Why America’s Workers Need Faster Wage Growth—And What We Can Do About It

Source: Elise Gould, Economic Policy Institute, Briefing Paper #382, August 27, 2014

From the summary:
…This paper, hand-in-hand with the overview paper (Bivens et al. 2014) for EPI’s Raising America’s Pay initiative, explains in detail why we need to raise wages in order to achieve real gains in the living standards of the vast majority of Americans. This paper begins by documenting the pronounced rise in income inequality in recent decades and then examines the implications of this rise in inequality for living standards growth for the vast majority. It then examines the link between wage growth and these wider income trends before undertaking a thorough analysis of wage trends since 1979. It concludes with an examination of the policy changes that have helped spur these wage trends by shifting bargaining power from the vast majority of workers to corporations and CEOs. The paper highlights an underappreciated subset of these policies: changes in labor market policies and business practices.

Key findings include:
· The vast majority of Americans have experienced disappointing living standards growth in the last generation—largely due to rising inequality. …
· The large increase in income inequality that has blocked living standards growth for the vast majority has been driven by the failure of hourly wages for the vast majority to rise in line with overall productivity after 1979. …
· Various wage gaps (particularly the wage gap between the middle and bottom of the wage distribution, between the top and the middle, and between the very top and everyone else) reflect the relative strength of policy changes in affecting Americans’ wages, as compared with other influences (such as the interaction of technology and education). …