What Happened to American Labor?
What Happened to American Labor? BY BRIAN MAHER for Daily Reckoning
THE United States Bureau of Labor Statistics informs us that American productivity has increased 70% since 1973.
But average real hourly pay (adjusted for inflation, that is) has scarcely increased 12% over 45 years.
Thus the average American worker finds himself a hamster upon a wheel… jogging largely in place.
Here our co-founder Bill Bonner reduces to concrete the abstract plight of the American worker:
In 1971, you could buy a new Ford F-150 for $2,500. At $4 an hour, it took 625 hours to buy the truck.
Today’s model costs $30,000, and the average hourly wage is $26. So the wage earner has to work for 1,154 hours to get a standard F-150. Put another way, he has to sell almost twice as much of his time to get a set of wheels.
But it is not only the F-150 owner who has lost the value of his dearest commodity — time:
You can do the same calculation for housing. An average man paid about $24,000 for the average house in 1971. Today, he pays $371,000. Priced in time, the house cost 6,000 hours in 1971 and 14,269 hours today… It takes more than seven years of work for the average guy to buy the average house today – four years more than it took in 1971.
Is it coincidence that Mr. Bonner selects the year 1971 to draw a contrast?
It is no coincidence whatsoever.
The Fiat Dollar and Globalisation
In August 1971, old Nixon slammed shut the gold window… and lowered the shade.
The gold standard was a mere rump in its dying days. It nonetheless kept the balance of trade in a range.
A nation running a persistent trade deficit risked depleting its gold stocks. The unbacked dollar — the ersatz dollar — removed all checks.
America no longer had to produce goods to exchange for other goods… or fear for its gold.
“By the sweat of your brow you will eat,” Genesis instructs us.
Under the new dollar standard, America could eat by the sweat of foreign brows — without perspiring one bead of its own.
Scraps of paper, rolling off an over labored printing press, were its primary production.
Ream upon ream went abroad in exchange for goods — real goods.
The international division of labor was suddenly opened to the world’s sweating and heaving masses. Many were peasants from the labor-rich fields of China.
They entered the factories in their millions, each toiling for one dollar per day. Perhaps two.
The competition depressed average American wages — wages that have never recovered.
Meantime, the past decade has only deepened existing trends…
The Sparrows Go Hungry
The trickle-down theory of economic progress argues you must first feed the horses in order to feed the sparrows.
It contains much justice — poor men do not open businesses. They do not provide employment. They put no bread in mouths.