Middle-Class Wages Have Barely Grown Since the 1970s: Here’s Why

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This is a rush transcript and may be updated. Click to play and follow along.

The middle class is disappearing right before our very eyes. Despite Washington’s promises to revive this crucial, important group, the backbone of our economy, our government’s policies are making it harder and harder for the average American family to keep up.

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Let’s face it. I’m sorry when diaper prices, diaper prices are up 14 percent. We do have a problem. Ladies and gentlemen, take the recent jobs report, which was pretty decent. We added 900,000 plus jobs. Wages did actually creep up a tiny teeny bit, zero point four percent. That’s four tenths of a percent. But who the heck cares when you got five point four percent? Inflation, in other words, were basically five percent in the hole. Hello, everyone. Welcome to the Trish Regan show. I’m Trish.

I’m looking out for you. I care. And I am not OK with this inflation that is so preventable, by the way. So preventable. What the heck is our Federal Reserve doing? What the heck is the Biden team doing?

People’s money is worth so much less. Wages aren’t really growing. And all this team tells us is that middle class is their priority or if it’s their priority, they better really get their priorities straight. Now, before we pin it all on Biden, I would say this. The destruction of the middle class is a problem has been going on for years. And despite a brief uptick in median wages after tax cuts from the Trump economic team, that really did help median household incomes grow. In fact, they grew by six grand. We’re right back where we started. In fairness, we had a pandemic, a global pandemic that hit, but really, how does that explain the last 50 years?

Wages No Longer Grew With Productivity After Early 1970s

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This is a startling statistic: From the late 1940s to the early 1970s, hourly compensation for the typical American worker grew roughly the same as productivity. Rates of productivity was increasing and guess what? Wages went up as well. And so what you typically saw was, you know, the value of goods and services that workers were providing rose by two or three percent in a given year. And guess what? Wages and benefits tended to go up at roughly two or three percent, as well.

But all of a sudden in the 1970s, things started to change, though productivity really grew… I mean, remarkably, actually. I mean, think about how technology has increased productivity, even though all the productivity was increasing the wages for middle class Americans, hourly compensation went nowhere, nowhere.

One economic paper by a group of liberal economists actually suggests that if compensation had actually kept up with productivity growth, the middle class wages would be at least 30 percent higher right now. So what happened? What happened? I’m going to tell you. But first, a word from one of our sponsors. (commercial)

But middle class wages have gone nowhere since the 1970s. Why would that be? Well, I see it as a capital labor balance that has gotten completely out of whack. You think about it. I mean, what CEOs are making nowadays and I don’t begrudge anybody the ability to make a living. And I think everybody should be able to. But there’s something kind of messed up because those with capital, those with the money have all the power. And labor really doesn’t have the power.

I mean, pre 70s, right before we started the sort of level off here and people say, oh, it’s because the technology and the productivity or the productivity gains actually should have meant people were going to make more money. But with all this technology, we’ve we’ve created an environment that leaves workers at a disadvantage. The left would tell you, well, you know, the unions don’t have the same power. I don’t actually think that’s it. I don’t think that’s it at all. I think it’s something very different. And I think it has a lot to do, not just with politicians, but what we’re seeing from the Federal Reserve. Because you think about what happened in the 70s…

The Hour-Glass Economy

We came off the gold standard, right?

We were supposed to follow a certain set of rules.

And in 1965, in part because of Johnson’s War on poverty and his whole, you know, remake of society, coupled with the Vietnam War, we got off the gold standard. We just didn’t pay any attention to it. And instead of watching inflation, our Federal Reserve was like, whatever. Right? And so they started printing all this money. And I think that created an environment that benefited certain classes, you’ve heard me talk over and over again about the hourglass economy and a lot on top, you know, I’ve actually been talking about this since the year 2000. I remember doing a story way back then. So it’s kind of crazy that we’re going on 21 years and nothing has been done to improve it. In fact, the squeeze is getting tighter and tighter on that middle class.

