US Economic Policy: Keeping Wages Flat Since 1979

In the United States of America the rich get richer, the poor stay poor, and the middle class—if they’re lucky—just stay “flat”.

For the last tens years, according to a new report by the Economic Policy Institute, the failure of the economy to provide a living wage to a majority of its workers has created a decade of stagnation.

The central problem, say the report’s authors Lawrence Mishel and Heidie Shierholz, is that “wage and benefit growth of the vast majority” of workers has remained steady—or even declined—amid rising costs of living while the “fruits of overall growth have accrued disproportionately to the richest households” in the country.

“The wage-setting mechanism has been broken for a generation,” write Mishel and Shierholz, “but has particularly faltered in the last 10 years.”


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“Corporate profits, on the other hand, are at historic highs,” they continue. “Income growth has been captured by those in the top 1 percent, driven by high profitability and by the tremendous wage growth among executives and in the finance sector.”

The cause of this situation, according to the report, began just as Ronald Reagan was about to be ushered into power in 1979 and is “the result of intentional policy decisions—including globalization, deregulation, weaker unions, and lower labor standards such as a weaker minimum wage—that have undercut job quality for low- and middle-wage workers. These policies have all been portrayed to the public as giving American consumers goods and services at lower prices,” but their real impact has been to cut earning power and upward mobility while making widely shared prosperity an impossibility.

To reverse this trend, the EPI analysis calls for two key policy initiatives. First, a commitment to severely curb unemployment by promoting a new surge in public investment, including a restoration of public services cut during the recent years of recession. And secondly, a national increase in wages across all sectors and the restoration of strong labor protections, including collective bargaining protections for union workers and an increase in the national minimum wage as key components of that effort.

This paper’s other key findings include:


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