Schafer: Despite recovery, stagnant wages are here to stay

Everyone knows recessions are always followed by recoveries, when economic growth resumes and people get called back to work. Hard times don't last.

Except not this time. At least, not this time for most Americans.

Whatever optimism I had about any gathering economic strength bringing benefits broadly to the middle class collapsed under the weight of a file full of sobering new research, all getting to the same conclusion: Declining inflation-adjusted wages for a broad swath of the workforce is a long-term, structural problem that an economic recovery won't fix.

So the hard times for most haven't ended. And the end isn't in sight.

This distinction between the normal ups and downs of the business cycle and structural change in the economy is an important one to make, because even when leaders in government dither during a normal downturn the economy sooner or later starts to expand, carrying incomes and employment along with it.

The policy choices to address long-term structural problems are more difficult. What is clear is that simply waiting isn't a good option.

Not all of the recent papers discuss potential solutions, but are all pretty clear on the extent of the problem.

Then there were the sobering conclusions of the Federal Reserve's regular survey of consumer finances that came out just after Labor Day.

The Fed's work showed that median incomes increased from 2010 to 2013 for the top 10 percent of families. But inflation-adjusted incomes fell for every other group.

The story is about declining wages, falling from 68.1 percent of total income in 2010 to 62.4 percent in 2013. More of our income in 2013 came from things like social security payments and particularly capital gains. Of course, workers at the lower end of the pay range don't usually have stock portfolios with big gains that can be realized.

One of the most interesting new reports came with a title that give away the ending. A Harvard Business School alumni survey out early last week was called "An economy doing half its job."

The authors concluded that a healthy economy isn't one that just works for the officers and managers of corporations — the very people being surveyed — without providing prosperity and security for everybody else.

The Harvard report covered a lot of other ground, too, but one striking thing the authors noted was that the low-wage industries with a lot of the job gains since the Great Recession were local in their structure. That meant no one could blame the low wages on foreign competition.

Looking for more? Well, there was a great presentation put together by an economist at the Federal Reserve Bank of St. Louis that circulated this past summer.

One of his simple slides showed that the wage premium for having a college degree is growing, which at first glance seems great for those who borrow a lot to pay college tuition.

But in looking at his chart, college grads were barely earning any more, once adjusted for inflation, than they were back in 1991.

It turned out that the only reason the wage premium for a college degree has been growing is that everybody who doesn't have one has been doing so much worse. Inflation-adjusted wages for that group have rolled off the table.

This may all sound like the experts had to have been wrong and the recession must not have ever ended, but there's no reason to repeat that economic heresy. We did, in fact, just have a full business cycle.

The Great Recession ended in June 2009, making it the longest economic contraction since World War II. It was the deepest, too, as from the peak in 2007 to the trough two years later the economy shed about 6 percent of its nonfarm jobs.

But when the jobs came back, it was not the same as before.

A colleague just reported that in Minnesota the total jobs number got back to prerecession levels a year ago, but industries that pay wages between $45,000 and $70,000 per year, what most consider middle-income jobs, eliminated more than 30,000 jobs in the state these past five years. The new jobs that have been created haven't paid nearly as well, in low-wage industries such as home health care.

So it should come comes as no surprise that a survey released a couple of weeks ago by Rutgers University carried the title "Unhappy, Worried, and Pessimistic: Americans in the Aftermath of the Great Recession."

"The belief that the economic downturn created irreversible shifts in the economy grew from 49 percent in November 2009 to 56 percent in September 2010," the authors wrote. "Now, 71 percent of Americans think the economy has changed permanently, which represents a broad consensus."

This is just a survey of regular folks, not economists. And we humans, all of us, are notoriously unreliable in our conclusions about the state of affairs. Our thinking is riddled with biases.

But what's been happening in our economy, well, this one is just too obvious for us to have misjudged.