1 United States GPN Report 2007 Submitted by: Sylvia A. Allegretto EPI Economic Policy Institute Washington, DC, USA Posted to GPN on April 30, 2007
2 United States GPN Report 2007 Sylvia A. Allegretto Introduction: The current expansion of the U.S. economy is well into its sixth year a relatively mature stage compared to recent cycles. The last recession in the U.S. was in 2001 and officially lasted eight months from March to November. As of this writing, Spring 2007, many of the underlying fundamentals of the economy look good. This recovery has seen some stellar productivity numbers, output has expanded at a decent clip, and unemployment has been relatively low. However, how individuals fare in the economy is greatly determined by where they are situated within it. This report focuses on the labor market and the workers that drive the U.S. economy. Workers across the economic spectrum are analyzed in a historical context, as well as, within the current economic cycle. This introduction briefly addresses two troubling issues that emerge from this report. The first concerns the persistent and increasing gap between productivity and wages. Second, the long term trend of increased inequality in the United States has continued to worsen in terms of wages, family income, and overall wealth. There has been a long standing mantra amongst economists that faster productivity growth leads to higher living standards. Figure A shows that this concept generally held true from the late 1940s into the late 1970s. However, since then there has been a breakdown in this relationship. Increased productivity and growth give rise to the potential for widely shared prosperity, but a number of other factors have to be in place for it to be realized. These include strong labor market institutions such as unions, collective bargaining, and a sensible minimum wage. As the figure shows, during the present cycle, the gap has grown substantially as productivity growth soared while median family income stayed flat. The post-1995 shift in productivity growth, partly attributed to the diffusion and more efficient use of information technology, has sometimes been referred to as the new economy. Reconnecting rising productivity of American workers to subsequent increases in living standards is a complex and perplexing problem. At present the additional wealth created in this expanding economy has flowed to those at the top of the economic spectrum at the cost of those in the middle and the bottom.
3 400 Figure A The growing gap between worker productivity and income, Productivity = Median family income Source: Author's analysis of US Bureau of the Census, Bureau of Labor Statistics, and Bureau of Economic Analysis data Increased inequality is the second overriding concern, and this economic concept is illustrated in Figure B. Income growth for low, middle and high earners was roughly at the same rate from the late 1940s to the late 1970s. Since that time, a widening dispersion of the growth rate in incomes persisted. Those at the top of the income distribution have commanded more and more of the economic pie. Since 1980, income growth was 50%, 19% and 10%, for family incomes at the 95th, 50th (median), and 20th percentiles respectively. This pattern of increased inequality persists regardless of the measure family income, individual wages, or overall wealth. Figure C illustrates wage growth in the new economy contrasted against the accelerated pace of productivity. An important concept here is that the similar growth pattern from 1995 to 2000 was due mostly to a truly tight labor market. Since the 2001 downturn, wages have stagnated both for lower earners such as those with a high school degree as well as for higher earners with a college degree. Although long overdue, many in the U.S. including economists, politicians, and U.S. Federal Reserve Chairman Bernanke have expressed concerns about the implications of growing inequality for our economy and our democratic society in general.
4 Figure B Growing inequality in family incomes, th percentile 140 Median 95th percentile = Source: Author's analysis of US Bureau of the Census data Figure C The productivity-pay gap in the new economy: Hourly productivity and real wage growth, Productivity College (Bachelors) wage 1995= High school wage Median wage Source: Mishel et al. (2007). Update of Figure A.
