We tend to reduce these arguments to their simplest elements. It's 'living wage' versus 'global competitiveness.' Slogans, really, because there is little actual discussion anymore. We shout at each other, understanding that no one on the other side is listening, or even interested in listening.
This is because the debate is shrouded in emotion, camouflaged with a thin veneer of data, only serving to inflame the other side which can produce reams of counter-data all its own.
The problem is that the economic impact is real, although not usually for the people most impassioned, especially those on the competitiveness/austerity side, who are generally well-insulated from the cold draft and well-compensated for their effort.
The question is what we, as a society are willing to do about this. As the following article explains, the evidence is overwhelming. Vast seas of statistics that threaten to swamp the ship of state as well as the people desperately hoping it stays afloat. The concept of reversion to the mean tells us that this cycle of stagnation will have to end - at some point. The weight of the data will permit no other outcome. The only issue is whether we, as a polity, are interested in having a hand in shaping that outcome - or taking our
laissez faire inclinations to their inevitable conclusion - and just letting it happen to us. JL
Lawrence Mishel and Heidi Shierholz report in the Economic Policy Institute:
The weak wage growth since 1979 for all but those with the highest wages is the
result of intentional policy decisions—including globalization, deregulation,
weaker unions, and lower labor standards such as a weaker minimum wage—that have
undercut job quality for low- and middle-wage workers.
The nation’s economic discourse has
finally shifted from talk of “grand bargain” budget deals to a focus on
addressing the economic challenges of the middle class and those aspiring to
join the middle class. Growing the economy from the “middle out” has become the
new frame for discussing economic policy. This is long overdue; in our view, an
economy that does not provide shared prosperity is, by definition, a poorly
performing one. Further, such an economy will not provide sustainable growth
without relying on consumption fueled by asset bubbles and escalating household
debt. The collapse of the housing bubble and the ensuing Great Recession have
laid bare the consequences of this model of unbalanced growth.
The revived discussion of strengthening the middle class, however, has so far
failed to drill down to the central problem: The wage and benefit growth of the
vast majority, including white-collar and blue-collar workers and those with and
without a college degree, has stagnated, as the fruits of overall growth have
accrued disproportionately to the richest households. The wage-setting mechanism
has been broken for a generation but has particularly faltered in the last 10
years, once the robust wage growth of the late 1990s subsided. Corporate
profits, on the other hand, are at historic highs. Income growth has been
captured by those in the top 1 percent, driven by high profitability and by the
tremendous wage growth among executives and in the finance sector (for more on
wage and income growth among the top 1 percent, see Bivens and
Mishel 2013).
President Obama’s July 24 speech in Galesburg, Ill., marking the kickoff of
the White House’s “A Better Bargain for the Middle Class” initiative,
illustrates both the best of this recent focus on the middle class and the
failure to adequately acknowledge and address the economy’s failure to broadly
raise wages. The president appropriately looked back in time, noting:
In the period after World War II, a growing middle
class was the engine of our prosperity. Whether you owned a company, swept its
floors, or worked anywhere in between, this country offered you a basic
bargain—a sense that your hard work would be rewarded with fair wages and
benefits, the chance to buy a home, to save for retirement, and, above all, to
hand down a better life for your kids.
And he correctly identified what broke down:
But over time, that engine began to stall. That
bargain began to fray. . . . The link between higher productivity and people’s
wages and salaries was severed—the income of the top 1 percent nearly quadrupled
from 1979 to 2007, while the typical family’s barely budged.
However, when it came to strengthening the middle class, the president was
too optimistic. Aside from advocating an increase in the minimum wage, the
president overlooked what it will take to solve the wage problem, saying:
With new American revolutions in energy,
technology, manufacturing, and health care, we are actually poised to reverse
the forces that have battered the middle class for so long, and rebuild an
economy where everyone who works hard can get ahead.
