What happened in 1971?

There's a fair amount of evidence linking wage stagnation over the last 50 years to erosion of collective bargaining and union membership. Unless there are very strong incentives companies are not going to pay employees more than they need to. Employees as a group have a lot of bargaining power, but as individuals, very little. Unless you happen to worn in a highly skilled, and high demand occupation, which are exactly the jobs that have seen wages remain comparatively high.

The short answer is that corporate lobbying exploded starting in the early 70's.

This is a deep and complex topic but the TL;DR is: money talks and this was the moment in US history where the people with the money were allowed direct access to the lawmaking process in congress. For the first time in history lobbyists were allowed to sit in congressional committee meetings and not just wait in the hallway outside. From that point on, corporate America has had more 'representatives' in congress than US citizens do.

And businesses only care about profits, and the single biggest expense most businesses have is labor. Decreased labor cost = more profits. So one of the first things that happened is wages stopped growing.

There is so much to talk about here including how and why it happened, who caused it (spoiler: Nixon is a recurring character), and what other impacts it had (too many to list).

This website does a great job of laying out the argument and providing citations: congressionalresearch.org. There are also some very helpful charts that really drive home the impact the increase in lobbying has had.

If you're interested in this sort of thing I also recommend reading about The Powell Memorandum, 1971 which is basically the blueprint for modern capitalism and advocates specifically for increased corporate lobbying. Fun fact: It is also considered by some to be a forerunner to Project 2025.

There are a lot of other good points being brought up like decreased union membership but I would argue that increased lobbying is the root cause and all other explanations are symptoms.

For anyone who hasn't seen it: wtfhappenedin1971.com

The gold standard was the only thing ensuring the dollar didn't lose all its value. Poor people hold dollars while rich people knew about this. This is how we got here with that much inequality

Don't forget the computer revolution.

You know how you can right click on a doc and select copy or save? That used to be two whole jobs.

I know people always choose Hitler if they could go back in time and kill. Someone, but tbh I would choose Nixon, if I remember correctly, most of our problems we have in the US are directly related to him and his fucking over America for corporate greed.

I think they all played a role, but it was Nixon's neoliberalism that prevented the trend from correcting.

No sources from me, only uneducated guesswork.

Two events of 1971 stand out to me, as I knew of them beforehand:

• My brother was born. Not relevant to the question at hand (I hope), I just wanted to mention it.
• The oil crisis.

The latter strikes me as probably a big factor. The world was basically using oil for everything (Even more so than now), and an oil shortage (or fear thereof) is likely to send a drastic shock to the system. Manufacturing, logistics, energy, EVERYTHING becomes more expensive, resulting in having to do more with less.

Shortly after the (percieved) shortage, there was an oil glut and overcorrection. I'm not clever enough to say what effect this would have in exact terms, but I highly doubt that an already turbulent world economy did well because of it.

No sources from me but speculation. It's the decade before, the 60's where focus was on people, freedom, honest compensation for labor and social equality.

I know I will get push-back on this, it being perhaps to simple of a theory or me missing key elements. I will die on this hill though, it was the hippies.
The conservatives around the world got a collective heart attack from the 60's and what transpired therein and this is when conservatism started to plan on breaking those wild communist activist freeloaders. We can see the effects today still. Mismanagement from the 'left' (or better yet, the world at large tbh) to capitalize on the spirit of the 60' and truly change society. The focus on business and the suppression of those pesky 'hippies' and/or 'communists' started to gain traction and voila, there is the divide of the two lines somewhere in the 70's.

For good measure, I have nothing against the 60' and hippies, just pointing to these as a 'shock to the system' as an explanation for what happened in the 70's and what we see today.

From ChatGPT:

Ending the Bretton Woods system in 1971 had a cascading effect on corporate profits and income distribution. Wealth shifting toward shareholders and executives rather than workers:

1. Deregulation of Money and Credit

Once the dollar was no longer tied to gold, the U.S. government and Federal Reserve had more flexibility in managing the money supply. This led to:

• Higher inflation, which eroded workers’ real wages.

• Easier access to credit, fueling corporate financialization (more focus on stock buybacks, mergers, and financial engineering instead of wage growth).

2. Rise of Shareholder Capitalism

With the shift away from the gold standard, corporate governance changed. Instead of focusing on long-term growth and worker stability, companies prioritized maximizing shareholder value, which became a dominant ideology by the 1980s (reinforced by Milton Friedman’s theories).

• Stock Buybacks & Dividends – Companies increasingly used profits to buy back shares, boosting stock prices and benefiting executives/shareholders.

• Executive Compensation in Stocks – CEO pay shifted from salaries to stock options, aligning their interests with shareholders rather than employees.

3. Decline in Labor’s Bargaining Power

As globalization and automation accelerated, companies could move production abroad, weakening the leverage of American workers. Meanwhile:

• Unions declined, further reducing workers’ ability to demand wage increases.

• Deregulation in industries like finance, airlines, and trucking shifted power away from labor and toward corporate management.

4. Explosion of Financialization

The detachment from gold allowed an unrestricted credit boom, fueling speculative bubbles and making the financial sector more dominant. Instead of reinvesting profits into worker wages or capital expansion, firms:

• Focused on financial activities (derivatives, leveraged buyouts, etc.), which benefited investors rather than workers.

• Moved toward short-term profits, cutting costs via outsourcing and automation.

End Result

With productivity still rising but wages stagnating, the gains went disproportionately to executives and shareholders. This is why, after 1971, you see charts showing a widening gap between worker pay and corporate profits.

The first oil crisis was in 1973, which is roughly what the graph suggests.

In 1971 the oil-fuelled postwar party was still in full swing.

Anyone knows where to find data for European countries or the EU?

It's been a ling time that we should be able to work less and have more freedom IMO but I'd love having it backed up by raw numbers like this.

confused by exactly how badly the people there were going at each others throats in the comments

I'm reading that thread and I don't see anyone being aggressive.

someone there also mentioned Nixonland which actually is a good book to understand the circumstances of era

inflation basically