Where did all the money go?

The admirable Billmon has a statistic I don’t understand and can’t really believe: All told, real wages dropped more than 20 per cent between 1972 and 1992. I’ve often wondered what the political fallout would have been if that same decline had been administered the old-fashioned way – through direct pay cuts by employers instead of the gradual, indirect erosion of inflation.”

I can’t think of anything which Americans were able to buy 20% less of in 1992 than in 1972 — not even illegal drugs. So in what sense did real wages fall? The statistic I always remember is that for the “middle classes”, real wages have stayed approximately the same since the 1970s. This alone would produce a certain dissatisfaction and political savagery, especially in a culture where everything is always meant to be improving.

But maybe I am just showing a lack of imagination. Things that might be 20% less affordable for the average American include health care, child care, and housing.

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7 Responses to Where did all the money go?

  1. James Moody says:

    The period includes part of the Nixon/Ford inflation, which was particularly bad in the first few years of the ’70s (I was getting cost of living raises in excess of 10% in those years). It may well be that real wages lost then were not made up over the succeeding decade and a half. Which doesn’t conflict with your memory that real wages have remianed approximately the same since the ’70s.

  2. cs says:

    Heartland prices 1972:

    Lid of pot, $15-20; Weighed oz.: $20-30

    9-yr-old Karmen Ghia convertible capable of traveling entire eastern US: $300.00

    Minimum wage: $1.60 hr; Constant dollars: $6.01

    Hearland prices 2003:

    Pot: Don’t know, but a heck of a lot more

    13-yr-old Saab capable of road trips: $3,000.00

    Minimum wage: $5.15; constant dollars $4.40

    Wages in constant dollars are 23% lower in 2003 than 1972.

    You were bein’ facetious, right?

  3. quinn says:

    my best friend and i compared my mom’s situation in 1973 in LA with hers, since she stayed and i left. my mom was making minimum wage in the 70s, and had an apartment, a little baby, an unemployed spouse, and a drug habit. for tina to do the same she would have had to make well above $40k a year. housing can eat up a lot, back at home the household income is above six figures, but we’ve basically had our hopes at getting a starter home dashed, it’s just not possible in the bay area. let’s not even start on healthcare, but let it suffice to say i’ve breathed a bit of relief at having part of ada’s bill from december paid off, and still about a year to go on the rest. i don’t where billmon gets his figures either, that’s a lot more than a 20%

  4. el Patron says:

    I wasn’t being facetious. I’m fascinated. I shall get a column out of this. But I’ve just spent all day in sticky London, making a radio programme, and will come back with jmor ecoherent thoughts later.

  5. el Patron says:

    Billmon’s figures come fro the department of “Labor” web site. I have checked. They are unambiguous. They don’ tmesh very well with the census figures, which show a median household income of $40,000 more or less, 1n 2003. But the Labour department figures are in 1982 dollars, and the effort of converting is beyond me right now.

  6. quinn says:

    i’d really love to see that column. i am understandably facinated myself.

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