A ‘Lost Decade’ Of Wage Stagnation

A new report released Wednesday by Lawrence Mishel and Heidi Shierholz of the Economic Policy Institute confirms what millions of Americans already know: The vast majority of workers have seen their wages stagnate for years, severely hampering their economic security and the nation’s economic growth.

The study, which tracks wage trends using both employer-based and household-based survey data, concludes that “the vast majority of wage earners have already experienced a lost decade, one where real wages were either flat or in decline.” Among many other findings, the authors show that even before the Great Recession in 2007, average wage and compensation growth lagged far behind productivity growth (a trend that accelerated after the financial crisis.)

EPI chart1

The problem dates back decades; according to the report, the median worker saw an average wage increase of just 5 percent between 1979 and 2012, despite productivity growth of 74.5 percent throughout the same period.

Not everyone’s wages have been stagnating; perhaps unsurprisingly, the richest of the rich have seen more growth.

EPI chart2

Mishel and Shierholz conclude that the weak wage growth “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.” Although President Barack Obama has recently redoubled his efforts to fight inequality and grow the middle class, few of the above policies are likely to change as long as Republicans control the House of Representatives.

One potential remedy does have a chance to gain some political traction, however: increasing the minimum wage. As Alec McGillis points out in The New Republic, “there are few issues better designed to split the GOP coalition than the minimum wage.” A recent Pew poll finds that 71 percent — including 50 percent of Republicans — favor raising the minimum wage from $7.25 per hour to $9.00 per hour. If the president is really committed to reversing wage stagnation and growing the American economy from the middle out, then increasing pressure on Congress to raise the minimum wage may be his most politically potent option.

Read Mishel and Shierholz’s full report here.


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