When I was working at a gas station, I had an old-timer come in and tell that he used to make $2/hour at a factory job when he was in his late 20’s. He said he could feed his whole family for the night by buying a 24-cut pizza for $2. Fast forward to my gas station job, where I was making $8/hour, but a 24-cut pizza in my town costs closer to $20—2.5 times more on a dollar-for-dollar basis. He said he had no idea how I even survived on what I was making (I was insured through college at the time, but had no savings, and relied on family for large expenses).
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This is what people mean when they talk about income inequality. The reason wages have not kept pace with expenses is because the nation’s previous method of wage redistribution—union representation—has declined substantially. Wage increases have subsequently been absorbed on an increasingly larger basis by corporate entities and the top 1% of earners. Strong unions used to serve as a soft redistribution mechanism to help ensure that increases in prosperity were shared equally. A critical mass of union representation in the labor force has always had derivative wage benefits in the non-union labor market. That critical mass no longer exists, however. Consequently, the decline of union labor has led to a concurrent decline in wages relative to expenses, because there’s no longer an institutional mechanism for redistribution of earnings increases in the economy. The critical mass of union representation is gone, and nothing has taken its place.
“Look at the difference: In 1977 I bought a small house in Portland Oregon for $24,000. At the time I was earning $5 per hour working at a large auto parts store. I owned a 4 year old Chevy Nova that cost $1,500. Now, 36 years later that same job pays $8 an hour, that same house costs $185,000 and a 4 year old Chevy costs $10,000. Wages haven’t kept up with expenses at all. And, I should point out that that $5 an hour job in 1977 was union and included heath benefits.”