Chart of the day, US earnings edition

By Felix Salmon
March 4, 2011

The jobs report this morning showed average hourly earnings increasing by 1 cent to $22.87 over the past month; that brings weekly earnings up to $782.15, on average, up 2.3% on last year. That’s a modest improvement, but an improvement all the same.

But Michael Greenstone and Adam Looney decided to take a step back, and look at median earnings across the population overall, rather than just in the working population. The resulting picture, especially for men, is pretty gruesome:

0304_jobs_greenstone_looney_chart1.jpg

They write:

This analysis suggests that earnings have not stagnated but have declined sharply. The median wage of the American male has declined by almost $13,000 after accounting for inflation in the four decades since 1969. This is a reduction of 28 percent!

There’s a lot going on here, but a large part of it is that between 1970 and today, the share of men without any earnings at all increased from 6 percent to 18 percent. Many of those men are in prison, but a lot more are simply discouraged.

The blue line in this chart can be read as showing the competitiveness of working-class Americans in an increasingly globalized economy. It’s in secular decline, it’s not coming back, and it has been exacerbated greatly by the loss of 12 million jobs over the course of the Great Recession. Those jobs aren’t coming back, either. The US is going to have to create millions of new jobs going forwards. But it’s also going to have to look after the growing ranks of the unemployed — those who are looking for work, to be sure, and also the growing ranks of those who don’t even bother any more.

Comments
11 comments so far

Are “prison” and “discouraged” the only alternatives to full-time employment?

What about “retired”? Or “pursuing part-time employment around wife’s career”? Or “working under the table to dodge child-care payments”? I freely admit to dragging down that median over the last half-dozen years, and I assure you that I’m not writing from behind bars.

I wonder how the “median adult wages” have trended over that period of time? That might be a more meaningful measure of the competitiveness of working-class Americans, though even then the median does not properly capture the complexity of the distribution.

Posted by TFF | Report as abusive

Culture has definitely shifted. I am certain that the biggest cause of the blue curve is the increase in unmarried, “unburdened” men.

Among lower socioeconomic groups marriage rates have fallen off a cliff and out-of-wedlock births have become an overwhelming majority of all births. Among higher socioeconomic groups, marriage and in-wedlock childbearing remains the norm. The relationship between poverty and individual ethic is very strong.

The ethic of men has collapsed among certain groups. My father worked two jobs, one white collar and one blue collar while his children were small and made sure the bills got paid no matter what. Eventually he got enough raises at the white collar job to not need two jobs. This was typical of earlier generations.

Sadly among some groups very few men step up and carry the responsibilities that their fathers and grandfathers accepted. Is this a moral problem? I think so.

From a data driven perspective, if Obama really cares about wealth gaps and income gaps, he ought to say something about the marriage gap and the tragedy of millions of fatherless children.

Posted by DanHess | Report as abusive

Some truth to that, DanHess, though cause and effect may be confused.

Are these men irresponsible because they aren’t married? Or do the women refuse to marry them because they aren’t responsible and can’t find steady jobs? Out-of-wedlock births may be a rational (if tragic) answer to a situation in which too few men share your father’s work ethic.

I do scratch my head about what it really means when somebody does “not even bother any more” to find work? Do they look around and not see any jobs that need to be done? Are they waiting for somebody else to tell them what to do? Or are they putting the paycheck ahead of simple productivity? If you aren’t earning anything, it should be pretty simple to find a job that pays at least as much as you are presently earning.

Start a business. Learn some new skills. Volunteer. Remaining unemployed for a decade isn’t the only alternative.

Posted by TFF | Report as abusive

For every interpretation like this, I see two from respected economists who say that the unemployment problem is cyclical (due to the economy) rather than structural (due to a skills mismatch and a more productive workforce).

My belief tends toward yours. There is plenty of anecdotal evidence for a skills or expectations mismatch. But the really telling thing, in my mind, is the manufacturing industries (auto, aero, industrial) that have lost hundreds of thousands of jobs over the last several years. There is just no industry or occupation on the horizon that can absorb this number of displaced workers, especially those whose primary skill is working on a production assembly line.

Back in the 1960s-1970s, when my father got laid off multiple times from the steel mill, he waited patiently to be called back. For those who have expectations for the phone to ring, the days of employment are largely over.

