PAY GAP IS
Four decades ago, in 1979, the typical low-income worker—perhaps a waitress or a cashier—earned about $9.42 an hour when adjusted to today’s dollars. In 2016, a person in that same job
earned about $9.33 an hour—roughly 1 percent less than what his or her
counterpart was making 40 years ago.
The economy in 2018 has been
strong, unemployment is at an all-time
low, many businesses are turning
healthy pro;ts and the ;nancial
markets have surged. Yet that has not
translated into robust wage growth for
many U.S. workers, even though basic
economic theory holds that this should
have happened. Instead, pay for many
low- and middle-income employees has
remained relatively ;at, in some cases
not even keeping pace with in;ation.
Theories abound as to why:
; Automation and global outsourc-ing have reduced the demand for
lower-skilled workers and the
pressure to increase their pay.
; A four-year college degree no longer promises the ;nancial bargaining power in the labor market that
it once did.
; The decline in labor unions has
made it more di;cult for low-wage
employees to negotiate higher pay.
; The minimum wage doesn’t have the
buying power it had decades ago.
; Company leaders, boards and
shareholders grew gun-shy following the Great Recession and prefer
to keep labor costs low in case of
another economic downturn.
INCREASE IN INEQUALITY
Those who have experienced wage
growth are mainly upper-middle-and top-income earners.
“There’s been a decline in the share
of economic output going to workers,”
said Ryan Nunn, policy director of
The Hamilton Project, a research
group within think tank The Brookings Institution. “The biggest part of
the story is the increase in inequality.
Workers at the top are getting wage
growth, while others have not.”
While employees considered
middle income—those earning about
$19 an hour—saw pay raises that
outpaced the average cost-of-living
increase from 1979 to 2016, that
growth has remained relatively
low for various reasons. ¬