The mass layoffs and sky-high unemployment levels of the Great Recession have mostly receded. What’s left is a bigger issue: the fact that wages basically haven’t moved in a decade for the majority of American workers.
A new report from the Economic Policy Institute, highlighted by economist Jared Bernstein in The New York Times, finds that for many there’s been basically no progress in a decade.
From the report:
“Between 2002 and 2012, wages were stagnant or declined for the entire bottom 70 per cent of the wage distribution. In other words, the vast majority of wage earners have already experienced a lost decade, one where real wages were either flat or in decline.”
Here’s an EPI chart showing the virtually nonexistent wage growth compared to a huge jump in worker productivity:
Wages have barely outpaced inflation, even when you include benefits. Even workers with a college education haven’t seen much in the way of improvement.
While wages have been flat for the average worker, they’ve been pretty good for the top earners, and pretty awful for those at the bottom of the income distribution:
So where are the benefits from all of that productivity going? According to a follow-up report from the EPI, an increasingly large percentage of income gains and wealth have gone to corporate profits instead of to workers’ pockets. Basically, companies’ profits are up, and it comes at the expense of wages.
Continuing to lower unemployment would go a long way towards turning wage stagnation around. But the relationship between companies and their employees has changed, too. Simply put, when companies do well, less of the benefit goes to employees than it used to.
It’s hard to pinpoint exactly why that’s happened. Typically, a weak labour market means that companies can keep wages down pretty easily and still keep good workers. Unions and the ability to collectively bargain are weaker than they have been in the past as well.
Corporations are organised for shareholders, not workers, and if the market supports low wages, they’ll stay low. That means the solution to this problem is going to have to come from government, not from public pressure on companies.
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