Where the People Are

July 20th, 2011 at 2:06 pm

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.

Source: BLS

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.

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3 comments in reply to "Where the People Are"

  1. Michael says:

    For the 1,000,000th time:
    There is no sustainable budget path for the United States of America, so long as the United States of America has Republicans in it.

    It doesn’t matter how good your projections are. It doesn’t matter if it will create or destroy jobs. Literally none of that matters, because no matter what, the Republicans will cut taxes to their wealthy benefactors in an attempt to create a financial crisis to destroy the social programs they hate.

    It is exhausting that so many professionals on the Left do not understand this. Eat, drink, be merry, and govern well while you can. The GOP will burn everything when they get a chance.

  2. Tom says:

    They don’t want to burn everything. They just want the wealthy to own as much of it as possible.

    If and when our bond rating is lowered, who benefits? Interest rates rise, and it’s the people with money to loan who will benefit, that’s who.

    Put another way, the wealthy “job creators” (who haven’t been using their Bush tax cuts over the last decade to create many jobs) will now take their tax cuts and loan money to the less-advantaged, or buy U.S. government bonds that will suddenly (surprise!) have to pay higher interest rates.

    In pushing the U.S. toward a lower bond rating and/or default, Republicans remain loyal to a wealthy elite who underwrite the conservative movement. Sadly, the movement’s apparent goal is the protection of entrenched wealth, not the ultimate prosperity of the entire country.

  3. Dave says:

    Why doesn’t this graph show anything before 2009? The BLS data that was used as the source goes all the way back to 2001.