Have Wages Kept Pace with the Cost of Living?

Abstract

Wage Rates and Actual Earnings First, with regard to wages: It is quite evident that higher wages paid in a sufficiently depreciated currency might leave the recipient poorer than before. It is nearly as obvious that high money wages in an era of high prices may confer only an illusory prosperity upon the wage earner. Here is the real point of this inquiry. We wish to ascertain whether real wages have been rising or falling, for in a time like the present it is unlikely that they could have remained wholly stationary. For any period during which the prices of the items for which the worker expends his income have risen more than has his money wage, we must conclude that real wages have fallen. Conversely, for any period during which the wages of the worker have risen more than has the cost of his customary budget, for such a period there has clearly been an increase in real wages. Another phase of the definition of wages should be noticed. It concerns the distinction between the wage rate and actual earnings. The former is stated in terms of cents per hour, dollars per week or month, or dollars or cents per unit of work performed; the pay envelope, however, contains a sum of money, the amount of which depends in part upon considerations other than the wage rate. If a machinist earned 50 cents an hour, assuming an eight hour day, and worked overtime at time and a half on week days and double time on Sundays, he might earn by working 10 hours a day, under war conditions, not merely 48 x 50 cents or $24 a week, but, in addition, he would be paid for two hours of overtime (for which he would receive three hours pay) each week day. This would amount to 18 hours a week; if he worked 10 hours on Sunday also, he would be paid for 90 hours' work. His overtime and Sunday work would, therefore, net him 38 hours at 500, or $19, in addition to the $24 earned during regular time. His pay envelope would thus contain $43 for a week's work. Suppose now, that the machinist's pay, i.e., his rate, receives a rather xtreme increase of 50 per cent, which advances him to 75 cents an hour, and, at the same time, the shop in which he is employed returns to its former 48-hour week. He will now find that his pay envelope contains $36 (48 x 75 cents). This is 16 per cent less than he had been receiving. Thus, a 50 per cent increase in the wage rate, coupled 135