Broad-Based Wage Growth Is a Key Tool in the Fight Against Poverty

Source: Elise Gould, Alyssa Davis, and Will Kimball, Economic Policy Institute, Briefing Paper #399, May 20, 2015

From the Press release:
Broad-based wage growth could make a significant dent in the poverty rate, according to Broad-Based Wage Growth is a Key Tool in the Fight against Poverty, a new EPI study from senior economist Elise Gould and research assistants Alyssa Davis and Will Kimball. Despite the fact that wages and work-related income represent more than two-thirds of the total income of the bottom fifth of non-elderly American households, wage growth is often overlooked as a tool to fight poverty. Gould, Davis, and Kimball demonstrate how significant reductions in poverty could have occurred if wages for all workers had grown alongside either average wages or productivity since 1979….. The report uses various simulations to determine the effect of broad-based wage growth on poverty rates. If all workers’ wages had grown at the same rate as average wages since 1979, 4.5 million fewer people would be poor, including 1.7 million children. If all wages had grown at the same rate as productivity since 1979, these reductions would be even larger—7.1 million fewer people would be poor, including 2.7 million children. The largest impact broad-based wage growth would have on the poverty rate would occur if the economy were closer to full employment—combined with wages increasing alongside productivity growth, full employment would bring 11.2 million people out of poverty, including 4.4 million children. …..