Innovations in energy, technology, manufacturing, and health care are
undoubtedly important. However, in and of themselves, they will not reestablish
the broad-based wage growth and improved job quality needed to generate and
sustain middle-class income growth. Nor will they, on their own, permit access
to a rising middle class for those now left behind.
EPI’s The State of Working
America, 12th Edition (Mishel et al. 2012) provides a comprehensive
assessment of recent decades’ wage and benefits trends and an extensive analysis
of the causes of wage stagnation and wage inequality. In this paper we document
the economy’s continuing failure to provide real wage gains for most workers. We
track wage trends (and, where possible, compensation trends, which include not
just wages but also fringe benefits such as health care and pensions) using both
employer-based and household-based survey data. We focus primarily on trends
since 2007, the year the Great Recession began. We generally examine
year-over-year trends using calendar years, though to assess the most recent
trends we also include year-over-year trends using just the first half of each
year. We also discuss these trends in the context of patterns since 2000, as the
2000–2007 business cycle—and especially the recovery years of that business
cycle, 2002–2007—were characterized by dismal wage growth. In some cases we
provide data going back to 1979, as most workers have experienced weak wage
growth for more than three decades.
This paper’s key findings include:
- According to every major data source, the vast majority of U.S.
workers—including white-collar and blue-collar workers and those with and
without a college degree—have endured more than a decade of wage stagnation.
Wage growth has significantly underperformed productivity growth regardless of
occupation, gender, race/ethnicity, or education level.
- During the Great Recession and its aftermath (i.e., between 2007 and 2012),
wages fell for the entire bottom 70 percent of the wage distribution, despite
productivity growth of 7.7 percent.
- Weak wage growth predates the Great Recession. Between 2000 and 2007, the
median worker saw wage growth of just 2.6 percent, despite productivity growth
of 16.0 percent, while the 20th percentile worker saw wage growth of just 1.0
percent and the 80th percentile worker saw wage growth of just 4.6 percent.
- The weak wage growth over 2000–2007, combined with the wage losses for most
workers from 2007 to 2012, mean that between 2000 and 2012, wages were flat or
declined for the entire bottom 60 percent of the wage distribution (despite
productivity growing by nearly 25 percent over this period).
- Wage growth in the very early part of the 2000–2012 period, between 2000 and
2002, was still being bolstered by momentum from the strong wage growth of the
late 1990s. Between 2002 and 2012, wages were stagnant or declined for the
entire bottom 70 percent of the wage distribution. In other words, the vast
majority of wage earners have already experienced a lost decade, one where real
wages were either flat or in decline.
- This lost decade for wages comes on the heels of decades of inadequate wage
growth. For virtually the entire period since 1979 (with the one exception being
the strong wage growth of the late 1990s), wage growth for most workers has been
weak. The median worker saw an increase of just 5.0 percent between 1979 and
2012, despite productivity growth of 74.5 percent—while the 20th percentile
worker saw wage erosion of 0.4 percent and the 80th percentile worker saw
wage growth of just 17.5 percent.
Trends in average hourly wages and compensation in
employer-based surveys
We first look at wage and compensation trends using data drawn from the
available surveys of employers, sometimes referred to as establishment
data. All of the establishment-based series that provide up-to-date national
measures of wage and/or compensation trends are presented in Table 1.
It should be noted that the wage and compensation data in this table are
averages, which are all that are available in the establishment
data. Averages can be misleading when data are heavily “skewed” at one
end. This happens to be the case for U.S. wages and compensation; those at the
top have extremely high earnings, thereby pulling up the average. Thus, the
average is actually not an accurate measure of the typical worker’s earnings.
Later, when we turn to an examination of household data, we are able to look at
medians, which are a direct measure of the earnings of the typical worker (i.e.,
the person in the middle of the distribution). The data demonstrate,
however, that across all of the available establishment-based measures, even
average wages and compensation have grown anemically, if at all, for more than a
decade.
