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Paul Blow- The Economist

Wages Stagnate for Workers

As productivity continues to increase, wages fail to keep up

Brian Young's picture
Feb 21, 2020

While Trump is on the campaign trail talking about how strong the economy is and the new record that the Dow hit, average Americans are still struggling to get by. Even with near-record unemployment, wages have not gone up as fast as they usually would. Now a new study from the Economic Policy Institute (EPI) finds that there is a larger problem that dates back forty years and has led to slow, uneven, and unequal wage growth.

According to EPI’s study, the median hourly wage in the United States is $19.33, or for a full-time worker about $40,000 a year. From 2018 to 2019 the median wage increase was only 1% and the story is much worse for the bottom 10% of wage earners who actually saw their salaries decrease by .7%. However, this wasn’t the case for wage earners in the top 5% who saw their salaries increase by 4.5%. The study also notes that the wage increase for top earners could actually be higher because the government stops counting wages above $2,884.61.

This small increase for the average worker is leading to rising income inequality as the people who do the work are falling further and further behind the bosses that are profiting. It should also be noted that the estimated living wage for the United States is $16.07 an hour meaning that the average US worker is only making slightly above what is needed to pay the bare minimums towards survival.

EPI also found that wages have failed to keep up with productivity. Many would say that if a worker is 10% more productive they should get paid 10% more. From 1948-1979 that was roughly the case. Productivity increased by 108% and wages increased by 93%. However, since 1979, there has been a widening divide. Productivity has increased over the last 40 years by 253% but wages have only grown 115%. So where does the extra money go? While some of it goes towards higher corporate profits and getting paid out to stockholders, most of it went to the highest wage earners at the company, people like the CEO and the CFO. During this period, wages for the top .01% have increased by 340%, even higher than the increase in productivity, while wages for the bottom 90% have only increased by 24%. Over 40 years, the average inflation rate is 3.15% meaning that the average worker's salary has failed to keep up with inflation.

With income inequality growing it comes as no shock that this began in 1979. Throughout the 1980’s organized labor was weakened and has gone from representing 34% of workers in 1979 to just 10% of workers today. Without a voice on the job or a collective bargaining agreement that guarantees raises, it is up to the boss to decide what crumbs they will give. As the EPI study shows, they will give just enough for you to get by, while hoarding the rest for themselves to pay for their luxury cars, vacation homes, and fancy boats.

You can read the full study by clicking here.

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