The base year is 1992 so 1992 = 100. From the BLS website we find out that in 1992, total compensation per hour was $17.27 ($12.33 in wages and $4.94 in benefits of which $1.13 was health insurance). Adjusting for inflation gives the following numbers: $25.52 per hour total compensation, $18.22 per hour in wages, $7.30 in benefits of which $1.67 was health insurance.

With that information, we can calculate the dollar amounts of real per hour compensation in any year from 1947 to today. For example, in 1973 the index is about 85. We set up a mathematic ratio as follows: 25.52 / 100 = x / 85. Solving for x gives $21.69 which is the total compensation per hour in 2007 dollars in 1973.

We can go further and figure out how much of that was in wages and how much was in benefits. Wage data is available from the BLS. Using that information, we find out that in 1973, average hourly earnings were around $9.08 in 1982 dollars. In 2007 dollars that is $19.51. So the wage component of total compensation in 1973 is $19.51 leaving $2.18 in benefits ($21.69 – $19.51).

Compare that to the total compensation numbers for 2007. Workers received $28.03 per hour total which included $19.56 in wages, and $8.47 in benefits of which $2.21 was health insurance.

I’ll take you word for it.

Gabriel is on target in pointing out that wage rates ultimately reflect changes in productivity, while productivity is primarily boosted by the accuumulation of additional capital. And as Dr. Reisman explains in “Capitalism”, an increase in capital goods happens nearly as soon as new workers are introduced into the division of labor.

There are several interrelated ways in which the addition of more workers to an economy boosts productivity and real wage rates. First, the division of labor is intensified and extended by the additional workforce, which lifts the producitivty of the existing capital stock. For workers temporarily displaced by new labor find work as new employment is created in response to new spending. What is the source of this new spending? Reductions in nominal wage costs, which yield higher business incomes, which are consumed or invested. Either way, the new spending adds to capital spending, most obviously in the form of hiring new workers; but also as spending on producer goods to lift production. So the capital base increases and real wage rates are nudged higher.

On a seperate note, there is a small problem with the idea that rising job benefits have rescued real wage rates from stagnation in the USA since, say, 1990. The steadily increasing dollar costs associated with such benefits are due in part to rising inefficiency in the health care system as the result of increasing regulations of medical provision. To cite one of several possible examples, recall the rising cost of medical malpractice lawsuits, which are certainly a form of legalized extortion from Doctors and hospitals to trial lawyers. Skepticism about the value of the growth in “benefits” is in order.

I’m getting closer to find the historical employee compensation data. The Federal Reserve’s website has a chart showing real compensation per hour all the way back to 1947. The infamous year 1973 is significantly below today’s mark. The increase in benefits has outstripped the decline in wages by far. I’ll keep looking for more precise data though.

Wouldn’t that wage be the wage that existed before the fall of communism?

Besides, Dr. Reisman wasn’t writing about lower wages, but inequality caused by the wealthy becoming wealthier at a faster rate than other classes. The cause is simple: if certain people consistently receive new money first, before prices rise, they will benefit financially over those who get the new money last, after prices have risen.

I’m still trying to find where I saw the data going back to the ’70s. This pdf takes it back to 1986 (see page 12). But I know I saw going back further than that. The problem is, from 1986 and onward, the BLS called this measure “Employer Costs for Employee Compensation,” but before 1986, they called it something else. I don’t remember what. But I will keep looking. Also, as I write, parts of the BLS website are not functioning (they say they they’re updating their database). That may be why I can’t find it.

fundamentalism, you’re right about real wages per hour being less today than in 1973. But the difference was more than made up by the increase in benefits. I hope I can find that data!

When I was doing my research, I was mainly concerned with demonstrating the effect of productivity on wages. The data shows a strong correlation between average wages and productivity and explains a large part of the downward trend from ’73 and the upward trend since ’90. Since productivity is determined primarily through capital investment, most of the popular proposals to boost wages would actually hurt wages by reducing capital investment.

That’s a very good point. Aggregate numbers hide a lot of interesting things.

Gabriel found something different in the BLS data than I did, and I would be interested in seeing his data. He says that average wages aren’t lower today than ’73, while the data I had seen showed a decline from ’73 until about ’90 then a strong rise but not matching ’73. But my didn’t didn’t include benefits, I believe, and his does. Nevertheless, I have often wondered how middle class standards of living could increase so much since ’73 while average wages haven’t. Benefits could be some of the explanation, but your thoughts on the influence on the mean of immigration may be the rest of the answer.

There have been periods of wages + benefits stagnation, there have been periods of wages + benefits falling, and there have been periods of wages + benefits rising in the past few decades.

• In 1991 (the earliest year I could find both wage and benefits data for), workers received $24.91 per hour ($17.89 in wages and $7.04 in benefits).

• By 1999, workers received $25.13 per hour ($18.23 in wages and $6.91 in benefits).

That’s an increase of just 22 cents in eight years. I call that stagnation. In contrast, however:

• In 2000, workers made $25.35 per hour ($18.40 in wages and $6.95 in benefits)

• In 2007, workers made $28.03 per hour ($19.56 in wages and $8.47 in benefits)

That’s an increase of $2.68 in seven years or about 1.5% per year. It’s not fabulous, but its not stagnation either.

A few months ago, I managed to find the data all the way back to the 60s (and including the famous 1973 year). It turned out that after adding both wages AND benefits and adjusting for inflation, in 1973 worker compensation was less than it was today. In other words, the decline in wages was more than offset by a rise in benefits. Is anyone is interested, I can dig up the numbers again.

I always suspected it since learning from the Mises institute, but now Dr Reisman now confirms a major aspect of it, that most of the social “inequalities” under the truly free market are merely the result of each individuals diverse preferences rather than a stratified hierarchy, like one person having blue socks and another having red socks, instead of one person having blue socks while another has no socks.

This is a great article for the pro-welfare state left to read.

Finally, I think Eugen Bohm Bawerk (forgive my errors in spelling) said that labor cannot increase its share at the expense of capital, but is credit expansion generally a (failed) attempt to increase the share of capital at the expense of labor??

The data on benefits hasn’t been kept for very long, so it’s hard to tell, but extrapolating backwards from today’s level, benefits don’t seem to have varied that much. They seem to follow the trend in wages, too.

I’ve always read that benefits have increased significantly, especially in health care. But I don’t know if thats the truth, a damned lie, or a statistic.

I think its pretty obvious that, regardless of what statistics say, the standard of living has increased significantly since 1973. The poor have cell phones, cars with airbags, cable TV and an internet connection.

Average wages have risen constantly since the early ’90′s in spite of increased immigration.

My point is that (all else being equal) the introduction of poor, less-skilled workers pushes down mean and median wages while not actually effecting the well-being of those who were in the sample group before those new workers arrived. It seems to me any statistics should correct for immigration. If China were to suddenly become part of the USA and our statistics, we couldn’t suddenly say the USA got poorer.