5 The tables and figures that follow focus on the U.S. economy in terms of a broad labor market perspective. This analysis will start with a discussion of job growth and proceed to look at unemployment, employment, wages, poverty, union coverage and the minimum wage. Important demographic breakdowns of these data are included to reveal diverse labor market outcomes. The job market is the primary mechanism through which economic growth is distributed. In the aftermath of a recession, a robust job market that is to say one with enough job creation to fully utilize the workforce s workers and their skills is a critical component to a strong, lasting, and equitable recovery. Figure D shows job growth from business cycle peaks to just over five years out (the current point in this cycle). The last two downturns are broken out separately from the previous three. As illustrated, the two most recent recessions had prolonged contractions in job growth, and it took a long time to recoup the lost jobs. On average (following the 1960, 1973 and 1981 cycles) it took about 24 months to regain peak employment. Comparatively, it took approximately 30 and 45 months, to regain peak-level employment following the 1990s and 2001 recessions, respectively. These last two recessions were accompanied by lengthy time spans to recoup peak level employment and are sometimes referred to as jobless recoveries. The official length of both of these recessions was just eight months; therefore the economy on whole was into recovery far in advance of the jobs recovery. As of March 2006, non-farm employment is million. 12% Figure D Job Growth in the new and old economies: 2001 Cycle uniquely weak 10% 8% Average Growth: 1960, 1973 and 1981 Cycles Percent change from peak 6% 4% 2% 1990s Cycle 2001 Cycle 0% PEAK % -4% Source: Mishel et al. (2007). Update of Figure B. Months from peak
6 Unemployment The unemployment rate is perhaps the single most discussed statistic regarding the health of the labor market. Table 1 looks at peak unemployment rates and the most recent data (2006) available by gender and by race. Generally, peak unemployment rates for women were higher than for men although the difference between rates by gender has been shrinking. In 2006 unemployment rates by gender were the same. The convergence of unemployment rates by gender is due, at least in part, to the increased participation of women in the workforce and the changing demand on the workforce as more heavily dominated female sectors such as Education and Health Services grow, and male dominated sectors like manufacturing have been on the wane. Unemployment rates were highest for African Americans followed by Hispanics and then lastly whites. Table 1 shows that the tight labor markets of the late-1990s helped greatly to bring down all unemployment rates, but especially for African Americans as their cyclical peak unemployment rates were lowest in 2000 at 7.6%. Table 1 Unemployment rates, Business cycle peaks Total Male Female White African American Hispanic* Asian n.a. n.a. n.a. n.a n.a. n.a. n.a n.a n.a n.a Annual averages n.a. n.a. n.a. n.a n.a. 7.5 n.a n.a n.a n.a *Hispanic category includes blacks and whites. Source: Mishel et al. (2007). Update of Table 4.2. Along with gender and race, educational attainment heavily influences labor market outcomes also. Table 2 gives unemployment rates for gender and race by educational attainment over the current cycle. Because of the educational analysis, the sample for this table only included persons at least 25 years old. The table gives unemployment rates for the last peak year (2000), the last recessionary year (2001), the end of the jobless recovery (2003), and the most recent annual data (2006). The first thing to note in this table is the vast differences in unemployment rates by educational attainment; this pattern held regardless of gender or race. Over this time frame, there was less discrepancy across educational cohorts in the unemployment rates of men than compared to women. By race, this measure was least for Hispanics and greatest for African Americans compared to whites. Regardless of year,
7 unemployment rates for African Americans were much higher than the corresponding rates for whites or Hispanics. Across the board, the unemployment rates for African Americans with less than a high school degree were extremely high and remained in double digits even in the peak year of On average, the difference in unemployment rates for African Americans was close to 10 percentage-points between college graduates and those with less than a high school degree. Another interesting facet of these data is that as educational attainment increases the difference in unemployment rates by race lessens. Table 2 Unemployment rates over the current cycle by gender, race, and educational status (persons 25 yrs or older) Percentage-point change to 2001 to to Educational status Total Less than high school 6.3% 7.2% 8.8% 6.8% High school Some college College graduates Men Less than high school 5.4% 6.4% 8.2% 6.1% High school Some college College graduates Women Less than high school 7.8% 8.6% 9.8% 7.9% High school Some college College graduates White Less than high school 5.6% 6.5% 7.8% 5.9% High school Some college College graduates African American Less than high school 10.7% 11.8% 13.9% 12.8% High school Some college College graduates Hispanic Less than high school 6.2% 7.4% 8.2% 5.5% High school Some college College graduates Unemployment rate 25 years and older 3.0% 3.7% 4.8% 3.6% Source: Mishel et al. (2007). Update of Table 4.4. Three notable facts: First, the tight labor markets reduced the variations in unemployment rates across races within educational cohorts as shown in Second, due to the prolonged jobless
