Earlier this year, we posed the following challenge for our readers:

Why does the following chart, which spans 50 years of data for the United States in the post World War 2 era, look the way it does?

In this chart, we observe that the ratio of the U.S. National Average Wage Index starts off at a level 127.3% of the U.S.' GDP per Capita in 1951, slowly rises to peak at 137.8% of GDP per Capita ten years later in 1961, then falls steadily for the next three decades until 1994 when it flattened out at around 88.3% of the U.S.' GDP per Capita.

Since then, it has been as high as 91.3% of GDP per Capita in 2001, and as low as 86.2% of GDP per Capita in 2006. In 2010, the ratio of the U.S. National Average Wage Index to GDP per Capita is 88.6%.

What we can't explain is why these patterns exist. How can the average wage earned by individuals in the U.S. go from being as much as 37.8% higher than the U.S.' GDP per Capita over forty years ago to being steadily 11.4% below that quantity three decades later. What factors caused this ratio to first rise, then fall, then stabilize?

Ratio of U.S. National Average Wage Index to GDP per Capita, 1951-2010

Several of our readers responded, offering the following possibilities:

  • Why the ratio was rising from 1950 to 1961:
    • Casualties in World War 2 reducing the pool of able-bodied men available to work, which boosted wages.
  • Why the ratio fell so dramatically from 1961 to 1994:
    • Technology replacing human capital in the workforce.
    • An increasing share of women entering the workforce at lower wages.
    • Baby boomers entering the U.S. workforce at lower wages.
    • Declining union membership in the private sector.
    • A declining portion of GDP going to wages.
  • Why the ratio leveled off after 1994:
    • Baby boomers no longer entering the U.S. workforce.
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6 Comments So Far
jnovak692 Wrote: Dec 09, 2012 6:55 PM
Jsut pay up ALL the IOU'S the goverment has given and SS will be just fine. IF they stay out of it!!
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George33 Wrote: Dec 09, 2012 8:42 PM
Pay with what? Print more dollars? Borrow more from China, et. al.? That's what got us here in the first place.

The federal reserve was designed to take money from the population via inflation, then give back enough to buy votes (social security, etc.).

The last election proved that the siren song of socialism overcomes all common sense. We are now firmly in its grasp, and talking about the crumbs we were promised when social security was created. We are on the road to a Russia-style dictatorship.

Will there ever be a free country again, like the former USA? I doubt it.
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canetoad Wrote: Dec 09, 2012 5:40 PM
But no mention of the huge upward trickle of wealth, the percentage of worker compensation of GDP goes down while the percentage of Corporate compensation of GDP goes up.
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canetoad Wrote: Dec 09, 2012 5:20 PM
Simple, we are witnessing the rise of plutocracy in the United States, driven in large part by the wealth and influence of the fossil fuel companies, that not only manage to control the wealth and influence government but also happen to be making the planet unlivable at the same time. If we don't eliminate their stranglehold on decision making (worldwide) we will never be able to create a sustainable livable alternative for the planet.
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kbright Wrote: Dec 09, 2012 12:58 PM
That is when progressivism got more pronounced here in this country. We had more federal bureaucracies created, and created, and created....

Agenda 21 was being put into operation, we were still naive about being able to trust politiicans we put into office to represent us, instead of them actually representing other the USA and her people.

Remember, one must get the complete picture, or as much of it as one can to actually have enough information to come to an informed decision. So do not rely only on financials - find out what else can affect them and correlate that data into your conclusion. Part of the problem of education in the USA is limiting each "major" to specific, limited information.
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