The vast majority of the rise in non-government per capita wages that has taken place has happened when the inflation-adjusted price of oil was less than $30 barrel.įigure 4. The thing that is striking is that both the current period and the previous “flat” period took place during periods of high oil prices (Figure 4, below). Looking at Figure 3, the other time when wages were flat was the period between 19. This is very low by historical standards it is between the level they were in 19. More recently they dipped again and (with government deficit spending) have recovered a bit, rising to $18,053 in 2012. In 2007, they briefly surpassed the year 2000 high point, hitting $19,573. They then dropped back to $18,145 in 2003. Average wages on a Figure 3 basis hit a high point of $$19,112 in 2000. A major portion of the increase in wages in Figure 3 is thus driven by a higher proportion of the population having jobs, at least up until the year 2000.įigure 3 emphasizes how poorly wages have performed since the year 2000. Non-governmental wages and population from Bureau of Economic Analysis Adjusted to 2012 cost level using CPI-Urban from Bureau of Labor Statistics.Ĭomparing Figure 2 and Figure 3, we can see that they follow generally the same shape. US per capita non-governmental wages, in 2012 dollars. If some jobs move overseas and are not replaced, this will act to reduce wages.įigure 3. Some of this growth will be from families in recent years having fewer children, so that adults make up a larger portion of the population. Some of this growth will be from a second wage-earner in a family joining the workforce. If we take inflation-adjusted non-government wages, and divide by the total US population (not just employed workers), we get a measure of the extent to which wages have been growing or shrinking. Putting all of these pieces together suggests a connection to “Limits to Growth.” I also discovered a disturbing connection between high oil prices and flattening or declining wages. I discovered that these wages are doing very poorly. In particular, I decided to look at wages, other than government wages, adjusted to today’s cost level using the “ CPI- Urban,” cost index of the Bureau of Labor Statistics. I decided in this post to look at the dollars these workers are earning. US Number Employed / Population, where US Number Employed is Total Non_Farm Workers from Current Employment Statistics of the Bureau of Labor Statistics and Population is US Resident Population from the US Census. Instead of using the analogy of a backbone, perhaps I should say that wages are the base that ultimately determines the quantity of goods and services an economy can afford.įigure 2. Another piece outside the US wage-loop is taxes on resource extraction, if these resources are exported.
#Unrealistic optimism and susceptibility to trickery free
With the advent of free international trade, this source is disappearing. There are a few pieces outside of this loop, such as taxes on imports from foreign countries. Governments tend to get their revenues from private citizens and from businesses, both of which are dependent on wages of private citizens. It is the wages paid by private companies (rather than governments) that are important, as the backbone to the economy. It is not just any wages that are important. Even if a business produces a resource that is in very high demand, such as oil, it still needs wage-earning customers either to buy the resource directly (for example, as gasoline), or to buy the resource indirectly (for example, as food which uses oil in production and transport). There can be business-to-business transactions, but ultimately somewhere “downstream,” businesses need wage-earning customers who can afford to pay for goods and services.
Governments will have a hard time collecting enough taxes, and businesses will have a hard time finding enough customers. If workers have difficulty finding a job, or have difficulty earning sufficient wages, the lack of wages will be a problem, not just for the workers, but for governments and businesses. In my view, wages are the backbone an economy.
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