8 recovery that followed the 2001 recession, unemployment rates continued to increase into Lastly, in 2006, over five years into recovery, unemployment rates were still higher than they were in While unemployment is difficult, a stint of long-term unemployment six months or more of unemployment may be devastating. Typically, after six months out of work, a worker has exhausted unemployment benefits and may have significantly or completely depleted savings. It is at this point that unemployment may have lasting effects such as elevated levels of debt, diminished retirement and savings, or relocation from secure housing and communities to unfamiliar places in order to find employment. Figure E charts unemployment rates and, of those unemployed, the share unemployed long-term. The most striking aspect of the figure is the unprecedented gap between the unemployment rate and long-term unemployment shares that emerged following the 2001 recession. Figure E Long-term unemployment as a share of total unemployment and the unemployment rate, % 30% Unemployment Rate 11% 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% Recession Long term unemployment share Unemployment rate 25% 20% 15% 10% 5% Long term unemployment as a percent of total unemployment 0% % Source: Mishel et al. (2007). Update of As Figure E shows, unemployment rates peaked right at the end of the double-dip recessions of the 1980s, which is consistent with all post-war recessions. However, this was not the case for the last two economic cycles. In addition, shares of long-term unemployment peaked much sooner in the 1980s and all other post-war recoveries compared to the two most recent ones. A closer look reveals how the last two cycles both of which encompassed jobless recoveries have differed from historical measures. Excluding the last two cycles, since 1948 it took on average 1.6 months into an economic recovery for unemployment rates to peak and 8.3 months for long-term unemployment shares to peak. In other words, unemployment peaked very near the end of recessions and long-term
9 unemployment peaked shortly thereafter. The last two cycles have seen a different pattern emerge. Following the recession it took 15 months for unemployment and 19 months for long-term unemployment to peak. The lag was even longer following the 2001 recession, when it took the unemployment rate 19 months and long-term unemployment 29 months to peak. Following the recession, the unemployment rate increased more gradually, reaching a maximum of 7.8%. As the unemployment rate fell from 7.8% to 5.8%, long-term joblessness remained above 20% for 22 of those 29 months. This is the first instance of high shares of longterm unemployment persisting despite relatively low and falling unemployment rates. For the most recent economic cycle, the share of long-termers reached 20% in October months into the recovery. The share of the long-term unemployed stayed above 20% for an unprecedented streak of 32 consecutive months. During those 32 months, the unemployment rate varied between 5.1% and 6.3%. The divergence of these two indicators is unmistakable in Figure E. The enormous gap that materialized after the 2001 recession represents an unambiguous break with precedent. It is clear that a significant share of the unemployed found it extremely difficult to secure employment following the 2001 recession. Overall unemployment and long-term unemployment capture important features of the labor market and its strengths and weaknesses. However, those statistics may fall short in explaining the extent of the underutilization of labor. Forever lost is the output from underutilized human resources, and its economic impact is far-reaching. Unemployment data include only workers who report that they are willing and able to work and have looked for work in the last four weeks; the data overlook workers who are not fully employed or who would like to be employed but are not actively seeking a job. A broader measure of underemployment in the economy is presented in Table 3. This alternative measure includes unemployed workers as well as: (1) those working part time but who want to work full time ( involuntary part-timers); (2) those who want to work but have been discouraged from searching by their lack of success ( discouraged workers); and (3) others who are neither working nor seeking work at the moment but who indicate that they want and are available to work and have looked for a job in the last 12 months. (The second and third categories together are described as marginally attached workers).
10 Table 3 Underemployment, 2000 to current period Underemployment Unemployed 5,703 6,755 8,791 6,966 Discouraged* Other marginally attached* 855 1,006 1, Involuntary part time 3,137 3,593 4,542 4,089 Total underemployed 9,981 11,642 14,798 12,417 Civilian labor force (thousands) 142, , , ,428 Underemployment rate** 6.9% 8.0% 10.0% 8.2% Unemployment rate *Marginally attached workers are persons who currently are neither working nor looking for work, but who indicate that they want and are available for a job and have looked for work in the last 12 months. Discouraged workers are the subset of the marginally attached who have given a job-market-related reason for not currently looking for a job. **Total underemployed workers divided by the sum of the labor force plus discouraged and other marginally attached workers. Source: Mishel et al. (2007). Update of Table 4.6. Generally underemployment rates, like its major component unemployment rates, are countercyclical. As the economy expands/contracts, these rates decrease/increase. In 2003, a tenth of the workforce was underemployed in some way which represents a large magnitude of lost output. As the labor market tightening continued into 2006, underemployment declined also. It is, however, interesting to note that like unemployment, this rate remained considerably higher than in 2000, a time when truly tight labor markets prevailed. Employment rates Employments rates measure the share of the working age population that is employed. Employment rates tend to get less attention than unemployment rates, although they are a particularly informative indicator during labor market weakness. There has been significant speculation with regard to the decline in employment rates that followed the 2001 downturn. Were these declines more cyclical (driven by weak labor demand) or structural (changing preferences for work) in nature? The long run trend in employment rates increased from 56.1% in 1950 to 64.4% in 2000, and has since retracted to 63.1% in At any given time, cyclical and structural changes are occurring in the labor market. Long run structural changes with regard to gender can be seen in Figure F where attachment to the labor force was weakening for men while strengthening for women. More recently, the rate changes for men and women have tempered. A closer look at
11 the subtleties of employment rates may be analyzed by looking at employment rates separated by gender, without the overall total, over the last three cycles (referring the early 1980s doubledip as once cycle). These subtleties and the cyclical nature of employment rates are clearly seen in Figure G. Figure F Employment rates by gender, % 80% 82.0% Men 70% 70.1% Employment rate 60% 50% 56.1% All 63.1% 56.6% Women 40% 30% 32.0% 20% Source: Mishel et al. (2007). Update of Figure 4N.
