are the people in high places. Looking at the upper most percentile, the very top has seen real wages rise to 11.2% of all wages paid as of 2004. In other words, the top single percent get more than 11 cents out of every wage dollar paid. In 1994, they got 8.7% and in 1974, they were paid 6 percent of all wages.

At the same time, corporate profits are up, which exaggerates the benefits flowing to the top of the corporate ladder. Because much of their compensation beyond mere paychecks stems from options and stock grants, the better the profit picture, the better the extras look. Corporate profits now make up more of national income than they have since the 1960s while wages make up the smallest portion since 1947.

So, when the GOP talks about rising GDP, they are using a measure of economic growth that doesn’t really affect most Americans. Unemployment rates and job creation figures are slightly more in tune. However, the best measure is real wages of the median American household. Given the Labor Department figures, there’s a reason they want to talk about other measures.

© Copyright 2006 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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