No matter how you examine it, the Middle Class has gotten screwed since the late 70s

sprocketsby Patrick Hoesly

The Middle Class Really is in a Three-Decade Slump |
[Via Mother Jones]

Did middle-class incomes really decouple from overall economic growth in the mid-70s? If you look at median family income vs. GDP per capita, the answer is yes. From 1950 through 1975, both grew at about the same rate. After that, median family income grew quite a bit slower than GDP per capita.

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Here is the graph:

income

I’ve talked about this disconnect many times before. No matter how you slice it, it still shows the same thing.

income for the middle class has stagnated over the last 30 years, while income for the top have continued to grow.

But overall productivity has not changed at all. So what could be the reason for why the amount of GDP produced per person has not shifted at all when people are making much less money?

I imagine technology has a lot to do with it. If 5 people could produce X but now 5 people can produce 5X, then we would see something similar. Productivity going up but no change in income.

Or look at it another way, what once took  5 people can now be done by 1. What do those other 4 people do?

In a strong economy, there may be jobs for many of those people but eventually the increasing productivity due to technology filters down and remakes those jobs. Where do people go then?

Continuing the trend, we would eventually have everything being done by just a few people and the rest would not have anything to do. No job and no income.

One of the hallmarks of the industrial revolution is that it made agriculture more productive, meaning that many farm jobs disappeared. Rural workers came to the cities to get industrial age jobs, where there was a huge need.

But in the Information Age, there really does not appear to be an excess of jobs available for the average person.

We can imagine a world where a very few work very hard and the rest have nothing. Productivity still goes up but fewer and fewer people have the money to buy things.

That won’t be very stable. Perhaps The Jetsons had it right. George Jetson was a single wage earner living a middle class lifestyle.

He accomplished this by pushing a button 1 hour a week!

That could work. Reducing the work week but keeping overall wages the same would result keep productivity the same but work to increase wages.

Perhaps what technology is driving us to is a time where either a few people do a lot of work and the rest are unpaid, or one where a lot of people do a little work and all are paid.

I wonder if that sort of economy is even possible? We may have to find out because it is impossible to have a stable economy if a few get paid and most do not.

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7 thoughts on “No matter how you examine it, the Middle Class has gotten screwed since the late 70s

  1. Here is something for you to research—in 1960 what percentage of the average salary paid for a loaf of bread? Rent? Gas? What was the average salary? Have you looked at a budget for the “average” family in 1960 and the “average” budget for a family in 2011′? Good luck!

    1. I’ll look but the numbers are already normalized for changes in the CPI which includes the price of bread and other household needs. But for the wages to stay the same while productivity continues means that a household is getting twice what it did in 1970 for the same amount of money, even taking inflation into account.

      WHat I left out from my discussion is the interesting aspect that average income have continued along the same curve. In fact it is only median wages that become disconnected.

      But median and average incomes were the same in 1975. When the average is so much higher than the median, that indicates that a small number of people are making a lot while a large number are making little.The chart actually is another demonstration of how much wealth the top has gotten, wealth that used to go to all of us.

    2. Here is a nice paper showing the budgets and percentage of the budget spent over the last century.As you can see, over much of the last century the makeup upon the household budgets have not changed a whole lot. Housing is about the same percentage (30%). Since 1970, transportation parts of the budget have gone up some but food has also gone down.

      But the total amount spent for food was about $7100 in 1994 and $7300 in 1970.

      But, from the turn of the 20th Century, household incomes increased 3-fold. This allowed larger homes to be bought and bigger cars. But since the 1970s, the household income has hardly changed at all.

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