Overall trends during the Great Recession and its aftermath
During the Great Recession and its aftermath
(i.e., between 2007 and 2012), economy-wide productivity grew 7.7 percent. Table
1 shows that across all available measures, wage and compensation growth lagged
far behind productivity. Compensation grew 0.9 percent as measured by the Labor
Productivity and Costs (LPC) program, was flat (grew 0.0 percent) as measured by
the Employment Cost Index (ECI), and fell 0.6 percent as measured by the
Employer Costs for Employee Compensation (ECEC) program. In the ECI, wage growth was even weaker than
compensation growth, declining 0.7 percent, and in the ECEC, the drop in wages
matched the drop in compensation, declining 0.6 percent. As for the Current
Establishment Survey (CES), which is the survey used to track payroll job growth
each month, there are two measures of wage growth available: one for all
private-sector workers and one for private-sector “production and nonsupervisory
workers” (who comprise 82 percent of private-sector payroll employment,
excluding typically higher-paid managers and supervisors). Average hourly wages
of all private-sector workers and of production and nonsupervisory workers
increased modestly between 2007 and 2012, by 1.2 percent and 2.4 percent,
respectively.
The most recent data, covering in most cases changes between the first half
of 2012 and the first half of 2013 (the last line of data in Table 1), show that
wage and compensation growth remains bleak. Compensation as measured by the LPC
program fell 0.3 percent, whereas it grew 0.3 percent according to the ECI and
dropped 0.6 percent according to the ECEC. Wages grew 0.3 percent as measured by
the ECI, dropped 0.7 percent as measured by the ECEC, and increased only 0.5
percent and 0.3 percent for all private-sector workers and for production and
nonsupervisory workers, respectively, in the CES. In short, this is what wage
and compensation stagnation looks like.
However, these latest data were largely an
improvement from the prior year’s data (2011–2012), which show wages and
compensation declining according to every measure. Unfortunately, it is unlikely
that the acceleration in wages and compensation over the past year will
continue. First, much of this acceleration of real wage growth was due
to a drop in inflation between the two periods (from 2.3 percent to 1.5 percent,
as shown in Table 1). This means there was little acceleration in nominal wage growth over
this period. Additionally, a substantial part of the slowdown in inflation was
due to a slowdown in the prices of food and energy, which are volatile from year
to year. These prices are likely to bounce back, pulling down
the growth of real wages moving forward (though core inflation, which excludes
the volatile food and energy items, is expected to remain subdued due to the
weak economy). Furthermore, with continued high unemployment, wage growth is
unlikely to accelerate much in the next few years. With so few outside job
opportunities, employers simply do not have to offer strong wage increases to
get and keep the workers they need.
Overall trends since 2000
Another key point that Table 1 demonstrates is that wage and compensation
growth was weak even before the Great Recession began. Between 2000 and 2007,
the last full business cycle before the start of the Great Recession,
productivity grew 16.0 percent. However, compensation grew by just 9.4 percent
over this period as measured by the LCP program, by only 5.5 percent in the ECI,
and by just 7.2 percent in the ECEC. Wages grew just 2.4 percent as measured by
the ECI, 5.0 percent as measured by the ECEC, and 3.3 percent for production and
nonsupervisory workers in the CES.
The weak wage and compensation growth in the 2000–2007 business cycle,
combined with the even weaker growth in the Great Recession and its aftermath,
mean that average wage and compensation growth was far outpaced by productivity
growth between 2000 and 2012. Furthermore, wage and compensation growth in the
first few years of this period was still being buoyed by the momentum of the
strong wage and compensation growth of the late 1990s. Figure A shows
year-by-year productivity growth along with compensation growth as measured by
the ECI and the ECEC since 2000. It shows that there has been no sustained
growth in average compensation since 2004. The stagnation began even earlier, in
2003, when considering wages alone. Since 2003, wages as measured by both the
ECI and the ECEC (not shown) have not grown at all—a lost decade for wages.
