The Hidden Forces Behind Low Real Wage Growth and Inequality in America
Despite nominal wage growth reaching as high as 5.74 percent in May 2023, many Americans are still struggling financially. This article explores the complex factors behind low real wage growth and the role of an increasingly unequal economic landscape, ultimately blaming the oligarchic system for undermining workers' gains since the 1970s.
Nominal vs. Real Wage Growth
Nominal wage growth has been impressive, but real wage growth has been stagnant. According to the most recent data, annualized US wage growth reached 5.74 percent in May 2023, compared to a peak inflation rate of 9.1 percent in June 2022. Adjusting for inflation, the picture looks vastly different. Economists and policymakers need to focus on real wage growth to truly understand the impact on workers' standard of living.
One key factor is the rise in inflation. From June 2022 to May 2023, the Consumer Price Index (CPI-W) dropped from 9.1 percent to 4.0 percent, marking a significant decline. Despite these improvements, real wage growth remains low, indicating that increases in nominal wages are not keeping pace with the cost of living.
Economic and Social Implications
Low real wage growth has severe implications for Americans, particularly those in the bottom 75 percent of income earners. These individuals face significant financial pressures, with many working multiple low-wage, part-time jobs and struggling deeply in debt amid high childcare and health insurance costs.
The wealth gap in the US is staggering. According to recent studies, the top decile holds an astronomical amount of net worth, while the bottom 75 percent of Americans barely have a tenth of that wealth. The consequences of this disparity are far-reaching, contributing to social unrest and financial instability.
The Oligarchy’s Role
The increasing wealth and income inequality in America can be traced back to a concerted effort by the American oligarchy, a term coined to describe the small group of super wealthy individuals who control significant portions of the nation's wealth and influence. This oligarchy has been influential in shaping economic policies to their advantage since 1973, when they began to increase their grip on corporate compensation.
A recent RAND Corporation study highlighted the ongoing systematic subversion of the American middle class. Beginning in the early 1970s, the "reverse distribution" of income and wealth upwards has resulted in a massive annual theft of approximately $2.5 trillion from the middle and working classes. This covert class war has hindered real wage growth, leaving many Americans financially squeezed and struggling to make ends meet.
Influencing Political Discourse
The American oligarchy's influence has not been limited to economic policies alone. They have also shaped political discourse and policies to their advantage. The infamous Powell Memorandum, issued in 1971 by Lewis F. Powell Jr., outlined a blueprint for the American oligarchy to undermine the power of the American middle class and restore their dominance.
With the support of substantial funding and the backing of right-wing think tanks, the oligarchy has exerted a significant influence on conservative politicians and the Republican Party. This has effectively shifted the political spectrum to the right, making any meaningful left-wing reforms nearly impossible. Meanwhile, the once-strong Democratic Party has also been increasingly coopted by corporate interests, leaving few genuine options for workers.
Empowering the Working Class
To address the issue of low real wage growth, a fundamental shift in political and economic power is necessary. This can only be achieved through mass mobilization and widespread participation in protests and general strikes. Only when millions of Americans come together to demand real change can the oligarchy be held accountable and forced to negotiate meaningful policy reforms.
Obstacles to real reform include political gridlock and a lack of genuinely progressive options at the ballot box. However, the path forward is clear: workers must rise up, unite, and demand not incremental changes but fundamental reform to the economic and political systems that perpetuate inequality.