Monday, February 25, 2013

90% of Americans Earn Less Than 1950 Minimum Wage Standard

The good ol' days. We always hear about them from our parents and grandparents. Some of us were there and still look back with fond nostalgia to the heyday of American capitalism. The 1950's defined the American ideal. We had emerged from World War II as the richest, most powerful nation on the planet, and we were ready to cash in on our victory.

There was a suburban home with a white picket fence, a new car built from American steel sitting in the driveway, a regular 9-to-5 job, good schools for your children, and a good wife who managed the homefront with aplomb and a fresh baked apple pie. The American dream was not just a television show in black-and-white television re-runs, that was how we actually lived. It was a way of life that was attainable for just about anyone willing to work hard, and work hard we did.

Our parents and grandparents were no slackers. They had paid their dues through the most destructive war mankind had ever known, they had struggled through the misery of the Great Depression before that. They were grateful to be rewarded now with an honest day's pay for an honest day of work, and spiteful of those godless Communists who could promise only drudgery. Our own social contract worked out just fine. Our obligations to our neighbors and to our country were tempered by the personal liberty prescribed in our nation's Constitution. The harder we worked, the better life would be, and there were no free rides for anyone. The promise of freedom was never more clear. Each man would be made or broken on the basis of his very own efforts. And for the time-being, it was upheld by a government we still believed was for the people and by the people, serving the interests of the people.

In 1950, the Federal minimum wage in the United States was set at 75-cents per hour. This meant that no matter what a person did for a living, according to national productivity standards for workers, their work was worth a minimum of 75 pennies for an hour worked, $30 for an average work week, or a little over $1560 a year. At that time, this was a bit more than the average cost of a brand new automobile.A worker could work all year, save every penny, and buy a brand new mid-grade car without taking out a loan.

In 2012, the average cost for an automobile was $30,748, slightly more than double what a minimum wage worker would be paid, before taxes, working full time.

So does this mean that the average American worker only works half as hard as his counterpart in 1950?

A lot of people would be quick to answer yes, absolutely. The average worker in 1950 probably did work twice as hard as today's worker, many might agree. Which might explain too, why even someone like a grocery clerk, a department store salesperson, a delivery driver, why so many jobs paid well enough for a person to actually support a family on back then, while today most people think of such jobs as "lowly" or "meant for high-school kids."

I remember when I first entered the labor market myself back in the late 1980's, that being a grocery store cashier or department clerk was still considered to be a viable career option. There were plenty of adults supporting households on what they earned in those postilions. No one was getting rich, but the bills got paid. For a young teenager like myself, there was the promise of a competitive wage, regular raises, benefits, and even retirement if I put in the time there. Hardly what a worker today can expect from a company like Wal-Mart.

But is this because people are actually working less, are they any less skilled? Quite the opposite actually.

A projectionist in a movie theater was once considered to be a prestigious technical grade career, that required an apprenticeship rather than a college degree. Today, it's a minimum-wage job. While much of the "old art" has gone the way of the Dodo bird due to changes in technology, and while more and more classic projectionists are finding themselves out of work entirely, movie projection itself is not completely automated. Even with the newest digital projectors, a knowledgeable technician is still required. 

There are still some old techniques and skills that the worker still needs to understand, the fundamentals of projection with lighting and lenses and so forth. But rather than splicing together platters of film, the modern projectionist must understand complex  computer programs. There is also the hardware to maintain, such as the computer terminal used to control the projectors, or even the speakers and sound system components of a theater. While the technology has indeed made a dramatic shift, the need for a skilled technician still remains. So why are the old projectionists out of work now, and why has this job become a minimum wage endeavor with little prestige?

Quite simply, because worker productivity has been undermined by depressed wage standards. The projectionist unions have had their backs broken, and the high-school kid who is good with computers will come in and do the job for video game money. There ends the once prestigious career of movie theater projectionist. Either that high school kid will move on to college in a year or two to be replaced by another high school kid, or he will be stuck in a dead-end job with his pay raises tied to the Federal minimum wage increases. A minimum wage that is far less than what he would have earned in 1950. 

