Here's why millions of Americans feel left behind by the economic recovery

There is a reason so many Americans feel the economy’s recovery from the Great Recession has not benefited them: it hasn’t.

An expansion that began, believe it or not, more than seven years ago, has extended a longer-run trend of wage stagnation for the average US worker, despite a sharp drop in the official unemployment rate to 4.4% from an October 2009 peak of 10%.

No wonder the recovery seems so lopsided, particularly given economic inequality levels not seen since before the Great Depression.

A new report from the Hamilton Project, an economic policy initiative of the Brookings Institution in Washington, offers a range of startling figures and charts that paints a rather dramatic picture of US economic disparities.

“The U.S. economy has experienced long-term real wage stagnation and a persistent lack of economic progress for many workers,” wrote Jay Shambaugh, a former White House economist under President Barack Obama who now heads the Hamilton Project.

After adjusting for inflation, wages are just 10% higher in 2017 than they were in 1973, amounting to real annual wage growth of just below 0.2% per year, the report says. That’s basically nothing, as the chart below indicates.

One big source of the problem: Starting around the 1970s, US productivity growth began rising much more rapidly than workers compensation — meaning the share of growth was accumulating increasingly in corporate profits at the expense of pay. The report attributes this both to the increasing role of technology in the workplace but also a loss of bargaining power brought on by anti-union labour policies and other wage-suppressing measures.

“Changes in worker bargaining power, competition within and across industries, and globalization can all influence the share of output workers receive,” the report said.

Another metric pointing to the erosion of the economic position of average families and consumers is the decline in the portion of national income received by workers, to 56.8% today from 64.5% back in 1973.

“Over the past few years the U.S. labour share has ceased falling, but this might reflect the ongoing economic recovery rather than any change in the long-run downward trend,” the report says.

Then there’s the sharp inequality in the nature of income growth. “Much of the growth in wages has been concentrated at the top,” the Hamilton report says.

The richest 20% of Americans saw hourly wages grow from $US38 per hour in 1979 to $US48 per hour in 2016 — a 27% increase. In the bottom fifth, real wages fell slightly over the same period.

A key reason for workers’ waning bargaining power is the declining presence of unions in the workplace.

“In 1956 about 28% of all workers belonged to a union; in 2016 that number was a little more 10%. This decline has occurred principally among private sector workers, only 5% of whom now belong to a union,” the report says.

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