Economy

Have Middle-Class Wages Really Stagnated?

Too many Americans are convinced that we're living through tougher times than we really are.

Brian Mark Weber · Aug. 17, 2018

In 2017, President Donald Trump signed into law the Tax Cuts and Jobs Act. At the time, Republicans promised the act would open the floodgates for economic growth and productivity, and help the country in terms of job growth, rising wages, and investment. It did.

It’s no wonder Democrats fought against cutting anyone’s taxes, as a robust economy makes it harder for them to create class envy or accuse Republicans of only looking out for the rich. Simply put, a good economy is bad for Democrats. Hence, they’ve continued to denounce the tax cuts by claiming that they’re nothing more than a break for the so-called “One Percent.”

If one takes to heart the recent findings of the Pew Research Center, one wonders if there’s some truth to these claims. Drew DeSilver of Pew claims, “After adjusting for inflation … today’s average hourly wage has just about the same purchasing power it did in 1978, following a long slide in the 1980s and early 1990s and bumpy, inconsistent growth since then. In fact, in real terms average hourly earnings peaked more than 45 years ago: The $4.03-an-hour rate recorded in January 1973 had the same purchasing power that $23.68 would today.”

But the Pew Center’s claims that real wages haven’t moved in nearly 40 years is deceptive when viewed through the prism of one economic study.

Pew’s analysis is based on a measure of inflation produced by the Bureau of Labor Statistics known as the CPI-U. This tool overestimates inflation and underestimates purchasing power when it comes to the many options consumers have in making their purchases. Moreover, inflation-adjusted wages have remained constant over the last four decades, but total compensation has increased substantially.

Another part of the problem is the false perception that the Leftmedia and Democrats have created over the years. In other words, too many Americans are convinced that we’re living through tough times when there are signs all around suggesting otherwise.

Ramesh Ponnuru writes at Bloomberg, “The idea that most people have made no economic progress in four decades just feels wrong — it contradicts the growing material abundance that I think nearly anyone in our society ought to be able to see. Yet many people seem to find the picture of long-running stagnation plausible. Meanwhile, they find implausible what the best reading of the evidence suggests about poverty: Material deprivation has sharply declined over the last few decades, too.”

Economic adviser David Winston reminds us about the big tax cuts of 1964, 1981, 1997, and 2003, which all sparked an increase in gross domestic product, lower unemployment, and increased federal revenues. He states, “As optimistic economic data pours in and anecdotal evidence of a growing economy mounts, it is becoming more difficult for the media to paint a negative picture.”

Winston adds, “Today, we are seeing unemployment rates reaching historic lows, especially for women and minorities, and more than a million jobs have been created since the Republican tax cuts were enacted. From January to May, the Treasury’s monthly statements suggest its early revenue figures are coming in about $26 billion, or 2 percent, higher than last year for the same period. And just recently, the Bureau of Economic Analysis announced that corporations repatriated over $300 billion back to the U.S. during the first quarter of this year. The same period last year, that figure was just $38 billion.”

What Democrats might describe as windfalls for these companies have actually translated into higher wages, bonuses, and expanded employee benefits, as well as lower costs for customers and millions of new jobs. In fact, the Labor Department announced earlier this summer that the U.S. has more job openings than unemployed people to fill them.

But all the good news about the economy won’t stop Democrats from painting a bleak picture in the days leading up to the midterm elections. Admitting that tax cuts help the middle class and boost the national economy would effectively pull the rug out from under the Democrats’ tax-the-rich schemes that do nothing for hardworking middle-class Americans but allow progressives to engage in class warfare.

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