Did “working-class wages” peak in 1971? Batya Ungar-Sargon, Newsweek opinion editor and a columnist at The Free Press, made the assertion on X earlier this week.
1971 was “the high water mark for working-class wages,” she tweeted on March 11. “Everything Trump is doing with tariffs and immigration controls is to give the American worker a shot at the American Dream again after half a century of race-to-the-bottom economics that enriched the elites. So naturally, the elites are apoplectic.”
Real wages—wages adjusted for inflation—have increased at a faster rate from 1971 to 2024 than inflation. Real wage growth is calculated by taking nominal wage growth and dividing by a measure of inflation. There are several ways to calculate real wage growth, depending on the type of wage and inflation measurements used.
There is no government metric for “working-class wages,” as “working class” is a loosely defined term. Ungar-Sargon told The Dispatch Fact Check, “I define working class as anyone working in an industry that doesn’t require skills acquired in college who has been locked out of the top 20 percent,” adding that it’s the same definition she used in her 2024 book, Second Class: How the Elites Betrayed America’s Working Men and Women. She further emphasized that her definition does not include “rich business owners.” “When I said ‘high water mark’ I meant for working class people to be able to afford a middle class standard of living,” she said.
One wage metric the Bureau of Labor Statistics (BLS) measures over time is “Average Hourly Earnings of Production and Nonsupervisory Employees, Total Private.” “About four in five people in the labor force are included in this group, and they can be thought of (roughly) as workers, not managers,” Michael Strain, director of economic policy studies at the American Enterprise Institute, wrote in a 2019 Bloomberg article. He added, “They are often described as ‘typical workers.’”
There are two primary metrics used to measure inflation. The first, the consumer price index (CPI), is published by the BLS and measures the change in prices for a basket of goods and services over time. The second is personal consumption expenditures (PCE), produced by the Bureau of Economic Analysis (BEA). Instead of measuring the change in prices for a select basket, PCE measures the change in expenditures to account for consumer substitutions. For example, if the price of one good rises significantly, some consumers will substitute a cheaper alternative. As such, PCE tends to produce lower inflation estimates than CPI.
But real wage growth calculations show an increase from 1971 to 2024 using both CPI and PCE. In 1971, the average hourly wage for production and nonsupervisory employees in the private sector was $3.63. In 2024 it was $30.13. In terms of purchasing power, $3.63 in 1971 translates to $28.13 today using CPI, which has increased by a factor of 7.75. That shows real wages growing by 7.1 percent. While the chart below—which divides hourly earnings by the CPI—shows real wage growth did decline in the 1980s, wages are higher today than at any point in the 20th century.
Using the PCE inflation metric shows even higher wage growth. PCE inflated by a factor of about 5.99 from 1971 to 2024. Under PCE, $3.63 worth of expenditures in 1971 equaled $21.74 in 2024. Comparing that figure to the $30.13 average hourly wage in 2024 shows real wage growth of about 38.6 percent from 1971 to 2024. Real wage growth calculated using the PCE inflation metric shows a much slighter real wage decrease in the 1980s than CPI, while also recording real wages now vastly exceeding real wages at any point since 1965.
Ungar-Sargon acknowledged that workers today earn slightly more than their 1971 counterparts in “raw dollars” but argued that select goods and services have outpaced wage growth. “Today workers make just a bit more than they did in the [1970s] in terms of raw dollars, but their purchasing power when it comes to the hallmarks of the American Dream has evaporated,” she told The Dispatch Fact Check. “Housing, health care, retiring, and education have all skyrocketed astronomically since the ’70s, while worker wages have stagnated, until recently [when] they rose a tiny bit.”
It’s true that some goods and services are more expensive now than in 1971, even adjusted for inflation. As The Dispatch Fact Check noted in January, “The median house sales price at the beginning of 1971 was $24,300, and has since increased to $420,400 in the third quarter of 2024—a price 17.3 times higher than in 1971.” That rate of increase does indeed outpace the 8.3x growth in the production and nonsupervisory employees wage metric.
Meanwhile, health care expenses have grown at a much higher rate than wages. “According to numbers published by the Centers for Medicare & Medicaid Services’ National Health Expenditure Accounts, total national health care spending per capita went from $387 in 1971 to $14,570 in 2023, increasing by a multiple of 37.6,” The Dispatch Fact Check also previously noted. That figure does not show out-of-pocket expenses for Americans, but shows that the total amount spent on health care in the U.S., divided among each individual American, has increased more quickly than wage growth.
While some goods and services are more expensive now for workers than in 1971—such as housing and health care—many others, including clothes, computer electronics, and furniture, are now less expensive. On average, production and nonsupervisory employees are better off in 2024 than they were in 1971.
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