Three charts that define the last 45 years in the US

Its the time of year for summations, usually for just the previous year. My selection of charts explains much of the past 45 years for the rich, middle-class, and poor in America.

The Great Divide

The dark blue line describes the growth in productivity. That is the dollar value of output per hour of labor. It has been rising fairly steadily for the entire post-WWII era. This is the result in improvements in technology and the skills of the workforce. The light blue line displays the typical worker’s wages over the same period. Gains in productivity were matched almost dollar for dollar between 1948 and 1979. This drove the explosion of the American middle class during this period. Then, starting in 1979, the results changed markedly. Over the next 40 years, the average worker’s wages only grew by 14% while productivity increases continued on to increase by 60%.

What happened to all of the money not paid to average workers??

Two researchers at The Rand Corporation posed exactly this question.[1]Price, Carter C., and Kathryn A. Edwards. “Trends in Income From 1975 to 2018.” RAND Corporation, September 14, 2020. https://www.rand.org/pubs/working_papers/WRA516-1.html.

What if the income trend of the period between WWII and 1979 had continued through to 2019?? They referred to this as a counter-factual question. Here is the chart they came up with:

So, just look at the “Median” row – the row displaying data for those exactly in the middle of the population. In 1975 they earned $42,000,[2]All dollars are constant inflation-adjusted dollars – apples to apples by 2018 their income had grown to $50,000. BUT, based on the work by Price and Edwards, if the income trends of the previous phase had continued their income in 2018 would have been $92,000 (that’s in the “Projected” column). $92,000 is 84% more than they actually earned.

The last column on the right, “𝞈” displays the percentage growth in income between 1975 and 2018 (43 years). Now look down to the “Top 1% Mean” row. Here is where all of the growth in income ended up. If the earlier income trend had persisted the top 1% mean income would have $630,000. In fact, in 2018 this tiny group took in $1,384,000. That is 321% more than what they would have received under the earlier income distribution.

So, then, Price and Carter noted that the total increase in income at the top of the pile was $47 trillion dollars. $47,000,000,000,000. Yep, 47 trailed by twelve zeroes. You can read my attempt to contextualize the meaning of trillions in terms of piles of dollar bills next to Billionaire Row skyscrapers in mid-town Manhattan: “What is $47 trillion – 47,000,000,000,000 – a comparative exploration?”

Keep in Mind

The US economy grew from $2.63 trillion in 1979 to $21.38 trillion in 2019. A bit more than an 8 times increase. By comparison, the US population was 220 million in 1979 and 334 million in 2019, an increase over the same 43 years of roughly 1 1/2 times. On a per-person basis, in 1979 GDP was $11, 762 growing to $65,120 in 2019. Meanwhile, the vast bulk of the population received only 14% raise.

How is it that our politicians and media never mention these facts??

The rich and corporations have been conducting class warfare, and they have won. BTW, wealth inequality is even worse! And, BTW2, if you are black or brown your situation is much worse.

This did not happen as an act of some god or nature.

For more about neoliberalism see my essay About Neoliberalism (opens in a new tab).

Footnotes

Footnotes
1 Price, Carter C., and Kathryn A. Edwards. “Trends in Income From 1975 to 2018.” RAND Corporation, September 14, 2020. https://www.rand.org/pubs/working_papers/WRA516-1.html.
2 All dollars are constant inflation-adjusted dollars – apples to apples