Thirteen facts about wage growth

///Thirteen facts about wage growth

Thirteen facts about wage growth

The expectation of rising living standards, with each generation doing better than the one before, has long been a given. More recently, that expectation has diminished—and with good reason. One of the best measures economists use to determine Americans’ economic advancement is whether wages are rising, broadly and consistently. After adjusting for inflation, wages are only 10 percent higher in 2017 than they were in 1973, with annual real wage growth just below 0.2 percent. The U.S. economy has experienced long-term real wage stagnation and a persistent lack of economic progress for many workers.

For more than a decade, The Hamilton Project has offered proposals and analyses aimed at increasing both economic growth and broad participation in its benefits. This document highlights the necessary conditions for broadly shared wage growth, trends closely related to stagnation in wages for many workers, and the recent history of wage growth, with an emphasis on the experience of the Great Recession and recovery. It concludes by discussing how public policies can effectively contribute to the growth in wages that is a core part of improving living standards for all Americans.

Fact 1: The share of economic output workers receive has generally fallen over the past few decades.

Long-term wage stagnation can be traced to many trends, including the decline in labor’s share of income. The portion of national income received by workers fell from 64.5 percent in 1974 Q3 to 56.8 percent in 2017 Q2. Over the past few years the U.S. labor share has ceased falling, but this might reflect the ongoing economic recovery rather than any change in the long-run downward trend.

Fact 2: Wages have risen for those in the top of the distribution but stagnated for those in the bottom and middle.

Wage inequality has been on the rise over the past several decades. In figure 2 we examine wages rather than total compensation, which include nonwage benefits. (Compensation has also exhibited increasing inequality; see Pierce 2010.) This permits a sharper focus on wages, which are of particular interest to many workers.Much of the growth in wages has been concentrated at the top, with wages in the top quintile growing from $38 per hour in 1979 to $48 per hour in 2016—a 27 percent increase. Wages in the upper-middle quintile increased by 12 percent, from $24 per hour to $27 per hour. In the bottom fifth, real wages fell slightly over the same period.

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2017-10-12T18:56:27+00:00 Tags: , |