Wages Are Less Than the Minimum

August 28, 2006

Real wages have been falling for years. Today, the average wages of American workers are drastically below the minimum needed to sustain even a basic standard of living.

Since 1973, average real wages, figured on the basis of the minimal cost-of-living calculator of the U.S. Labor Department, have fallen 20%. When we include the added cost of health care premiums which employers have shifted onto the workers over these years, real wages have fallen by 28%. After further including tax increases (including state and local sales taxes), the decline is even greater.

This drastic and continuing drop in wages is having disastrous effects on American workers. Most families now must have 2 or more wage-earners just to make end meets. Millions of workers hold 2 jobs. Millions are forced to work years past retirement age and 40% of seniors live in absolute poverty. Tens of millions of workers and their families go without needed health care. Housing conditions are deteriorating and home ownership is completely beyond the means of most workers today. Grandparents are forced to provide child care and entire extended families are involved in the struggle to make ends meet.

The overwhelming majority of Americans are workers and wages are the only way we have to obtain a livelihood. In order to sustain our lives and the lives of our families we are forced to sell our labor-power (our ability to work) to the capitalists, day in and day out. Thus, at the very minimum, wages must be enough to guarantee a standard of living commensurate with the level of development of our country and with the historical struggles of the working people to gain a measure of economic security. This minimum standard must include the necessities of physical survival (food, housing, clothing, health care, transportation, child care, etc.). It must also include discretionary income which is necessary so that we can do something with that part of our lives left over after working 8-plus hours/day for the capitalists.

The facts show that today wages are dramatically below the minimum.

In May 2005, average weekly wages for private sector workers were $543/week ($16/hour or $28,236/year). Yet, in 2004, a basic family budget for a 4-person Chicago family (with 2 children) was $43,704/year or 54% more than the average worker's income. (The "basic family budget" as computed by the Economic Policy Institute includes only enough to meet the basic needs of housing and utilities, food, clothing, household necessities, transportation, health care, child care and taxes). (1)

The fact that wages are dramatically less than the minimum required for a secure, healthy life is all the more intolerable when we consider the tremendous wealth of our country and the fact that all the material blessings are produced solely by the labor of the workers.

Wages are so low because the workers receive only a small portion of the value they produce (and, for the last 30 years, a constantly decreasing portion).

In 2000, manufacturing workers created $1,900 billion in new values but received in wages only $363.3 billion (see Commerce Department's "Annual Survey of Manufacturing"). Thus workers created the value of their wages in about 1 and 1/2 hours out of an 8-hour working day. Workers received less than 1/5th of the wealth they produced while the capitalists grabbed the other 4/5ths as surplus value (profit). The average rate of exploitation in manufacturing was 427%. (surplus value divided by wages).

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(1) The Economic Policy Institute's basic family budget calculates a basic budget for a Chicago family of four in 2004 by using:

a) HUD's 40th percentile rent and utilities for a modest two-bedroom apartment: $906/month.

b) The department of Agriculture's "low-cost plan" for nutritionally adequate meals: $587/month.

c) Child care based on a study by the Children's Defense Fund: $763/month.

d) Health care costs recognize that not all workers are covered by employers and the cost uses weighted average of employee's share of employer-sponsored insurance plus out-of-pocket medical expenses: $350/month.

e) Transportation based on cost of owning and operating a vehicle used for average miles driven per month: $321/month

f) Taxes: $312/month

g) Other necessities, including clothing, household needs, school supplies: $403/month. (to be continued).