Real wage growth over the past decade was lower than during the Great Depression

Investor's Business Daily:

The increase in total private-sector wages, adjusted for inflation, from the start of 2001 has fallen far short of any 10-year period since World War II, according to Commerce Department data. In fact, if the data are to be believed, economywide wage gains have even lagged those in the decade of the Great Depression (adjusted for deflation).


Two years into the recovery, and 10 years after the nation fell into a post-dot-com bubble recession, this legacy of near-stagnant wages has helped ground the economy despite unprecedented fiscal and monetary stimulus — and even an impressive bull market.

Over the past decade, real private-sector wage growth has scraped bottom at 4%, just below the 5% increase from 1929 to 1939, government data show.

To put that in perspective, since the Great Depression, 10-year gains in real private wages had always exceeded 25% with one exception: the period ended in 1982-83, when the jobless rate spiked above 10% and wage gains briefly decelerated to 16%.

There are several culprits, of which by far the biggest has been the net loss of 2.7 million private nonfarm jobs since March 2001. (Government payrolls rose by 1.2 million over that span.)

That excess supply of labor has given employers the upper hand in holding back wage gains.

Then there is a dramatic, decade-long job shift that has occurred. The often higher-paying goods-producing sector, including construction and manufacturing, has shed 26% of its workers. Meanwhile, typically lower-paying service industries have kept growing their payrolls: social assistance (41%), nursing homes (21%), leisure and hospitality (10%).

"To the extent you have more hotels and fewer manufacturing jobs," the changing composition of the work force has been a negative for wage growth, said John Silvia, chief economist at Wells Fargo Securities.

Behind this job shift is the globalization of production, which has fed "the substitution of capital for labor" amid a push for productivity and competitiveness...

Via Economist's View