by Brian T. Lynch, MSW
Americans have suffered from wage suppression since 1975. That is when business owners stopped giving wage earners productivity raises. It was intentional. For decades before, companies regularly shared their growing profits with their employees. Cost of living adjustments (or COLAs) were a bonus to keep dollars earned in line with inflation.
I have been writing about this issue as long as I have been blogging. It seems too few citizens realize just how diabolical this change was, or how much impact it is having still.
Before about 1975, wage compensation and U.S. economic growth grew in tandem. We all shared in the new wealth that, working together, we all created. The middle class grew stronger every year, as did business owners. After America’s corporations colluded to eliminate productivity wages, all new economic growth (new wealth) accrued to corporate and business owners, not to their employees. As a result, while the American economy grew, wages compensation no longer grew in proportion. American workers only received COLAs to adjust for inflation. Our income and wealth began shrinking relative to the U.S. economy. It continues to shrink every year.
As of the end of 2025, when adjusted for inflation, the economy of the United State is over five times larger than it was in 1975. If wage compensation and U.S. economic growth continued to rise in tandem over these past 50 years, our wages would also be five times higher than what they were in 1975. The difference between what our wages should be and what they are is roughly equal to the total growth of wealth inequality in America. Moreover, the loss of middle-class income due to wage suppression results in a loss of state and federal income tax revenue needed to fund our growing nation. To put it another way, income tax revenue would be five times higher without any tax rate increase in 50 years. The failure of wealthy owners to share America’s economic growth with the American people is the root cause of our present affordability crisis.
Here is one example of how wage suppression impacts an economic issue. In 1968 the federal minimum wage $1.60/hour. Adjusted for inflation, that would correspond to a minimum wage of $15.06 per hour today. If you compare the dollar increase in minimum wages between 1968 and now with the inflation adjusted minimum wages for the same period, you get two very different graphs:
Federal Minimum Wage Rate (1968-2026)
Federal Minimum Wage Rate: $7.25 as of 2026
HISTORICAL RATES HISTORICAL RATES ADJUSTED FOR INFLATION
The graph on the left is the dollar increases in federal minimum wage over time while the graph on the right is the purchase power of a minimum wage over the same time. The one on the left rises while the one on the right declines.
In New Jersey, we set out to raise our minimum wage. This year it stands as $15.92. That means it is eighty-six cents higher now than in 1968. Great! But wait! The national economy is five times greater than it was in 1975 (and how much larger than in 1968?). If wages rose in proportion to the growing wealth of our economy, our minimum wage should have grown five times more than in 1975 as well. That means our current minimum wage should be $15.06 X 5, which is $75.30 per hour.
That may seem ridiculous until you compare that wage rate to the current rate of a living wage in the Country. A living wage is the minimum hourly income necessary to meet a person, or a family’s basic human needs. It varies from region to region, but in New Jersey, the average living wage is higher than you might suspect. Here is what a search for the current living wage in New Jersey has to say:
As of early 2026, the estimated living wage for a single adult in New Jersey is approximately $27.35 per hour ($56,888 annually, assuming 2,080 hours) to cover basic necessities. A separate 2025 analysis suggests a higher, broader estimate of roughly $72,773 annually, while families with children require significantly more, with a single parent of three needing over $73 per hour.
There it is. Fifty years later, the minimum wage in 1975 was close to what a family of four required to meet their basic needs. Today that same minimum wage in New Jersey (again, adjusted for inflation) is inadequate to pay for the basic needs of a family of four.
Before about 1975, wage compensation and U.S. economic growth grew in tandem. We all shared in the new wealth that, working together, we all created. The middle class grew stronger every year, as did business owners. After America’s corporations colluded to eliminate productivity wages, all new economic growth (new wealth) accrued to corporate and business owners, not to their employees. As a result, while the American economy grew, wages compensation no longer grew in proportion. American workers only received COLAs to adjust for inflation. Our income and wealth began shrinking relative to the U.S. economy. It continues to shrink every year.
As of the end of 2025, when adjusted for inflation, the economy of the United State is over five times larger than it was in 1975. If wage compensation and U.S. economic growth continued to rise in tandem over these past 50 years, our wages would also be five times higher than what they were in 1975. The difference between what our wages should be and what they are is roughly equal to the total growth of wealth inequality in America. Moreover, the loss of middle-class income due to wage suppression results in a loss of state and federal income tax revenue needed to fund our growing nation. To put it another way, income tax revenue would be five times higher without any tax rate increase in 50 years. The failure of wealthy owners to share America’s economic growth with the American people is the root cause of our present affordability crisis.
