Where did all the money go?

The admirable “Billmon”:http://billmon.org/archives/001604.html has a statistic I don’t understand and can’t really believe: %(sane)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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