As the 2012 elections loom and President Barack Obama pushes for his jobs plan, a key issue is how middle-class families have fared over the past generation.
Obama and other Democrats would like to see the Bush-era tax cuts expire for couples making more than $250,000 and also raise taxes on hedge-fund millionaires paying relatively low capital gains tax rates. For their part, Republicans claim Obama is engaging in "class warfare" against job creators.
In a Sept. 27, 2011 speech at St. Anselm College’s New Hampshire Institute of Politics in Manchester, David Axelrod, one of Obama’s top strategists, said there has been a "hollowing out of the middle class in this country" in recent decades as "wages have essentially flat-lined" for many workers.
"There was a census report just a couple of weeks ago, and what it said was that the average white male worker, the typical white male worker in this country, is making in real terms what he was making in 1973," said Axelrod, a former White House aide and now a senior adviser to Obama’s political campaign. "In total, the average worker is making what they were making in 1996, but we know prices haven’t gone along accordingly."
If true, that’s quite a ride back in time. Asked for substantiation, Katie Hogan of the Obama campaign referred us to a U.S. Census report released last month, and articles in the New York Times and the New Yorker website crunching some of the numbers.
The report itself didn’t have the precise numbers to back up Axelrod’s first claim -- that the typical white male worker made the same amount -- adjusted for inflation -- in 1973, when Richard Nixon occupied the White House.
But a related census spreadsheet shows that real wages have not only failed to grow but have actually declined slightly for white males working year-round and full time.
But first, a semantic point near and dear to the heart of economists. Even though Axelrod said "average" in his statement, it’s clear by his subsequent use of the word "typical" and the reports to which we were referred that median income, not the mean, is what applies here.
In 2010, according to census data, the median earnings for a full-time white male worker were $50,074. By comparison, in 1973, the median for that category, in 2010 dollars, was $50,513. So Axelrod not only was correct that white men were no better off, adjusted for inflation, in 2010 than they were 37 years ago, they were taking home about $8.44 less per week.
And when measured by the purchasing power of those dollars, the gap is even bigger. Because wages haven’t kept up with prices, as Axelrod asserted, the typical white male worker's purchasing power has eroded by almost 11.5 percent in 37 years.
Heidi Shierholz, a labor market economist for the Economic Policy Institute, a liberal think tank in Washington, said Axelrod’s statement about white male workers is "unambiguously true," and that wages haven’t kept up with major gains in productivity.
"The growing wealth of the country actually didn’t translate into higher standards of living or wages for typical workers," she said. "Where it [the wealth] went was to the top."
In the second part of Axelrod’s statement -- that "the average worker is making what they were making in 1996" -- it appears that the Obama strategist got some numbers mixed up.
A census table shows that median earnings for all full-time workers who clocked at least 50 weeks of labor increased by about 7 percent in real terms between 1996 and 2010, to $41,919. This came as earnings by women, and their participation in the labor force, grew at a faster rate than that of men, though the female-to-male earnings ratio was still 77.4 cents to the dollar in 2010.
Given the report Hogan, the Obama campaign press aide, cited, however, along with a number widely reported in the press last month, what Axelrod apparently was referring to when he spoke of average workers making what they did in 1996 were census numbers that showed total household income, adjusted for inflation, has barely increased. Median household income in 2010 was $49,445, only a $333 increase, or 0.7 percent, in inflation-adjusted dollars from 1996.
Some important factors are at play in household income numbers. For starters, households are smaller now, meaning there are fewer wage-earners to be counted. But women’s participation in the labor market has also increased. What that means, essentially, is that wage-earners in middle-class American households are working more to maintain the same level of income.
"One of the ways families made up the difference was more work," Shierholz said of the stagnant wage issue. "It’s largely an hours story."
A paper Shierholz co-authored after the new census numbers were released also showed that median income for working-age households fell by more than 10 percent in the past decade, to $55,276.
Given such factors, she said the second half of Axelrod’s statement "captures the flavor" of what the EPI and others have labeled a "lost decade" in terms of income.
Axelrod was on the money in talking about the erosion of earnings for white male workers since the early 1970s, and basically on track in comparing how things stand today for the typical American family compared to 1996. We rate his statement Mostly True.