As reported relentlessly here over the past decade, millions of Americans saw the Great Recession wipe out their savings, force their eviction or foreclosure, delay their entry or continuance in college, bury them deeply in debt, make them accept employment with lower pay and benefits, and force them into unwanted early retirement. During the long, still incomplete recovery from that devastating economic downtown, those workers who kept their jobs or found new ones after lay-offs have on average seen their “real”—that is, inflation-adjusted—wage gains remain paltry.
Between the 2nd quarter of 2009 and the 2nd quarter of 2018, for instance, median weekly real wages rose just 1.8 percent. And over the past year, real average hourly wages didn’t rise at all and average weekly wages rose less than 25 cents.
At the left-leaning Economic Policy Institute, Heidi Shierholz and Elise Gould write:
Some have posited that our far-less-than-stellar wage growth right now could be due to workers not having the skills employers need. But that idea has the logic backwards. When employers can’t find workers with the skills they need at the wages they are offering, they will raise wages in order to attract qualified workers—if employers can’t find the workers they need among the unemployed, they will offer higher wages in an attempt to poach needed workers from other firms, who will then raise wages in an attempt to keep their workers, and so on. In other words, if there are skills shortages, we should see signs of faster wage growth for workers with needed skills. This fast wage growth for skilled workers should push up average wages, not weigh them down. Since we continue to see anemic average wage growth, not just slow wage growth for select groups of workers, it’s clear that there is not a widespread shortage of the types of workers (i.e., those with the right skills) that employers need.
As the table above shows, only the legal profession showed such a combination, 1.8 percent unemployment and 3.7 percent wage growth. But occupations requiring employees to have the computer and mathematical science skills that employers often say they need but can’t find, the unemployment rate is 2.3 percent, but real wage growth over the past 12 months has been under 1 percent. And while the alleged lack of skilled construction workers is one of the most commonly heard employer complaints, their real wages fell last year.
In another analysis by the two EPI economists, they note that the failure of real wages to grow means it’s “likely that the unemployment rate is overstating the strength of the economy.” That rate is currently 4 percent, although another measure issues each month by the Bureau of Labor Statistics puts the percentage of unemployed and underemployed workers at 7.8 percent.
While real wage growth for the whole population is a good measure of the health of the economy, it disguises some of what is going on.
For instance, as can be seen in the EPI chart below, workers in the bottom 40 percent of the labor force along with those in the 95th percentile saw the greatest real hourly wage growth over the past year. That’s not surprising because the lower level of unemployment has in the past “benefited low-wage workers more than middle-wage workers and middle-wage more than higher-wage workers.”
One key reason for the greater wage growth in the lower quintiles is the rise in state-mandated minimum wage levels. That spike in the 95th percentile is part of the inequality trend we’ve been lamenting for four decades.
And then there’s the education gauge. Shierholz and Gould again:
It is particularly striking that the wages for workers with less than a high school degree or just a high school degree rose faster over the last year than any other group at 3.0 percent and 1.0 percent, respectively. Furthermore, wages for those with a college degree were essentially unchanged, rising 0.1 percent over the year. Cumulatively, over the last two years, wage growth for high school educated workers was faster than for college educated workers (2.6 percent versus 0.9 percent). Wage growth for those with an advanced degree was faster than those with just a college degree, but still slower than high school degree wages over the last year (0.6 percent) and the last two years (2.4 percent). The faster wage growth for those workers with just a high school degree pushes back directly against any evidence of education based skill shortages.
Missing from the EPI analysis is a breakdown by sex and race. As we know all too well, the disparities found in wages for women and people of color still lag behind those of white people, even when other reasons for lower wages are accounted for. Even if those income disparities are closed later in life, they can have lifelong psychological, social, and financial impacts, One of those impacts, as Adam Harris writes at The Atlantic this week, comes in the form of a lower intergenerational accumulation of wealth:
The numbers are staggering: White Americans with a college degree are on average three times as wealthy as black Americans with the same credential, and in families whose head of the household is employed, white families have 10 times the wealth of black ones. One estimate on the conservative end suggested that this wealth gap could take two centuries to close. [...]
And the thing about wealth, says Tatjana Meschede, a researcher at the Institute on Assets and Social Policy at Brandeis University, is that it’s “sticky”: It tends to stay with a family. That has serious repercussions for how much money people accumulate over the course of their lives, regardless of whether they attend college—something that is usually thought to make a significant difference financially.
When discussing what we as progressives should do about inadequate wage growth, the income gap, and the wealth gap, we should never ignore how these disparities continue to play out. And our proposed economic policies should put a high priority on closing them.