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Reflections on the "Wage Recession"
Townhall.com ^ | March 2, 2013 | Mike Shedlock

Posted on 03/02/2013 7:23:06 AM PST by Kaslin

Jed Graham at Investor's Business Daily has an interesting chart showing Wage Recession Hits 5 Years; Worse Than Jobs Drought. I can show it's even worse, but first let's consider a chart and commentary by Graham.

As bad as the current job recovery has been — and it's by far the weakest since World War II — the recovery in wages has been far worse.

Five years after the recession began in December 2007, total wages in the economy have yet to fully recover in real terms, Commerce Department data show. In other words, the wage recession continues.

By comparison, the longest previous post-war wage recession, which began with the 2001 downturn, was over in 2-1/2 years, even though that jobs recession lasted four years.

In recoveries past, wage recessions have ended long before payrolls hit new highs. But in the current expansion, wages and employment are on the same slow track to recovery. Both remain about 2% below their old peaks.


Real Disposable Income

Instead of looking at wages, let's consider real disposable income as a measure of the "wage recession". Here is a chart from Doug Short at Advisor Perspectives on Nominal vs. Real Income.

Real Disposal Personal Income Per Capita



click on any chart for sharper image

That chart shows an income recession for six years. I suggest the wage and income recession is even longer if one looks a breakdown of median income.

I commented on this previously in Top 1% Received 121% of Income Gains During the Recovery, Bottom 99% Lose .4%; How, Why, Solutions.

Also consider my followup post Reader Asks Me to Prove "Inflation Benefits the Wealthy" (At the Expense of Everyone Else).

Real US Household Incomes



In "real" (CPI-adjusted) terms, 50% of households are no better off than they were in 1988. Let's dig a litter deeper.

Growth in Real Household Income by Quintile



The above chart shows percentage income growth by quintile since 1967. Since 1988, the bottom, 4th and middle quintiles (a combined 60% of households) have negative real income growth.  The next chart shows the same thing in a different way.

Real Household Income by Quintile



No matter what your timeframe, only the top quintile did well. And from 1980 until 2000 the top 5% got the lion's share of income gains.

How Long a Recession?

Those in the top quintile have arguably had an "income recession" for 13 years! Only those in the top 5% have had real gains.

Those in the bottom three quintiles have not seen any improvement in real income since 1988 or longer (25 Years)!

To be fair, some people have moved up from quintile to quintile (or up within a quintile). However, unless someone moved up to the top quintile (if not the top 5%), inflation adjusted income growth has been a real struggle for a long time.


TOPICS: Business/Economy; Culture/Society; Editorial
KEYWORDS:

1 posted on 03/02/2013 7:23:11 AM PST by Kaslin
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To: Kaslin

Wage recession is caused by globalism and free trade. Even if we had a booming economy with low taxes/little regulations, corporations will still be training lower cost overseas nations to do what American factory workers, high tech workers and even medical professions are doing and replace all of them. What ever they cannot do overseas, corporate America can import via legal immigration or under the table via subcontractors with illegal immigrants. Corporate America has no allegiance to the US, they worship only money and the preservation of the 1 percent power. Every other American can go to Hell as far as they care, except if their members are being attacked by terrorists, only then they remind everyone they are Americans and require some Main Street American kid go overseas to die protecting or rescuing them.


2 posted on 03/02/2013 7:39:25 AM PST by Fee
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To: Fee

Corporate America has no allegiance to the US,

Careful, the New World Order wing of Free Republic will call you names.


3 posted on 03/02/2013 7:47:30 AM PST by freedomfiter2 (Brutal acts of commission and yawning acts of omission both strengthen the hand of the devil.)
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To: Fee

Shhh, our government and corporate masters don’t like it when the peasants get uppity, and question their authority. You might even incur the wrath of the moneychangers lurking around here on FR, intent on smacking down any dissent.


4 posted on 03/02/2013 8:08:54 AM PST by factoryrat (We are the producers, the creators. Grow it, mine it, build it.)
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To: freedomfiter2

Tell Duke Energy that. They got $700 million in stimulus money, gave the DNC $10 million as a loan for the National Convention in Charlotte, and got stiffed.

Now they get a $10M write-off for bad loans.


5 posted on 03/02/2013 8:42:12 AM PST by DownInFlames
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To: Fee

Supply and Demand doesn’t work very well when you have an unlimited supply of something. (Labor).

Funny how the Free Traders scream about free markets, but then do everything to rig the supply of labor.


6 posted on 03/02/2013 8:50:28 AM PST by desertfreedom765
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To: freedomfiter2
"Corporate America has no allegiance to the US,--"

There is truth in what you say because Corporate America no longer exists but rather has evolved into Corporate World.

Corporate allegiance is to their bottom line and stockholders. Globalism and technology is causing equalization of the world's economies and standards of living for the masses in the effort to maximize profits. For America, this is the new normal. High unemployment and pressure to lower wages to stay competitive with the rest of the world. The end result is a social situation which enables the likes of Obama to be able gain power and implement the socialist agenda.

