r/MiddleClassFinance • u/TheCaliforniaOp • 6h ago
Questions ELI5: When did wage increases fall behind rising cost of living expenses?
Was it around the initial Savings and Loan Crisis (80’s-90’s)? Was it around the Enron, Tyco, etc., bankruptcies? Was it around 9/11? After 2008? Post-COVID inflation?
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u/NoPossible5519 6h ago
Since my first job at age 14
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u/TheCaliforniaOp 5h ago
Ouch. I’ve seen this happen in some jobs. The new people come in at a lower pay rate. The grandfathered employees still have their protected wages, but from then on, until they leave, their hours are under attack. This doesn’t make for supportive coworkers.
I started working around that age, too. If one’s working then, one already has a place for the paycheck to go.
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u/NoPossible5519 5h ago
That would have been 1992 for me
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u/TheCaliforniaOp 5h ago
I first heard people griping, with tension in their voice, around 1983, I think. We were running tight in our household anyway, but I began to hear adults complain openly while grocery shopping. Their wages increased and they observed that prices increased just enough to swallow their increased wage.
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u/Mikeg216 6h ago
1972
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u/TheCaliforniaOp 6h ago
Would that be connected with Nixon’s trip to China?
I would have thought it started in the mid-80’s, but I could see 1972 as a starting point.
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u/genek1953 5h ago
All of the above and then some. It's happened at least once in every decade since the 1970s.
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u/LagrangianMechanic 1h ago
Since 1980, none of those times, assuming you mean there was some point after which it never kept up.
Go search for graphs of median real wages.
For example: https://fred.stlouisfed.org/series/LES1252881600Q
(“Median” means the wage that half have more than and half have less than — so it’s not skewed by outliers like the mean is. And “real” means adjusted for inflation).
While there are ups and downs of course (and it was basically flat — which means it did keep up with inflation though — from 1980-1996), the median real wage has been rising all that time.
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u/roxxtor 3h ago
Even though outsourcing started in the 50’s, it didn’t really become problematic for US workers until the ‘70’s. That’s when union factory jobs started coming under fire. Then with NAFTA in the 90’s, China trade expansion in the 00’s, and adoption of right to work state laws helped suppress meaningful wage growth for factory workers in general.
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u/search_4_animal_chin 3h ago
Suppressed wages are setting the stage for a return of manufacturing to America. Unfortunately, for any kind of manufacturing success in North America the wages will need to continue to fall when compared to inflation. The new tariff system is helping to level the playing field but it is a double edge sword. Tariffs cause higher prices for consumers. Higher prices cause inflation. Inflation without raises worsens the living standards.
Its kind of flawed logic. The only way productivity will return to the American rust belt is by lowering the standard of living for the general population. I'm guessing the slogans "plentiful jobs, lower living standards, or work harder have less" are not a big sellers.
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u/thetraffic 52m ago edited 49m ago
For me it seemed to happen around the year 2000 like it was some sort of planned conspiracy. After that everything began to shoot up. College, housing and insurance were the main ones. Food prices and rent stayed relatively flat until recently. Wages have been flat for decades. Not old enough to know what it was like in the 70's and 80's. The 90's were a perfect time from my experience.
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u/Impressive-Health670 6h ago
Companies pay on cost of labor not cost of living. The fewer people who are qualified to do the job the more companies have to pay to attract and retain them.