Today, income inequality in the U.S. exceeds any other democracy in the developed world. Two-thirds of American families earning less than $30,000 a year are often in crisis mode when the bills come in, but the misery is conspicuously not shared. In 1944 the top 1 percent earned 11 percent of all income. By 2012, it was 23 percent of the nation’s income.
Real output per person from 2000 to 2011 rose nearly 2.5 percent a year, but real pay increased less than 1 percent over the same period, according to the Bureau of Labor Statistics. Adjusted for inflation, incomes in 2014 are still roughly $2,100 lower than when President Barack Obama took office in 2009 and $3,600 lower than when President George W. Bush took office eight years earlier.
When we look at figures for average incomes we see a rise, but that’s misleading. The number is driven by gains for the wealthy, which is why median income is stagnating. Somewhat more than half the population say they are losing ground financially, their incomes unable to keep pace with the cost of living. Only 5 percent of those surveyed by the Pew Research Center said their income is rising faster than the cost of living; 45 percent of Americans said they have lived through one serious financial hardship over the last year, an event such as a job loss or falling behind on bills or not being able to afford medical care. Two-thirds of American families earning less than $30,000 a year faced one of these economic challenges recently.
Nationally, inflation-adjusted wages at the median of the earnings distribution curve have either fallen or barely risen in 35 years going back as far as 1979. Thirty-five years! So when were the good times? It wasn’t so bad from 1947 to 1973. Labor productivity rose 2.8 percent per year but real hourly compensation was only a little behind then, rising 2.6 percent. But now we are well and truly in the age of inequality with little prospect of a high-pressure economy boosting the demand for labor, and hence pay.
There is a pattern of low-wage and, often part-time jobs, replacing high-wage, full-time jobs. The number of full-time jobs last year was still 2.3 million below where it was back at its peak in 2007. Today’s jobs are 23 percent lower in pay than the vanished jobs, according to the U.S. Conference of Mayors and IHS Global Insight – a fact well known personally to workers in hospitality, health care and administrative support. Part-timers are a stunning 19 percent of the employed U.S. population. Alas, here, too, low pay is the new norm.