But, you know, upper class people that had money to invest? They benefited. And consequently, you started dealing with more of a global investing environment where companies would would chase the cheapest labor possible. Right. So that resulted in workers effectively having less say and less value. At the same time, anybody who’s investing is doing better because rather than working for a wage, they’re investing their money. And when the Fed just keeps printing money, well, then those asset prices, over time, they tend to go up. And so consequently, you start to see a bigger disparity, right, between owners and workers.

In fact, if you look at some of these charts, they talk about things like the wealth gap. It really started to kick in in 1964. And if you look at the charts, it got worse and worse over time. And I think that a lot of that really does have to do with policies that benefited people with money at the expense of the middle class. And you know, it’s not about unions, although, you know, unions in some ways kind of sealed their fate because they made it really challenging for management. And then at the same time, management had the flexibility and ability to kind of go wherever they wanted. And you had things like NAFTA (thank you Bill Clinton) which sent a lot of jobs to Mexico.

I think you’re now at a state, though, where we can’t continue like this because the middle class is the foundation of this country. And if we don’t want to become like a Latin American banana republic (which sometimes it really feels like we are) if we don’t want to become that, then we need to get back to our roots, which means having this strong, family oriented middle class. And so that means we got to get off the sugar high from the Federal Reserve. It served its purpose. It’s not helping us. And, I say it served its purpose specifically as it relates to the pandemic. I understand that the Federal Reserve felt that it needed to just, you know, put all this money out there and flood the system because that was a scary time. And we went into a really deep recession, quick, quick recession, the fastest one we’ve ever had, but the deepest since the Great Depression. And the reality is that’s kind of over.

I realize they’re worried about Delta, but nonetheless, we’ve got an unemployment rate that’s now five point four percent rate. So why are you still going on and on and on about employment when we’ve got inflation that simultaneously is five point four percent?

If the Fed continues down this path, we have two risks in front of us. One, we’re getting an asset bubble. Don’t forget 2007 going into 08, you got one big old asset bubble and that could, in fact, be what’s being created. I mean, when you’ve got memes stocks, for goodness sakes. That’s that’s a problem. The other problem is that we’re going to see more and more inflation in this economy. Because when you’re printing that much money, there’s no other way around it, OK? That’s why prices are going up and they’re going to continue going up. Policy really matters. And the law of unintended consequences, it matters. And nobody’s really thinking all of this through. You cannot print your way to prosperity.

For the for the super rich, as long as the bubble doesn’t burst, they’re going to keep doing great. They benefit from these lower interest rates. But the middle class, they’re going to keep getting squeezed because these prices are going to keep going higher. We’re not seeing the growth in wages that we should see.

Again, I would I would get back to getting off the gold standard.

I’ve got a terrific, terrific show coming up tomorrow, by the way, that I can’t wait to talk with you some more about, because this gold standard thing is actually looking like it may be sort of the linchpin in all of it. I’m not saying that we can go back to it. The genie is kind of out of the bottle at this point.

But wow, when you think historically about what has what’s happened to our economy and how, interestingly, middle class wages really haven’t gone up since the 1970s, what does that have in common with what was going on?

We got off the gold standard, so we’re going to talk about that some more tomorrow. But this is a big problem because our middle class is going to keep getting squeezed and until we actually see some leadership from our leaders. It’s going to continue being a mess, and I worry, you know, great civilizations. They often fall because of economic troubles, let’s not let that be us. Thank you so much for tuning in.

Remember, go to Trish Intel dot com, subscribe to this podcast on Apple, iTunes, on Spotify or anywhere that you get your podcast. And I will see you on the website, Trish Intel. Dotcom, do sign up for the newsletter and of course, right back here tomorrow.

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Trish Reganhttps://trishintel.com
Trish Regan is an award winning financial journalist, an American television talk show host and author who interprets political events through an economic lens.

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