This NYT article, The Decline of the $20 Wage”, on the vanishing blue-collar worker with a middle-class income is both depressing and…confusing. Adjusting the numbers for inflation is at least alluded to initially:
Leaving aside for a moment those who have lost their jobs, what of those who still have them? Once upon a time, a large number earned at least $20 an hour, or its inflation-adjusted equivalent, and now so many of them don’t.
However, from this point on the article seems to talk about wages which were $20-an-hour or above in the past–even as far back as the 70s–and are now less than $20 in nominal terms.
The $20 hourly wage, introduced on a huge scale in the middle of the last century, allowed masses of Americans with no more than a high school education to rise to the middle class. It was a marker, of sorts. And it is on its way to extinction….
Hourly workers had come a long way from the days when employers and unions negotiated a way for them to earn the prizes of the middle class — houses, cars, college educations for their children, comfortable retirements. Even now a residual of that golden age remains, notably in the auto industry. But here, too, wages are falling below the $20-an-hour threshold — $41,600 annually — that many experts consider the minimum income necessary to put a family of four into the middle class….
Since [the 1970s] the percentage of people earning at least $20 an hour has eroded in every sector of the economy, falling last year to 18 percent of all hourly workers from 23 percent in 1979 — a gradual unwinding of the post-World War II gains.
The decline is greatest in manufacturing, where only 1.9 million hourly workers still earn that much. That’s down nearly 60 percent since 1979, the Bureau of Labor Statistics reports.
The shrinkage is sometimes quite open. The Big Three automakers are currently buying out more than 25,000 employees who earn above $20 an hour, replacing many with new hires tied to a “second tier” wage scale that never quite reaches $20. A similar buyout last year removed 80,000 auto workers. Many were not replaced, but many were, with the new hires paid today at the non-middle-class scale, and with fewer benefits.
Surely $20 an hour in the 70s would be $60 or so an hour now, adjusted for inflation? It makes a big difference to this article and the author has totally failed to explain the issue. ‘Fewer people of this class make even 1/3 as much per hour as they did 30 years ago’ is a very different message from ‘fewer people of this class make this inflation-adjusted wage.’ It seems clear the article implies the former but muddies the waters with the nominal wage, ironically further masking the dramatic decline of the blue-collar middle class.
{ 64 comments }
Tim Worstall 04.20.08 at 10:34 am
“The decline is most significant in the data that the Bureau of Labor Statistics collects for the nation’s hourly work force, which totals 76 million, or 52 percent of all workers, and ranges from managers and professionals to factory and construction workers to technicians, educators and sales people. The wages of many salaried workers show a similar trend, although the bureau does not convert their pay into hourly amounts.”
That the wages of many salaried workers show the same trend might indeed be true: but unless we know how many we can’t really say anything definitive about average wages as a whole. Further, unless we know what the change has been (if any) between hourly and salaried workers as a portion of the economy we’re also missing some information.
I’d love to know the answers actually, the BLS doesn’t present them. Has here been a shift from hourly pay to salary over those decades? Have salaries on average risen by more than hourly pay has fallen or not?
It might be (and I emphasise that I don’t know but would like to) that the decline of the high hourly wage is down to only the lower paying jobs being still paid hourly, with the higher paying jobs now being salaried. For example, are service sector jobs more likely to be salaried than manufacturing?
abb1 04.20.08 at 10:35 am
Since [the 1970s] the percentage of people earning at least $20 an hour has eroded in every sector of the economy, falling last year to 18 percent of all hourly workers from 23 percent in 1979 — a gradual unwinding of the post-World War II gains.
Only 18 percent of all workers make at least $20/hour? Jesus. It’s much worse than I thought.
Or are these “hourly workers” only a small subset of all the workers?
belle waring 04.20.08 at 11:25 am
I think that “hourly workers” are only people paid by the hour rather than salaried workers.
abb1 04.20.08 at 11:33 am
But in the same para they say “percentage of people earning at least $20″. And in the last para they talk about “buying out” “employees who earn above $20″. Employees you have to buy out have gotta be salaried workers.
