Savings & Investment, Smart Spending

Gold Versus Wages: Americans Are Hurting

Those gold bugs can be annoying, I know. Even though it is clear that I am somewhat simpatico with their views, it is undeniably true that they can be a bit like ants at a picnic. For many, maybe even most people, the constant harping on gold (and silver) really is not a welcome opinion. After all, it doesn’t really help the average person’s portfolio and even if it did, there is a dooms day feel about the whole enterprise. For gold to really skyrocket after all, there needs to be something calamitous happening. This goes against human nature to root for, essentially destruction. It implies that any holdings in the dollar will turn nearly worthless and let’s face it, a lot more people have their savings in the dollar than they do precious metals, Bitcoin or the Yuan. But while the gold bulls can be annoying in the

short term, there is no denying their long term truths. And it is probably worse than you think.

Wages in America have been in a tough environment for years if not decades, and any comparison to hard metals really showcases this:

Today’s minimum wage employee works 12 percent longer to earn a gallon of milk compared to 1965, according to the Bureau of Labor Statistics. Today’s senior engineer works almost twice as long to buy a gallon of gasoline, according to the Department of Energy.

And of course, that is including all of the advances in production over the last 50 years that have brought costs down precipitously. Now, this study begins right after Johnson took our coinage off the silver standard. That can be looked at as sensible or awfully convenient. As many of you know, coins made before 1965 have actual, real silver in them. In fact a simple 1964 Washington quarter has nearly $4.00 worth of silver in it. That is correct, a genuine, U.S. Mint issued quarter can buy a gallon of gas, even with all of those taxes added over the years. Because of that some may say it is a bit unfair to compare wages from 1965 to today, in that it puts a thumb on the scale. That may be true, but the fact is people that were working prior to 1965 (and after as the silver coinage was readily available for years) were paid in money that was easily transferred into genuine U.S. silver money.

Whatever your feelings on the matter, the results are jaw-dropping. Today’s wage earner is way behind that 1964 worker in every category:

The bottom line is that, in terms of gold, wages have fallen by about 87 percent. To get a stronger sense of what that means, consider that back in 1965, the minimum wage was 71 ounces of gold per year. In 2011, the senior engineer earned the equivalent of 63 ounces in gold. So, measured in gold, we see that senior engineers now earn less than what unskilled laborers earned back in 1965.

That’s right: today’s highly skilled professional is making less in real, comparative terms than yesterday’s unskilled worker.

Whoa. And keep in mind, this is being written after gold has tumbled about 40% (although still up from the 2008 bailouts). A senior engineer in their example is paid less in gold today than a minimum wage earner in 1965. It can be argued with some justification that it is unfair to compare wages to gold and that a dollar to dollar comparison is more useful. That is undeniably true to some extent, but it is also true that gold is a useful proxy of buying power. In other words, it can show the effects of long term inflation much more accurately than can a dollar comparison. And to be fair, any “hard asset” will probably show similar results. So, for example, if you substituted homes for gold, the inflation would be keenly obvious as well.

Those gold bugs may get under your skin, but there is no arguing that they have long term facts on their side. Now, in the near term…well, that remains to be seen.