Trends in average private-sector compensation by occupation
We turn now to an investigation of private-sector compensation and wage
growth by occupation, using data drawn from the Employment Cost Index (ECI),
whose aggregate trends were discussed in the previous sections. We focus this
discussion on Table 2, which provides trends in total private-sector
compensation over 2001–2013 (for reference, Table 3 provides information
on private-sector wages alone over this same period). The key difference between
trends in compensation and wages that these tables reveal is that while both
have grown very slowly across all occupational categories over this period,
wages have grown more slowly. For example, between 2001 and 2012, while
productivity grew 22.2 percent, compensation grew 4.2 percent (as shown in Table
2) and wages grew 0.8 percent (as shown in Table 3). (Note that ECI data by
occupation are only available since 2001.)
Between 2007 and 2012, compensation for all private-sector occupations
combined was unchanged (0.0 percent growth, as shown in Table 2), despite
productivity growth of 7.7 percent. Stagnant compensation was not restricted to
certain types of jobs, but was instead the norm in white-collar, blue-collar,
and service jobs, with little variation among occupational categories. Among
white-collar occupations, compensation remained unchanged for managers and
professionals, while it declined 2.2 percent for sales jobs (which include
retail sales jobs but also stock and real estate brokers, and insurance and
travel agents) and increased 1.0 percent for office and administrative jobs.
Among blue-collar occupations, compensation remained unchanged for construction
and natural resources jobs, while it grew 1.0 percent for installation and
maintenance jobs and increased 0.6 percent for production and transportation
jobs. In service jobs, compensation declined by 0.4 percent.
Over the last year, from the first half of 2012 to the first half of 2013,
compensation among all occupations combined grew just 0.3 percent, partially
reversing the 0.4 percent decline from the first half of 2011 to the first half
of 2012. Across occupational categories there was little variation (ranging from
growth of 0.1 percent over the last year in construction and service occupations
to a 0.6 percent increase in installation and maintenance). However, this modest
acceleration in real compensation stems partly from a deceleration of inflation
that is unlikely to continue.
Another trend Table 2 highlights is that weak compensation growth across
occupational categories did not begin with the Great Recession. Between 2001 and
2007, when productivity grew 13.5 percent (not shown), overall compensation grew
only 4.2 percent. In this period, too, stagnant compensation was the norm across
all occupations, with compensation growth ranging from 2.5 percent in service
jobs and in production and transportation jobs to 5.9 percent in construction
and natural resources jobs. Combining these two periods reveals that in the
11-year period from 2001 to 2012, during which productivity grew 22.2 percent,
compensation grew just 4.2 percent overall, with weak growth in all occupational
categories. Furthermore, compensation in the first part of this period was still
buoyed by the momentum from the strong labor markets of the late 1990s. Once
that faded, there was very little compensation growth. Since 2004, compensation
has not increased in most occupational categories, as shown in Figure B.
The stagnation began even earlier, in 2003, when examining wages alone; since
the fourth quarter of 2003, wages have declined overall and in all major
occupational categories (not shown).
Trends in wages in household-based surveys
The remaining sections turn to an examination of wages using the Current
Population Survey, which collects data on wages from households each month (and
also, for example, provides the monthly unemployment rate). These data are based
on information from the workers themselves, as opposed to employers. One
advantage of such data is that they permit us to look at not just average growth
rates, but also at the wage growth of workers at various points in the wage
distribution (i.e., we are able to track wage growth for low earners,
middle-range earners, and high earners). In later sections, we also use these
data to look at wage growth for different demographic breakdowns, including
breakdowns by gender, education, and race/ethnicity.
Average hourly wages across the wage distribution
Table 4 shows wage growth at various wage percentiles. (If the
workforce were ranked from the lowest wage earner to the highest wage earner,
the 10th percentile wage is the wage level of the person who makes more than 10
percent of the workforce and less than 90 percent of the workforce, the 20th
percentile wage is the wage level of the person who makes more than 20 percent
of the workforce and less than 80 percent of the workforce, etc.)
