1. Wages Stagnation: Causes

Wages Stagnation: Causes
1. Wages Grew Consistently Until 1971
2. Foreign Competition Was A Culprit
3. Profits Beat Wages in the Flat World
4. Slow Technological Adjustments
5. College Solution Didn't Work
6. Low Job Relocation
7. World Changed, Good Few Jobs
8. High Skilled Immigration Not a Cause

Editorial Note: Illegal low skilled workers keep low wages even lower.

See Wage Stagnation Solutions Economic Wellbeing

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1. Wages Grew Consistently Until 1972

WW 2 generated savings, pent-up demand and few foreign few competitors generated 25 years of high profits higher wages and cooperative unions.

As if Watergate and the Cold War were not enough, the oil cartel OPEC had the unity to succeeded with a 1973-74 oil embargo. The embargo was targeted at nations perceived as supporting Israel during the recent Yom Kippur War. Trouble was brewing.

Normality ended when Carter appointee FED Chairman Volker found higher interest rates were not enough so he lowered commercial bank reserves. This quickly pushed the Federal Funds Rate to 20%. Banks would not loan. Two recessions followed. The first cost Carter reelection and the second, though severe, was over so Reagan was reelected.
The End of the International Liberal Order? 1hr: 28 min

2. Foreign Competition Began the Process

High Oil prices pushed Japan into more valued added exports like automobiles, machinery and computers. This competition caused a stagnate Rust Belt with lower wages and eventually lower employment. Japan's manufacturers got lucky from increased demand for gas efficient small green cars with catalytic converters. Detroit protected profit by seeking tariff protection. Investment needed to lower cost and increase product quality was ignored. Auto union leaders protected their positions. Current worker protected existing jobs and salaries by accepting a two-tier wage system. It minimized the need for new workers who would receive lower wages for a similar jobs. Feeling political pressure Japan built many modern U.S. plants often in the nonunion southern states offering the highest tax incentives. see How the U.S. Squandered Its Steel Superiority

3. Profits Beat Wages
in the Flat World Competitive Adjustment Battle

Labor Held It's Own Until 1980's

US Companies have competed very well in a flat world using technology, outsourcing to Asia, Mexico...and by keeping wage increases low. Source Total compensation has done better although Obama Care gave companies an opportunity to again lower compensation.

Question: What Happened in 1980?
Source More Data 1 Data 2 Think Rust Belt then NAFTA and soon TPP? See How Democratic Failed Workers 11 min Short Term vs. Long Term Returns 52 min

4. Technological Adjustments Slow

Gilded Age Politics from 1865 to 1910
Had No Wage Adjustment as Politicians Protected Business Oligarchs.

Industrial Revolution #1 Gains Went to the Wealthy.

New Century Workers Gained Fewer Required Hours and
Better Working Conditions as
Industrial Revolution #2 Gains Were Shared Because
Mistreated Factory Workers Revoltes
Were Helped by Progressive Era politiciaans.

Industrial Revolution #3:
Better Low Priced Consumer Products
With Slow Wage Growth.

More College Didn't Work Graduates Doubled
Many Student, Parents, Politicians, Educators Made Poor Education Investments See Can Education Reduce Stagnate Income Wages Down for All But the Best and Brightest
Some Major Earn Low Wages See FED Data from 73 Majors
Lower Immigration of high-skilled workers Companies figured out that in one department there were stars worth a lot more than the average Joe. These companies looked for stars and paid them bigger dollars. In finance, high tech, and management the spread began to widen between those in the middle and the STARS.		"In 2011, the top 30 percent of earners with a high-school degree earned more than what 50 percent of workers with an Associate’s degree earned. This same top-earning group of high-school-degree workers also made more than a quarter of workers with bachelor’s degrees. We find that higher-paid high-school-degreed workers are represented more heavily in occupations that require technical post-secondary education attainable through certificates or apprenticeships." clevelandfed.org See Economics of College Education
Economic Return Based Upon What You Learn Not Where Low Job Relocation Occupational churn — the rate at which workers move to different occupations Declined for a Second Time Source Why a Stagnant Job Market?

Job polarization
has decreased the career opportunities for High School graduates.