Jacob T. Levy 04.20.08 at 11:41 am
No, they don’t– not if they’re unionized, certainly. They have a right to stay until retirement in the absence of firing for cause or a general layoff; they were first hired so should be last fired; etc.
Barry 04.20.08 at 12:38 pm
Warning – possible threadjack:
As a service to newer readers to CT, I should point out that Tim Worstall is a paid, um, ‘analyst’ for various right-wing causes. Here is an example of his latest shennigans, mentioned on Deltiod:
http://scienceblogs.com/deltoid/2008/04/why_does_tim_worstall_hate_cor.php
Matt McIrvin 04.20.08 at 12:43 pm
The salary equivalent of $60 an hour today strikes me as a lot more than anyone other than Charlie Gibson would reasonably consider minimum entry into the middle class, even for a family of four. $20 in 2008 dollars sounds about right for a threshold.
Markup 04.20.08 at 12:52 pm
”It might be (and I emphasise that I don’t know but would like to) that the decline of the high hourly wage is down to only the lower paying jobs being still paid hourly, with the higher paying jobs now being salaried. For example, are service sector jobs more likely to be salaried than manufacturing?”
Yes, and you should consider taking that assistant manager job at McD’s and reap the benefits.
Matt Weiner 04.20.08 at 1:26 pm
Or are these “hourly workers†only a small subset of all the workers?
According to the article they’re 52% of all workers currently.
If you scroll down to Table 10 here, I believe “percentage of total wage and salary workers” gives the hourly workers as a percent of the workforce from 1979 to 2005; though it seems to me that they must be using a different denominator from the Times, since the total number of hourly workers is in line with the number given by the Times (Times: 76 million in 2007; table: 75.6 million in 2005) but the percentage is very different. Anyway, if I’m reading the table correctly there hasn’t been any drastic change in the percentage of hourly workers; from 59.1% in 1979 it moved in a range from 58.2% (in 1982) to 62.1% in 1995, and is 60.1% in 2005.
So it’s unlikely that this is an artifact of any massive migration of the labor force to salaried employment.
Matt Weiner 04.20.08 at 1:33 pm
The tables I linked seem to exclude self-employed people; that might account for the difference in denominator (if you add 12.2 million self-employed to the 2003, you get a percentage of 54%).
s.e. 04.20.08 at 2:02 pm
Automobile workers get benefits that double their wage. My last job (non-union construction) was at $20 with none.
jim 04.20.08 at 4:13 pm
I don’t think the muddying is intentional. He (or his subeditor) doesn’t want to continually repeat “$20 an hour, or its inflation-adjusted equivalent,” so just says $20, without thinking that the economically literate reader will wonder whether that’s a real $20 or a nominal $20.
I was around in the ’70s. I didn’t know anyone who made $20 an hour then.
hnc 04.20.08 at 4:52 pm
it has to mean $20 in today’s dollars, right?
john c. halasz 04.20.08 at 5:05 pm
IIRC, from skimming the article last night, the $20 was in 2005 dollars. 1980 dollars would be about 2.5 times greater in value, so $8/hr in 1980. When I worked for the USPS in 1979, my starting wage was $7.25. There’s no confusion in the article. Current average hourly wage is about $17.50 in current dollars.
newshutz 04.20.08 at 5:18 pm
$20/hour x 40 hours x 52 weeks is $41600
At least one salaried employee (my father, an engineer in the aerospace industry) earned less than 26000 a year around 1970. Which is $12.50 an hour for a 40 hour week. I remember him complaining about auto workers earning more than him.
OTOH, I expect any worker earning $20/hour in 1970 was uncommon and at the very high end of hourly workers.
Yan 04.20.08 at 5:19 pm
“The salary equivalent of $60 an hour today strikes me as a lot more than anyone other than Charlie Gibson would reasonably consider minimum entry into the middle class, even for a family of four. $20 in 2008 dollars sounds about right for a threshold.”
So, the only people more out of touch with the economic realities of this country than major network newscasters are, apparently, academics. $20/per hour as the _bottom rung_ of the middle class? Are you kidding? The national average salary is surely below that. So there’s NO middle class–just a middle club?
Or do you mean only as an average for a family of four?
