Labor Day 2017 no resurgence in worker power, wages are lower than 40 years ago


It may be that worker strength and bargaining position has finally hit bottom. But it is probably unlikely.

Here are the facts.

The share of the work force that is represented by unions has been on a long steady decline and is at a long time low. Between 1983 and 2016 the share of the total wage and salary workers in the United States represented by unions fell from 23.3 to 12.0 percent, according to Bureau of Labor Statistics data. And much of union strength is in government public sector jobs where 37.9 percent of workers were represented by unions in 2016, compared to only 7.3 percent of private sector workers with union representation.

In circa 1960, students of economics were taught about an economic constant, that two-thirds of total United States income goes to labor. The other third of income went to capital and its owners (owners of companies and factories and buildings and machinery and land). For a while the share of income going to labor did look to be pretty constant, hovering around just under that two-thirds number. Economists even embedded the number in what was called the nation's aggregate production function.

But something happened beginning around the year 2000. The share of income going to labor began to fall. And it hasn't happened only in the United States. Bruce Bartlett has written a nice piece about this in which he presents a graph of the decline in labor share of income, showing the decline not only in the United States but also in other developed nations.

And the graph below shows labor's declining share of U.S. nonfarm private sector income/output from 1947 to 2016.

This graph clearly shows labor share of nonfarm private sector income in the United States holding relatively steady at just under the two-thirds level between 1947 and about 1960, it then bumps down a notch between 1960 and 1970 before beginning a slow decline, a brief blip up between 1998 - 2000, and dropping to lows of under 59 percent by 2016.

What do you think has happened to the real wages of workers while all this is happening? Well I looked at the Bureau of Labor Statistics data on the average weekly wage of United States production and non-supervisory workers, in 1982-84 dollars in order to control for inflation. In July 1977 that average weekly wage was $322.38. What is that average weekly wage for production and non-supervisory workers in July 2017? Would you believe $304.89. The average worker's wage is lower by a substantial margin than it was 40 years ago.

That is not something to celebrate on Labor Day 2017.

But Happy Labor Day anyhow. After all the unemployment rate is below 4.5 percent. Maybe wages will begin to rise soon.

References:

Source on average weekly wages is .U.S. Bureau of Labor Statistics retrieved from St. Louis Federal Reserve data site.

Article by Bruce Bartlett at https://economix.blogs.nytimes.com/2013/06/25/labors-declining-share-is-an-international-problem/?_r=1

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