The wage story of the past 40 years? Slow growth and inequality (boosted by weak policies)

  • Published on February 23rd, 2020

Donald Trump and his cheerleaders are happy to talk about the “booming” economy, falsely and relentlessly labeling it the “best ever.” While the economy is still growing, now in its 128th month of expansion, the idea that it’s better than ever is malarkey.

Source: EPI analysis of Kopczuk, Saez, and Song, Earnings Inequality and Mobility in the United States: Evidence from Social Security Data Since 1937 (2010), Table A3, and Social Security Administration wage statistics. Note: Shaded areas denote recessions.
Source: EPI analysis of Kopczuk, Saez, and Song, Earnings Inequality and Mobility in the United States: Evidence from Social Security Data Since 1937 (2010), Table A3, and Social Security Administration wage statistics. Note: Shaded areas denote recessions.

In Barack Obama’s final three years as president, for instance, the economy created 1.5 million more new jobs than have been created in Trump’s three years in office.

And inflation-adjusted growth in gross domestic product in the best four quarters under Obama exceeded it in the best four quarters under Trump.

It cannot be pointed out too often that Obama inherited an economic downturn worse than any since the 1930s and policies he promoted gave impetus to a recovery that has continued under the current occupant at 1600 Pennsylvania.

By the time Obama turned over the White House keys to Trump in 2017, most of the acute economic problems visited upon us by the Great Recession had been overcome—though many Americans hadn’t fully recovered from its impacts, and some never will. The chronic problems long predating the crash, however, remain with us. In a lengthy analysis brimful of charts, Elise Gould at the liberal-leaning Economic Policy Institute has scrutinized one of the biggest of those chronic problems: wages.

While wages have recently shown some upward movement, the pattern for the majority of Americans has for 40 years been the same: rising inequality, with the upper economic tiers raking in the biggest gains. Consistent wage growth has only occurred during 10 of those years. In fact, were it not for the higher wages that came with the exceedingly low unemployment of the 1990s, there would have been no average wage growth at all in those four decades. We’re also plagued by continuing and sometimes worsening gender and racial wage disparities. There’s a serious disconnect between expanded worker productivity and pay. And wages for the bottom 50% of college graduates have lost ground compared with the wages of their predecessors in 2000.

Gould notes that in spite of some recent modest improvements, “wage inequality continues to climb and workers at the middle and bottom of the wage scale are just making up lost ground and continue to struggle to make ends meet rather than get ahead. The median hourly wage—the wage at which half the workforce is paid more and half the workforce is paid less—stands at $19.33 per hour. For a full-time, full-year worker, this would translate into about $40,000 per year.”

As for the slow gains in wages, that cannot, she says, be excused on the grounds of education deficits, or concealed by references to total compensation with benefits, or by rejiggering the way inflation is calculated. “Slow and unequal wage growth is the result of a series of policy decisions that have reduced the leverage of most workers to achieve faster wage growth.” And these decisions have left “the vast majority of the U.S. workforce without economic power and the means to achieve a decent standard of living.”

One big reason for that, as noted previously? Nearly half the jobs available are low-wage affairs. One of the big reasons for that is the ever dwindling numbers of unionized workers.

Here’s a look at three specifics explored by Gould.

  • Inflation-adjusted hourly pay for most Americans since 1979 has failed to keep up with productivity, something she places “at the root of numerous American economic challenges.” As you can see from the chart, rising productivity and hourly compensation have diverged widely over the past 40 years. In that period, productivity grew 69.6%, but compensation for production and nonsupervisory workers grew 11.6%, just a sixth as much.
  • Latino workers have been closing the wage gap with white workers in the bottom 70% of the wage distribution, narrowing it from 12.3% in 2000 to 10.8% in 2019. However, the gap between blacks and whites went in the other direction, from 10.2% in 2000 to 14.9% in 2019.
  • For women, the gender wage gap with men narrowed at the median, with a typical woman earning 85 cents for every dollar earned by the typical man. Since the turn of the century, wage growth has been faster for men with a bachelor’s or graduate degree than for women, but wage growth for women with some college, a high school diploma, or less than high school has been faster than for men.

One of the success stories of grassroots activists and progressive Democrats in dealing with economic equality has been the rise in average wages in those states that have recently raised the minimum wage. Where that has happened, wages for the bottom 10th of the workforce have risen faster than those for the top 10th.

But while these increases are a blessing for workers, a federal minimum wage hike is needed to spread this success nationwide, and other wage inequalities need policy adjustments of their own. Creating a truly best-ever economy, environmentally sustainable and gender and racially just, will require far more than a few tweaks.

About the Author

Meteor Blades is a writer and contributing editor at DailyKos. He believes there is something profoundly wrong with our system. - the unchecked accumulation of wealth and power into the hands of a very small group of corporate business interests has contributed to the wholesale corruption of our political system. For an understanding about the level of corruption in our country, he encourages you to view these two PBS documentaries: (1). ,The Untouchables; (2) The United States of ALEC.