Tim Worstall 04.20.08 at 5:29 pm
Barry,
Thanks for giving everyone the heads up. I’m absolutely certain that no one around here knew that I’m of the rightside persuasion, nor that I write for part of my living.
Matt Weiner,
Thanks for that in a more serious manner. I’ve learnt somthing today which is always good.
abb1 04.20.08 at 5:29 pm
Current average hourly wage is about $17.50 in current dollars.
If the average is $17.5, the variant on the right side has to be pretty low for only 18% of them to be above $20.
bjk 04.20.08 at 5:37 pm
How is it possible to write an article on the decline of the hourly wage without mentioning immigration?
Tangurena 04.20.08 at 6:15 pm
Only when used dishonestly to compare Toyota with the Big Three. Such as this Business Week article where the author compares Toyota paying workers $26/hour vs GM’s “fully burdened overhead” of $62/hour, while carefully ignoring that the FBO includes wages, healthcare, insurance, employee’s share of manufacturing plant, tooling, machinery, property taxes and utilities. FBO runs about 2.5x the actual wages paid to workers. The intention of the article is to brainwash the readers into believing that GM pays their assembly workers $62/hour.
I don’t consider “my share of the building I work in and the costs of running that building” to be a “benefit” of any shape, form or fashion.
Colin Danby 04.20.08 at 6:16 pm
A useful table on average hourly earnings, adjusted and current: http://www.gpoaccess.gov/eop/2008/B47.xls
if you find an older version of the economic report of the president, the rise in this figure in the post-WWII period and its stagnation after the early 1970s is dramatic. Maybe someone has a link to a graph.
cpi
ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
You can use cpi data to convert the 1982 dollars of the first table to up-to-the minute dollars; it looks you’d multiply them by about 2.2. That’ll just about get you an average hourly wage of twenty of today’s dollars in the peak real-wage year of 1972.
bjk, an article might not mention immigration because its impact on changes in wage levels, especially at the aggregate level, is not clear. I think there’s been some careful investigation of that question but someone else can go look that up.
bjk 04.20.08 at 6:28 pm
The article mentions off-shoring, but not immigration. Is the impact of moving production overseas clearer than the impact of immigration? No. But the former is an acceptable bogeyman and immigration is not.
someguy 04.20.08 at 7:31 pm
“The national average salary is surely below that [$20/hour]”
Yeah, it’s gotta be. I’ve always thought that “household” income was less useful, since people make decisions about who works, and households are heterogeneous. BLS says median income was $25,149 per worker in 2006, or $12/hour. (I think the stat includes the 7.9% of working age people who don’t work. Only including full-time workers, over 25 gives $33k/yr.).
So yeah, $20/hr. puts a single worker at the 65.6 percentile mark, among ages 25+, working full time. Maybe as high as 75% percentile for all working age people (adding in unemployed and 16-25 year olds).
s.e. 04.20.08 at 8:06 pm
So Toyota workers don’t get bennies?
Walt 04.20.08 at 8:10 pm
yan, there is no reward for most inexplicably dumb comment of the day, which is too bad, because you’d be an early front-runner.
s.e. 04.20.08 at 8:17 pm
“$20/per hour as the bottom rung of the middle class? Are you kidding?”
It’s not even in the middle class, unless its half the income of a two wage family.
abb1 04.20.08 at 8:21 pm
Why, it depends on where you are.
Witt 04.20.08 at 8:25 pm
“$20/per hour as the bottom rung of the middle class? Are you kidding?â€
There are two very different defintions at work. One is “middle quintile of household income,” and one is “sufficient to obtain the safe and spacious housing, full health insurance, access to decent schools, and car ownership” that we typically associate with the social status of middle-class people.
It is entirely possible to be in the middle quintile of income and not be able to afford the items mentioned above, especially if you are in an area with a high cost of living.
Witt 04.20.08 at 8:32 pm
(I should note that my comment at 27 refers to the U.S.)
Onlooker 04.20.08 at 10:02 pm
barry, I didn’t know that Tim Worstall is a paid wingnut shill. Now I do, thanks to your digging. Kudos to you!
Yan 04.20.08 at 10:50 pm
Walt, could you clarify why my post was dumb and inexplicable? I find your post a little, well, inexplicable.