Posted by Curmudgeon | Report as abusive

Men’s participation rate has been steadily declining. That’s not necessarily apocalyptic; women have been working more. CR has a nice chart:

http://cr4re.com/charts/charts.html?PR#c ategory=PR&chart=PRMenWomenFeb2011.jpg

Posted by colburn | Report as abusive

Interesting charts, colburn.

Never had more than ~60% of the population employed until 1985. Labor force participation was around 64% in the early 80s. Now back to 64%, with an older population. Does a 15-year stretch of greater employment establish a new norm? Or was that the aberration?

It seems just yesterday that I was reading laments on the decline of the American Family with parents working too many hours and spending too little time together. Perhaps this decline in labor force participation is a GOOD thing? It might make it difficult to support those two-ton SUVs and the McMansion in the suburbs, but how important are those really?

This also relates to deep-seated concerns I have about conventional measures of economic activity. Economists implicitly assume that anybody not participating in the labor force is dead weight, useless and unproductive. While I’m sure there are a few people who spend their entire day sitting in front of the TV and reading blogs, I suspect many more find useful things to do with their time — even if those useful things don’t generate a paycheck and don’t add to the GDP. Labor force participation has fallen from 63% to 58% in the last few years, a 7%-8% decline. That suggests to me that there are now tens of millions more Americans engaged in useful activities that DON’T contribute to GDP. If you add that to the formal GDP figure, you would see rather spectacular growth.

I am concerned about wealth distribution in our society, but I’m far less concerned about the overall level of employment or about the fate of those who choose to leave the labor force. They may be “discouraged”, and they may have less income to play with, but I suspect they will mostly find productive activities to occupy their time.

Posted by TFF | Report as abusive

It’s hard to replace 12M lost jobs with a country that ranks 30th in science and math, no how much we innovate. Innovation certainly creates jobs, but the majority of these jobs end up overseas – e.g. all iPhones and iPads are made in China. Foxconn, who manufactures these and other products, employs far more people than Apple.

Yes, the higher quality jobs are at Apple, but how many Apples can we create in this country with a workforce largely ill-equiped to fill the high end jobs? The low end jobs end up overseas. Obama is right in that we need to increase the quality of our education, but this will take at least a decade, teacher unions aside.

Posted by netvet | Report as abusive

@netvet – What you say is very true. However, I still don’t see any industry or combination of knowledge industries that will employ as many people as the auto industry and its vendor infrastructure. Even if our high schools and colleges churn out millions of science-educated professionals, I don’t see any chance of employing them all. That’s the problem that India has now, and China is starting to face.

As for improving education, the quality deficit you cite has been known for 25 years, and we still haven’t quantifiably improved the quality of student. We’ve thrown money at the problem (my school district’s spending per student is about 2.5 times what it was 20 years ago), but that doesn’t seem to be the answer. We’re very good at producing a small number of excellent students, but the rest remain extremely mediocre (or worse).

Posted by Curmudgeon | Report as abusive

Part of the problem, Curmudgeon, is that we are much more productive than we were in the 70s. That change has served to concentrate more wealth in the hands of those who own/build/manage the technology, less in the hands of the “common laborer”.

Service industries have plenty of room for expansion, though. Each modern day “lord” earning $200k+ can support half a dozen “peons” from that wealth. Of course you get 10:1 disparity in incomes under that structure.

Not sure of the answer, other than to note that there IS opportunity for individuals with skills in the present economy, whether or not there is sufficient opportunity for 12M such individuals.

Posted by TFF | Report as abusive

PLEASE STOP LABELING THOSE OF US THAT NO LONGER QUALIFY FOR UNEMPLOYMENT AS “DISCOURAGED”, AND “GIVEN UP” YOU DO NOT HAVE A CLUE WHAT YOU ARE WRITING ABOUT. We didn’t give up, by saying this you deflect blame from the politicians who refuse to help us, and label the problem as being a result of inaction by discouraged, lazy unemployed workers……..

PLEASE STOP BLAMING US… THIS IS NOT OUR FAULT

Posted by turtlephungi | Report as abusive

including hidden and underemployment the US has a 20% unemployment rate – what can turtlephungi do?

the problem is globalization was used to re-distribute wealth upwards, concentrating it in the financial services sector at the expense of the middle class and long term economic growth. Both sides of the Atlantic are now on the economic periphery, governed by predatory elites who would rather squeeze wealth out of the middle class than do something useful.

Posted by jackmiller | Report as abusive
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