Lately, there has been a big debate going on among Democrats about why workers aren't outraged by their economic condition, and therefore more hostile to Republican economic policies and more sympathetic to Democratic policies.
On the surface, it would appear that workers should be in open revolt. According to the Bureau of Labor Statistics, the average worker is no better off today than he was seven years ago in real terms. In August 2006, his average weekly earnings were $275.49. In August 1999, they were $275.61 (both in constant 1982 dollars).
Census Bureau data confirm this trend. According to recently released information, median annual earnings for men fell to $41,386 in 2005 from $43,158 in 2003 (in 2005 dollars), despite steady economic growth. Male earnings in 2005 were lower than in every year since 1997. Female earnings also fell in 2005 to $31,858 from $32,285 a year earlier and were lower than in any year since 2000.
Looking at the broadest measure of economic well-being, median household income, we also see flatness. In 2005, the median income -- the point at which half of households are above and half are below -- was $46,326. This was up from the levels in 2002, 2003 and 2004, but below those registered from 1998 to 2001. Median household income peaked in 1999 at $47,671 (in 2005 dollars) and fell every year thereafter until 2005's small uptick.
There is no simple explanation for worker passivity in the face of income stagnation. One argument is that labor union membership has fallen sharply over the last generation and, consequently, workers have no organizational mechanism through which to bargain for higher wages or protest wage stagnation politically. In 2005, labor union membership was down to just 7.8 percent of private sector workers, from 24.2 percent in 1973.
Another possibility is that workers have been so beaten down by layoffs and give-backs in recent years that they are just grateful to have jobs at all, even if their pay stinks. And because of declining health coverage by employers, those lucky enough to have health insurance may feel compelled to hold onto such jobs. If they switch to another job, they may get higher pay but lose their health benefits in the process.
Indeed, the rising cost of health benefits is a key reason for the flatness of wages. From the point of view of employers, their total labor costs have risen sharply. But all of the increase has gone into benefits, with nothing left over to raise wages. Workers may not like this fact, but accept its reality.
According to the BLS, wages and salaries have fallen from 72.6 percent of total compensation in 2000 to 70 percent in June of this year. At the same time, health benefits have risen from 5.9 percent of compensation to 7.7 percent.
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