Witt:
Thanks, this is a helpful distinction. But “sufficient to obtain the safe and spacious housing, full health insurance, access to decent schools, and car ownership†sounds like a rather over-optimistic description of “middle class” to me. Particularly the “safe and spacious” and “full” qualifications on the first two.
I worry that an overgenerous definition of “middle class” has the reactionary effect of helping us to forget the depth and extent of economic hardship in this country, since many assume out of hand that they and almost everyone they know are “middle class.”
Yan 04.20.08 at 10:59 pm
Oh, and for what it’s worth:
It appears the median national hourly wage is $14.61 (mean: $18.84). (http://www.bls.gov/oes/current/oes_nat.htm)
Witt 04.20.08 at 11:03 pm
Particularly the “safe and spacious†and “full†qualifications
FTR, I meant safe as in “neighborhood you would let your kids play in,” spacious as in “no more than 2 people/bedroom,” and “full” as in “for every member of the family.” Heaven forbid we aspire to vision and dental; I wasn’t even thinking of that.
joseph duemer 04.20.08 at 11:32 pm
There is an interview somewhere in which Warren Buffet’s daughter describes herself as “middle class.” I haven’t got the motivation to look it up, sorry.
jim 04.21.08 at 12:04 am
It’s well known that the US contains only the middle class and the poor. There are no rich people. Ask anyone if they’re rich. They’ll deny it. They may concede that they’re a bit more comfortable than others, but rich? no! To be rich you’d need to be able to afford [some luxury that this particular person can’t afford]. So of course Warren Buffet’s daughter is middle class. And the only social statistic of interest is the boundary between the middle class and the poor: $20/hr is as good a boundary as any.
Daniel 04.21.08 at 12:25 am
Low wages!!!
It’s immigration, stupid.
Gatherdust 04.21.08 at 2:25 am
How is immigration the issue? The meatpacking industry, for example, was once a typical workplace paying the premium wage Uchitelle writes about. But those jobs and the job holders have long since been replaced by a workforce earning significantly less. Immigration isn’t the issue. Meatpackers wanted a cheaper labor force. That many jobs in the industry may be held by transient labor is almost besides the point. It’s the employers who determine the number and kind of jobs available, not labor.
Sortition 04.21.08 at 2:29 am
The U.S. had no immigration before 1980?
Witt 04.21.08 at 3:09 am
If immigration is merely assumed to add to the pool of workers, it’s legitimate if rather simplistic to think that it may drive down wages.
The question is that is more complex, as Colin notes above, how the intersection of variables such as geographic location of jobs, skill levels of workers, social desirability of jobs, transient or seasonal nature of the work, etc. combine to affect wages. From what I have seen on this issue, economists disagree and reliable data is hard to come by.
(Also: It is fair to suggest that the level of immigrants in this country in 1970 was at one of the lowest levels in the entire 20th century. It changed quickly though, as the visas available through 1965 immigration act began to become available, and a flow of refugees from Cuba and Southeast Asia began.]
jk 04.21.08 at 3:10 am
Questions for those who know more:
Hasn’t the average ceo wage increased in the neighborhood of 400% over a similar period of time.
How much has merely the cost of health care risen in relation to inflation?
I take middle class to be more or less economic contentment, where your wants are not all that great and your needs are more or less taken care of.
I can only hope, no matter what our current economic times are, that this isn’t over-optimistic or over-generous. I would like it to be quite optimistic and realistic.
Quo Vadis 04.21.08 at 3:25 am
It’s well known that the US contains only the middle class and the poor. There are no rich people. Ask anyone if they’re rich. They’ll deny it. They may concede that they’re a bit more comfortable than others, but rich? no! To be rich you’d need to be able to afford [some luxury that this particular person can’t afford]. So of course Warren Buffet’s daughter is middle class. And the only social statistic of interest is the boundary between the middle class and the poor: $20/hr is as good a boundary as any.
The problem is the use of the word ‘class’ which doesn’t mean income or wealth category. Class has lots of other connotations which are based upon specifically European history, culture and social structure. The fact that it doesn’t apply well in the US should not be surprising.