12 Figure G Employment rates by gender, % 86% 81% Employment rates 76% 71% 66% 61% Recessions Men Women 56% Source: Mishel et al. (2007). Fig. 4O. Employment rates are sensitive to economic downturns, even as longer term trends persist. This can be seen in Figure G. The contractions in employment rates that occurred around the 2001 recession were significant. The decline in the male rate was very similar to the rate pattern exhibited around the early 1990s downturn. The rate took longer to bounce back in the current cycle, but it clearly has. The rate decrease for women was more pronounced in terms of severity and duration throughout and following the 2001 recession compared to previous downturns. Only time will tell if this rate, which has been on a slight increase for the past two years, will rebound to its pre-recessionary peak. As with the prolonged time it took for jobs to rebound in this cycle it has also taken a long time for depressed employment rates to bounce back. But, much of the data presented here especially the most recent trends since the end of the jobless recovery (mid-2003) seem to indicate that the declines in employment rates were, in large part, responses to lackluster demand and opportunity. Wages and Family Income For the most part working Americans live on what they earn from their labor. Therefore, trends in wages are important. Wages refer to the wages that individuals earn. Also of importance is family income which refers to all income (wages, rents, interest, dividend, etc.) received within a family unit. Each is discussed in this section. As stated in the introduction, over time inequality has increased for both measures.
13 For any given trend in average wages, particular groups of workers will experience different outcomes if wage inequality grows, as it has throughout the last 26 years: it grew pervasively in the 1980s, and grew at the top and fell or was stable at the bottom through most of the 1990s and 2000s. Wage trends can be described by examining groups of workers by occupation, education level, and so on, but doing so omits the impact of changes such as increasing inequality within occupation or education groups. The advantage of an analysis of wage trends by wage level or percentile (the 60th percentile, for instance, is the wage at which a worker earners more than 60% of all earners but less than 40% of all earners) is that it captures all of the changes in the wage structure. Table 4 provides data on wage trends for workers at different percentiles (or levels) in the wage distribution, thus allowing an examination of wage growth for low-, middle-, and high- wage earners. The data are presented for the cyclical peak years 1973, 1979, 1989, and 2000, and for the most recent year for which we have a complete year of data, Also included is 1995, thereby allowing analysis for the period of rapid productivity growth referred to earlier as the beginning of the new economy. Table 4 Wages for all workers by wage percentile, (2006 dollars) Wage by percentile* Year Real hourly wage 1973 $ 6.79 $ 8.20 $ 9.74 $ $ $ $ $ $ $ Percent change % 2.4% 1.2% 2.4% 1.0% 2.1% 3.9% 5.9% 3.1% 0.3% * The Xth percentile wage is the wage at which X% of the wage earners earn less and (100-X)% earn more. Source: Mishel et al. (2007). Update of Table 3.4. Peak to peak wage growth was strongest from 1989 to 2000 where, remarkably, the fastest growth was at the two extreme ends of the wage levels (10th, 20th and 90th percentiles). The bulk of the growth occurred between 1995 and 2000, when productivity soared and tight labor markets persisted. Since 2000, wage growth has been
14 modest, and the growth at the median, 3.5%, was less than half that of the period. Wage growth among higher-wage workers was also much slower in recent years than in the period. This wage deceleration, thus, has been pervasive. Long run ( ) wage growth has been positive across the wage spectrum but it has also been very uneven. Wages at the 10th percentile grew just 6.7% while they grew over 30% at the 90th percentile and above. This overall analysis of wage growth masks very important differences by gender. As the analysis of employment growth by gender alluded to, women have become very integrated into the labor market, and their wage story is much different that that for men. The following tables and figures illustrate this difference. Table 5 presents percentile wage growth from 1973 to 2006 for men. Similar to the overall data, male wages across the wage spectrum had the highest growth rates between the period. However, long run growth from 1973 to 2006 for men was very different from the overall. For the 50th percentile and below, wage growth was negative, and the bulk of wage growth occurred above the 80th percentile. This wage growth pattern is illustrated in Figure H. Simply put the increased dispersion of the lines that represent percentile wages is indicative of increased inequality. The bottom percentile wage is 3.7% less than what it was in 1973 (hence, it is below the 100 line) while the 95th percentile wage was 34% higher. Figure H Change in real hourly wages for men by wage percentile, th th Hourly wage, index (1973=100) th 50th 10th 20th Source: Mishel et al. (2007). Update of Figure 3D.
