Productivity grows, family income does not

September 2, 2012
   
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 Over the period from the end of World War II through the mid-1970s, productivity grew steadily and median family income grew right alongside it at a similar pace, adjusted for inflation. In the mid-1970s, these two trends began to diverge and although productivity (output per hour) continued to grow at a healthy pace, median family income grew much more slowly and even declined in some years, despite increased worker hours by most families over this period. Since 2007, median family income has declined each year in inflation-adjusted terms, while productivity has grown.

Inequality spikes

Wages have gone down for upper-middle income, middle income, lower-middle income and low-income workers over the past 33 years, when adjusted for inflation. The only wage growth is among the group that already earned in the top 20 percent, and even there, growth has been stronger for the most advantaged. Since 2007, every group, including the top, has seen a wage decline. The table below breaks the Ohio workforce into ten equal parts, looking out how earnings have changed since 1979. Someone at the tenth percentile earns more than ten percent of workers and less than 90 percent. Workers across the entire bottom 70 percent of the spectrum have seen hourly wage decline, with steeper drops for middle and lower-middle income workers over the long term. By 2011, workers at the 90th percentile earned 4.19 times more than workers at the tenth percentile. This doesn’t capture income inequality among the top ten percent, which would substantially worsen the picture. It is wage income, so it doesn’t capture programs like the Earned Income Credit, which help low earners with children, and it doesn’t capture income from stocks, dividends and other non-wage earnings that go in vast disproportion to the wealthy.

Presenting one key point from the table above in a bar chart, below, tells the story clearly. Between 1979 and 2011, Ohio’s wage structure became more unequal. For workers in the 90th percentile – those who already earned more than 90 percent of other workers – wages have grown by about $4.00 an hour. For the next group down, earning between the 80th and 90th percentiles, wages have also grown slightly, and for all other groups wages have declined.

Data on wealth inequality is not easily available at the state level. The top 1 percent of Americans owned more than one third (35.6 percent) of the wealth in the United States in 2009 and the top 5 percent owned nearly two-thirds (63.5 percent) of the wealth. The bottom 80 percent of Americans own a tiny and shrinking share of the wealth, down from an already paltry 18.7 percent in 1983 to just 12.8 percent in 2009.

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