You Have Not Had a Raise Since 1970

You Have Not Had a Raise Since 1970

 

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Introduction

Workers in many industrialized nations have been confronted with the harsh reality of salaries that have remained stagnant over the previous five decades, despite the expansion of their economies and developments in technology. The detrimental impact that inflation has on consumers’ ability to make purchases can, in the eyes of many, be explained by this phenomenon. 

 

In this article, we will investigate how the steady erosion of the real value of salaries caused by inflation has left employees battling to maintain their level of living. We will be able to shed light on the long-lasting influence that inflation has had on the economy as well as the lives of employees if we analyze the relevant facts.

The Impact of Inflation on Wages

Inflation refers to the general increase in the prices of goods and services in an economy over time. While moderate inflation can be a sign of a growing economy, prolonged high inflation rates can lead to a reduction in the purchasing power of money. Inflation is a major concern for workers as it affects their ability to afford essential goods and services with the same nominal wage.

 

The year 1970 holds significant importance as it marked the beginning of a prolonged period of inflation in many developed countries. Since then, wages have struggled to keep up with rising prices, resulting in a stagnation in purchasing power for the average worker.

Erosion of Purchasing Power

To understand the erosion of purchasing power, let’s compare the value of wages in 1970 to their value in recent years, adjusted for inflation. According to the U.S. Bureau of Labour Statistics, the minimum wage in 1970 was $1.65 per hour. The federal minimum wage in 2023 will be $16.65 per hour. On the surface, there has been a significant jump in the numerical value of the minimum wage.

 

However, that numerical increase has not resulted in increased purchasing power. To prove that, we’ll crunch some numbers. Remember, the minimum wage in 1970 was $1.65. Now, in 2023, it is $16.65. A gallon of gas was $0.35, now it is $6.06. That means in 1970, the minimum wage could buy 4.71 gallons of gas, but now it’ll only buy 2.74 gallons

 

Statistics also show that the median household income, adjusted for inflation, has barely increased over the last few decades. According to the Pew Research Centre, the median household income in the United States in 1970 was around $42,000 (in 2021 dollars), while in 2021, it was just over $68,700. Again, although there has been an increase in nominal income, it has failed to keep up with inflation, leading to a decline in actual purchasing power.

The Rising Cost of Living

The impact of inflation becomes more pronounced when we consider the rising cost of living. Essential goods and services, such as housing, healthcare, and education, have seen exponential price growth, far outpacing wage increases. Housing, in particular, has witnessed a significant surge in prices, making homeownership increasingly unaffordable for many.

 

Moreover, the costs of healthcare and education have risen significantly, putting additional strain on families budgets. As a result, workers find themselves struggling to make ends meet, despite working harder and longer hours than previous generations.

Impact on Quality of Life

The erosion of purchasing power due to inflation has not only affected the economic well-being of workers but has also had adverse effects on their quality of life. With stagnant wages and rising living costs, people find it difficult to save for emergencies, invest in their future, or enjoy leisure activities. Additionally, the lack of financial security has increased stress levels and impacted overall mental and physical health.

How Can You Fight Inflation?

Gold has traditionally been seen as a store of wealth, which means that gold IRAs have the potential to serve as a hedge against inflation. Holding physical gold in an individual retirement account (IRA) allows investors to diversify their portfolios, maintain their purchasing power, and protect themselves against the devaluation of fiat currencies during times of rising inflation. 

 

The consistent demand for gold on a global scale is an opportunity for long-term investment; nevertheless, before making any choices, one must take into account their unique circumstances and level of risk tolerance. Keep in mind that careful research is required, and if necessary, seek the assistance of professionals.

 

Here are some specific things you can try to protect against with Precious Metals

 

  • Invest in Assets: Diversify your investments into assets that tend to outpace inflation, such as stocks, real estate, and commodities like gold.

 

  • Adjust Budgeting: Prioritize needs over wants, cut unnecessary expenses, and maintain a balanced budget to mitigate the impact of rising prices.

 

  • Fixed-Rate Debt: Opt for fixed-rate loans or mortgages to lock in borrowing costs, protecting against increasing interest rates during inflationary periods.

 

  • Increase Income: Look for opportunities to boost your income through side jobs, freelancing, or investing in income-generating assets.

 

  • Inflation-Indexed Investments: Consider inflation-protected securities or bonds specifically designed to keep pace with inflation.

 

  • Diversify Currency Holdings: Hold currencies of countries with lower inflation rates to preserve purchasing power in international markets.

 

  • Negotiate Contracts: Negotiate long-term contracts to lock in prices for essential goods and services before inflation impacts them.

 

  • Keep Emergency Funds: Maintain an emergency fund to cover unexpected expenses and reduce the need to liquidate assets during inflationary periods.

 

  • Monitor Inflation Rates: Stay informed about inflation trends and adjust financial strategies accordingly to proactively respond to changing economic conditions.

Conclusion

The absence of substantial pay raises since 1970 has put workers at a disadvantage in coping with the relentless effects of inflation. The rising cost of living, coupled with stagnant wages, has significantly diminished the purchasing power of workers over time. This situation has far-reaching consequences, affecting not only individuals but also the overall economy.

 

To address these challenges, policymakers need to consider measures that protect workers from the adverse effects of inflation. Implementing fair wage policies, investing in education and healthcare, and promoting sustainable economic growth are some potential solutions. By addressing the root causes of wage stagnation, we can strive for a future where the growth of purchasing power aligns with the growth of the economy, ultimately benefiting workers and society as a whole.