Erosion in Buying Power Extends Beyond Blue-Collar Jobs, says LISEP

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Ludwig Institute for Shared Economic Prosperity

Aug 24, 2023, 11:00 ET

Two-thirds of all professions – from food service to physicians – saw a decline over the last 20 years

WASHINGTON, Aug. 24, 2023 /PRNewswire/ -- It's not just a blue collar or low-wage job phenomenon: the majority of occupations in the U.S. saw a decline in buying power over the last 20 years when adjusted for the rising cost of basic necessities, according to a study released by the Ludwig Institute for Shared Economic Prosperity (LISEP).

The analysis included a review of median salary and wage levels for more than 60 professions in the U.S. from 2001 to 2021, adjusted based on LISEP's True Living Cost (TLC) Index. In contrast to the Consumer Price Index (CPI), the TLC is a measure of price changes of the minimum adequate needs required to maintain a basic standard of living, while the CPI is based on a diverse basket of more than 80,000 items. Many of these items – such as rental cars and hotel rooms – are of little or no relevance for most households. The TLC focuses on the basics: housing, food, healthcare, childcare, transportation, technology, and miscellaneous personal care and household items – the expenditures that consume nearly the entire budget of most American families.

For most observers, it may come as no surprise that, on the median, secondary school teachers and nurses have lost ground in terms of salaries over the period: adjusted for the rising cost of living, secondary school teachers lost about 13% of their income (roughy $9,000 in 2021 dollars) and nurses about 6% ($4,000 in 2021 dollars) during the period. But white collar professions were not immune. Accountants, engineers, architects, even doctors and lawyers, saw their effective buying power erode, some by up to 20% of their income, according to LISEP.

"It's important to note that the hit to buying power is not just a blue collar problem, it is not just a problem among low-wage earners – it's an issue for practically every household, from low-income to upper-middle income families," said LISEP Chairman Gene Ludwig.

Of the eight broad occupation categories analyzed – business and professional, construction and labor, education and social services, food service, healthcare, personal care, public safety, and retail and sales – all saw an overall decline in median real wages for individual professions, with the exception of healthcare, where seven of the 11 health-related job categories posted gains, led by podiatrists, who saw TLC-adjusted wages rise from $85,806 to $144,231 over the period.

Overall, an overwhelming majority of professions saw declines, according to LISEP. Occupations with the largest percentage drop include firefighters, with their adjusted wages falling about 12%, from $80,444 to $70,000, and dental assistants with a 16% drop, from $35,587 to $35,000. Those with the biggest gains are CEOs and legislators/public administration, jumping 56% from $77,316 to $120,150; dentists, with a 40% increase from $89,381 to $125,000; and podiatrists.

An obvious conclusion from the study, Ludwig said, is that the income gap is real and growing, has been growing for more than two decades, and practically no one is immune.

"We now see that even among professions that are considered high-paying and stable, households are losing buying power, and it has been progressing for more than two decades," Ludwig said. "It's no longer 'somebody else's problem.'"

A full interactive graph of LISEP's findings is available here, or at lisep.org/tlc.

About TLC
In announcing the debut of the True Living Cost (TLC) metric, LISEP issued the white paper "Determining More Accurate Living Cost for Median- and Lower-Income American Families" (abridged version here). TLC assesses a set of minimal adequate needs that a household requires to function: housing, medical care, transportation, food, childcare, technology, and miscellaneous (e.g., clothing, personal care, and household items) that takes into account household size (the eight household sizes range from one to two adults and zero to three children) and the relevant census region (Northeast, Midwest, South, and West). The TLC tracks change in price for minimal adequate needs over time.

As a comparison to the TLC, the Consumer Price Index (CPI) measures rising prices of a whole host of goods and services, many of which are not relevant for middle- and low-income Americans. The CPI remains a useful inflation metric rather than a cost-of-living metric due to the inclusion of items not relevant to one group or the other and by only including the urban population, among other issues.

About LISEP
The Ludwig Institute for Shared Economic Prosperity (LISEP) was created in 2019 by Ludwig and his wife, Dr. Carol Ludwig. The mission of LISEP is to improve the economic well-being of middle- and lower-income Americans through research and education. LISEP's original economic research includes new indicators for unemployment, earnings, and cost of living. These metrics aim to provide policymakers and the public with a more transparent view of the economic situation of all Americans, particularly low- and middle-income households, compared with misleading headline statistics.

About Gene Ludwig
In addition to his role as LISEP chair, Gene Ludwig is founder of the Promontory family of companies and Canapi LLC, a financial technology venture fund. He is the founder and CEO of Ludwig Advisors, which counsels financial firms on critical matters. Ludwig is the former vice chairman and senior control officer of Bankers Trust New York Corp. and served as the U.S. Comptroller of the Currency from 1993 to 1998. He is also author of the book The Vanishing American Dream, which investigates the economic challenges facing low- and middle-income Americans. On Twitter: @geneludwig.

SOURCE Ludwig Institute for Shared Economic Prosperity