Monetary Sources of Real Wage Stagnation

 

The left-wing Economic Policy Institute posts the chart below, which shows that real wages and productivity began to diverge in 1973, two years after President Nixon's abolition of the secondary gold standard and in the midst of a 15-year period of massive regulatory expansion, including workplace regulation such as ERISA, OSHA, and Medicaid. Before 1971 the average real hourly wage increase was .5% to 2% per year, resulting in 65% real wage growth in 50 years. That relationship began with the Jacksonian (no central bank) era or even earlier, in the colonial era, and it ended in 1971. The pre-1971 path shown on the chart (1948-1971) was characteristic of the laissez faire, Progressive, and New Deal eras.Since 1971, a period of about 47 years, there has been zero real wage growth. Although unions have declined in proportion to the work force, there was a similar level of unionization during the laissez faire era, when inflation-adjusted wages grew at .5% to 2.0%. In addition, because there were no (zero) income taxes in the laissez faire period, workers kept their wages and saved, to the tune of 30% of income in the late 19th century. The interest on that savings was higher than during the Fed era. Stock and bond market returns were, however, lower.            https://www.epi.org/publication/charting-wage-stagnation/