It Ain't Fair

Corporate America is shutting average Americans' voices out, while they help themselves to taxpayer dollars. The economic playing field is tilted against the middle class — and we have the power to change that.

Cost of living Inflation living wage wages fall behind cost of living

Wages: Have they kept up with inflation?

A non-scholarly look at economics and the state of our country.

Have they kept up with inflation?

Then and Now

In 1970, there were 63,400,000 households in America. The median income per household was $9,870 per year. This median means half of the households made more than $9,870, and half earned less.

In 2020, there were 128,500,000 households in America, and the median income per household was $68,400.

According to the Bureau of Labor Statistics, Inflation between those two years was 567%, while wages went up by 590%. That sounds good, right?

Cost of Living

How about buying a house in either of those years? In 1970 the average price of a home was $17,000; in 2020 that number was $280,000. Whoops, that’s a 1,550% increase. That makes that 590% rise in wages looks puny.

Let us see if we come out any better buying a new car. In 1970 a new VW Beetle cost $1,899; in 2020 the cost was $25,300. That’s up 1250%. 

The cost of going to college should not have changed that much, right?  The University of Minnesota Twin Cities Campus charged $522 in 1970; in 2020, they charged $15,142. Holy Cow, that’s up 2,800%. 

Now how do you feel now about your 590% salary increase? 

What other expense do you have in 2020 that you didn’t have in 1970?

Here are a few examples:

  • Internet                           $50 a month
  • Cable                                $50 to $100 a month
  • Smartphone                    $35 to $50 a month
  • Health Insurance           $500 to$1,500 a month.

What about CEO pay?  In 1970, the CEO of JP Morgan made $276,250; in 2020, he made $31.5 million. If your $9,870 had gone up by the same percentage, you’d have earned $162,855 in 2020, not $68,400.

If your $9,870 had gone up the same as college tuition, your salary in 2020 would have been $286,230 rather than $68,400.

What about the profitability of American corporations during that period?  

According to the Federal Reserve Bank of St. Louis, total corporate net profit in 1970 was $55 billion, and the top corporate tax rate was 46%. In 2020, corporate net profit was $1.9 trillion, and the top tax rate was 21%. So median household income went up about seven times, and corporate earnings went up about 35 times.

We’ve learned that 64,500,000 households in America earn $68,400 a year or less. While that wage may work in many cities, if you have kids or college debt, or daycare, or live in a high cost of living city, it might be a real struggle. Additionally, state and federal taxes have to come out of that $68,400; FICA taxes alone would take 7.65% or $5,232 from this wage. 

So how do we fix this?

From another perspective, 82% of all American jobs are called Production and Non-Supervisory positions. Cornell University publishes a Job Quality Index for jobs in that category, which they divide into “high paying” and “low paying.”  As of February 2021, the “high paying” category had 43.6 million positions at a median salary of $61,416 per year. The “low paying job count” was 53.8 million positions with a median pay of $35,464 per year.

Again, some people are doing just fine. But many are struggling. We need to figure out how to fix that. 

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https://fred.stlouisfed.org/series/MEHOINUSA646N

https://archive.curbed.com/2018/4/10/17219786/buying-a-house-mortgage-government-gi-bill

https://www.ohe.state.mn.us/dPg.cfm?pageID=812

https://www.rand.org/blog/2020/11/women-are-leaving-the-labor-force-in-record-numbers.html