During the Great Recession and its aftermath (i.e., between 2007 and 2012),
wages fell for the entire bottom 70 percent of the wage distribution, despite
productivity growth of 7.7 percent. The losses tended to be larger further down
the wage distribution; wages at the 80th percentile were essentially flat
(increasing by 0.2 percent), the median (50th percentile) worker saw a decline
of 2.6 percent, and the 20th percentile worker saw a decline of 5.5 percent over
this period. This is typical; high unemployment hurts wage growth across the
wage distribution, but its impact is more negative further down the wage
distribution (see Mishel et al. 2012, 242–246).
The first two years of the recovery, 2009–2011, were particularly bleak years
for wage growth, with losses across the board. There was also wage erosion for
almost the entire bottom 80 percent of wage earners for the last full-year
comparison available, 2011–2012. The most recent data show some modest
improvement: From the first half of 2012 to the first half of 2013, the 80th
percentile worker saw an increase of 1.0 percent, the median worker saw an
increase of 0.9 percent, and the 20th percentile worker saw a decline of “just”
0.4 percent. However, most of the improvement in real wage growth was due to
particularly subdued inflation over the last year (1.5 percent, down from 2.3
percent, as shown in Table 1), meaning there has not been much acceleration in
nominal wage growth. With continued high unemployment, wage growth is
unlikely to accelerate much in the next few years. As mentioned previously, with
few outside job opportunities, employers do not have to offer substantial wage
increases to get and keep the workers they need.
Another important point that Table 4 highlights is that weak wage growth for
most workers was not a new phenomenon emerging in the recessionary years since
2007. Between 2000 and 2007, the median worker saw wage growth of just 2.6
percent, despite productivity growth of 16.0 percent, while the 20th percentile
worker saw wage growth of just 1.0 percent and the 80th percentile worker saw
wage growth of just 4.6 percent. The weak wage growth over 2000–2007, combined
with the wage losses for most workers from 2007 to 2012, mean that between 2000
and 2012, wages were flat or declined for the entire bottom 60 percent of the
wage distribution (despite productivity growing by nearly 25 percent over this
period). Furthermore, wage growth in the very early part of this period, between
2000 and 2002, was still being bolstered by momentum from the strong wage growth
of the late 1990s. Figure C shows that between 2002 and 2012, wages were
stagnant or declined for the entire bottom 70 percent of the wage distribution.
In other words, the vast majority of wage earners have already experienced a
lost decade, one where real wages were either flat or in decline.
Finally, Table 4 also highlights that for virtually the entire period since
1979 (with the one exception being the strong wage growth of the late 1990s, not
shown), wage growth for most workers has been weak. The median worker saw an
increase of just 5.0 percent between 1979 and 2012, despite productivity growth
of 74.5 percent, while the 20th percentile worker saw wage erosion of 0.4
percent and the 80th percentile worker saw wage growth of just 17.5 percent.
Average hourly wages by gender and education
We now turn to an examination of wage trends for various demographic
groups; Table 5 shows average hourly wages by education and gender. Between 2007 and 2012, only workers with an advanced
degree (who were just 11.4 percent of the workforce in 2012) have seen any wage
growth—wages declined for all other education groups, from high school dropouts
to those with a bachelor’s degree. Male workers with a bachelor’s degree saw a
decline of 0.7 percent over this period, and those with a high school degree saw
a decline of 3.5 percent. In comparison, female workers with a bachelor’s degree
saw a decline of 1.6 percent, and those with a high school degree saw a decline
of 2.7 percent.
Wage growth was particularly weak from 2009 to 2011, the first two years of
the recovery, with losses across the board—even for those with an advanced
degree. The most recent data show some improvement for some groups. From the
first half of 2012 to the first half of 2013, workers with a college degree or
more have seen some growth (1.2 percent for those with a bachelor’s degree and
0.2 percent for those with an advanced degree), but those with a high school
degree or less continued to see losses (-0.7 percent).