7 posted on 03/02/2013 8:56:33 AM PST by buckalfa (Tilting at Windmills)
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To: Kaslin

“When the whole world brought its savings to the United States, people of mediocre skills and slack work habits could afford big houses, expensive vacations, and (at taxpayer expense) generous pensions. Why Americans expected to live well indefinitely on the largesse of foreign investors is a question for the psychiatrists, not the economists.” —Spengler, Asia Times


8 posted on 03/02/2013 9:00:57 AM PST by Mr. Jeeves (CTRL-GALT-DELETE)
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To: buckalfa
Corporate allegiance is to their bottom line and stockholders.

How quaint. Actually, we'd be much better off were that true. Corporate allegiance is to their bonuses and pay-packages. We'd be infinitely better off with a herd of Jay Goulds who actually work for the shareholders (the second clause, usually omitted from Gould's infamous "The public be damned," was "I work for my shareholders".) Instead every manager, every fiduciary in commerce, finance, industry, government, the non-profit sector, now seems to believe his position exists not the maximize benefit in whose interest he nominally works, but to feather his own nest. This is what the Kondratieff winter looks like close up, and it's not pretty.

9 posted on 03/02/2013 9:06:59 AM PST by The_Reader_David (And when they behead your own people in the wars which are to come, then you will know...)
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To: Fee

Great post to explain wage recession.

The GOP offers the tax cut placebo and union blame while Obama the green mirage and ‘investment’ neither of which alone will place America on the upward glide path to the future. As we have in the past, we have to make what we import even at the expense of American corporate investing. As Americans we are all in this together. This is economic warfare. Restore the tariff - no boat loads of tax-free goods to compete against American made.


10 posted on 03/02/2013 10:04:40 AM PST by ex-snook (God is Love)
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To: DownInFlames

Tell Duke Energy that. They got $700 million in stimulus money, gave the DNC $10 million as a loan for the National Convention in Charlotte, and got stiffed.

Good. Corporations should stay out of politics. Only citizens should have that privilege.


11 posted on 03/02/2013 10:23:09 AM PST by freedomfiter2 (Brutal acts of commission and yawning acts of omission both strengthen the hand of the devil.)
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To: freedomfiter2
" Corporations should stay out of politics. Only citizens should have that privilege. "

Another keeper, thanks,

12 posted on 03/02/2013 10:34:41 AM PST by ex-snook (God is Love)
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To: Fee
Wage recession is caused by globalism and free trade. Even if we had a booming economy with low taxes/little regulations, corporations will still be training lower cost overseas nations to do what American factory workers, high tech workers and even medical professions are doing and replace all of them. What ever they cannot do overseas, corporate America can import via legal immigration or under the table via subcontractors with illegal immigrants. Corporate America has no allegiance to the US, they worship only money and the preservation of the 1 percent power. Every other American can go to Hell as far as they care, except if their members are being attacked by terrorists, only then they remind everyone they are Americans and require some Main Street American kid go overseas to die protecting or rescuing them.

Nice summary !
13 posted on 03/02/2013 11:42:53 AM PST by khelus
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To: desertfreedom765
Supply and Demand doesn’t work very well when you have an unlimited supply of something. (Labor).

Funny how the Free Traders scream about free markets, but then do everything to rig the supply of labor.


Amen !
14 posted on 03/02/2013 11:45:10 AM PST by khelus
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To: The_Reader_David
Re:Corporate allegiance is to their bottom line and stockholders.

How quaint. Actually, we'd be much better off were that true. Corporate allegiance is to their bonuses and pay-packages. We'd be infinitely better off with a herd of Jay Goulds who actually work for the shareholders (the second clause, usually omitted from Gould's infamous "The public be damned," was "I work for my shareholders".) Instead every manager, every fiduciary in commerce, finance, industry, government, the non-profit sector, now seems to believe his position exists not the maximize benefit in whose interest he nominally works, but to feather his own nest. This is what the Kondratieff winter looks like close up, and it's not pretty.


Funny how "Free Traders' never notice that!
15 posted on 03/02/2013 11:48:19 AM PST by khelus
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To: freedomfiter2
Re:Corporate America has no allegiance to the US, Careful, the New World Order wing of Free Republic will call you names.

ROFL. How true !
16 posted on 03/02/2013 11:51:05 AM PST by khelus
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To: Kaslin; All

When you look at the chart of ‘Real Disposal Personal Income Per Capita’, remember that real income is created using Chained Dollars which are pure substitution effect, i.e. a measure the cost of a DECLINING standard of living.


17 posted on 03/02/2013 12:07:12 PM PST by khelus
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To: khelus

+1


18 posted on 03/02/2013 12:23:05 PM PST by griswold3 (Big Government does not tolerate rivals.)
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To: Kaslin

Since 2000, at least 1 million new LEGAL immigrants have entered the USA each year.

One third have not graduated from high school.

One third have a high school diploma.

One third have a college degree.

Since almost all LEGAL immigrants come from Third World countries, most of their college degrees are not accredited by American corporations, and are completely useless.

Almost all LEGAL immigrants are competing directly against home grown Americans who have limited skills and limited education.

Supply and Demand.

Is it really any wonder that wages have stagnated?


19 posted on 03/02/2013 6:14:58 PM PST by zeestephen
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