Having trouble making ends meet? A beer income rather than champagne tastes could be the reason.
That’s because real average salaries – wages adjusted for inflation – today aren’t much bigger than they were in 1978, according to the Pew Research Center.
Lately we hear a lot of rah-rah about low unemployment (3.9 percent), and the fact that the private sector has been creating jobs consistently (101 straight months as of July). However, the Pew study indicates that not only has wage growth dawdled, most salary gains have gone to higher-paid workers.
Workers in the private sector averaged $22.65 per hour, a gain of about 2.7 percent from last year. That’s the new normal, according to the study; in the past five years workers have seen salary gains of 2 to 3 percent.
However, average hourly earnings tended to go up by 4 percent in the time period before the Great Recession. In the 1970s through the early 1980s, it wasn’t unusual to get wage increases of 7 to 9 percent. Those were high-inflation times, however, so the money was desperately needed.
Here’s where it gets depressing, though: Our inflation-adjusted salaries haven’t gone up by much. In January 1973, average hourly wage was $4.03. Today, that would be $23.68 – and as noted above, private-sector wages currently average $22.65 an hour.
The rich stay richer?
Another way to measure income is called “usual weekly earnings,” i.e., a person’s wages, tips and commissions before taxes and other deductions. In 1979, median earnings in seasonally adjusted current dollars amounted to $232.
In the second quarter of 2018, the median usual weekly earnings amount was $879. Sounds like a pretty big jump? It isn’t. That $232 from 1970 would be about $840 today.
(“Seasonal adjustment” is a statistician’s attempt to account for the ways seasonal patterns affect earnings. For example, a retail worker might get a slew of overtime hours from Black Friday through Christmas Eve, and a freelancer could cut way back during the summer when his kids were out of school.)
In the past 18 years, usual weekly wages have gone up by 3 to 4.3 percent for workers in the lowest-earning quarter of workers. Up at the top, it’s a different story: Wages have gone up a cumulative 15.7 percent. Earners in the top one-tenth get $2,112 per week, which is almost five times more than the bottom tenth ($426).
Keep in mind that averages lie. If the salaries of a fast-food worker, a divorce attorney and a pediatric oncologist were averaged, that burger-flipper would be bringing in a ton of money (on paper, anyway). But averages are at least a starting point to talk about money.
One discussion topic is income inequality. According to a Pew analysis of Census Bureau income data, the top 10 percent earn 8.7 percent more than the bottom tenth. But back in 1970, the top dogs out-earned by a rate of 6.9 percent.
This no doubt has a lot to do with manufacturing; when my dad graduated from high school, he had his pick of decently paid factory jobs. You didn’t need a bunch of additional education to make a salary that would comfortably support a family.
Some of those manufacturers had closed by the time I graduated, 22 years later. However, you could still get a job packing glass, dyeing fabric or working in a cannery.
These days, not so much. While visiting family a few years back, I talked with a supermarket manager who told me he’d posted five jobs. Two thousand people applied.
Salaries: More than money?
Too, wages aren’t the only measure of income. During my newspapering years we didn’t earn a whole lot but at some point the company added a 401(k) with a modest employer match. We also had excellent health insurance (a godsend when my daughter was critically ill).
The newspaper allowed us to take “mental health days,” i.e., if you felt burned-out you could take a sick day without having to prove you were sick. I’ve also heard of companies that provide gym memberships, rides to work, a free or heavily subsidized cafeteria, and other perks that improve quality of life and help keep down the cost of living.
But salary tends to be the bellwether, in part because we have daily expenses that keep going up (even if wages don’t) and in part because it feels good to say, “Yeah, I earned $80k last year.” The Pew study cited plenty of possible reasons why wages stagnate, including but not limited to the rise of service-sector jobs, non-compete clauses, a lack of education and the decreasing impact of unions.
