Don’t look at wage data, look at consumption data. The ever-wise Arnold Kling summarizes some of the evidence. For instance in 1970 only 45 percent of all households had a dryer. As of 2001 45 percent of poor households had a dryer. Three-quarters of poor households had a microwave oven, again circa 2001.
Given these statistics, what explains the fact that, adjusted for inflation, the pay of the lowest-wage workers has not increased much over the past thirty years? There are a number of factors involved, but I suspect that the largest component of the explanation is a shift in the composition of the low-wage work force. In the 1970’s, many of the people at the bottom of the wage scale were heads of households. Today, many low-wage workers are providing second or third incomes to families.
The important point to bear in mind is that “the bottom fifth of the wage distribution” does not represent some permanent group of people. Instead, it signifies the earnings of workers who at that time have the lowest levels of skills and experience. My college-age daughters, doing temporary clerical work, are in the bottom fifth. But even if the income of the bottom fifth were to stagnate over the next twenty years, my daughters will earn higher incomes as they acquire valuable knowledge.
Read the whole thing, as they say.
Addendum: Here is another Kling post on productivity; it also has links to excellent pieces by DeLong and Postrel.