Breaking news alert! Wages fell at the fastest rate ever recorded during the first quarter of this year, the government’s Bureau of Labor Statistics reported.
Hourly wages fell 3.8 percent in the first quarter, the biggest drop since the BLS began tracking compensation in 1947. Productivity rose half a percentage point. The result was that what economists call “labor unit costs” fell 4.3 percent.
In plain English, that means paychecks overall shrank, but work output grew. If you are a business owner, that is news worthy of a toast with a bottle of the finest Cristal champagne, which at $595 is more than the $518 that a median-wage worker earns in a week.
If you have not heard this news about plummeting wages, it is not surprising. Except for right-wing websites, and an item at the liberal Huffington Post, the June 5 announcement went unreported.
The networks and the major newspapers all have staffs of business reporters, yet they missed the third paragraph of the official government announcement that contained this important news.
That is because they are mostly assigned to write about hedge funds, high finance and the latest smartphone app. Hardly any business reporters cover workers or work, and when they do, it is often from the perspective of company executives and investors.
My former employer, The New York Times, not only failed to report this awful news affecting the vast majority of Americans who work, but gave a misleading account in both a news report and a blog post:
Average weekly hours and average hourly earnings, for example, have shown little improvement in recent months, according to the Labor Department.
That is true, by the way. Misleading and incomplete, but true. It is also in line with that paper’s tradition of focusing readers on any silver lining in an economic storm.
What the Times reports matters a great deal, as every other news organization turns to it first because of its unmatched resources and talent. But that also means that when that newspaper misses, or muffs, a story, so does everyone else.
It is not like this new wage news can be dismissed as an anomaly, either. It is evidence of a troubling trend – falling incomes for the 99 percent.
Pay for most jobs has been falling because of a combination of anti-union rules that have reduced membership to its lowest level in almost a century, trade deals with China that have destroyed 2.8 million jobs and put pressure on workers to accept lower pay to compete with imports, and the severe cuts in welfare benefits over the past two decades, which have flooded the market with low-wage workers. America ranks second only to South Korea in the share of workers earning low wages, both at about one job in four.
At the same time, taxpayers have been giving ever-larger subsidies to employers, notably Walmart, many of whose workers need food stamps.
From 2007 to 2011 the average pretax income of the bottom 90 percent fell from $35,173 to $30,437. That is a drop of more than $4,500. It is also a decline of nearly 13 percent.
The 2012 data are likely to show that drop has worsened, with the vast majority’s average income likely to be down $5,000, or roughly $100 per week. We’ll see how well that gets reported in the fall when new data becomes available.
By the way, if you make a good living, or your household enjoys two above-average incomes, don’t think that you are exempt from this trend toward less.
During the same period, the threshold to enter the top 10 percent fell by 6.5 percent, a drop of $7,665 to $110,651, analysis of the latest IRS data by economists Emmanuel Saez and Thomas Piketty shows.
This drop in income is part of a long-term trend in which the economy grows, but nearly all the gains go to the top. From 2009 to 2011 the top 1 percent got 121 percent of all the gains, which was possible only because the 99 percent got less.
In 2011, the top tenth of one percent got 7.4 percent of all the income in America, up from 2.2 percent the year Ronald Reagan took office as president, a fact reported in only a few news articles.
For the bottom half of taxpayers the decline has been brutal. In 2010 the bottom half of Americans averaged just under $15,300 per household in reported income. Every household in the bottom half made less than $32,400 in income, IRS data posted by the conservative Tax Foundation shows.
More than a third of all workers, 51 million of them, made less than $15,000 in 2011. Half of workers, 75 million people, earned less than $27,000, which is $519 a week with no vacation. That figure has been essentially flat since 1999.
Did you know these figures? Did you know half of households get only about $1,100 a month? If you do, you are part of a very small and well-informed minority. Please spread this news to the vast, ill-informed majority of Americans by telling everyone you know what you read here at National Memo, but not in your morning newspaper.
The reasons a record fall in pay was not mainstream news are hard to fathom. But, sadly, what was once a mass medium that drew many reporters from the working class and intellectual blue-collar families has become so focused on high-income readers, listeners and viewers that institutional views of what is news change.
The stock options granted to executives, reported almost as a competition to see which CEO can make the most for the least performance, make the news. I played a role in that trend, showing in 1996 how journalists were systematically under-reporting executive pay by a lot. What happened since is a surprising personal lesson in the law of unintended consequences.
Today’s news organizations focus much more on investors than workers or consumers. They tend to view banking through the eyes of the few who invest in banks rather than the vastly larger audience who have bank accounts. But then mutual funds and banks buy ads and the investors in them tend to have high incomes, which in turn helps them afford the $25 to $65 monthly cost of newspaper home delivery.
For TV and radio, advertisers also want younger people in the top half — and preferably top quarter — of the income distribution, not the half of workers making less than $518 a week.
Concern about falling wages is also influenced by the heavily marketed idea that we need lower pay to have a strong economy. That may explain why falling wages have been reported as news by Drudge, the website of Fox, the libertarian California newspaper The Orange County Register and the like.
Higher minimum wages, the corporate economists and right-wing news organizations say, destroy jobs. The Chicago School sect of neoclassical economics, which dominates in America, teaches that as dogma. It is not, however, what empirical research shows.
Falling wages mean less disposable income, which in turn means there is less reason for corporations to invest because there is less money to buy products and services. It also means less in tax revenues than if we pursued a high-wage strategy and, at the same time, included in the idea of markets the actual ability of workers to collectively negotiate their compensation just as our economic competitors do.
AP Photo/J Pat Carter