Earnings are all over the map, obviously, due to choice of profession and/or good fortune and/or hard work and/or wild-card variables such as being in the right place at the right time. For example, I know exactly one person who gets an annual bonus, whereas in some professions a Christmas check is standard.
A woman I know earns six figures as a freelance writer, while other word nerds struggle to bring in a few thousand a year. An old friend began her career as a licensed practical nurse, but saw her life go sideways due to personal and family issues (and a couple of bad personal choices); she now scrapes by with part-time wages at a major discount retailer.
Some people I know can look forward to a reasonably comfortable or even wealthy retirement. Thanks to that 401(k) I should be okay myself, despite the fact that I haven’t held a square job in 16 years.
At least two old pals, however, haven’t saved one thin dime for their golden years – and Social Security alone is not going to cut it. Income inequality will feel exponentially worse in your last few decades of life.
Readers: Are you feeling the pinch? Seeing raises of 1 to 2 percent, or no raises at all?
Related reading:
- College is optional. Education is not
- Towards a care-free retirement
- What do we want to be? A few thoughts on labor
Good article, Donna. I am 56 now, and remember in 1978 applying for a job paying $4.15 an hour. It was decent pay at the time. I now make 24.16 an hour ($1.00 shift differential included) as a respiratory therapist. However, I had to go back to school, graduating at 53. I was still raising two boys and was (still am) unmarried, and lived alone. I had just under 25,000 in student loans when I graduated, plus other debt due to going to school full time but only being able to work part time to make it through the respiratory program. I was laid off before all this happened. I figured by changing careers I’d never have to go through a lay off again. I am slowly crawling out of debt, I think the gamble is paying off. Just seems like it takes a lot more effort and work these days to pretty much break even to where I was in 1978, (allowing for inflation, of course). Thanks
Thanks for the great article! I have witnessed this very thing in our neck of the woods. BUT also folks who are entering retirement are carrying a mortgage as well as helping with aging parents and their own children and grand children…It’s troubling…
Going into retirement with a mortgage sounds extremely troubling. Add in boomerang kids (and maybe grandkids) plus parents who need this, that and the other and you’ve got a recipe for extreme financial and emotional stress.
I started as a chemical engineer for $18,000 which is equal to $69,000 in today’s dollars. However starting pay now at my company for the same job is $80,000. That means the pay has gone up 16% for the same position. I think it shows that while average pay may not have kept up that in demand jobs are still doing very well. A great reason to rethink choosing a liberal arts major.
“A great reason to rethink choosing a liberal arts major.”
Yes and no. A lot of employers are looking for so-called “soft skills” (e.g., the ability to work in a group, the flexibility to think outside the box and to improvise when things go wrong), and liberal arts majors tend to be able to do this. Some CEOs of major corporations majored not in economics but in liberal arts or some non-business field of study.
One of them put it this way: “(You) have a broad understanding not just of how businesses work but how people work. I think I was well prepared to address a variety of problems that come up in the context of a large business organization.”
Also, it’s just not in some folks to be a scientist, a lawyer or other professional job that pays well. Personally, I would be unable to do a hard science no matter how big the paycheck. That’s just not the way my brain works.
Thanks for reading, and for leaving a comment.
Hey I am not trying to insult anyone’s field of study but I do think that it is smart to look at what various degree holders make once they are in the work world as one of many factors to consider. Talent wins out in every endeavor and as you say, there are lots of wealthy CEO’S with all kinds of degrees. Certainly your education and experience have served you well, you are an incredible writer.
Thanks! Just want to put in there that while degrees matter, a huge field of growth is in jobs that require just two-year degrees:
http://donnafreedman.com/college-optional-education-not/
And I know a young man who is doing quite well as a member of the plumbers and pipefitters union. He helps building hospitals and power plants, and has yet to fix a single toilet.
