Date: Wed, 01 May 1996 10:37:33 -0500
From: Denny Braun <DennyB@vax1.Mankato.msus.edu>
Subject: Declining Wages
To: WSN@csf.colorado.edu
Organization: Department of Sociology, Mankato State University
Greg Ehrig wrote:
> A more up to date example of bias affecting analysis is the current
> "stagnant wage" debate here in the US. It is true that real cash
> wages among manufacturing workers remain stagnant, BUT what is
> not mentioned is that, when non-cash benefits (pension, health,
> in-kind compensation) are factored in, total compensation (wages +
> benefits) has continued to increase. Similarly, many studies which
> perport to show declining wealth for the bottom 10 percent of the US
> economy only report wage income. What more rigorous analyses
> show is that when benefits from the state (welfare, food stamps,
> afdc, etc.) are brought in, real income is rising. Why are these
> oversights allowed to occur? The answer is that stagnant wages
> make for a better story, and helps more government agencies, than
> one based on slow but steady total compensation for workers.
_________________________________________________________________________________________________(material from THE RICH GET RICHER 2nd ed.--forthcoming)
To begin with, since reaching its peak in 1972-73 real average weekly
earnings have fallen by nearly 19 percent through December of 1994. A graphic
illustration of this can be seen in data which traces the performance
of average weekly earnings paid in the United States since the end of World War II.
The Bureau of Labor Statistics (BLS), which collects and monitors such data, has
converted the earnings into constant 1982 dollars to remove the effect of
inflation and permit a fair comparison to earlier years. The facts speak for
themselves. The average American worker is worse off today than at any time in
the past third of a century. In terms of real earnings, today's typical worker
actually earns less pay as workers in 1960.
The picture gets worse. The decline in wages has
been fairly widespread, although some sectors have managed to stay even or inch
ahead slightly. Figure 5.8 tracks the performance of real average weekly earnings
(in constant 1982 dollars) by private industry groups between 1970 and 1993.
Although the figures show general decline for all earnings recipients as a whole,
some workers were able to eke out a few gains. Those jobs in the service sector
which are supposed to be the highlight of our emerging high-tech, information-age
economy are stagnant over the past 23 years, as is the average weekly pay of
manufacturing jobs. Those in the mining industry actually gained weekly earnings,
but five other industrial categories lost real income. Among the worst hit are
retail workers. Already at a paltry $205 per week in 1970, their average weekly
earnings had skidded 30 percent to end at $143 in 1993. Considering the loss of
manufacturing jobs and the explosion of retail jobs in the U.S. during this period,
the implication for average weekly earnings for most American workers is forbidding.
(End RICH GET RICHER material)
_________________________________________________________________________________________________
As for the claim that employers are really paying as much or more in compensation
when fringe benefits are factored in, Lawrence Mishel and Jared Bernstein, THE STATE OF
WORKING AMERICA 1994-95 (p. 114) show:
1. A drop of 13% drop in hourly wages ALONE between 1977 and 1994 (from $15.40 down
to $13.39);
2. An increase in employer fringe benefits of 12.5% for health and pension ($1.52 up
to $1.71) and an increase of 20.9% in employer payroll taxes ($1.29 up to $1.56).
In essence, Ehrig is partly correct regarding the employer increase in this area.
But, it was not enough to stem the slide of wages;
3. Factoring all of the above together, there is still an 8.5% decrease in hourly wages.
I would also add, as Mishel and Bernstein do, that employers have been shedding pension
and health benefits at record rates, or adopting much less generous plans. Between 1979
to 1989 the cost of retirement benefits fell nearly 40% (p. 132). The percentage of the
private workforce covered by a pension plan went down from 50% in 1979 to 43% in 1980
(p. 134). The government has just announced that the number of Americans not covered by
any health insurance jumped over the past few years from 37 million to 42 million (much of
this due to employer discontinuance of health coverage).
The following material is relavant to the claim that our nation's welfare benefits (not
counted as income) really mislead us into believing those with low income are more
impoverished than reality.
____________________________________________________________________________________________
To be sure, the way poverty is currently measured is far from perfect. The Census Bureau,
which gathers the yearly poverty statistics in its March Current Population Survey, admits
that several improvements could be made to the data. Aside from including in-kind benefits
such as food stamps when measuring income, taxes need to be subtracted out to derive a
better index of real disposable income. Spending for food no longer represents one third
of a family budget according to the Current Expenditure Survey (CEX). Most families now
require a lot more than three times their food budget to adequately function in today's
society, since child- care, housing, transportation and health costs are relatively more
expensive. No adjustments are made to income for people in different regions of the
country, despite very real variations in the cost of living from one region to the next
(it is much cheaper to live in the South and/or in rural areas).
The various methodological and conceptual difficulties which have mounted in the
thirty- some years since the measure's inception now demand remedy. Accordingly, and by
special invitation of Congress, the National Research Council established a panel to
address the concerns about how poverty is measured. Their report is now complete and
contains a variety of recommended changes that meet some of these concerns. For example,
the experts now agree with conservative critics that the dollar value of food stamps,
subsidized housing, school lunch programs, and home-energy assistance should be counted
as income. In 1992, 36.8 million persons were officially designated as poor under
current measurement techniques. Counting in- kind benefits such as the above would reduce
the poverty count by 4.2 million individuals (11.4 percent). Yet, it is only fair to
subtract state, federal and payroll taxes (such as Social Security) from income, which
adds 1.2 million more to the poverty register. Another 2.7 million are added when the
cost of work-related expenses (transportation, uniforms, dues, child care, etc.) is taken
into account. A whopping 5.3 million cross the line into poverty when out-of-pocket
expenditures for medical and health care are added into the economic equation. In all,
the analysis concludes that if all of the panel's recommended changes were to be adopted
by Congress, anywhere from 9.1 to 11.4 million additional persons could be added to the
poverty count. Although many of these changes are long over-due, it is highly unlikely
they will be instituted by politicians currently engaged in slashing welfare programs.
The belief by the majority in Congress is that the nation is now strapped for cash,
and can no longer shoulder the burden of social programs as it has in the past.
Ultimately, it is politically impossible for elected officials to admit that poverty
is even a worse problem than we previously realized--but to then go about the business
of tearing down the nation's social safety net.
Most experts are of the opinion that poverty--as currently measured--is
vastly understated. The nearly unanimous feeling is that the way poverty is defined by
the government is way too low to be realistic in identifying those who are greatly
deprived. A study by Andrew Winnick, for instance, states that the official definition
of poverty vastly understates the extent of the problem. Instead, he presents alternative
measures which lead him to conclude that as many as one-third of American families are poor.
Lee Rainwater, in an analysis of U.S. poverty rates from 1949 to 1989, introduces a
number of refinements to its measurement--such as an equivalence scale to account for
need based upon different family sizes and age of household head. He also bases his
definition of poverty upon what the American public thinks it ought to be, which has
consistently been half of mean household income. Even when non-cash benefits such as
food stamps are counted as income, Rainwater concludes that there has been a tangible
rise in poverty during the 1970s and 1980s. By 1989, his measure categorizes 19.1
percent of persons as under poverty, a rate that is one-half again as large as the
official level of 12.8 percent. Using different methodology, Rodgers and Rodgers
not only support the conclusion that there has been a real rise of poverty in the
past two decades, but that it has become chronic and less transitory in nature.
_________________________________________________________________________________________________
Best regards,
Denny
-- Denny Braun Department of Sociology Mankato State University Mankato, MN 56002-8400Voice: (507) 389-5609 FAX: (507) 389-5615