The phrase does get trotted out from time to time by people trying to make arbitrary social classifications sound less arbitrary where it’s meaning is adjusted to best support author’s point.
Sortition 04.21.08 at 5:27 am
The size of the pool of workers was affected more by the entrance of women into the pool (40% in the mid-60s, 60% in the late-90s) than by immigration.
This change also lowered the level of acceptable income for a worker, since what used to be the sole source of income for a family – the salary of the male – gradually became supplemented by another (smaller, but growing) source of income.
So, why don’t those endowed with the infinite courage required to blame immigrants take aim at all those working women instead?
bjk 04.21.08 at 5:36 am
That’s easy: because women are also US citizens.
As for the person who asked if immigration started in the 80s, here are some numbers:
http://www.cis.org/articles/2007/back1007.html
The nation’s immigrant population (legal and illegal) reached a record of 37.9 million in 2007.
Immigrants account for one in eight U.S. residents, the highest level in 80 years. In 1970 it was one in 21; in 1980 it was one in 16; and in 1990 it was one in 13.
Dan 04.21.08 at 6:03 am
Thanks, this is a helpful distinction. But “sufficient to obtain the safe and spacious housing, full health insurance, access to decent schools, and car ownership†sounds like a rather over-optimistic description of “middle class†to me.
Congratulations, you’re lower class. Along with a whole lot of people, self included, who might want to believe they’re middle class but definitely aren’t.
Gareth Wilson 04.21.08 at 7:55 am
Barack Obama’s daughter once asked him if their family was rich. If I recall correctly this was after he was elected to the Senate, and after his first book had been published. He admitted to her that they were better off than most people, but still insisted they weren’t “rich”. Was he correct?
abb1 04.21.08 at 8:03 am
That’s easy: because women are also US citizens.
But legal immigrants are also citizens in most respects; they just can’t vote, which is irrelevant for the issue of depressing wages. Illegal immigration is, of course, a different story.
abb1 04.21.08 at 8:15 am
I think the “middle class” is best defined as a group of people who are (in the realm of economics) not a part of the elite but nevertheless have a stake in the system, significant and obvious incentive to support and preserve the system.
Since the early 1970s wages of the vast majority of this group have been stagnant, while their productivity doubled (or almost doubled); the elite appropriated pretty much all the productivity gains. I believe at this point the middle class has no real, tangible incentive to preserve the system; it’s all hanging on indoctrination. Not a solid foundation.
Stuart 04.21.08 at 9:40 am
If immigration is merely assumed to add to the pool of workers, it’s legitimate if rather simplistic to think that it may drive down wages.
Not really, after all you are adding to the poll of workers and consumers both at a 1:1 ratio, so you can’t assume any affect purely by the fact of net immigration, you have to look at the details before you know what effects it is likely to have.
katherine 04.21.08 at 10:24 am
“So, why don’t those endowed with the infinite courage required to blame immigrants take aim at all those working women instead?”
Um, where have you been? They do! Working women are selfish creatures who want it all (ie what men already have).
belle waring 04.21.08 at 10:55 am
wait, so I’m just the confused one and the original ref was to 20 2008 dollars an hour in the 1970s, so $7 or something? I submit my total confusion as evidence that the article was confusing, but this may not be compelling to all for various reasons.
Yan 04.21.08 at 11:26 am
“Congratulations, you’re lower class. Along with a whole lot of people, self included, who might want to believe they’re middle class but definitely aren’t.”
I see your point, but still find this misleading for the reasons I mentioned before (because everyone assumes they’re middle class, an overgenerous definition helps disguise the extent of economic hardship, since the “real” middle class assumes everyone’s as comfy as they are, the self-designated faux middle class assumes averyone else is as poor as they are.
I think it would be less deceptive to say there no longer is a middle class, just upper and lower.
Gatherdust 04.21.08 at 11:41 am
Did the influx of women into the labor force between 1975 and 2000 drive down the wages of men? This change did represent a sizeable increase in the size of the available labor pool – across the various labor market segments as well. If immigration is important because it adds to the labor supply then there should be a prior effect from working women.
