(The term real wages refers to the actual purchasing power of workers’ earnings after inflation is taken into account. For example, workers who receive a 5 percent wage increase in the same year as inflation hits 10 percent, would actually face a 5 percent decline in their real wage.)

What are the facts?

While the Economist is not referring to the working class as a whole, it’s worth noting that a 6.4 percent increase for the lowest-paid 20 percent of the population over a 22-year period is hardly anything to brag about. That comes out on average to less than 0.3 percent per year—in fact, this tiny increase for the worst-off section of the working class fits into the downward curve of real wages in this country since the mid-1970s.

Also the Economist deliberately starts in 1979, instead of going back 30 years to the mid-70s, when, prior to the 1974-75 recession, real wages were at a high point. By 1979, a substantial drop in real wages had already taken place due to inflation and other effects of the economic downturn. The chart below shows clearly that, overall, real wages over the past 30 years have declined considerably.

“Real earnings rose sharply for several decades after World War II, but the trend slowed abruptly during the 1970s,” says a recent U.S. Bureau of Labor Statistics report. In the 30 years following the Second World War, when Washington gained unrivaled dominance over other imperialist powers, the employing class could afford to concede regular wage increases to sections of the working class in exchange for labor peace.

By the early 1970s, however, the postwar boom had ended and the curve of capitalist development dipped downward. At the root of this turn was the decline in the average rate of industrial profits.

The deep recession of 1974-75 brought a sharp increase in unemployment and an intensified employer attack on workers’ wages and conditions. Beginning with the takebacks Chrysler imposed on autoworkers in 1979, the bosses rammed through massive cuts that drove down actual take-home pay—before inflation was even taken into account.

There was a modest upturn in workers’ real wages in the late 1990s, the labor bureau report indicates. Although this was true for the working class as a whole, government statistics show that the increase was relatively greatest among those at the bottom of the pay scale. This is explained by an increase in the minimum wage at the same time as a decline in joblessness.

An 8.4 percent increase in the minimum wage in 1997 to $5.15 per hour—as miserly as that figure is, and which remains the federal minimum wage today, eight years later—meant a short-term hike in real wages. At the same time the unemployment rate in the second half of the 1990s fell to its lowest level in 30 years, remaining below 5 percent from 1997 to 2001. Not since the late 1960s had the unemployment rate held below that figure for five consecutive years. Under such conditions, the labor of the working class is in higher demand, and workers gain greater confidence in their ability to win improvements in wages and benefits from the employers.

The upward turn lasted until the recession of 2001. The pattern of the overall downward curve in real wages resumed as the unemployment rate began to rise, and the $5.15 minimum wage lost more and more of its purchasing power. Real wages fell in 2004 by 0.6 percent, approaching the level they were at in the depths of the 2001 recession.

The Economist uses data in a way that masks the class contradictions that lie behind changes in the real wage. The Economist authors compare only the “lowest fifth” in income in the population with the “top fifth”—whose real wages grew by 70 percent in 1979-2000. Thus they promote the liberal myth that those who do not fall into the category they define as “poor” are part of a better-off “middle class.” This obscures the grinding conditions that the working-class as a whole faces as the employers’ assault on wages and working conditions takes its toll.

“Most Americans believe that their country still does a reasonable job of providing opportunities for everybody, including blacks and women,” argues the Economist. But nothing good for the working class comes from “opportunities provided” by benevolent employers or social service agencies. It comes from hard-fought struggles.  
 
 
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