This thought occurred to me too, but then I realized even 37% is very high. In a reasonable society, most individuals' earnings should go up all the time. The downward pressure that should exist is high earners retiring and low earners just starting their career. A mildly idealized society should probably have 3% go from unemployed to employed, 3% go from employed to (voluntarily) unemployed, and the remaining 94% increase their earnings.
The only thing that surprised me about this article is that more people didn't see real wages decline. 2021-2024 was a period of peak inflation that the US hadn't seen in decades. And of course the primary cause of this inflation was governments flooding dollars into the market by literally paying people not to work, which while perhaps faulty was at least a reasonable response to Covid. The ironic thing is that, in the US at least, the inflation rate was coming down before we decided to install the guy who instituted massive tariffs, an unprecedented deportation program, and an unprovoked war in Iran, all of which are highly inflationary.
So it's completely unsurprising to me that wages, especially of people who stayed in the same job, didn't accelerate faster than inflation. This feels a bit like picking your dates to tell a narrative. I'd be much more interested in the percentage of folks whose wages fell in real terms by looking at multiple overlapping 5 year timespans.
>In a reasonable society, most individuals' earnings should go up all the time.
I don't think this is a reasonable expectation at all. In the absence of economic growth I would expect the average individual's earnings to be flat.
The only way for wages to go up across the board is if productivity increases. If you're not creating more wealth than last year, the only way for one person's wages to go up is if someone else's goes down.
I read it as 3% retire, 3% enter the workforce, and everyone else is slightly better / more senior than the year before. So the average wage could be flat.
> The downward pressure that should exist is high earners retiring and low earners just starting their career.
> and the remaining 94% increase their earnings.
This is an extremely unrealistic expectation. There are a multitude of reasons for people's incomes to fluctuate other than retirement. People make career changes that result in lower income for many reasons, like taking a better job, changing careers, transitioning to a lower demand job when they have children, or moving to a new city with lower wages for personal preference.
For many jobs the earnings are also dependent on the company's earnings. Incentive structures, bonuses, RSUs. Even low paying companies scale their staff up and down based on demand. They can't hold a monotonically growing set of staff and also monotonically increase their wages when the incoming demand for their product is not monotonically growing.
The only way to come close to an "idealized society" like you're proposing is a totally self-sustaining, command and control economy where a central authority determines not only everyone's income, but their expenditures too. It's not possible to keep the entire economy and everyone in it moving in the same direction unless you're dictating where all of the money goes in society to a fine degree. Variations of this have been tried. The members of that society do not find themselves more well off.
Its interesting, I thought it was pretty well established that COVID era stimulus helped lower earners make real gains, even adjusted for inflation, while higher earners who did not get stimulus checks lost ground?
From page 36 of the paper: All deciles during this earlier period experienced annual real wage growth, with the growth being the largest for the bottom two deciles of the wage distribution.
I’m pretty confused where you’re coming from. Stimulus checks were a one or two time payment of a couple thousand dollars, but stocks and corporate profits went absolutely parabolic.
Unemployment almost by definition means they’re not getting as much money as they were before.
We can focus strictly on wages, but for higher earners, it doesn’t tell the entire story, especially if we’re focusing on my new detail details like a couple thousand dollars per person.
Many people were making more money on unemployment than their standard wage due to the covid increased pay. The fed paid $600 on top of state benefits for a few months and then $300 for more than a year after that meaning people were seeing 16 -> 24 dollars an hour in wages for not working in my state of Georgia for instance. It was often smarter to stay unemployed until that ran out compared to local wages.
While losing a job is a pretty unpleasant disruption to one’s life, it can also be the case that the next job will be better and one ought to (in hindsight) have changed jobs sooner. Potentially the shake-up of employment in low-productivity sectors was also good for the economy (and in hindsight I think this strategy worked better than subsidising people in their current jobs, ie furlough, which is what many other countries did).
My cousin and many others I knew were getting more money from unemployment than when they had their jobs during covid. Though I don’t believe that caused inflation. Inflation was an international phenomenon and countries experiencing inflation had very diverse stimulus responses to COVID. It seems the Russian invasion of Ukraine, a pivot to a goods based rather than services based economy, coupled with climate changed caused shortages and retiring boomers caused it.
Yeah agree, share of wealth definitely went up for folks who had the money to be invested in the stock market.
My recollection is that some combination of stimulus checks / COVID dynamics made it much harder to hire low wage workers, so employers were "forced" to raise wages in response. At the same time, higher wage workers who got "normal" raises were not keeping up with inflation.
Maybe it's very bad. Or maybe it's negligible. And which third of americans is it, the poor the middle or the rich or a mix of everyone? These factors are important before we can draw more than the most shallow of conclusions.
There's a chart of the average that looks pretty bad. But also I don't have time to read 78 pages right now.
I don't think the "average" is a good metric for the social impact of this. Everyone (or almost everyone) being at a standstill would be the minimum that governments should worry about. When even a sizable minority loses ground, that could create unrest.
> This compression accelerated in 2021: real wage growth in the bottom two deciles remained positive and close to its pre-period pace, while all other deciles experienced declines of about 2 percent, roughly four percentage points below their pre-period growth
That’s true, and you could even use any measure you’d like. Perhaps the Gini coefficient. I should specify that I’m not trying to make direct claim about inequality.
Only that, for anyone against the ails of inequality, the bottom wage earners getting more (and even outpacing other deciles) is a win.
You can't put electricity, meat, coffee... in the same bag as Teslas and iPhones, otherwise you'll hide the type of inflation that makes the lower classes unable to pay rent and buy food while still being able to access the latest smartphone and SUVs.
I'm not sure averages are that interesting, because the people at the high end have an extra-ordinary amount of influence on the average. You might want to look at the shape of the distribution?
One could make the point that in a society that is primarily driven by capital, it is wise to keep an eye on the health of it from those that are within said system.