The wage losses for workers at most education levels between 2007 and 2012
came on the heels of a business cycle from 2000 to 2007 characterized by weak
wage growth across the education spectrum. Workers with a college degree saw
wage growth of just 2.4 percent between 2000 and 2007, despite productivity
growth of 16.0 percent over this period. Wage growth for workers with a high
school degree was even lower, at 1.3 percent. Combining the two periods
(2000–2007 and 2007–2012) reveals that though productivity grew by 24.9 percent
between 2000 and 2012, the wages of workers with a college degree increased by
only 1.0 percent, while the wages of those with a high school degree fell by 1.6
percent.
Furthermore, as mentioned previously, wage growth in the early part of this
period was spurred by the remaining momentum from the strong wage growth of the
late 1990s. As can be seen in Figure D, wages of workers with a
bachelor’s degree were lower in 2012 than in 2002, 10 years earlier. Real
wage gains have eluded the vast majority over the last 10 years, including those
with college degrees. This has even been true for those in science, technology,
engineering, and mathematics occupations (see Figure K of Salzman,
Kuehn, and Lowell 2013) and for those in business occupations (see Table
4.45 of Mishel et al. 2012).
The college wage premium, presented in Figure E, is the wage gap
between (four-year) college graduates and high school graduates. It shows the
percent by which the wages of college graduates exceed those of “otherwise
equivalent” high school graduates (“otherwise equivalent” means that the premium
is calculated using a regression analysis that controls for differences in
factors such as age, marital status, race, ethnicity, and region of residence).
The college wage premium for both men and women grew strongly in the 1980s,
increasing 13.8 percentage points for men and 15.0 percentage points for women
between 1979 and 1989. In other words, over this period the wages of those with
a college degree were rapidly pulling away from the wages of those with just a
high school degree. The growth rate slowed dramatically in the 1990s, however,
with the college wage premium growing 8.0 percentage points for men and 7.9
percentage points for women between 1989 and 2000 (with most of the growth for
women occurring in the first half of the decade, and most of the growth for men
occurring in the second half). The growth rate slowed even further in the 2000s,
with the college wage premium growing just 4.1 percentage points for men between
2000 and 2012 and growing less than a percentage point for women. Figure E
underscores that while workers with a college degree earn higher wages than
otherwise similar workers with just a high school degree, the era of the rapidly
rising college wage premium is behind us—and this has been true for more than a
decade.
Median weekly earnings of full-time workers by gender, race,
and ethnicity
We now turn to wage trends by gender and race/ethnicity. The best data series
for this analysis is the Bureau of Labor Statistics series on the median
weekly earnings of full-time workers (as opposed to the hourly earnings
of both full- and part-time workers combined, which have until this point been
the focus of this paper). Theoretically, weekly earnings combine the impact of
both changes in the growth in hourly wages and changes in hours worked per week,
and therefore provide a clearer sense of what is occurring with workers’
paychecks. However, because the data are restricted to full-time workers (people
who work 35 hours per week or more), the effect of changing hours on paychecks
will not be a major factor in this analysis.
Table 6 shows median weekly earnings of full-time workers by race,
ethnicity, and gender, both for employed people of working age (age 16 and over)
and “prime-age” (age 25–54) workers, the latter range capturing the ages of
highest labor force participation in the U.S. labor market.
Between 2007 and 2012, median weekly earnings of full-time workers overall
were essentially flat—declining by 0.2 percent from $770 to $768—despite
productivity growing by 7.7 percent over this period. Some of that lack of
growth was due to more job loss among men, who have higher wages on average.
