What happened in the 70s?

Jyri posted an article on Facebook, Where Inequality Took Root: “In the mid-70’s, we traded in our post-World War II social contract for a new one, where ‘greed is good.'”  This amazing graph shows something big happened in the 1970s to prevent workers from sharing the gains of productivity in the workplace, but the question is, what?

productivity-versus-wages

Jyri conjectures that personal computing may have had something to do with the changes.However, I think that was a small part of the changes going on in the United States at the time. The bigger changes were social.

There was a great deal of change during the 70s in terms of womens’ rights, gay rights, civil rights and also, significantly, immigration. For example, after Hart-Celler was passed, the ethnic makeup of the U.S. changed dramatically, viz, this data from Wikipedia:

“Prior to 1965, the demographics of immigration stood as mostly Europeans; 68 percent of legal immigrants in the 1950s came from Europe and Canada. However, in the years 1971–1991, immigrants from Hispanic and Latin American countries made 47.9 percent of immigrants (with Mexico accounting for 23.7 percent) and immigrants from Asia 35.2 percent. Not only did it change the ethnic makeup of immigration, but it also greatly increased the number of immigrants—immigration constituted 11 percent of the total U.S. population growth between 1960 and 1970, growing to 33 percent from 1970–80, and to 39 percent from 1980–90.”

My mother’s family immigrated from the Philippines to the United States when people from non-European countries were subjected to more stringent requirements than Europeans, and very few were allowed in. They believe they were admitted to the U.S., for example, because they had had a great deal of higher education, and graduate degrees from American universities.

The graph above can tell a thousand stories, and it is hard to point to any single factor. Personal computing may have changed the workplace dramatically, but I think it is likely that the social contract changed because the social construct changed. More women, more minorities, more foreign-born citizens were taking their places in American society and there was a growing sense of threat to entrenched power.

3 thoughts on “What happened in the 70s?

  1. Sorry to be dense but I’m not sure you’ve explained why either the rise of personal computers or a change in the social makeup of the country drove wages down while productivity went up. I’m not disagreeing with either idea, I just need some help with the wages piece.

    Gordon Gekko (Carl Icahn, Donald Trump) dropped wages because he was greedy and it was the easiest way to get more profit out of a company. It seems to me that it became fashionable to aggressively treat workers like pawns in the larger equation of squeezing every last bit of profit out of a company, even if it died in the process and people’s lives were ruined. What did automation and/or a change in the social fabric of the workforce have to do with this, if anything?

  2. The key to the chart you show is that the wages are those of folks in the “goods” sector, aka manufacturing. The oil embargo, the lack of capital investment, the decline of American quality, all conspired to reduce both employment and wages. Raging inflation ate all wage increases. When new investment was made, technology (think mini-mills and computer driven machine tools) replace people. Fewer people, much more productivity.

    In the second graph (in the original post), you see what happens when you add the (then growing) service sector into the picture. Median wages actually rose. But note the impact of the social changes on the slopes of the increases (and declines) in the various income quintiles. The top percentiles gain faster and fall slower. The lower percentiles gain slower and fall faster. Further, these trends increase over time. This is the impact of the “greed is good” mentality of that time (less the late 70s, more so the early 80s and ever since.) The impact is seen in the first and second derivatives of the curves. Rich folks get a larger (and more importantly) and increasingly larger share of “created” wealth.

    This is not good. It creates a social climate where the losers in this game look for victims, with less power, to blame. It can create a national Stockholm syndrome, where the losers of the game end up in league with, or at least sympathetic to, their “captors.” And if money is political speech, political speech can become the private domain of the few. Any of this sound familiar?

    I wish I had a comfortable ending to “therefore it can clearly be seen that we must…”

    I don’t.

    Others?

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