Why Wages Have Lost Ground in the 21st Century

Why Wages Have Lost Ground in the 21st Century, by Charles Hugh Smith. US story, but similar throughout the West.

The top 5% began pulling away in the 1980s, when financialization and globalization took off, and accelerated in the 1990s tech boom and the early 2000s housing bubble. The bottom 95% benefited from these booms, but at a much more modest level: wages for the bottom 95% almost returned to 0% gain as opposed to actual declines. …

Note the structural change in the early 1970s and the stagnation in all income levels since 2000:

The forces that gathered steam in the 1970s, 80s and 90s that pressured wages are well-known: financialization, which benefited the top echelons at the expense of the increasingly burdened debt-serfs; globalization, which pitted American workers against an ever-expanding global work force of low-paid employees, and automation/software, which expanded from the factory floor into service sectors.

Those workers with the skills required by financialization, globalization and automation–the technocrat and managerial classes–benefited mightily, while those who could not add enough value at the top of the chain saw their wages stagnate.

But … there are three other equally powerful structural forces at work:

1. Zero interest rates and abundant liquidity have kept zombie firms alive, bloating supply. … In an environment of historically normalized rates, i.e. 6% mortgages and higher rates for other debt, these zombie firms would be shuttered and the oversupply would diminish, enabling the survivors to regain pricing power and thus the wherewithal to pay higher wages.

2. Revenue that could have gone to wages has been siphoned off by soaring labor overhead: healthcare premiums, higher workers compensation taxes, etc. …

3. Many if not most employers can’t afford to pay higher wages regardless of the labor market. Most employers are facing ever-higher costs while their pricing power (ability to raise prices) is effectively zero due to the oversupply of virtually everything.

Economic stagnation for the lower 95% is driving a lot of the other woes.

At root, it is mostly due to our banking system and the way we manufacture money — which manifests itself as financialization, and includes the setting of interest rates by a bunch of bureaucrats. Few understand the issue, and it gets zero traction in the media — which is very convenient for the beneficiaries of the system. Most people cannot answer simple questions: where does our money come from? Why is there a lot more of it now than 20 years ago? (I wrote an essay on it in 2009.)

Immigration to the West is also a big factor. The globalists have managed to keep this out of the media for decades, but it is such a deleterious factor that it has broken through into public discussion nearly everywhere in the last two years.