Real wages are falling

No, not as a result of the neoliberalism of the past 30 years. I\’m afraid that those who want to say that there has been no improvement in living standards since the 1970s are simply wrong. But real wages are indeed falling:

“In 2011, real wages are likely to be no higher than they were in 2005,” he said. “One has to go back to the 1920s to find a time when real wages fell over a period of six years.

Capitalism does have its booms and busts and we\’re in a bust now. We\’ve given up all the gains of 6 years of economic growth. Or rather, a couple of years of growth and a few years of not growth have cancelled each other out.

Now yes, it\’s true that we humans really don\’t like giving up what we already have, valuing what we have much more highly than the equal amount that we could have had but didn\’t. So a fall in real incomes is something we dislike much more than a rise that we could have but didn\’t get.

But, here\’s the crucial point about this capitalism/free market mix. It\’s the only system we know of that gives us the booms, in which real wages advance, even at the cost of the busts. And on average over the decades, real wages do increase. Even at 2% (which is somewhere around the historical average) real wages double every 35 years, every generation. And we really haven\’t found another system which does such. This doesn\’t mean that there isn\’t one out there, just that we haven\’t found it yet.

Oh, and the real wages of 2005? Bach in 2005 they looked pretty good really, didn\’t they? Highest ever?

While now may not be all that enjoyable for the above reasons, it\’s rather difficult to say that because real wages are at 2005 levels, we\’ve all been plunged into penury.

3 thoughts on “Real wages are falling”

  1. “Capitalism does have its booms and busts and we’re in a bust now. We’ve given up all the gains of 6 years of economic growth.”

    I take your general point Tim but ‘capitalism’ didn’t cause this bust (and the previous boom was at least partly illusory).

  2. @James
    I have seen graphs before which show that real wages of the median US worker has stagnated. Is that what you are referring to?

    I must say though, although I’ve seen them myself, I’m sceptical. I had a very working class childhood in the seventies, and my father is still in that same income bracket. To suggest his standard of living hasn’t improved much since then is totally contrary to our lived experience.

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