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That 70s Show – Episode 2

August 15, 2015

That 70s Show – Episode 2

NonSup wages vs prod

In Episode 1 we showed how the US labour market changed dramatically from the 1970s on back of excess money printing which allowed Americans to buy tradable goods on the international market, hollowing out its own manufacturing base, and essentially creating an unsustainable consumer driven economy where the broad masses get their employment within service sector.

We will now take that a step further and look at what this has meant for the US worker. As our first chart shows, non-supervisory real wages stagnated in the early 1970s and has essentially remained flat ever since.

Measured labour productivity on the other hand continued upward, but its rate of growth shifted down. More on this in our next blog post.NonSup wages vs prod

Source: Bureau of Labor Statistics (BLS), Bawerk.net

The American middle class, i.e. the non-supervisory workers, managed to grow their consumption in the midst of stagnating wages through

  • moving to two income households (women constitute almost 50 per cent of the labour force today)Share women

Source: Bureau of Labor Statistics (BLS), Bawerk.net

  • by increasing debtHousehold Debt

Source: Federal Reserve – Flow of funds Z.1, Bawerk.net

It should be clear that when the share of women in the labour force has reached 50 per cent and further leverage of a shrinking household income has become counterproductive the end-game has started. The only way to increase living standards from here will be the old fashioned way; consume less than you produce and productively invest the surplus.

…click on the above link to read the rest of the article…

 

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