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January 1982, Vol. 105, No. 1
The spendable earnings series:
has it outlived its usefulness?
Paul O. Flaim
Are American workers "better off" now than they were 5 or 10 years ago? That is, considering wage and inflation trends, have workers been making further gains or losing ground in terms of the purchasing power of their earnings?
The answers to this question can vary considerably, depending on what statistical series is used to determine the basic trends in gross earnings and on what calculations and assumptions are made in translating the statistics on gross earnings into estimates of purchasing power.
One of the statistics most often used to depict the trend in purchasing power of American workers has been the "real spendable weekly earnings of workers with three dependents." This series, published monthly by the Bureau of Labor Statistics, was initiated about four decades ago. Its initial purpose was to keep track of the purchasing power of factory workers by taking into account changes in consumer prices as well as deductions from pay for Federal income taxes and social security contributions. In the early 1960s, the scope of the series was expanded to all production and nonsupervisory workers in the private nonfarm economy. The following tabulation shows the trend in this series (in 1977 dollars) over the 1950-80 period:
According to the tabulation, real spendable weekly earnings grew steadily and significantly from 1950 to 1965, were stagnant until 1975, and then dipped considerably over the next 5 years. Why this change in trend? Is it possible that, after making considerable progress over the 1950-65 period, the average American worker lost ground in terms of purchasing power over the next 15 years?
This excerpt is from an article published in the January 1982 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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