From 1950 to 2000, the productivity of the American worker increased roughly 400%. This means that the standard of living for the average American worker should be 4 times higher, or that it should only take one-fourth the number of work hours to enjoy the same standard of living as someone working the same job in 1950. In the year 2000, we were working 4 times harder and/or smarter than our parents and grandparents were in 1950. One worker today, is doing the work of four or more employees in 1950.

This runs contrary to what they tell us of course, and what we even tell ourselves, about everyone being lazy good-for-nothings today. But clearly this self-hating mindset is brought on by psychosocial factors, rather than mathematical truth. 

Productivity and Workweek

The hard data for that particular study only runs up to the year 2000, but we want to get a little bit closer to where we are at today. Using the data from that study, we can project that by 2010 worker productivity had increased by at least 425% since 1950, and even more by 2013. For the purposes of this essay though, with the the data that is readily available, we will adjust the entire data set to 2010 dollars.

If we take the inflation adjusted minimum wage for 1950 then multiply that by 4.25 to account for increased productivity, according to the working standards of previous generations, a minimum wage worker today should be paid $28.56 per hour in 2010 dollars. That is $2.48 cents more than 75%  of American workers in 2010 who were paid less than $26.08 per hour according to the Bureau of Labor Statistics.

The disparity in wages versus productivity has no doubt only increased in the last few years, for which the numbers have not yet been fully published. More alarmingly though, the picture is actually worse than that portrayed by the flawed methodology of the BLS statistics. For example, if they reported the unemployment rate the way it was measured back in the 1930's we would see that unemployment was actually higher in 2012 than at any point during the Great Depression.

But these aren't the only numbers they tinker around with ni order to trick the public. Another example is how they make it rather difficult to find what the median hourly wage is, or how they make a mean wage appear as a median wage. Mean average income and median income are not the same thing at all in most cases. Knowing about weighted averages and an understanding of the difference between mean and median are fundamental to understanding these figures. The mean average income is simply the average of all incomes combined. But because of widening income disparity, because the highest wage earners are paid proportionally much more than the majority of other workers, the "average" is now only what about the top 35% of workers actually earn, rather than half of Americans in the job-place. The median is the true dividing point where 50% of workers earn either less, or more than the given amount, and is much lower than the mean average of salaries paid out to American workers.

The BLS reports that in 2010 the mean hourly rate was $21.35 with a median figure of $16.27/hr. Annually this amounts to $44,410 and $33,840 respectively. Both figures fall well below our inflation-adjusted productivity-based 1950 minimum wage rate of $28.56/hr, yet these numbers both appear to be much higher than actual income when compared to figures provided by the U.S. Census Bureau. According to that agency, the mean annual income for Americans was $38,328 and the median was a mere $26,175. This means that in 2010, half of American workers earned less than $12.58/hr. That is 227% less than a minimum wage worker in 1950 when the increased 425% productivity is factored. 

The discrepancy between the Bureau of Labor Statistics and those provided by the U.S. Census Bureau is roughly 130%. This means that actual wages are 1.3 times lower than what is reported by the BLS. According to them, the 90th percentile of workers earned less the $39.97/hr. But if we reduce that wage by 130% to be in line with the more accurate methodology of the Census Bureau, we can extrapolate that 90% American workers actually earned less than $27.98/hr. This is 58-cents per hour less than our adjusted 1950 minimum wage.

With that remainder change, and considering that we have not factored increased productivity and inflation between 2010 and today, it could easily be said that even more than 90% of American workers earn less then a minimum-wage worker in 1950.

So just to recap here. If we were paid for our output as an employee today as compared to the standard expected of a worker in 1950, the minimum wage in 2010 would have been $28.56. (The actual minimum wage was only $7.25/hr.) $28.56 was slightly more than 90% of Americans who earned less than $27.98 per hour. Hence, 90% of American workers earn less than a minimum wage worker earned in 1950.

This serious disconnect between how hard we work and how we are actually compensated for our labor is clearly reflected in the bulging income disparity between the majority of Americans, and the wealthy who are reaping the profits of our labor.

Not only are we working harder in every hour than ever before, we are also working more hours in a week. Back in 1950, most Americans enjoyed a 9-to-5 sort of job. The 40-hour workweek was absolutely typical, sick time and vacation time were expected in almost any field of work, and most household operated on a single income.

