Look to history, not headlines.

You’ve probably heard that inflation is on the rise, and you probably realize that your new paycheck might not be keeping up with inflation. For most Americans recent raises are falling behind increasing prices.

The headlines are full of announcements and analyses of the recent ups and downs of the economy. A few months ago headlines focused on wage increases. After that is was inflation. In the last few days it’s been the steady decline in stock market values.

But those headlines are only the latest drips and drags of a far more important story.

On the whole we are getting poorer, have been for decades.

Here’s the numbers:

According to the BLS, in the first quarter of 2022 wages increased by 4.9% from a year earlier, while the Consumer Price Index — the most common measure of inflation — rose by 8.0%. In other words, the cost of living increased by about twice as much as wages.

Even with that raise or good paying new job most Americans found themselves about three percent less buying power than a year earlier.

And prices are almost certainly going to continue their rise.

But wages won’t. Wages haven’t kept up with inflation for the last thirty years, and it’s unlikely they will in the near future. The recent increases we’ve seen are an anomaly.

But that’s only part of the picture.

Employers have been complaining about a lack of workers for several years, but only now are they increasing wages, but as we see, not by enough to outpace inflation.

In reality there are millions of people out of work who are sitting on the sidelines waiting for a chance to contribute to the economy. But we ignore them. We pretend they do not exist.

In 2017 Jessica Bruder wrote Nomadland, a bestselling book about economic migrants traveling the county in vans and RVs trying to cobble together a living, like something out of Grapes of Wrath. A movie based on the book and starring Frances McDormand won three Oscars in 2020.

The book and movie made a splash when they came out, but now it seems as if they never existed.

We seem to have forgotten about the millions of people without jobs, a future or hope. Instead we fixate on the recent media hype about a 3.5% unemployment rate; the people profiled in the book and movie didn’t just disappear. They are still searching for financial security and a chance to settle down.

It might come as a surprise, but there are simply not enough jobs to go around.

The portion of the population not in the labor force is higher than it has been for fifty years. Data from the Federal Reserve of St Louis shows that the proportion of the United States population outside the labor force is about the same now as it was in 1975, when the majority of women were housewives and had not yet entered the labor market.

Here is what that looks like in a graph:

Let that sink in for a moment.

In terms of how much of our population is active in the workforce we are now at about the same place as we were when our grandmothers were expected to stay home and take care of the kids. Back then an economy so wealthy it allowed a breadwinner to work one job and support a wife and three or four kids in a middle class lifestyle was normal.

The end of that economy should be the story the media creates breathless headlines about.

Something else the media overlooks is the trouble that college grads have in getting good jobs. In February of 2021 the Federal Reserve of New York pegged the unemployment rate for recent college grads at 4.8% and found that 41% of them had taken jobs that did not require a degree.

That does not sound like a booming job market. It sounds more like bright hardworking young people taking anything they can find.

So why are we hearing so much about an unemployment rate of 3.4% and a super tight job market?

It’s all in the way unemployment is calculated. It’s not that the government is lying — you’ve got to define and calculate unemployment in some way. The problem is that Bureau of Labor Statistics calculates unemployment as if it is still 1985.

Gig work, working from home and contingent employment are examples of how work has changed. These changes are not addressed by government statisticians, but they have made an incredible change in the way the labor market works.

The Ludwig Institute tracks what they call the “real unemployment rate”. Unlike the government definition of employment that includes even people who have no job, Ludwig’s definition of employed includes a full or part time job generating an income of at least $20,000 a year — enough to live, if not comfortably, at least to survive in near poverty. With this more stringent and pragmatic definition Ludwig calculates the unemployment rate at about 23% as of March 2022.

What we are experiencing is a continuation of a steady decrease in wealth creation that started with the end of the industrial economy. Our standard of living has been going down for decades and will likely continue.

In his comprehensive history of the US economy, The Rise and Fall of American Growth, economic historian Robert J Gordon identifies 1970 as the beginning of the decline of our standard of living.

It’s one thing to read Gordon’s explanation, and quite another to actually see it.

Plotting income and inflation since the mid 1970’s presents a dramatic picture of the gradual decline in our real wages. Even though annual median income steady increases, it is insufficient to outpace inflation.

What’s the solution?

We have to replace the incredible wealth creation engine of the Industrial Age.

Technology won’t save us, at least not in its present form.

We are doing little more than making 19th century technologies more efficient. Modern airliners use the same kind of wing to generate lift as the Wright Flyer at Kitty Hawk and the same turbo fan engines first tested during World War Two.

As much as we think of electric cars as a modern marvel we forget that the first electric cars were built in the 1880’s. Gas and diesel engines emerged at about the same time, but we still use them to power most of our cars, trucks and trains.

These technologies are vastly more efficient in the 21st century then when they were first invented, but they are still the technologies of more than a century ago.

Any solutions will likely from unexpected and unlikely sources, just as previous technologies did. Chemical combustion and electrical engines were other worldly to the average person of the 19th century, yet they formed the basis for the 20th century economy.

We need to be thinking about developing 22nd century technologies that our children and grandchildren can exploit to power their economy.

That economy might be based on towing asteroids into Earth — Lunar orbit and mining them for valuable raw materials.

Something that sounds even more far-fetched are the musings of physicists contemplating the propulsion technologies of the UAPs allegedly buzzing US aircraft carriers.

These kinds of paradigms are not likely to make an impact anytime soon, and we will be stuck with the economic realities of our times.

But then, virtually no cars were being mass produced in 1900, but only about twenty years later a collection of industries in oil production, petroleum refining, asphalt creation, coal and steel productions, and of course, auto manufacturing was in full swing. They catapulted the world into the greatest era of wealth creation civilization has ever seen.

History tells us that once these events reach a critical point they move very quickly.

Maybe we won’t have so long to wait after all.

Read more at VicNapier.com and my Medium.com page.

Links may lead to sites where the author has an affiliate relationship