Another factor that impacts retirement is divorce. My sibling and I are in the same field and throughout our careers have made pretty much the same salaries. He went through a divorce, where he lost a hefty chunk of his retirement, plus had to sell the house and on and on. I have been married 35 years and am entering retirement much better placed for comfort—not only because I didn’t lose half of everything but also because two of us were contributing to retirement and splitting bills. I am not saying people should stay in bad marriages, and I realize I was lucky to find a good mate (and believe me, I was such an idiot that this can only be explained by luck), I am just saying that divorce is another factor that can severely impact retirement. (Which is why it is important that women, especially, figure that for one reason or another they may end up alone and need to keep putting money away. It scares me when I see young women who stay home to raise kids and depend entirely on the man for their future security.)
Definitely. I got divorced in 2006 and I’m doing okay, but not nearly as well as I would have been had I been with DF for 23 years instead of my ex.
Women generally live longer than men, too, and tend both to earn less and to take time away from the workplace to deal with family stuff (including their husbands’ parents). So we’re putting away less and needing it longer. Yikes.
As for those young women…They need to demand spousal IRAs and also try if at all possible to stay relevant in their fields. Things change so quickly that even an office manager could find herself hopelessly behind in terms of software and such.
DH, Donna? Did I miss something significant or is that contextual supposition?
Whoops! Fixed it.
MrH recently increased his rates for the first time in ten years. Shortly thereafter, he had a couple of really busy months–hard on body and mind, but a real boost for our finances! It’s still going to take us some time to recover the economic ground we lost over the past few years of not quite making it.
There are a lot of jobs open in our area right now, but they’re mostly low-wage jobs, and frequently part-time. Many employers want to offer part-time hours, but require full-time availability, which makes it really hard to stack multiple part-time jobs.
Income inequality really worries me. It’s getting to be impossible for the folks on the bottom rungs to make a living. On top of that, it tends to concentrate money in the hands of a relative few, which creates economic stagnation, because there’s no way a small number of people, even spending lavishly, can spend as much as a large number of people, even spending less lavishly. You want to see the economy take off? Put more money in the hands of folks in the lower economic tiers, who will surely find ways to spend it and get the economic gears turning again.
At least, that’s my economic theory.
Donna,
Income inequality really worries me. I live in a rich place, but people with a lower tier education, and usually poor family support, are finding it harder to make out. Politically motivated encouragement of dependence on state handouts at the lower ends of our society is troubling because those funds are drying up. The result is crime and drug running. The middle class is also drying up, those of us left are finding ourselves the target of crime because the truly rich, who caused the problems, live in safe guarded compounds.
Raises? Gimme a break: an increase of x% of zero is still zero. 😀
I set my own pay, and so over time I’ve devised ways to extract what I believe to be fair pay for a given job. A word rate, for example, works well to accomplish that.
If I were still working adjunct, I understand the community colleges here have increased adjunct pay. Slightly. That also comes under the heading of x% of zero…or next to it. One way I’ve learned to avoid low pay is to refuse to take jobs — such as adjunct teaching — that are underpaid. This means working less, but the upshot is about the same in terms of pay…for a lot less work.
We are more comfortable than I ever dreamed, have the house paid off, have helped our kids a lot and they are now in good jobs and self sufficient (and wise money managers). We went through Viet Nam (my husband was severely injured), a long lay off and putting 3 through college. Never have lived very expensively and it has paid off. My husband worked in the electronics industry and I’m an RN but stayed home to raise the kids. Most of our savings was in the last few years he worked then he had to retire early for health reasons. I am very thankful that I had parents that set a good example, that helps a lot.
Nice.
My niece was recently at her bank meeting. They announced that they were going to raise the entry wage to $15 an hour. “Hey Wait! I have worked here 10 years and I make $15.07!” Suddenly the regional manager ended the meeting.
Teachers?. My starting salary was $14,000 in 1979. That is $50,000 today. The average beginning salary is actually $39,000 (about $22-$24 an hour).
Wages are stuck in certain (traditionally female) fields. I don’t see that ending anytime soon.