In recent years, income inequality has become a major political and economic issue in America. Income inequality, the argument goes, was caused not only by the growth of incomes among the wealthy but also by wage stagnation among middle-class Americans. According to a 2015 report issued by the Economic Policy Institute, a pro-labor think tank based in Washington, DC, “ever since 1979, the vast majority of American workers have seen their hourly wages stagnate or decline.”
The blame, predictably, fell on President Ronald Reagan and his free-market reforms, even though economic liberalization started under his Democratic predecessor, Jimmy Carter. But income is an imperfect measure of overall living standards, which are much better than they used to be.
You earn more than just your wage.
It is true that, adjusted for inflation, average hourly earnings of production and nonsupervisory employees in the private sector (the closest approximation for the quintessential blue-collar worker that I could find) have barely changed between 1979 and 2015. In October 1979, average hourly earnings stood at $6.51, or $21.20 in 2015 dollars. In October 2015, average hourly earnings stood at $21.18 – slightly below the inflation-adjusted 1979 level. But wages do not provide the full picture of workers' earnings.
In recent decades, for example, non-wage benefits have exploded. Today they include relocation assistance, medical and prescription coverage, vision and dental coverage, health and dependent care, flexible spending accounts, retirement benefit plans, group-term life and long-term care insurance plans, legal and adoption assistance plans, childcare and transportation benefits, paid vacation and sick leave, and employee discount programs from a variety of vendors, etc. These could amount to between 30 and 40 percent of the workers' earnings.
Moreover, prices of many important consumer goods have declined dramatically. Comparing the prices of everyday items in the 1979 Sears Catalogue with similar products on walmart.com at the end of 2015, I found that the inflation-adjusted prices of bicycles, blenders, coffee makers, convection ovens, dishwashers, food processors, refrigerators, gas grills, home entertainment systems, gas stoves, microwaves, slow cookers, toasters, treadmills, television sets and vacuum cleaners fell by an average of 76 percent.
