Ok. I get it. We need to both raise the debt ceiling and to get on a sustainable budget path.
But we also need to do something about this graph, and it’s a far more pressing, immediate problem than the debt-to-GDP ratio.
The line is but a simple plot of the inflation-adjusted, median weekly earnings for full-time workers. The median worker, to remind you, is the person right in the middle of the wage scale. So think of this as a proxy for the middle-class wage.
It’s falling in real terms. Persistently high unemployment takes its toll on wage growth, as weak demand and strong supply (i.e., the 14 million unemployed plus 8 million underemployed “involuntary” part-timers) create enough slack in the job market so that there’s little pressure to raise anybody’s wage much. And, of course, inflation has picked up lately too.
I’d like to urge the gang of 535 up there on Capitol Hill to shift their focus to this problem for a while. I guarantee them that’s where the people are.
Update: Using the Economy.com forecasted values for unemployment and inflation through 2013q1, I was able to forecast real wages through that period. The slow decline in unemployment along with a significant tapering off of inflation (probably lower energy prices) stops the slide of real wages by the end of this year. That would certainly be an improvement, but after that, they don’t go up…they just remain flat.
And of course, if the unemployment rate stays high, we’ll see more of the above.