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Thanks to increased income tax rates since 1936, today's workers attempt to reduce taxes by converting
their earnings into other, non-taxable forms of income. Why use after-tax income to pay for medical care if you
can get it as an untaxed fringe benefit? Why pay for the full cost of lunch if the company can subsidize meals at
work? The proliferation of such "receipts in kind" has made it increasingly difficult to make meaningful com-
parisons of the distribution of income over time or of earnings in different social and occupational groups.
Comparing money wages over time thus offers only a partial view of what has happened to worker in-
comes. But what do the simple overall figures for earnings by the typical worker (before tax and ignoring "in
kind" allowances) show? By 1980 real earnings of American non-farm workers were about four times as great
as in 1900. Government taxes took away an increasing share of the worker's paycheck. What remained, how-
ever, helped transform the American standard of living. In 1900 only a handful earned enough to enjoy such
expensive luxuries as piped water, hot water, indoor toilets, electricity, and separate rooms for each child. But
by 1990 workers' earnings had made such items commonplace. Moreover, most Americans now have radios,
TVs, automobiles, and medical care that no millionaire in 1900 could possibly have obtained.
The fundamental cause of this increase in the standard of living was the increase in productivity. What
caused that increase? The tremendous changes in Korea, Hong Kong, and Singapore since World War II dem-
onstrate how tenuous is the connection between productivity and such factors as sitting in classrooms, natural
resources, previous history, or racial origins. Increased productivity depends more on national attitudes and on
free markets, in the United States as in Hong Kong and Singapore.
Output per hour worked in the United States, which already led the world in 1900, tripled from 1900 to
1990. Companies competed away much of that cost savings via lower prices, thus benefiting consumers.
(Nearly all of these consumers, of course, were in workers' families). Workers also benefited directly from
higher wages on the job.
The U.S. record for working conditions and real wages reveals impressive and significant advances, greater
than in many other nations. But the quest for still higher wages and for less effort and boredom shows no sign
of halting.