15 Table 5 Wages for male workers by wage percentile, (2006 dollars) Wage by percentile* Year Real hourly wage 1973 $ 8.01 $ $ $ $ $ $ $ $ $ Percent change % 0.1% 2.2% 3.8% 4.7% 4.9% 7.0% 7.9% 3.2% 2.7% * The Xth percentile wage is the wage at which X% o f the wage earners earn less and (100-X)% earn more. Source: Mishel et al. (2007). Update of Table 3.5. The same type of data is presented in Table 6 for women. Additionally Figure I depicts a similar picture of increased inequality in the wages of women although the entire wage distribution is better off in 2006 compared to 1973 (hence, wages for all percentiles are above the 100 line in 2006). However, even with this improvement in female wages, they are still significantly below those of men at each percentile. In 1973, the median male wage was 58.4% higher that that of women, in 2006 it was 21.7%. Interestingly, the reduction in this gap was due to two effects. First, the median wage for women increased by almost 29% and, secondly, the median male wage decreased by almost a percent. The closing of the gender gap at the 50th percentile and below was due, in part, to decreasing male wages at those percentiles. Above the 50th percentile, the gap shrunk due to significantly higher wage growth for females compared to males. Table 6 Wages for female workers by wage percentile, (2006 dollars) Wage by percentile* Year Real hourly wage 1973 $ 5.64 $ 7.02 $ 7.89 $ 8.83 $ 9.95 $ $ $ $ $
16 Percent change % 8.5% 4.7% 4.4% 4.0% 5.0% 3.8% 4.8% 5.4% 5.5% * The Xth percentile wage is the wage at which X% of the wage earners earn less and (100-X)% earn more. Source: Mishel et al. (2007). Update of Table 3.6. Figure I Change in real hourly wages for women by wage percentile, th th Hourly wage, index (1973=100) th 50th 10th 20th Source: Mishel et al. (2007). Update of Figure 3E. Where wage income is a single measure, family income is multidimensional. Family income includes wage income from all family members as well as income from other sources such as rents, capital gains, and interest. Table 7 shows family income by income quintiles and for the top 1%. The first point is that there is a wide range of incomes from the bottom to the top quintile 2004 average family income in the bottom quintile was $15,400 compared to $207,200 for the top quintile. The ratio of the top to the middle quintile was 2.6 in 1979 and it grew to 3.7
17 in However, the ratio for the Top 1% to the middle quintile grew from 10.2 to 22.4 during the same time frame, thereby showing that the bulk of rising family income inequality was generated by increases for the Top 1%. Table 7 Average Real Family Income Levels, , by Income Group, and Shares of Growth Accruing to Each Group (2004 dollars) Lowest Second Third Fourth Highest Fifth Fifth Fifth Fifth Fifth Top 1% ,100 32,700 49,000 66, , , ,400 31,900 50,200 71, , , ,100 36,500 55,100 81, ,400 1,413, ,400 36,300 56,200 81, ,200 1,259, % -2.4% 2.4% 7.7% 24.6% 56.8% Share of Income Growth To Income Group: % 3.3% 5.3% 13.4% 77.1% 39.9% % 3.4% 6.8% 14.4% 75.1% 35.7% Source: Mishel et al. (2007). Update of Table The bottom of Table 7 calculates the share of income growth to each group. The distribution in the share of growth from 1979 to 2000 represents analysis for two peaks. Over that time, the top fifth of families acquired the bulk of the growth in income (77.1%). The lowest fifth had a less than 1% growth in average family income over the two decades. A hugely disproportion share almost 40% of the growth went to the Top 1%. Data analysis from 1979 to 2004 gives about the same overall picture of increasing inequality. However, the share of growth that went to the wealthiest families lessened a bit due to the lingering effects of the stock market collapse in Table 7 clearly shows the large disparities in incomes in the United States, and further shows that income growth has generally flowed to those at the top of the income scale especially to the Top 1%. Poverty rates Significant strides to reduce poverty were made throughout the 1960s. At the beginning of that decade, the poverty rate was around 22% by the end it was about 12%. Much of this decline was due to the significant expansion of Social Security Benefits which helped contribute to economic expansion and a reduction of poverty for the elderly by 20 percentage points. Once this long slide ended in the early 1970s, poverty rates became more insensitive to economic expansions. Figure J shows the trends in overall poverty and rates by race/ethnicity starting in the early 1970s. In 1973, the overall poverty rate was 11.1%, and for the most recent data (2005) the rate was a bit higher at 12.6%.