Of course, there is the little matter that men traditionally would not permit women to work for wages except for particular racial/ethnic and class reasons. So context is important.
Is it disciplinary or ideological blinders – or both – that so much attention is drawn to changes in labor supply rather than demand? Or context?
BTW and this is probably futile but class can be regarded solely a European thingie only if one overlooks the the past couple hundred years of capitalism.
rea 04.21.08 at 12:45 pm
How is it possible to write an article on the decline of the hourly wage without mentioning immigration?
You are clearly right–something bad is happening, and we have to find an “other” to blame!
bjk 04.21.08 at 1:43 pm
I haven’t yet reached that level of consciounsess, rea. Scapegoating get a bad rap.
Chris Stiles 04.21.08 at 2:02 pm
The following excerpts from an interview with Elizabeth Warren may be relevant in this context:
http://globetrotter.berkeley.edu/people7/Warren/warren-con0.html
deliasmith 04.21.08 at 2:02 pm
As a European, may I ask if this (see no. 41) is a widely held view in the USA:
“The problem is the use of the word ‘class’ which doesn’t mean income or wealth category. Class has lots of other connotations which are based upon specifically European history, culture and social structure. The fact that it doesn’t apply well in the US should not be surprising.”
mpowell 04.21.08 at 3:37 pm
As a European, may I ask if this (see no. 41) is a widely held view in the USA
deliasmith, as an American, I can assure you that there are no agreed upon standards as to what class means in the United States. Just lots of different opinions. The only thing that is common, I think, is that everyone thinks of themselves as middle class and aspires (and expects) to be rich at some time in the future. This makes class-based politics virtually impossible.
abb1 04.21.08 at 4:18 pm
@56 – not everyone. Not underclass in the urban ghettos. That’s why their politics are much more sensible.
mpowell 04.21.08 at 4:29 pm
57- yes, granted. I was overstating the matter.
Aloy 04.21.08 at 5:53 pm
Belle @ 49: Yeah, you’re right that the article is confusing. It has:
“The $20 hourly wage, introduced on a huge scale in the middle of the last century, allowed masses of Americans with no more than a high school education to rise to the middle class. It was a marker, of sorts.”
If the wage is in 2007 dollars, how could it have been a ‘marker’ back in the middle of the century? I assume it’s a marker because it’s a nice, round number–mmmm, $20/hr–but if it was actually $6.50 or whatever, well, what’s the article on about? It doesn’t make sense…
Matt McIrvin 04.21.08 at 11:08 pm
$20/per hour as the bottom rung of the middle class? Are you kidding? The national average salary is surely below that. So there’s NO middle class—just a middle club?
Yeah, how about that?
The median household income is actually a little above that. But just a little.
H. E. Baber 04.22.08 at 12:30 am
These $20/hour uneducated, unskilled workers were white guys who were paid more than they were worth (by any standard) because of the social consensus that white families should maintain a certain standard of living and that men should be paid a “family wage”–backed by unions. Irrational notions of what was “appropriate” and looked right beat the market–in the short run.
But not for long, because now wages for these white men are falling to a more rational level. And now these dumb white guys are all bent out of shape because they imagine that they merit what as in fact the white guy premium. Now these dumb jerks are bitching about affirmative action, about special race-based and sex-based advantages, when they, or at least their daddys have been eating off of a race-based, sex-based avantage all their lives.
I have not one whit of sympathy, or empathy, for them. If they want more money let them understand that it can only come as a benevolence–through government programs or charity–because they aren’t worth it.
Luther Blissett 04.22.08 at 12:48 am
Salary for a first-year teacher with two Masters degrees and a Ph.D. (that is, me) in my New York State district is $41,000. Given that I work from 7:30 until 5 or 6 in the evening, 190 days each year, I am earning around $25 per hour. That’s not taking into account any training or prep work during the summer.
White collar or blue, times are hard all over.
H. E. Baber 04.22.08 at 1:31 am
Yeah, and back in those good old days dumb blue collar jerks were making more than teachers, with or without Ph.D.s because teaching was womanswork: even if guys did it, while they would of course be paid more than women doing the same work, they wouldn’t be paid as much as guys who did guy jobs.
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