From the summary:
This paper argues that broad-based wage growth is necessary to address a constellation of economic challenges the United States faces: boosting income growth for low- and moderate-income Americans, checking or reversing the rise of income inequality, enhancing social mobility, reducing poverty, and aiding asset-building and retirement security. The paper also points out that strong wage growth for the vast majority can boost macroeconomic growth and stability in the medium run by closing the chronic shortfall in aggregate demand (a problem sometimes referred to as “secular stagnation”). Finally, the paper argues that any analyses of the causes of rising inequality and wage stagnation must consider the role of changes in labor market policies and business practices, which are given far too little attention by researchers and policymakers.
The paper’s key data findings include:
∙ Despite increasing economy-wide productivity, wages for the vast majority of American workers have either stagnated or declined since 1979, and this weak wage growth extends even to those with a college degree….
∙ Inequality fueled by broad wage stagnation is by far the most important determinant of the slowdown in living standards growth over the past generation, and it has been enormously costly for the broad middle class (households between the 20th and 80th income percentiles)….
∙ The failure of wages to grow for the vast majority is the leading reason why progress in reducing poverty has stalled over the last three-and-a-half decade….
∙ Key economic evidence implicates policy decisions—and particularly changes in labor market policies and business practices—as more important in explaining the slowdown in hourly wages for the vast majority than many commonly accepted explanations (such as the interaction between technological change and the skills and credentials of American workers)….