Wolff: Middle-class decline started in 1973

By Bryan Richardson

Edward Wolff, New York University economist, spoke Tuesday about the “sad, disturbing and outrageous” story of middle-class decline in America.

Wolff spoke at Forum Hall in the K-State Student Union as a part of the Lou Douglas Lecture Series.

Douglas was a distinguished professor of political science at K-State from 1949 until 1977.

In 2012, Wolff noted, the top 10 percent of earners represented 50 percent of the country’s total income, which is the highest recorded level. In 2011, the U.S. reached 45 percent on the Gini index, which measures income inequality on a 0-to-100 scale — with 100 representing the most inequality.

Wolff settled on 1973 as the critical year that started the nation’s transformation due to events related to globalization, oil and information technology.

In 1973, the top 10 percent of earners represented less than 35 percent of the country’s total income. That year, the country also measured at 35.6 on the Gini index.

Wolff said 1973 represented a sharp rise in international trade in the U.S. The Bretton Woods System, which maintained fixed exchange rates, had collapsed during this time period.

Wolff said the influx of low-skilled workers to match the increased needs for goods affected the overall outlook.

Wolff said companies first had to deal with an oil embargo set by OPEC in 1973 and 1974 that caused production to remain stagnant from 1973 to 1979.

At the same time, Wolff said the “third industrial revolution” occurred with information technology, which eliminated the need for a lot of mid-level skill jobs as well as blue-collar production jobs.

Among the numbers presented, Wolff charted the progression of the median family income based on 2011 dollars.

• It doubled from 1947 ($26,697) to 1973 ($54,527)

* It grew 38 percent from 1973 to 2001 ($65,307)

• It grew less than one percent from 2001 to 2007 ($66,554)

•  It declined by five percent from 2007 to 2011 ($60,974)

The gap between the mean and median family income levels has grown larger, because the top salaries are pulling up the average at a much higher level. The difference between the mean and median was $7,108 in 1973 and $20,033 in 2011.

“We used to have a society where incomes were growing almost every year and people were better off year after year,” Wolff said.

Wolff said the heart of the stagnation in the growth is the lack of increase in the average hourly wage, which peaked in 1973.

“We’ve had literally 40 years of no growth of (real) wages in this country,” he said. “In fact, they’re still down from where they were in 1973.”

Wolff also made the point that more education hasn’t been the answer toward fixing the gap, as adults are receiving more education than in the past.

The number of adults 25 and older with a high school diploma has grown from 33.1 percent in 1947 to 87.9 percent in 2011.

The percentage with a college degree has grown from 5.4 percent in 1947 to 31.4 percent in 2011.

“We’ve actually been fairly successful in increasing education level in this country, but wages themselves have not really kept up with rising education,” Wolff said.

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