However, looking by gender we still find weekly wage growth of full-time workers
far outstripped by productivity growth. For full-time men, weekly wages grew 0.7
percent over this period. White men saw a 0.7 percent increase from $873 to
$879; black men saw virtually no change, increasing from $664 to $665; and the
earnings of Hispanic men increased 2.8 percent, from $576 to $592. For full-time
women, weekly wages grew 1.6 percent over this period. White women saw an
increase of 2.4 percent, from $693 to $710; black women saw a 1.5 percent
increase, from $590 to $599; and Hispanic women saw a 0.5 percent decline, from
$524 to $521. Full-time prime-age (age 25–54) men and women fared worse than the
larger population of working-age men and women; prime-age men saw a 0.7 percent
decline over this period, while prime-age women saw a 0.8 percent increase.
Most recently, from the first half of 2012 to the first half of 2013, wages
declined virtually across the board, with the exceptions being for white and
Hispanic women, who saw modest increases (0.4 percent and 1.3 percent,
respectively, both helping to offset declines in the prior year). Overall,
median weekly earnings of full-time workers declined by 1.0 percent over the
last year. For prime-age men they declined by 1.1 percent, and for prime-age
women they declined by 0.2 percent. The poor performance over the last year of
weekly wage growth for full-time workers—particularly that of full-time,
prime-age men—stands in contrast to the somewhat stronger growth over the last
year in real hourly wages of full- and part-time workers combined discussed
earlier in the paper.
Again it is important to note that the poor wage performance during the Great
Recession and its aftermath came on the heels of a very weak business cycle from
2000 to 2007. The median weekly wage of full-time workers increased by just 0.2
percent between 2000 and 2007, though productivity grew 16.0 percent over this
period. Men fared worse than women in terms of wage growth over this
period; male full-time workers saw a weekly wage decline of 0.7 percent between
2000 and 2007, while the weekly wages of female full-time workers increased by
3.4 percent. Looking at the whole 12-year span from 2000 to 2012, when
productivity grew by nearly 25 percent, we find that the weekly wages of
full-time male workers were stagnant, dropping by 0.1 percent from $855 to $854,
while the weekly wages of full-time female workers increased just 5.1 percent,
from $657 to $691. For prime-age workers the situation was even bleaker; from
2000 to 2012, the weekly wages of full-time, prime-age male workers dropped 3.3
percent, and the weekly wages of full-time, prime-age female workers increased
just 3.9 percent.
These policies have all been portrayed to the public as giving American
consumers goods and services at lower prices. Whatever the impact on
prices, these policies have lowered the earnings power of low- and middle-wage
workers such that their real wages severely lag productivity growth.
Macroeconomic policies have often added to the forces disempowering the vast
majority of workers by tolerating (or causing) unnecessarily high unemployment
rates to forestall (often hypothetical) increases in inflation or interest
rates.
To generate wage growth, we need to rapidly lower unemployment, which in the
current moment can only be reliably accomplished through expansionary fiscal
policy—particularly large-scale ongoing public investments and the
reestablishment of state and local public services that were cut in the Great
Recession and its aftermath. The priority has to be jobs now, rather than any
deficit reduction (which under current conditions will sap demand for goods and
services and slow job growth).
On top of lowering unemployment, policy should also aim to restore the
bargaining power of low- and middle-wage workers. This means aggressively
increasing the minimum wage so that it eventually grows to half the average
worker’s wage. It means reestablishing the right to collective bargaining for
higher wages and addressing workplace concerns. It means not allowing
immigration policy to be dictated by employers’ desire to bring in guestworkers
lacking basic labor market protections in order to undercut wages in both
high-wage and low-wage occupations. Instead, guestworkers should have full
rights to the same labor market protections as resident workers, and such
programs should be allowed only to relieve rigorously documented episodes of
genuine labor shortages. It means establishing citizenship for undocumented
workers who are currently vulnerable to exploitation. It means taking executive
action to ensure that federal dollars are not spent employing people in jobs
with poverty-level wages. Overall, it means paying attention to job quality and
wage growth as the key priorities in economic policymaking and as mechanisms for
economic growth and economic security for the vast majority.
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