Producing more - receiving less

For millions of workers, wages have flatlined. Take Caterpillar, long a symbol of American industry: while it reported record profits last year, it insisted on a six-year wage freeze for many of its blue-collar workers. Wages have fallen to a record low as a share of America’s gross domestic product. Until 1975, wages nearly always accounted for more than 50 percent of the nation’s G.D.P., but last year wages fell to a record low of 43.5 percent. Since 2001, when the wage share was 49 percent, there has been a steep slide.

For many workers, labor’s shrinking share is even worse than the statistics show, when one considers that a sizable — and growing — chunk of overall wages goes to the top 1 percent: senior corporate executives, Wall Street professionals, Hollywood stars, pop singers and professional athletes. The share of wages going to the top 1 percent climbed to 12.9 percent in 2010, from 7.3 percent in 1979. Emmanuel Saez, an economist at the University of California at Berkeley, found that the top 1 percent of households garnered 65 percent of all the nation’s income growth from 2002 to 2007, when the recession hit. Another study found that one-third of the overall increase in income going to the richest 1 percent has resulted from the surge in corporate profits.

 From 1973 to 2011, worker productivity grew 80 percent, while median hourly compensation, after inflation, grew by just one-eighth that amount, according to the Economic Policy Institute. And since 2000, productivity has risen 23 percent while real hourly pay has essentially stagnated.

 According to the Center for Budget and Policy Priorities, median income for working-age households (headed by someone under age 65) slid 12.4 percent from 2000 to 2011, to $55,640. During that time the American economy grew more than 18 percent.

 It is often thought that college graduates can escape these unfortunate wage trends. But 70% of college graduates have had their after-inflation hourly wages decline since 2000, according to the Economic Policy Institute, with the typical graduate experiencing a 3.1 percent decline.

New technologies have raised productivity and profits, while enabling companies to shed workers and slice payroll. Many economists say the stubbornly high jobless rate and the declining power of labor unions are also important factors behind the declining wage share, reducing the leverage of workers to demand higher wages. Unions represent just 7 percent of workers in corporate America, one-quarter the level in the 1960s.

“There are very few occupations or industries where unions are strong enough where they can set standards,” says Lawrence Mishel, president of the Economic Policy Institute. “There are no standards being set, so companies can push down on wages for all workers, union and nonunion alike.”  

When the Detroit automakers secure two-tier contracts, that enables them to pay new hires $16 an hour, far less than the $28 an hour earned by longtime workers. This also pushes down labor’s share. 

 Pamela Waldron, a cashier at a KFC restaurant in Manhattan, earns $7.75 an hour after eight years on the job and says she last received a raise in 2007.