Here is one example of how wage suppression impacts an economic issue. In 1968 the federal minimum wage $1.60/hour. Adjusted for inflation, that would correspond to a minimum wage of $15.06 per hour today. If you compare the dollar increase in minimum wages between 1968 and now with the inflation adjusted minimum wages for the same period, you get two very different graphs:
Federal Minimum Wage Rate (1968-2026)
Federal Minimum Wage Rate: $7.25 as of 2026
HISTORICAL RATES HISTORICAL RATES ADJUSTED FOR INFLATION
The graph on the left is the dollar increases in federal minimum wage over time while the graph on the right is the purchase power of a minimum wage over the same time. The one on the left rises while the one on the right declines.
In New Jersey, we set out to raise our minimum wage. This year it stands as $15.92. That means it is eighty-six cents higher now than in 1968. Great! But wait! The national economy is five times greater than it was in 1975 (and how much larger than in 1968?). If wages rose in proportion to the growing wealth of our economy, our minimum wage should have grown five times more than in 1975 as well. That means our current minimum wage should be $15.06 X 5, which is $75.30 per hour.
That may seem ridiculous until you compare that wage rate to the current rate of a living wage in the Country. A living wage is the minimum hourly income necessary to meet a person, or a family’s basic human needs. It varies from region to region, but in New Jersey, the average living wage is higher than you might suspect. Here is what a search for the current living wage in New Jersey has to say:
As of early 2026, the estimated living wage for a single adult in New Jersey is approximately $27.35 per hour ($56,888 annually, assuming 2,080 hours) to cover basic necessities. A separate 2025 analysis suggests a higher, broader estimate of roughly $72,773 annually, while families with children require significantly more, with a single parent of three needing over $73 per hour.
There it is. Fifty years later, the minimum wage in 1975 was close to what a family of four required to meet their basic needs. Today that same minimum wage in New Jersey (again, adjusted for inflation) is inadequate to pay for the basic needs of a family of four.
Eric writes: Brian, does you analysis take into account all of the good middle class manufacturing jobs that jobs lost to China and other foreign countries? Also, minimum wage was never sufficient to support a family. It was 2.35 in the 1970’s and even then not enough.
ReplyDelete
DeleteBrian Lynch
12h · Edited
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Author
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Roxbury Township
Eric Does your analysis take into account the fact that if wage earners continued receiving productivity raises between 1975 and now, they would have received their fair portion of an economy that grew in wealth by 1,730% in that time? Instead all that wealth went to the upper 1% of our citizens (mostly to the upper 0.1%). Even without productivity increases, minimum wage today is 10% of median income for a family of 4 while it was about 34% of the median income for a family of four in 1975.
Paul writes: What has happened is that compensation moved to jobs with higher impact to the business. That is due to a combination of economies of scale as well as the use of technology to greatly enhance productivity in certain jobs. This is really not that different than when the US transformed from an agrarian to industrial economy. In turn, the highest impact jobs increasingly became white-collar, and this is why we've seen an increase in wage gap between white collar and most blue-collar workers.
ReplyDelete
DeleteBrian Lynch
21h
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Author
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Roxbury Township
There have been many things that have impacted business since 1975 (+ and - a brief transition period) but none of it explains what suddenly happened to productivity raises in that period, or the stark and drastic impact the decoupling of wage compensation from new GDP wealth had then and now. The fair distribution of wealth suddenly shifted, although it was not immediately obvious. Since then we have been focusing on methodology to rebalance wealth via various redistribution schemes. But this only addresses the symptom, while rebalancing wealth distribution, how our productive labors contribute to America's growing wealth, would address the cause.
Brian
ReplyDelete"The fair distribution of wealth suddenly shifted..."
Paul writes: I must respectfully disagree. The "fair distribution of wealth" didn't change. Over time, it tends to flow to the segments of the workforce with the highest productivity and that's all that has happened. What you're seeing today is one of the consequences of the tech booms of ~1980 to 2000 and ~2015 - present, which resulted in massive increases in productivity in certain job functions.
Paul, in equal measure I respectfully disagree. See the Productivity vs. Hourly Compensation graph above. Notice how a relatively sudden change of direction took place around 1975.
DeleteIf you use the analogy of two ships on the ocean trailing each other, around 1975, the captan of the US Wage Compensation ship, suddenly changed course creating an ever widening gap between our countries growing wealth and wage earners compensation. Nothing you have mentioned can explain this. Nothing in our economic history since then has cause a course correction. What you see here is the root cause of our growing affordability crisis, our growing wealth disparity, our shrinking tax base and other economic ills.