There’s terrific news in the federal government’s latest, and most detailed, annual report on pay: American wages reached record levels last year after stagnating or falling from 2001 through 2012. Wages began rising in 2013, but initially at anemic rates.
Even better, my analysis of this data shows that the rate of wage growth per worker is accelerating and that the number of people with any paid work has been growing for a record 79 consecutive months, both signs that the economy is improving for more than just the tenth of workers paid $90,000 or more.
The most important measure is the median annual wage—half make more, half less. Last year the median wage rose to a record $29,930, up $1,074 over 2014.
To put that in perspective, in the 15 years from 2000 to 2014 the inflation-adjusted median annual wage rose by just $6. That’s right—six dollars.
The median wage in 2012 was actually lower than in 2000, down $453 when measured in 2015 dollars.
In 2013, the median wage increased by $111. That figure tripled in 2014 as the median wage grew by $332. It more than tripled again in 2015, rising by $1,074.
The average wage grew even more last year, up $1,551 to a record $46,120. Compared to 2000, the average wage was up $3,663. Significantly, almost two-thirds of the increase in the average wage since 2000 took place in the last two years. Wages per American, a way to compare pay to population growth, also hit a record high, surpassing $23,000 for the first time, up almost $1,000 per capita over the prior year.
At the very top wages and the number of jobs skyrocketed. The number of people paid $50 million or more increased from 134 to 202. Their average pay rose by more than $5 million to more than $91.4 million.
To give that some perspective, consider this: Those 202 workers who made more than $50 million were just one of every 796,000 people with a job, but they collected more than $1 out of every $400 in total wages. Significantly, this 51 percent increase in the number of jobs paying at least $50 million came after tax rates at the top were increased in 2013 from 35 percent to 39.6 percent with additional ads-on for investment income taxes and Medicare taxes.
Such growth in super highly-paid people lends no support to claims that higher tax rates reduce incomes, but may also reflect the power of corporate executives to extract from shareholders more pay to cover these higher taxes. If that is the case it means these executives, seeking what economists call rent or unjustified compensation, are sticking their thumbs in the eyes of shareholders, a trend identified in several studies by economists over the past decade.
The same analysis of higher marginal income tax rates not discouraging highly paid jobs also holds true for jobs paying $1 million to $2 million. They grew at a faster clip than jobs overall, up 5.5 percent to 94,616 workers, compared to the 4.7 percent growth in the total number of people with any paid labor.
These figures all come from the Social Security Administration, which adds up to the penny every wage report sent by employers. The data is both highly reliable and finely diced, with wages measured at 59 pay levels from a penny to $4,999.99 at the bottom to the $50 million plus level at the top.
The new data is especially significant in terms of the Presidential election and the dour outlook that Donald Trump presented in Las Vegas Wednesday night during the final campaign debate. With no specifics, he indicated that the economy was not producing enough jobs and that workers would be worse off in the future unless he is elected. But the data shows otherwise. The data also call into question two major claims. One is that raising income tax rates on those at the top leads to economic decline and, as Trump says, disaster. The other is that the Affordable Care Act would ruin the economy, destroy jobs and depress wages. The wage data show the opposite in both cases.
The wage growth in this century all came after top income tax rates were increased by Congress at the urging of President Obama, who kept tax rates for everyone but the top earners unchanged. That’s not to suggest higher taxes cause higher wages, but rather than decades of data show a relationship in which the median and average wage tend to rise in real terms when tax rates at the top go up and to flatten or fall when they go down, bringing into question the dogma that taxes are always and everywhere bad for the economy and incomes.
The wage growth accelerated after the Affordable Care Act was implemented in 2014. Opponents claimed it would be a job killer and would push down wages, but the hard data shows that in the last two years wage growth accelerated and jobs growth continued.
The nation has added 15.3 million private sector jobs in the past 79 months, according to monthly bureau of labor statistics reports. That unbroken record of increased jobs is better than Europe and Canada combined. Last year 160.8 million people had some paid work, the new wage report shows. That’s up 7.2 million from the 153.6 million workers in 2012 when taxes were lower and the Affordable Care Act had not yet taken effect.
Last year American workers earned $7.4 trillion, their aggregate pay up by $1 billion per day. That increase was all the money earned by the poorest paid 48 million workers. Its more money than the $330 billion earned by 7.8 million workers who made $40,000 to $45,000 each.
This is great news. Bigger incomes mean more spending and that means more jobs and a stronger economy. That should make us not worry, but rejoice.
Pulitzer Prize winner and recipient of an IRE medal and the George Polk Award, David Cay Johnston is author of five books. His new book, The Making of Donald Trump, was published on August 2, 2016. His next one will be The Prosperity Tax: A New Federal Tax Code for the 21st Century Economy. Johnston is a Distinguished Visiting Lecturer at Syracuse University College of Law and Whitman School of Management, and also writes for The Daily Beast and Tax Notes.