18 Figure J Poverty rates by race/ethnicity, African-American Poverty rate (%) Hispanic All 10 5 White, non-hispanic Source: Mishel et al. (2007). Update of Figure 6B. Despite the relatively mild recession of 2001 (at least in terms of duration and GDP decline), poverty rose consistently from 2001 to As can be seen in Figure J, poverty rose coming out of the early 1990s recession as well, though for just two years. Thus, the three-year increase in poverty from 2001 to 2004 is the longest in any recovery, a compelling example of the extent to which growth in this expansion is failing to reach those at the bottom of the income scale. Given their lower income, poverty rates for minorities are consistently higher than those of whites. The rate for African Americans, for example, was at least three times that of whites through However, poverty among blacks and Hispanics was much more responsive than for whites to the faster and more broadly distributed income growth during the 1990s, and by 2000 the poverty rate for blacks was the lowest on record. The importance of this period of tight labor markets, and their poverty-reducing impact, is a recurring theme. Since the 2000 economic peak, the gap is again widening, at least for blacks. Union coverage Along with the severe decline of its manufacturing base from just over 30% in 1940 to 10.3% in 2007 the United States also has a declining trend in the rate of workers covered by a union contract. Figure K depicts this trend. This is an important facet of the U.S. economy because union jobs are better paying jobs and are more likely to offer benefits in greater quantity and higher quality, such as health care, pensions, sick pay and vacations. The falling rate of unionization has lowered wages, not only because some workers no longer receive the higher union wage but also because there is less pressure on non-union employers to raise wages (a
19 spillover or threat effect of unionism). There are also reasons to believe that union bargaining power has weakened, adding a qualitative shift to the quantitative decline. This erosion of bargaining power is partially related to a harsher economic context for unions because of trade pressures, the shift to services, and ongoing technological change. However, analysts have also pointed to other factors, such as employer militancy and changes in the application and administration of labor law, which have helped to weaken unions and their ability to raise wages. Figure K Union Coverage Rate in the United States, % 27% 26% 24% 22% 20% 18% 16% 14% 12% 13.7% 10% Source: Mishel et al. (2007). Figure 3W.
20 Minimum wage The real value of the minimum wage has fallen considerably since its high point in the late 1960s. The decline was particularly steep and steady between 1979 and 1989, when inflation whittled it down from $7.46 to $5.26 (in 2006 dollars), a fall of 29.5% (Table 9). Despite the legislated increases in the minimum wage in 1990 and 1991 and again in 1996 and 1997, the value of the minimum wage in 2005 was still 25.7% less than in The increases in the 1990s raised its 2000 value 14.6% over Table 9 Value of the minimum wage, Minimum wage Year Current $ 2006$ Period averages 1960s s s s Percent change % % % % Source: Mishel et al. (2007). Update of Table Another way to illustrate the historically low level of the current minimum wage is to examine the ratio of the minimum wage to the average workers wage (as measured by the average hourly earnings of production/nonsupervisory workers). In 2005, the minimum wage was worth just 32% of what an average worker earned per hour, the lowest point in 40 years. In contrast, the ratio of the minimum wage to the average wage was about 50% in the late 1960s, about 45% in the mid-1970s, and about 40% in the early 1990s. This analysis shows that the earnings of lowwage workers have fallen seriously behind those of other workers, and this decline is a causal factor in rising wage inequality.