Wednesday, October 22, 2008

Wage Improvement Pre-Federal Reserve Bank, Pre Income Tax versus Post-Federal Reserve, Post Income Tax

Real Wages Pre-Federal Reserve, Pre-Income Tax

"In the United States, according to the data afforded by the census returns for 1850 and 1880, the average wages paid for the whole country increased during the interval for these years by 39.9 per cent...According to the investigations of the Massachusetts Bureau of Labor Statistics, the average advance in general wages in that State from 1860 to 1883 was 28.36 per cent...A careful investigation instituted by the Bureau of Labor Statistics for Connecticut of the comparative wages paid in the brass, carpet, clock, silk and wooden industries of that State in 1860 and 1887, and the comparative cost of the necessaries of life to the operatives at the same periods (see report for 1888), gave the following results: average advance in the wages of males about forty-three per cent, and of females fifty-seven per cent; decline in the price of staple dry goods thirty-nine per cent; of carpets, thirty-six per cent; increase in the average price of groceries and provisions, ten and a half per cent. 'There was an average advance in the retail price of such kinds and cuts of meat as are common to the market reports of both dates of thirty-three percent.'"

---David Ames Wells, Recent Economic Changes, p. 409

Real wage increase over 25-30 years: roughly 30-60%

Post Federal Reserve Bank, Post Income Tax

Average hourly wage, 1971: $3.67
Average real wage, Sept. 2008: $18.17
CPI Sept. 1971: 40.8
CPI in 2007: 208.49

Average real hourly earnings, Sept. 1971: 3.40 /40.8 = .08333
Average real hourly earnings, Sept. 2008 18.17/ 208.49 = .08715

Increase: over almost 40 years: 4.6%

Can flat real wages since 1971 be due to income tax policy, when there was no income tax in the 19th century and real wages grew 20 times faster?


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