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Tuesday
Jan132009

What cut in half the growth rate of average wages in 1982?

DateTuesday, January 13, 2009 at 04:00PM

The following graph shows that the average hourly wage of US production workers rose at a very steady rate from 1964 to 1982 when it abruptly changed and has been growing at half the prior rate ever since. The effective annual compound interest rate from 1964 to 1982 was 6.50% and since then has been 3.24%. Why?  (The wage data are plotted on a natural log scale because that shows a constant percentage increase as a straight line.)

 Natural log average nominal earnings US production workers 1964 to 2008

 Download Excel spreadsheet.

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