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

[xchrom]

http://www.epi.org/publication/why-americas-workers-need-faster-wage-growth/

***SNIP

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.

Between 1979 and 2007, more than 90 percent of American households saw their incomes grow more slowly than average income growth (which was pulled up by extraordinarily fast growth at the top).

By 2007, the growing wedge between economy-wide average income growth and income growth of the broad middle class (households between the 20th and 80th percentiles) reduced middle-class incomes by nearly $18,000 annually. In other words, if inequality had not risen between 1979 and 2007, middle-class incomes would have been nearly $18,000 higher in 2007.

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.

Between 1979 and 2013, productivity grew 64.9 percent, while hourly compensation of production and nonsupervisory workers, who comprise over 80 percent of the private-sector workforce, grew just 8.0 percent. Productivity thus grew eight times faster than typical worker compensation.

Between 1979 and 2013, median real hourly wages rose just 6.1 percent (or 0.2 percent annually), compared with a decline of 5.3 percent (or -0.2 percent annually) for the 10th percentile worker (i.e., the worker who earns more than only 10 percent of workers). Over the same period, the 95th percentile worker saw growth of 40.6 percent, for an annual gain of 1.0 percent. The tight labor market of the late 1990s was the only period when hourly wages increased across the wage distribution, with the strongest growth occurring at the bottom.

From the first half of 2013 to the first half of 2014, real hourly wages fell for all deciles, except for a miniscule two-cent increase at the 10th percentile. Underlying this exception to the general trend at the 10th percentile is a set of state-level minimum-wage increases in the first half of 2014 in states where 40 percent of U.S. workers reside.

There is no evidence of upward pressure on wages—let alone acceleration of wages—that would signal that the Federal Reserve Board should worry about incipient inflation and raise interest rates in an effort to slow down the economy.

[TreasonousBastard]

1. Lotta reading there, but it still missed a few things...

like college graduates might be making less than they should because art history majors can't find jobs. Accounting majors are doing well, but don't make up for those in less demand. Or no demand at all. One might think that chemistry or math majors would do well, but science budgets are being slashed everywhere. Don't get me started on the day Bell Labs fired the guy who discovered black holes because there is no way to market black holes.

Completely ignored is automation, which is probably the the biggest cause of "good job" loss. We can now make cars pretty much untouched by human hands.

Adjusting the minimum wage, which seems to be their big point along with bargaining power (unions), means little when we're looking at a future where you don't even have people working the counters at fast food joints any more.

Ultimately, what is needed is a restructuring of damn near everything to make Scrooge's "surplus population" relevant and productive.