Seven and a half cents

This Substack employs complicated ideas drawn from multiple social science disciplines. These ideas are laid out in my book America in Crisis. I cover some of the material from the book here plus new insights as they occur to me. For easier comprehension it may help to read past posts that are linked in the current piece in order to gain a better grasp on the tools being employed.

The 1954 musical Pajama Game featured a song called seven and half cents that was about the extra wealth a union-demanded pay increase would bring to workers at a pajama factory. 

Seven and a half cents doesn't buy a hell of a lot,
Seven and a half cents doesn't mean a thing!
But give it to me every hour,
Forty hours every week,
And that's enough for me to be living like a king!

I figured it out.

He figured it out!

With a pencil and a pad I figured it out!
Only five years from today!
Only five years from today!
I can see it all before me!
Only five years from today!
Five years! Let's see..thats 260 weeks, times forty hours every week, and roughly two and a quarter hours overtime.. at time
and a half for overtime! Comes to exactly. $852.74!
That's enough for me to get
An automatic washing machine,
A year’s supply of gasoline,
Carpeting for the living room,
A vacuum instead of a blasted broom,
Not to mention a forty inch television set!

Successive choruses listed the things the extra income could buy 10 and 20 years into the future.  This song whimsically expressed what would actually happen to working class Americans over the next twenty years. Figure 1 presents idealized version of this. Shown is the accumulated additional income an unskilled worker earned over and above what they earned in 1953 as a result of rising wages. Think of a hypothetical young person moving away from home and learning to support themselves on what they could earn then. Even if they stayed at this entry level position, their income would rise over time simply as a result of a growing economy under the SC economy where a “rising tide lifts all boats.” If they retained the same living standards as they had starting out in 1953 and saved the additional income from future raises for a downpayment on a house, they would have enough to buy the median home in 12 years. By doing so, our worker has advanced to the middle class. They likely will have married and started a family by this point as well. To reflect the increased expenditures these would entail, I set year 12 (1965) as the new basis year for future savings. The additional income obtained as a result of the growing SC economy after year 12 is now sufficient to acquire a serious of goods as suggested by the song: an automatic washing machine, a clothes dryer, a color TV, and a second car.

Figure 1. Accumulated wealth from “rising boats” secures a higher living standard.

I can illustrate this process through a real-life example, my own family. My father joined the Navy right out of high school. After his two-year hitch, he took advantage of the GI bill and at started college, dropping out after two years, at which point he started his civilian work life at age 22. This corresponds to year zero in the figure. He married in year 7, had my sister and me in years 8 and 9 and my younger brother in year 11. In year 12 my parents bought the house in which I grew up. Prior to that they had been living in a flat upstairs from my material grandparents. During this time, presumably, they had been saving up for a home of their own, which, with three kids in a cramped flat, they very much needed. Shortly after buying the house, they acquired a washing machine and in year 14, a dryer. In year 16 we got our first color TV, and in year 19, a second car.  My own family’s story maps well onto the story told by Figure 1.

After 1973 the rising tide ended. The immediate cause was the disruption caused by the oil crisis and the subsequent inflation, which largely stemmed from bad economic policy in the 1960’s and afterward. The rising tide was not reestablished after inflation ended in 1982, because economic policy had changed to one that selected for SP business culture. Household incomes still rose, partly by putting more adults into the workforce and partly because of upskilling. For example, my father had had two years of college education in electrical engineering plus self-study (he had been a ham radio operator) which gave him a solid background in electric circuits and basic electronics, which enabled him to get a skilled job as an electronics technician at the AC Spark Plug division of GM, where he worked on projects for NASA. After he was laid off in 1970. he was able to use this background to become a high school industrial arts teacher, complete his degree, and go on for a Masters. My mother also earned a Masters and became an instructor at the local university. In this way their living standards continued to rise through the seventies and eighties, with my parents able to afford a major remodeling project in the early 1980’s.

The situation was different for those who came of age in the post-1973 world. I define a scale that sets 100 as the standard of living afforded by my income at retirement. After high school there were a number of choices I could have made. I could have continued in the unskilled job category where I was working which would provide me an immediate income corresponding to 26. Alternately, one of my friends could have gotten me a job as a union telephone installer at an income of 23, but with benefits and opportunities for advancement. Or I could have taken an even higher-paid job as a construction laborer for 33 that another friend did. I did none of these because it was a no-brainer that would I go to college because I had scored in the top 1% on the SAT. I got a BS in chemistry, which boosted my market value to 35. In my senior year of college, I learned that I would be well advised to shift from chemistry to chemical engineering. I had been planning to get a Ph.D. in chemistry, so I got one in chemical engineering instead. This boosted my market value to 66. My telephone installer friend, having received company-provided training, was now a service technician earning about 26 when I finished with my degree, much less than what I would earn, but with accumulated savings from 12 years of paid work, allowing him to get a house before I did. This was the way that the SC economy had worked, upon leaving high school one could take two paths, a non-college path that meant more money now, but less later, or the college path of less now and more later.

In these calculations, I am doing the time adjustment using per capita GDP. That is, I am adjusting for rising standard of living as well as a rising price level over time. This rising standard of living is what was depicted in Figure 1. During my career my income kept up with per capita GDP and rose an additional 50% due to advancement. The experience for the non-college paths was different. Those pursing the unskilled income path would see a 40% decline in relative living standards over a 40-year career. About 53 million Americans fall into this category. Another 14 million Americans receive disability, most of whom would fall into the unskilled category were they are able to perform these often physically demanding jobs. In areas of high-priced housing, the constrained living standards afforded by modern-day low wage employment or disability has led to more than half a million homeless Americans.

Figure 2. Anticipated career income rise for men and their marriage rates.

I have previously argued that in the SC economy, when wages at all levels kept up with rising living standards, it was easier for young men to get a job, marry and become responsible citizens. Figure 2 above shows how a man’s “marriage prospects,” defined as anticipated career income gains for men resulting from the “rising boat” effect, compares with marriage rate by age 35. The marriage data largely reflects marriages a decade or so in the past, hence the prospects measure is lagged for direct comparison. Before 1940 white men could expect to see a doubling in the real income they could bring into a household, simply because of economic growth. Black men saw a greater rise due to starting from a lower base. Both offered good prospects to prospective marriage partners, with those for blacks somewhat better than for whites. The result was a high marriage rate for white men and an even higher one for black men. During the 1940-70 SC economy, career prospects were even better because of the widely shared prosperity under SC culture and the economic policy that enabled it. Marriage rates for men reached their peak value over this time. Since 1970, marriage rates have fallen, and social dysfunction has risen. We could return to the old ways and restore the SC world of my youth, but people seem more interested in arguments about gender, vaccines, and other identitarian issues than in fixing problems.

For people like me, folks with an advanced degree in a technical field, nothing has changed. I would have earned even more had I been willing to move out of the technical ladder into management. We continue to marry at high rates and stay married. The neighborhoods we live in have little crime and good schools. For a few, the situation is quite a bit better than this. A CEO in 1978 made about a 1300 on the scale I am using and today it’s about 12000. That is, a CEO has seen a nine-fold increase in their living standards for doing the same job. That is, their boat has risen nine times higher than all boats used to, while my boat is unchanged and those for half of America have sunk. This is because of changes in economic policy that led to the rise of SP business culture, the capitalist crisis, elite proliferation, and rising political strife that I talk about here.