Today, roughly 75% of us work more than 40 hours a week. Although 134 countries have a law which caps the maximum number of hours for employment each week, the U.S. does not. We often think of the Japanese as fanatically dedicated workers, yet the average American worker spends 137 more hours per year on the job. The U.S. has no law requiring sick time, and is the only industrialized nation that does not require any annual paid leave time of any sort.

The United States is also the only industrialized nation in the world that does not offer any parental leave. The average in Europe is 20 weeks, and even in the rest of the world a worker can expect at least 12 weeks parental leave. In Lithuania they enjoy a year off fully paid, and a second year at 80% pay to split between two parents however they like. In Ethiopia, workers enjoy 90 days of full-pay parental leave.

Despite not having any time off to care for them, 70% of children are raised in a home where all adults work. In 1960, that figure was only 20%. The impact on our children has been severe, with depression, suicide, and juvenile crime at unprecedented levels. Pharmaceutical companies offer up chemical solutions to social problems, while public schools have been transformed from institutions of learning to indoctrination hubs for corporatist ideals.

Contrary to the popular belief which has been brought about through clever social conditioning and propaganda, pushing women into the workplace never actually had anything to do with empowerment of women. By 1950 there was nothing stopping a woman from holding a full time job or pursuing a career if she chose to. Indeed, many women had held jobs once thought of as "man's work" during the war years. Some women stayed on in those jobs, others went back home to raise families. If the so called "women's liberation" movement of the 50's and especially the 60's had actually been about freedom for women, ask yourself why so many women today are utterly depressed over the fact that they are unable to stay home to raise their children and be the glue which holds their family together.

Beginning in 1950, under the Truman Administration, the United States became the first known industrialized nation to explicitly (albeit secretly) and permanently forswear a reduction of working time. Given the military-industrial requirements of the Cold War, the authors of the then secret National Security Council Report 68 (NSC-68) proposed the US government undertake a massive permanent national economic expansion that would let it “siphon off” a part of the economic activity produced to support an ongoing military buildup to contain the Soviet Union. In his 1951 Annual Message to the Congress, President Truman stated: 

"In terms of manpower, our present defense targets will require an increase of nearly one million men and women in the armed forces within a few months, and probably not less than four million more in defense production by the end of the year. This means that an additional 8 percent of our labor force, and possibly much more, will be required by direct defense needs by the end of the year. These manpower needs will call both for increasing our labor force by reducing unemployment and drawing in women and older workers, and for lengthening hours of work in essential industries."

From this we see that drawing in women (and old folks) to the workforce was a move to support the same military-industrial-complex the President Eisenhower would warn us about in his farewell address a decade later, not for anything as noble as freedom for the fairer sex.

Ignoring the greater social implications of political feminism and whether or not you want to buy into some of these larger agendas that have been spelled out, we are still left with certain simple economic facts. By enticing the vast majority of women into the workplace the demand for labor was seriously undermined, essentially cutting pay-rates in half. The net result was that every time a woman went to work, she wound up cutting her husband's pay rate in half. Which is why we see today that it takes both parents working full time to support a family, rather than the traditional roles of breadwinner and homemaker.

None of that should be interpreted as a gender bias either. It makes no real difference whether the father or the mother chooses to stay home with the children. The economic concern is simply that the labor pool was flooded, depressing wages and bargaining leverage across the board. By the end of the 1970's, the labor pool of America's women had been fully exploited, and the government-supported corporatists set their sights south of the border to Mexico and Latin America for another labor pool to exploit in order to further reduce wages in the United States.

The end result of all of this comes back again to the main topic of this essay. That today, more than 90% of American workers now earn less than a minimum wage worker in 1950. This is why we always feel like we can never get ahead no matter how much harder we work. This is why the rich get richer, while the poor get poorer. This is how our economy has been reduced to rubble. It was no accident. Welcome to Third World America.

What can we do about it?

We can stand up and demand, in one unified voice as American workers, an honest day's pay for an honest day of work. We can demand a minimum wage that reflects a basic standard of living without need of welfare assistance, social programs, and predatory loans from vampire bankers.

For more information on the minimum wage and how it effects you, please read:

Analyzing a Practical Minimum Wage

Wal-Mart: Lower-Prices, Higher Taxes

One in Three Americans Face Poverty, Latest Census Study Shows

World's Richest Woman Wants You to Work Harder for $2 a Day





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